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CNN Live At Daybreak

Cold Case Hot in BTK Killings; Spying on Iran? Music Money Makers

Aired February 17, 2005 - 06:28   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.


KELLY WALLACE, CNN ANCHOR: Moving ahead now to news coming out of Wichita, Kansas. A police news conference is scheduled later this morning on the latest communication sent by an alleged serial killer. It has been decades since the first grisly headlines, a padded manila envelope arriving yesterday at Wichita's KSAS-TV.
Is the second station to receive a message this week, ostensibly from the BTK serial killer. It reads -- quote: "KAKE-TV is a good station, but I feel they are starting to be singled out because of me and causing problems among the people. Let's help the news media and Wichita Police Department by using this package as a start."

The BTK killer -- which stands for bind, torture, kill -- first communicated with television station KAKE decades ago. Now, the latest on the clues in the case from KAKE reporter Theresa Freed.

(BEGIN VIDEOTAPE)

THERESA FREED, CNN AFFILIATE KAKE-TV REPORTER: Some numbers are clearly important to BTK. He's recently started numbering his communications. But in this latest possible package, there's something missing.

(voice over): Numbers. They're showing up everywhere in BTK communications. There were numbers on a list of captors KAKE received back in May. And since the January communication to KAKE, the killer has been numbering his communications.

Today's possible BTK package is labeled No. 11, which would make sense if there was a communication No. 10. But where is it?

Since the killer resurfaced in 2004, there have been 10 communications that we're aware of. The communication numbering started just last month. We received what is called communication No. 8 January 25. It referred to a communication No. 7, a packed police later told us they had recovered.

Communication No. 8 also directed KAKE news to a cereal box near Valley Center. About a week later, No. 9 arrived, another postcard to KAKE. And now, a package to a different station labeled No. 11.

So, where is No. 10? Robert Beattie has a theory.

ROBERT BEATTIE, BTK BOOK AUTHOR: It may be that something happened on February 10. FREED: February 10 was the anniversary of the first communication BTK ever sent to KAKE back in 1979. And, of course, we're Channel 10. So, could communication No. 10 still be out there?

BEATTIE: He's been successful at eluding identification by deception, but it's also possible there is a No. 10 that he's just uncertain whether anybody has recognized it as a message from him.

FREED: It's also interesting that in this latest package from BTK, under contents it says, "C.4." It's believed BTK has used that coding to refer to the chapters he sent in a letter to KAKE. Chapter 4 of that document is "fantasy world." The question is: What could that be referring to?

(END VIDEOTAPE)

WALLACE: And that report was from Theresa Freed of CNN affiliate KAKE-TV.

The messages may just be word games with police. The package sent to the Fox TV affiliate had a return address of -- quote -- "P.J. Fox." One of BTK's victims was Nancy Fox.

Well, you will learn lots of things in high school, but how to make a bomb shouldn't be one of them. One teacher is accused of what you might call an illegal lesson plan. CNN's Bill Hemmer will have more on this on "AMERICAN MORNING."

Good morning -- Bill. It's sort of an incredible story there.

BILL HEMMER, CNN ANCHOR: Yes, not on the list when you sign up for class, that's right. Kelly, good morning to you.

We're going to talk about this high school teacher arrested, accused of teaching students how to make a bomb in class. Police say he taught everything from the ingredients to how to use an electric detonator. We'll also speak with the lead investigator and find out why he says it is hard to believe there is an innocent explanation to all of this. It's part of our coverage, starting at 7:00 this morning.

See you at the top of the hour -- Kelly.

WALLACE: All right, Bill, we'll look forward to that. Again, an incredible story there. See you soon at the top of the hour.

And as we've been mentioning all morning, Defense Secretary Donald Rumsfeld is going back to Capitol Hill today. Secretary Rumsfeld has a date with the Senate Armed Services Committee this morning. He then heads to the House Armed Services Committee this afternoon.

The defense secretary actually cut his Senate testimony short yesterday after the dialogue became extremely heated.

(BEGIN VIDEO CLIP) SEN. ROBERT BYRD (D), WEST VIRGINIA: Why did you choose to ask for $5 billion in Army modularity funds in a supplemental? It seems to me this is the kind of program that ought to be funded and budgeted through the normal appropriations process. Here, we're hit with this request in a supplemental bill.

DONALD RUMSFELD, DEFENSE SECRETARY: This issue of what goes in a supplemental is something that really is beyond my pay grade. It's something that the Congress and the OMB worked on together, and they end up making judgments. And this is the way the judgments came down. I think it's the right judgment.

BYRD: Well, I have to tell you, Mr. Secretary, this seems to me to be an abuse, a serious abuse, of supplemental appropriations requests. I haven't seen anything like this.

SEN. PATRICK LEAHY (D), VERMONT: I think that's why it made sense when Senator Byrd asked, why are some of things that are basically supplemental doing in here? You said it's beyond your pay grade. Well, unless you exclude the commander-in-chief, there's nothing beyond your pay grade in the Department of Defense. You're the secretary of defense. You're the one who is supposed to make that decision.

