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Lou Dobbs Tonight

Al Qaeda Plans Attack to Disrupt U.S. Elections; Former Enron CEO Ken Lay Pleads Not Guilty

Aired July 08, 2004 - 18:00   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.


KITTY PILGRIM, GUEST HOST: Tonight, the government says it has information that al Qaeda is planning a large-scale attack to disrupt the presidential election.
(BEGIN VIDEO CLIP)

TOM RIDGE, SECRETARY OF HOMELAND SECURITY: This is sobering information about those who wish to do us harm.

(END VIDEO CLIP)

PILGRIM: Tonight, I will talk with former CIA director James Woolsey about the terrorist threat to this country and what we can do to protect ourselves.

Plus, former Enron CEO Ken Lay pleads not guilty to 11 criminal charges, among them securities fraud, wire fraud, and making false statements.

(BEGIN VIDEO CLIP)

KEN LAY, FORMER ENRON CHAIRMAN AND CEO: I firmly reject any notion that I engaged in any wrongful or criminal activity.

(END VIDEO CLIP)

PILGRIM: Insurgents kill five American soldiers in Iraq. Tonight General David Grange will give me his assessment of the strength of the insurgents in Grange on Point.

And a U.S. Marine reported missing in Iraq is tonight at the American embassy in Beirut, but there are many unanswered questions about what happened to Corporal Wassef Hassoun.

ANNOUNCER: This is LOU DOBBS TONIGHT for Thursday, July 8. Here now for an hour of news, debate and opinion, sitting in for Lou Dobbs who is on vacation, Kitty Pilgrim.

PILGRIM: Good evening.

Tonight, a new and disturbing warning that al Qaeda plans a major attack on the United States. Homeland Security Secretary Tom Ridge said al Qaeda wants to disrupt the democratic process before the November elections. Ridge said he has no specific intelligence about an attack. The nation's color-coded threat level will remain elevated at yellow for now.

Justice Correspondent Kelli Arena reports -- Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Kitty, this is the second such warning the public has received. If you remember, it was just six weeks ago that the FBI director and attorney general said intelligence suggested al Qaeda was moving forward with a plan to attack, but then, too, there were no specifics.

Well, today, Secretary Ridge explained that, while the intelligence does not offer a time, place or method, he still considers it very credible.

(BEGIN VIDEO CLIP)

RIDGE: We are basically laying out before the general public the kind of information that we've received, and it's not us -- these are not conjectures or mythical statements we are making. These are pieces of information that we could trace comfortably to sources that we deem to be credible.

(END VIDEO CLIP)

ARENA: But critics say warnings like today's do little to help the public.

(BEGIN VIDEO CLIP)

MICHAEL GREENBERGER, UNIVERSITY OF MARYLAND LAW SCHOOL: With these high-profile, periodic press conferences sort of calling every -- all hands on deck, that you do run the risk of crying wolf, and I think that's a danger that the administration faces.

(END VIDEO CLIP)

ARENA: Senior officials say recent intelligence shows that al Qaeda leaders along the Afghanistan-Pakistan border continue to give orders directing planned attacks, including Osama bin Laden and his number two, Ayman al Zawahiri.

Officials say al Qaeda remains interested in targeting locations that they have struck in the past and they maintain an interest in either attacking aircraft or using airplanes as weapons.

In addition, there is intelligence indicating that al Qaeda is looking at hitting transportation systems. Officials are particularly concerned about the use of truck and car bombs which could be used to destroy bridges, tunnels and other targets -- Kitty.

PILGRIM: All right. Thanks very much.

Kelli Arena.

Now the White House said it's prudent to raise public awareness about the terrorist threat, but some Democrats questioned the timing of the announcement. Those Democrats suggested the warning is designed to overshadow the Kerry-Edwards campaign.

White House Correspondent Suzanne Malveaux has our report -- Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Kitty, this terrorist warning really immediately drew fire from the skeptics who are saying that the Bush administration is engaged in fear mongering. There was one group that put out a release. They believe that this -- the timing of this announcement was to overshadow the Kerry-Edwards ticket, that that has been attracting a lot of attention the last 24 to 48 hours.

Now a lot of Bush administration officials describe the scenario as damned if you do, damned if you don't. They say that while the information is not specific, that it is credible, and they dismiss these accusations that they are trying to bolster the wartime president during elections by using these type of terrorist threats.

(BEGIN VIDEO CLIP)

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: We have an obligation, regardless of the time of year or what year we are in, to protect the American people and keep them informed about what we are doing to provide for their safety and security. And, when we receive credible information like we have regarding the increased risk that we face, we believe it's important to keep the American people informed.

(END VIDEO CLIP)

MALVEAUX: And the Homeland Security Department has offered briefings to both of the campaigns, and all four of the candidates have a Secret Service detail.

The Kerry campaign, however, took this opportunity to make the case here that they believe the Bush administration is not doing enough to protect the homeland, that they did not commit the kinds of resources that are necessary to do that.

They put out a statement, a part of that statement saying "Our crucial intelligence and military resources are overstretched abroad, and our homeland security effort at home is underfunded and poorly managed."

Now, Kitty, you could imagine that both Republicans and Democrats looking at this through a political prism through this election season, both of them trying to gain the upper hand on this very volatile issue -- Kitty.

PILGRIM: Thanks very much.

Suzanne Malveaux.