RUMSFELD: Senator, I thought the Congress was Article 1 of the Constitution.

(END VIDEO CLIP)

WALLACE: Secretary Donald Rumsfeld on Capitol Hill yesterday, again, heading to Capitol Hill today. We'll be watching to see what come out of those appearances.

Well, moving to Iran now, it says it has seen unmanned U.S. spy planes over its nuclear sites, and the government is vowing to shoot them down if they come within range. That seems to confirm a "Washington Post" report that drones have been flying over Iran, looking for evidence of nuclear weapons programs.

CNN military analyst General James "Spider" Marks joins us live from Oakton, Virginia, to discuss this. Actually, we're going to try and get the general on the phone. We're having some trouble. We'll get back to him shortly.

Moving ahead to news about Kid Rock. His arrest record is taking a hit. The rap star is now facing assault charges after a scuffle at a Nashville strip club. He is accused of slugging a deejay, because the guy announced it was closing time. Kid Rock, whose real name is Bob Ritchie, is out of jail on a $3,000 bond.

Omarosa Manigault-Stallworth didn't land the job on "The Apprentice," but she's definitely going to work, criticizing the show. During an NBC teleconference, the former contestant lashed out at the reality show's executive producer, Mark Burnett. She claims the show has a pattern of stereotyping blacks in a negative way. Burnett says all of the contestants are treated fairly. Alanis Morisette is now an American citizen. The singer says she'll hold dual citizenship by maintaining her status as a resident of Canada. Morisette says she's looking forward to make political comments and not being told she doesn't have the right to express an opinion.

And finally, don't look for Jennifer Lopez this week in London. No way. The music and movie diva says she's too sick to travel and has called off her European concert tour. She's also missing the British premiere of her movie, "Shall we dance?"

When it comes to making money in the music business, some of the more -- shall we say -- mature music makers are still raking in the green. "Rolling Stone's" list of the top money-makers in 14 minutes.

And new rules at European Union airports are a boon to stranded travelers. Carrie Lee has details in business news in five minutes.

Here, though, first is a look at what else making news this Thursday morning, February 17. We'll be right back.

(COMMERCIAL BREAK)

WALLACE: And welcome back.

It's time now for a little "Business Buzz." Travelers tired of waiting in airports are getting a little help from the European Union today.

Carrie Lee is at the Nasdaq Marketsite to tell us all about it.

Good morning -- Carrie.

CARRIE LEE, CNN FINANCIAL NEWS CORRESPONDENT: Hi, Kelly.

Some changes are coming under way on Thursday. If you're using an airline, if you're using a European Union airport, well, they're going to have to compensate passengers for things like overbooking, long delays, or canceled flights.

Now, the rules are taking effect on Thursday, as I said. It works like this: If you have a ticket but you've been denied a spot on the plane because the flight is overbooked, you will get up to $780. If your flight is delayed or canceled, then the airline has to give you food and, if necessary, overnight accommodations. And in some cases, carriers have to give the option of a refund trip and a trip back to their point of departure.

So, these are new government rules coming in. And one of the points of doing this is to have consistency throughout the carriers.

U.S. rules are a little less strict. There are typically no guarantees of compensation in the case of overbooking delays. And if there is compensation, then the nature is to be determined by the individual airline policies, not the government. But these new EU rules are even going to require compensation for passengers whose flights are delayed by weather.

So, really stepping up the bar here, Kelly. It will be interesting to see if there's any pressure to follow through here in the U.S.

Back to you.

WALLACE: I know a lot of Americans are watching there. Carrie, what are the futures looking like so far this morning?

LEE: Futures are looking pretty flat at this point. I have to say, we had a lackluster close yesterday, despite Alan Greenspan's remarks. We do have Hewlett-Packard shares moving higher. Well, they did last night, up about 2 percent on their new profit report. So, that could give techs a little bit of a bounce.

Also, we have Wal-Mart and Target, two retailers, reporting this morning. So, those are the stocks to watch for today.

WALLACE: All right. Carrie Lee, great to see you, at the Nasdaq Marketsite.

LEE: You too.

WALLACE: Thanks so much.

Turning back to our story about Iran, it says it has seen unmanned U.S. spy planes over its nuclear sites, and the government is vowing to shoot them down if they come within range. Right now, the White House, the administration is not confirming that drones have been flying over Iran.

We want to bring back on the phone our CNN military analyst, General James "Spider" Marks, joining us live from Oakton, Virginia.

General, are you there? GEN. JAMES "SPIDER" MARKS, CNN MILITARY ANALYST: I am. Good morning, Kelly.

WALLACE: Good morning. Thanks for being with us today.

Let me ask you this. A question of not, if it's true or not. But why would the U.S. run the risk of using drones as opposed to trying to gain some intelligence using satellites, which are less risky?

MARKS: Well, Kelly, the United States certainly has some incredible capabilities to conduct intelligence-collection. And satellites are available, and satellites, frankly, are being used.

What the unmanned aerial vehicles, or drones, provide you is a very dynamic capability to move that platform wherever you need to move it. And you can go after very specific, very pointed targets. And if you pick up some other piece of intelligence during the conduct of that mission, you can move the thing around a little bit. It's a much more flexible asset than a satellite with known pass times. WALLACE: What about, though, the Iranians? Wouldn't they be able to detect these unmanned drones flying over Iranian airspace?

MARKS: Oh, sure, absolutely. I mean, they will emanate. These unmanned aerial vehicles will emanate a signature that can be picked up. But they're relatively small. They operate at multiple altitudes. So, you can change what's called the profile of the UAV as it executes its missions. So, certainly, the Iranians could pick those things up. And if they could engage them, I'm certain they probably would try.

WALLACE: But there's still nothing like having intelligence on the ground, human intelligence.

MARKS: You got it, Kelly.

WALLACE: Tell me about that.

MARKS: You got it. What you really want to have is a complimentary set of intelligence capabilities. You want satellites. You want UAVs. You want other platforms that are what we called air- breathers up there collecting. But you really want guys on the ground, who can knock on doors and do swipe tests and can immediately relay what they see and what they sense and give a really good clear picture of what it is they're dealing with.

WALLACE: You saw the news yesterday, General. Iran and Syria are talking about forming a united front against the United States. It's not clear what this means. But give us sort of the military's perspective. Look at the militaries of Iran and Syria. How formidable could that be against the U.S.?

MARKS: Well, both of these countries have very formidable, relatively-modernized militaries. If you look at Iran, for example, it's got a coastal navy. You know, it's got a great coastline that has to be protected right there in the Persian Gulf.

And the concern for the United States certainly from the military's perspective is that we are smack-dab in between those two countries in Iraq as both Syria and Iran are closing ranks, if you will, diplomatically and militarily, to confront the growing U.S. presence, and the primarily the U.S. influence as democracy starts to bloom and blossom in their neighbor, Iraq.

WALLACE: All right, General, a lot to follow in the days and weeks ahead. Thanks for starting your day and getting up early with us. General James "Spider" Marks on the phone with us from Oakton, Virginia.

Your news, money, weather and sports. It is about 45 minutes after the hour. And here is what is all new this morning.

Defense Secretary Donald Rumsfeld warns that terrorists are regrouping for another strike against the U.S. Today, Secretary Rumsfeld goes before the Senate and House committees working on the defense budget. Thousands of mourners in Beirut gather for the funeral of former Lebanese Prime Minister Rafik Hariri. Washington has all but directly accused Syria of complicity in Monday's assassination. The U.S. ambassador to Damascus has been withdrawn, and Hariri's family demands an international investigation.

In money, the Federal Trade Commission has given the go-ahead for MGM Mirage to buy rival Mandalay Resort Group. The nearly $8 billion deal will give MGM control of 11 resorts on the Las Vegas Strip.

In sports, Illinois cruised to its 26th win, 83-63 over Penn State. It is the longest winning streak in school history, and the fighting Illini got it right this time, are the only undefeated team left in Division 1.

(WEATHER REPORT)

WALLACE: A husband and wife team, you can say, with some serious Hollywood cred (ph). Well, now they turn to Middle America. "AMERICAN MORNING's" Soledad O'Brien joins us now from her office in New York with a look at what she's working on this morning.

Good morning -- Soledad.

SOLEDAD O'BRIEN, CNN ANCHOR: Hey, Kelly, good morning to you.

This morning, we talk to director Spike Lee and his wife, Tonya Lewis Lee (ph). They're working together. They've teamed up for a new series on the N, which is Nickelodeon's nighttime network for teens. Their show is called "Miracle Boys." It's a series of six shows.

We're going to find out this morning why LEE has gotten involved in this project. It's very close to their hearts. Also, we'll tell you about the pretty unusual step that they took to make sure that the series was true to life. It involves a panel of young men and women who are helping them out, keeping it real, as they say.

Kelly -- back to you.

WALLACE: A lot of excitement, Soledad, about that project. It was the buzz in the makeup room the other day on "AMERICAN MORNING." We look forward to it.

O'BRIEN: Where it all happens, as you well know.

WALLACE: That's right. OK, Soledad, we'll see you in a few minutes.

O'BRIEN: Thanks, Kelly.

WALLACE: Thanks so much.

Well, Hollywood produces a lot of buzz words. So, what's the biggest one from 2004?

And the Oscar goes to? Well, we'll it after the break.

And rock royalty gets paid to play. We'll take a look at music's biggest money makers in 2004. This is DAYBREAK for a Thursday. We'll be right back.

(COMMERCIAL BREAK)

WALLACE: It is 51 after the hour. And here is what will be making news today.

Governor Arnold Schwarzenegger meets with California lawmakers in Washington today. He is trying to drum up federal funding for California as the state faces an $8 billion budget shortfall.

Hollywood meets Washington elsewhere today as Bill Clinton receives the ambassador for humanity award from the survivors of the Shoa (ph) Visual Foundation, a group founded by director Steven Spielberg.

And want to get paid to watch baseball? It sounds like fun. The Washington Nationals are hosting a job fair this weekend to fill 900 jobs being created by the newest Major League club. The positions range from cooks to bartenders to parking attendants.

Well, "Rolling Stone" is out with its list of music's 50 top money makers. And royalty leads the pack with earnings topping $56.5 million last year, more than the DAYBREAK anchor and meteorologist and national correspondent combined.

For more on music moves and shakers, we are joined by Brian Hiatt, who is the editor of "Rolling Stone" magazine.

Bryan, great to be here.

BRIAN HIATT, EDITOR, "ROLLING STONE" MAGAZINE: Good morning.

WALLACE: So, we're talking about maturity, and we're talking about royalty. Let's tell our viewers who is No. 1, the No. 1 money maker when it comes to music.

HIATT: Yes. We've got both maturity and royalty at No. 1. Prince was the No. 1 money maker in music last year.

WALLACE: I think people will find that surprising. How does that happen?

HIATT: (UNINTELLIGIBLE) may even have been surprised. I doubt it. He had a great year. He would get a long period in which he was not a commercial artist. He was not making that much money. He was not having success with tours or albums. He came back with the greatest hits tour, got great reviews, sold out a ton of shows, played a ton of shows, and just made a lot of money. And he kept his costs down, which helped, too. WALLACE: And the material girl is No. 2. I was reading some of your research. She hauls in more money on the road than any other artist, charging as much as $300 a seat. Is that why her numbers are so good?

HIATT: It definitely didn't hurt. Fans tend to hate high ticket prices. And for artists it doesn't work. But if you're Madonna, it works. That said, she also had a very high guarantee every night, so that worked in her favor as well.

What's interesting about her is she actually grossed more money on the road than Prince did. But because she has a million dancers and explosions and who knows what else, her costs were much higher. So, Prince wound up taking home more money.

WALLACE: Coming off the Grammys over the weekend, many of us -- myself included -- would have thought Usher, Alicia Keys, some of these newer, hotter names would have been the top money-getters.

HIATT: Sure.

WALLACE: But that's not the case.

HIATT: It's not the case. Usher and Alicia Keys were both on the list, and they both did very well. That said, the main way you make money in music is by touring. And the artists who have the hugest tours tend to be established artists. I mean, in our top 10, we have Jimmy Buffett. We have Phil Collins. We have artists...

WALLACE: Yes, you have Simon and Garfunkel up there, too...

HIATT: We have Simon and Garfunkel...

WALLACE: ... which we were like, what?

HIATT: ... who were splitting a million bucks a night guaranteed. And so, it's a matter of being around for a long time to build fans upon fans. And you wind up going out there and really have a lot of people to play to.

WALLACE: When you look at some of the top money-getters, are you seeing any trends? Are you seeing some people whose popularity might be high or they might be doing well right now, but trending in the downward direction?

HIATT: I don't think it's looking that great for Britney Spears. She made our list. She made roughly $14 million last year, and that was with a tour that she couldn't complete because of a knee injury, they said. That was with an album that didn't do that well.

I think we're going to see in coming years -- I mean, if you look at the chart of her album sales, for instance, it looks like this. And I don't see any reason to reverse that trend, although her perfume is doing very well. So, we...

(CROSSTALK) WALLACE: Because, you know, a lot of people had compared her in some way, the marketing genius perhaps, at some point to Madonna, but it's not looking like that, at least...

HIATT: No, it's not looking like that. But, you know, she actually is quite talented, and she could -- she's in a downward slump right now. She could actually turn it around. We'll have to see.

WALLACE: All right. Well, we'll be watching. Brian Hiatt of "Rolling Stone" magazine, thanks so much.

HIATT: Sure.

WALLACE: Again, lots of surprises on this list. Thanks for stopping by.

And we have another list to share with you; this one from the Global Language Monitor, a group that monitors word use. The group says pinot topped its annual list of show business words influencing the English language last year. That's pinot as in pinot noir, the wine of choice in the movie "Sideways." Of course, you can pick merlot. If you saw that movie, you know what I mean.

Surely we know what the word phrase of 2003 was, and that is -- quote -- "wardrobe malfunction." We don't even need to explain it. You know what we're talking about.

All right. Well, when we come back here on DAYBREAK, may the force be with you in the toy store. This is DAYBREAK for a Thursday morning. We'll be right back.

(COMMERCIAL BREAK)

WALLACE: And we're going to go to Rob Marciano for an update on the traveling forecast.

(WEATHER REPORT)

WALLACE: Well, we're not traveling, but if our viewers are, if they're traveling to New York this weekend, they can catch the International Toy Fair. Among the highlights, a wide array of new "Star Wars" toys. That includes Darth Tater. That's right. He's the little one on the right. Also on display will be trivia games, lifesavers and, of course, action figures galore. We'll have to check it out, Rob. It looks like some pretty cool stuff there.

ROB MARCIANO, CNN METEOROLOGIST: Mr. Potato Head Garth Vader- style, I like that.

WALLACE: All right. Rob, great to see you. From the Time Warner center in New York, I'm Kelly Wallace in today for Carol Costello. The news continues right now with "AMERICAN MORNING."

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Aired February 17, 2005 - 06:28   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KELLY WALLACE, CNN ANCHOR: Moving ahead now to news coming out of Wichita, Kansas. A police news conference is scheduled later this morning on the latest communication sent by an alleged serial killer. It has been decades since the first grisly headlines, a padded manila envelope arriving yesterday at Wichita's KSAS-TV.
Is the second station to receive a message this week, ostensibly from the BTK serial killer. It reads -- quote: "KAKE-TV is a good station, but I feel they are starting to be singled out because of me and causing problems among the people. Let's help the news media and Wichita Police Department by using this package as a start."

The BTK killer -- which stands for bind, torture, kill -- first communicated with television station KAKE decades ago. Now, the latest on the clues in the case from KAKE reporter Theresa Freed.

(BEGIN VIDEOTAPE)

THERESA FREED, CNN AFFILIATE KAKE-TV REPORTER: Some numbers are clearly important to BTK. He's recently started numbering his communications. But in this latest possible package, there's something missing.

(voice over): Numbers. They're showing up everywhere in BTK communications. There were numbers on a list of captors KAKE received back in May. And since the January communication to KAKE, the killer has been numbering his communications.

Today's possible BTK package is labeled No. 11, which would make sense if there was a communication No. 10. But where is it?

Since the killer resurfaced in 2004, there have been 10 communications that we're aware of. The communication numbering started just last month. We received what is called communication No. 8 January 25. It referred to a communication No. 7, a packed police later told us they had recovered.

Communication No. 8 also directed KAKE news to a cereal box near Valley Center. About a week later, No. 9 arrived, another postcard to KAKE. And now, a package to a different station labeled No. 11.

So, where is No. 10? Robert Beattie has a theory.

ROBERT BEATTIE, BTK BOOK AUTHOR: It may be that something happened on February 10. FREED: February 10 was the anniversary of the first communication BTK ever sent to KAKE back in 1979. And, of course, we're Channel 10. So, could communication No. 10 still be out there?

BEATTIE: He's been successful at eluding identification by deception, but it's also possible there is a No. 10 that he's just uncertain whether anybody has recognized it as a message from him.

FREED: It's also interesting that in this latest package from BTK, under contents it says, "C.4." It's believed BTK has used that coding to refer to the chapters he sent in a letter to KAKE. Chapter 4 of that document is "fantasy world." The question is: What could that be referring to?

(END VIDEOTAPE)

WALLACE: And that report was from Theresa Freed of CNN affiliate KAKE-TV.

The messages may just be word games with police. The package sent to the Fox TV affiliate had a return address of -- quote -- "P.J. Fox." One of BTK's victims was Nancy Fox.

Well, you will learn lots of things in high school, but how to make a bomb shouldn't be one of them. One teacher is accused of what you might call an illegal lesson plan. CNN's Bill Hemmer will have more on this on "AMERICAN MORNING."

Good morning -- Bill. It's sort of an incredible story there.

BILL HEMMER, CNN ANCHOR: Yes, not on the list when you sign up for class, that's right. Kelly, good morning to you.

We're going to talk about this high school teacher arrested, accused of teaching students how to make a bomb in class. Police say he taught everything from the ingredients to how to use an electric detonator. We'll also speak with the lead investigator and find out why he says it is hard to believe there is an innocent explanation to all of this. It's part of our coverage, starting at 7:00 this morning.

See you at the top of the hour -- Kelly.

WALLACE: All right, Bill, we'll look forward to that. Again, an incredible story there. See you soon at the top of the hour.

And as we've been mentioning all morning, Defense Secretary Donald Rumsfeld is going back to Capitol Hill today. Secretary Rumsfeld has a date with the Senate Armed Services Committee this morning. He then heads to the House Armed Services Committee this afternoon.

The defense secretary actually cut his Senate testimony short yesterday after the dialogue became extremely heated.

(BEGIN VIDEO CLIP) SEN. ROBERT BYRD (D), WEST VIRGINIA: Why did you choose to ask for $5 billion in Army modularity funds in a supplemental? It seems to me this is the kind of program that ought to be funded and budgeted through the normal appropriations process. Here, we're hit with this request in a supplemental bill.

DONALD RUMSFELD, DEFENSE SECRETARY: This issue of what goes in a supplemental is something that really is beyond my pay grade. It's something that the Congress and the OMB worked on together, and they end up making judgments. And this is the way the judgments came down. I think it's the right judgment.

BYRD: Well, I have to tell you, Mr. Secretary, this seems to me to be an abuse, a serious abuse, of supplemental appropriations requests. I haven't seen anything like this.

SEN. PATRICK LEAHY (D), VERMONT: I think that's why it made sense when Senator Byrd asked, why are some of things that are basically supplemental doing in here? You said it's beyond your pay grade. Well, unless you exclude the commander-in-chief, there's nothing beyond your pay grade in the Department of Defense. You're the secretary of defense. You're the one who is supposed to make that decision.

RUMSFELD: Senator, I thought the Congress was Article 1 of the Constitution.

(END VIDEO CLIP)

WALLACE: Secretary Donald Rumsfeld on Capitol Hill yesterday, again, heading to Capitol Hill today. We'll be watching to see what come out of those appearances.

Well, moving to Iran now, it says it has seen unmanned U.S. spy planes over its nuclear sites, and the government is vowing to shoot them down if they come within range. That seems to confirm a "Washington Post" report that drones have been flying over Iran, looking for evidence of nuclear weapons programs.

CNN military analyst General James "Spider" Marks joins us live from Oakton, Virginia, to discuss this. Actually, we're going to try and get the general on the phone. We're having some trouble. We'll get back to him shortly.

Moving ahead to news about Kid Rock. His arrest record is taking a hit. The rap star is now facing assault charges after a scuffle at a Nashville strip club. He is accused of slugging a deejay, because the guy announced it was closing time. Kid Rock, whose real name is Bob Ritchie, is out of jail on a $3,000 bond.

Omarosa Manigault-Stallworth didn't land the job on "The Apprentice," but she's definitely going to work, criticizing the show. During an NBC teleconference, the former contestant lashed out at the reality show's executive producer, Mark Burnett. She claims the show has a pattern of stereotyping blacks in a negative way. Burnett says all of the contestants are treated fairly. Alanis Morisette is now an American citizen. The singer says she'll hold dual citizenship by maintaining her status as a resident of Canada. Morisette says she's looking forward to make political comments and not being told she doesn't have the right to express an opinion.

And finally, don't look for Jennifer Lopez this week in London. No way. The music and movie diva says she's too sick to travel and has called off her European concert tour. She's also missing the British premiere of her movie, "Shall we dance?"

When it comes to making money in the music business, some of the more -- shall we say -- mature music makers are still raking in the green. "Rolling Stone's" list of the top money-makers in 14 minutes.

And new rules at European Union airports are a boon to stranded travelers. Carrie Lee has details in business news in five minutes.

Here, though, first is a look at what else making news this Thursday morning, February 17. We'll be right back.

(COMMERCIAL BREAK)

WALLACE: And welcome back.

It's time now for a little "Business Buzz." Travelers tired of waiting in airports are getting a little help from the European Union today.

Carrie Lee is at the Nasdaq Marketsite to tell us all about it.

Good morning -- Carrie.

CARRIE LEE, CNN FINANCIAL NEWS CORRESPONDENT: Hi, Kelly.

Some changes are coming under way on Thursday. If you're using an airline, if you're using a European Union airport, well, they're going to have to compensate passengers for things like overbooking, long delays, or canceled flights.

Now, the rules are taking effect on Thursday, as I said. It works like this: If you have a ticket but you've been denied a spot on the plane because the flight is overbooked, you will get up to $780. If your flight is delayed or canceled, then the airline has to give you food and, if necessary, overnight accommodations. And in some cases, carriers have to give the option of a refund trip and a trip back to their point of departure.

So, these are new government rules coming in. And one of the points of doing this is to have consistency throughout the carriers.

U.S. rules are a little less strict. There are typically no guarantees of compensation in the case of overbooking delays. And if there is compensation, then the nature is to be determined by the individual airline policies, not the government. But these new EU rules are even going to require compensation for passengers whose flights are delayed by weather.

So, really stepping up the bar here, Kelly. It will be interesting to see if there's any pressure to follow through here in the U.S.

Back to you.

WALLACE: I know a lot of Americans are watching there. Carrie, what are the futures looking like so far this morning?

LEE: Futures are looking pretty flat at this point. I have to say, we had a lackluster close yesterday, despite Alan Greenspan's remarks. We do have Hewlett-Packard shares moving higher. Well, they did last night, up about 2 percent on their new profit report. So, that could give techs a little bit of a bounce.

Also, we have Wal-Mart and Target, two retailers, reporting this morning. So, those are the stocks to watch for today.

WALLACE: All right. Carrie Lee, great to see you, at the Nasdaq Marketsite.

LEE: You too.

WALLACE: Thanks so much.

Turning back to our story about Iran, it says it has seen unmanned U.S. spy planes over its nuclear sites, and the government is vowing to shoot them down if they come within range. Right now, the White House, the administration is not confirming that drones have been flying over Iran.

We want to bring back on the phone our CNN military analyst, General James "Spider" Marks, joining us live from Oakton, Virginia.

General, are you there? GEN. JAMES "SPIDER" MARKS, CNN MILITARY ANALYST: I am. Good morning, Kelly.

WALLACE: Good morning. Thanks for being with us today.

Let me ask you this. A question of not, if it's true or not. But why would the U.S. run the risk of using drones as opposed to trying to gain some intelligence using satellites, which are less risky?

MARKS: Well, Kelly, the United States certainly has some incredible capabilities to conduct intelligence-collection. And satellites are available, and satellites, frankly, are being used.

What the unmanned aerial vehicles, or drones, provide you is a very dynamic capability to move that platform wherever you need to move it. And you can go after very specific, very pointed targets. And if you pick up some other piece of intelligence during the conduct of that mission, you can move the thing around a little bit. It's a much more flexible asset than a satellite with known pass times. WALLACE: What about, though, the Iranians? Wouldn't they be able to detect these unmanned drones flying over Iranian airspace?

MARKS: Oh, sure, absolutely. I mean, they will emanate. These unmanned aerial vehicles will emanate a signature that can be picked up. But they're relatively small. They operate at multiple altitudes. So, you can change what's called the profile of the UAV as it executes its missions. So, certainly, the Iranians could pick those things up. And if they could engage them, I'm certain they probably would try.

WALLACE: But there's still nothing like having intelligence on the ground, human intelligence.

MARKS: You got it, Kelly.

WALLACE: Tell me about that.

MARKS: You got it. What you really want to have is a complimentary set of intelligence capabilities. You want satellites. You want UAVs. You want other platforms that are what we called air- breathers up there collecting. But you really want guys on the ground, who can knock on doors and do swipe tests and can immediately relay what they see and what they sense and give a really good clear picture of what it is they're dealing with.

WALLACE: You saw the news yesterday, General. Iran and Syria are talking about forming a united front against the United States. It's not clear what this means. But give us sort of the military's perspective. Look at the militaries of Iran and Syria. How formidable could that be against the U.S.?

MARKS: Well, both of these countries have very formidable, relatively-modernized militaries. If you look at Iran, for example, it's got a coastal navy. You know, it's got a great coastline that has to be protected right there in the Persian Gulf.

And the concern for the United States certainly from the military's perspective is that we are smack-dab in between those two countries in Iraq as both Syria and Iran are closing ranks, if you will, diplomatically and militarily, to confront the growing U.S. presence, and the primarily the U.S. influence as democracy starts to bloom and blossom in their neighbor, Iraq.

WALLACE: All right, General, a lot to follow in the days and weeks ahead. Thanks for starting your day and getting up early with us. General James "Spider" Marks on the phone with us from Oakton, Virginia.

Your news, money, weather and sports. It is about 45 minutes after the hour. And here is what is all new this morning.

Defense Secretary Donald Rumsfeld warns that terrorists are regrouping for another strike against the U.S. Today, Secretary Rumsfeld goes before the Senate and House committees working on the defense budget. Thousands of mourners in Beirut gather for the funeral of former Lebanese Prime Minister Rafik Hariri. Washington has all but directly accused Syria of complicity in Monday's assassination. The U.S. ambassador to Damascus has been withdrawn, and Hariri's family demands an international investigation.

In money, the Federal Trade Commission has given the go-ahead for MGM Mirage to buy rival Mandalay Resort Group. The nearly $8 billion deal will give MGM control of 11 resorts on the Las Vegas Strip.

In sports, Illinois cruised to its 26th win, 83-63 over Penn State. It is the longest winning streak in school history, and the fighting Illini got it right this time, are the only undefeated team left in Division 1.

(WEATHER REPORT)

WALLACE: A husband and wife team, you can say, with some serious Hollywood cred (ph). Well, now they turn to Middle America. "AMERICAN MORNING's" Soledad O'Brien joins us now from her office in New York with a look at what she's working on this morning.

Good morning -- Soledad.

SOLEDAD O'BRIEN, CNN ANCHOR: Hey, Kelly, good morning to you.

This morning, we talk to director Spike Lee and his wife, Tonya Lewis Lee (ph). They're working together. They've teamed up for a new series on the N, which is Nickelodeon's nighttime network for teens. Their show is called "Miracle Boys." It's a series of six shows.

We're going to find out this morning why LEE has gotten involved in this project. It's very close to their hearts. Also, we'll tell you about the pretty unusual step that they took to make sure that the series was true to life. It involves a panel of young men and women who are helping them out, keeping it real, as they say.

Kelly -- back to you.

WALLACE: A lot of excitement, Soledad, about that project. It was the buzz in the makeup room the other day on "AMERICAN MORNING." We look forward to it.

O'BRIEN: Where it all happens, as you well know.

WALLACE: That's right. OK, Soledad, we'll see you in a few minutes.

O'BRIEN: Thanks, Kelly.

WALLACE: Thanks so much.

Well, Hollywood produces a lot of buzz words. So, what's the biggest one from 2004?

And the Oscar goes to? Well, we'll it after the break.

And rock royalty gets paid to play. We'll take a look at music's biggest money makers in 2004. This is DAYBREAK for a Thursday. We'll be right back.

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WALLACE: It is 51 after the hour. And here is what will be making news today.

Governor Arnold Schwarzenegger meets with California lawmakers in Washington today. He is trying to drum up federal funding for California as the state faces an $8 billion budget shortfall.

Hollywood meets Washington elsewhere today as Bill Clinton receives the ambassador for humanity award from the survivors of the Shoa (ph) Visual Foundation, a group founded by director Steven Spielberg.

And want to get paid to watch baseball? It sounds like fun. The Washington Nationals are hosting a job fair this weekend to fill 900 jobs being created by the newest Major League club. The positions range from cooks to bartenders to parking attendants.

Well, "Rolling Stone" is out with its list of music's 50 top money makers. And royalty leads the pack with earnings topping $56.5 million last year, more than the DAYBREAK anchor and meteorologist and national correspondent combined.

For more on music moves and shakers, we are joined by Brian Hiatt, who is the editor of "Rolling Stone" magazine.

Bryan, great to be here.

BRIAN HIATT, EDITOR, "ROLLING STONE" MAGAZINE: Good morning.

WALLACE: So, we're talking about maturity, and we're talking about royalty. Let's tell our viewers who is No. 1, the No. 1 money maker when it comes to music.

HIATT: Yes. We've got both maturity and royalty at No. 1. Prince was the No. 1 money maker in music last year.

WALLACE: I think people will find that surprising. How does that happen?

HIATT: (UNINTELLIGIBLE) may even have been surprised. I doubt it. He had a great year. He would get a long period in which he was not a commercial artist. He was not making that much money. He was not having success with tours or albums. He came back with the greatest hits tour, got great reviews, sold out a ton of shows, played a ton of shows, and just made a lot of money. And he kept his costs down, which helped, too. WALLACE: And the material girl is No. 2. I was reading some of your research. She hauls in more money on the road than any other artist, charging as much as $300 a seat. Is that why her numbers are so good?

HIATT: It definitely didn't hurt. Fans tend to hate high ticket prices. And for artists it doesn't work. But if you're Madonna, it works. That said, she also had a very high guarantee every night, so that worked in her favor as well.

What's interesting about her is she actually grossed more money on the road than Prince did. But because she has a million dancers and explosions and who knows what else, her costs were much higher. So, Prince wound up taking home more money.

WALLACE: Coming off the Grammys over the weekend, many of us -- myself included -- would have thought Usher, Alicia Keys, some of these newer, hotter names would have been the top money-getters.

HIATT: Sure.

WALLACE: But that's not the case.

HIATT: It's not the case. Usher and Alicia Keys were both on the list, and they both did very well. That said, the main way you make money in music is by touring. And the artists who have the hugest tours tend to be established artists. I mean, in our top 10, we have Jimmy Buffett. We have Phil Collins. We have artists...

WALLACE: Yes, you have Simon and Garfunkel up there, too...

HIATT: We have Simon and Garfunkel...

WALLACE: ... which we were like, what?

HIATT: ... who were splitting a million bucks a night guaranteed. And so, it's a matter of being around for a long time to build fans upon fans. And you wind up going out there and really have a lot of people to play to.

WALLACE: When you look at some of the top money-getters, are you seeing any trends? Are you seeing some people whose popularity might be high or they might be doing well right now, but trending in the downward direction?

HIATT: I don't think it's looking that great for Britney Spears. She made our list. She made roughly $14 million last year, and that was with a tour that she couldn't complete because of a knee injury, they said. That was with an album that didn't do that well.

I think we're going to see in coming years -- I mean, if you look at the chart of her album sales, for instance, it looks like this. And I don't see any reason to reverse that trend, although her perfume is doing very well. So, we...

(CROSSTALK) WALLACE: Because, you know, a lot of people had compared her in some way, the marketing genius perhaps, at some point to Madonna, but it's not looking like that, at least...

HIATT: No, it's not looking like that. But, you know, she actually is quite talented, and she could -- she's in a downward slump right now. She could actually turn it around. We'll have to see.

WALLACE: All right. Well, we'll be watching. Brian Hiatt of "Rolling Stone" magazine, thanks so much.

HIATT: Sure.

WALLACE: Again, lots of surprises on this list. Thanks for stopping by.

And we have another list to share with you; this one from the Global Language Monitor, a group that monitors word use. The group says pinot topped its annual list of show business words influencing the English language last year. That's pinot as in pinot noir, the wine of choice in the movie "Sideways." Of course, you can pick merlot. If you saw that movie, you know what I mean.

Surely we know what the word phrase of 2003 was, and that is -- quote -- "wardrobe malfunction." We don't even need to explain it. You know what we're talking about.

All right. Well, when we come back here on DAYBREAK, may the force be with you in the toy store. This is DAYBREAK for a Thursday morning. We'll be right back.

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WALLACE: And we're going to go to Rob Marciano for an update on the traveling forecast.

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WALLACE: Well, we're not traveling, but if our viewers are, if they're traveling to New York this weekend, they can catch the International Toy Fair. Among the highlights, a wide array of new "Star Wars" toys. That includes Darth Tater. That's right. He's the little one on the right. Also on display will be trivia games, lifesavers and, of course, action figures galore. We'll have to check it out, Rob. It looks like some pretty cool stuff there.

ROB MARCIANO, CNN METEOROLOGIST: Mr. Potato Head Garth Vader- style, I like that.

WALLACE: All right. Rob, great to see you. From the Time Warner center in New York, I'm Kelly Wallace in today for Carol Costello. The news continues right now with "AMERICAN MORNING."

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