CIA and FBI officials gave leading senators a private briefing about the al Qaeda threat. Senate Majority Leader Bill Frist said there's no reason for panic or paralysis, but Democratic Senator Charles Schumer said the information is troubling and worrisome. Congressional Correspondent Ed Henry reports -- Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Kitty, you're right. In that closed briefing, a lot of senators afterwards came out saying that they were very concerned about what they heard in there.

In particular, one Democratic senator said that he believed, based on what he heard, the current state of alert is in its worst state since 9/11 currently right now.

A second senator said he felt that it was ominous about the potential for more attacks this summer and in the fall leading up to the election.

But, as you mentioned, Senate Majority Leader Bill Frist tried to calm everyone down. Here's what he said.

(BEGIN VIDEO CLIP)

SEN. BILL FRIST (R), MAJORITY LEADER: There is obviously no reason for panic or no reason for paralysis, but the fact that general intelligence is that the country is at some increased risk between now and the time of the presidential election. It is important for people to be aware of that.

(END VIDEO CLIP)

HENRY: And, Kitty, Democrats also tried to score some political points here. Today, they were saying that they believe the Republicans in the Senate are wasting time on issues like a bill right now that stalled that would limit lawsuits.

Also, next week, Senate Republicans expected to bring up a constitutional amendment banning same-sex marriage. Democrats say that, given this concern about homeland security, Republicans should be focusing on that instead of these other issues.

Here's what Senator Hillary Clinton had to say.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D), NEW YORK: We have an appropriations bill standing in line for homeland security that we cannot get to the floor. Instead, we are engaged in these nonsensical, feudal, parliamentary, political, partisan games. It is a shame, and it reflects on all of us, but it most reflects on the majority leadership of this body.

(END VIDEO CLIP)

HENRY: Now an aide to Senate Majority Leader Bill Frist said, in fact, Republicans have been trying to bring up this homeland security spending bill for weeks, that Democrats are the ones who are blocking. Obviously, as you can imagine, the charges and countercharges are flying fast and furious.

The bottom line is that aides to Senator Frist say it's Democrats who are playing politics with homeland security -- Kitty.

PILGRIM: Thanks very much.

Ed Henry.

Shocking new details today about a security scare in Washington during Ronald Reagan's funeral. Police evacuated hundreds of people from the Capitol Hill building when a suspicious plane approached the area. The plane was carrying Kentucky's governor to the funeral, but air defense commanders had no information about the aircraft, and officers nearly ordered fighter jets to shoot the plane down.

A leading congressman today said he is appalled by the lack of coordination among government agencies.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It's both alarming and unacceptable that, after some two-and-a-half years since September 11, the federal and local agencies involved in airspace control and security still have not resolved some simple coordinations, communications and training issues that were highlighted by this incident.

(END VIDEO CLIP)

PILGRIM: Later, a top official an the Federal Aviation Administration testified that new procedures are now in place to prevent such an incident from happening again.

Still ahead, former Enron CEO Ken Lay faces an 11-count criminal indictment. Lay strongly denies he's guilty of any wrongdoing, and Senior Legal Analyst Jeffrey Toobin will join me.

Intelligence officials say Osama bin Laden is personally planning new attacks on the United States. Former CIA director James Woolsey is my guest.

And missing Marine Wassef Hassoun is safe in the U.S. Embassy in Beirut tonight, but there still is a mystery about what happened to him in Iraq.

(COMMERCIAL BREAK)

PILGRIM: Former Enron Chairman and CEO Kenneth Lay today pleaded not guilty to 11 criminal charges related to the company's collapse in late 2001. Now the charges against Lay include insider trading, securities fraud and wire fraud, and, if convicted, he could face up to 175 years in prison.

Jen Rodgers joins us tonight from Houston -- Jen.

JEN RODGERS, CNN CORRESPONDENT: Kitty, a very busy and dramatic day here in Houston for Ken Lay.

It started quite early, around 6:00 a.m. Central Time, when he turned himself into the FBI. We are told then he was photographed and fingerprinted, then the short drive over to the federal courthouse. He then entered the back of the courthouse in handcuffs.

He then made his initial appearance up here on the seventh floor of the courthouse. At that time, he entered his plea saying "Not Guilty, Your Honor," in a very loud voice.

Now he was released on $500,000 worth of bond. The government actually asked for $6 million, but, again, a release on a $500,000 bond. He left the courthouse hand in hand with his wife Linda Lay.

They then went to a press conference that they had set up at a downtown Houston hotel just in the shadow of Enron's headquarters. It was a wide-ranging press conference, very rare.

He spoke for about 30 minutes answering questions from reporters, talking about Enron's demise and the impact on him and his family as well and also talking about placing some of the blame, saying he takes the responsibility being the man at the very top of the corporate ladder, but that other people, specifically Andrew Fastow, the former CFO who is cooperating with the government and pled guilty already, is to blame as well.

(BEGIN VIDEO CLIP)

LAY: You have a lot of senior officers that have a lot of authority in which you place enormous trust, and, in the process of doing that in over 30 some years, I found that for the most part, those that I put in those positions and I entrusted to those positions have, in fact, justified that trust.

Clearly, in this case, there was at least one, Andy Fastow, that betrayed that trust and betrayed it very, very badly, and that caused an enormous amount of damage at Enron and ultimately caused Enron's collapse.

(END VIDEO CLIP)

RODGERS: Michael Ramsey, Ken Lay's attorney, calling the indictment this week a stretch, but, in Washington, D.C., where the Department of Justice and the FBI had their own press conference, they called it a milestone and a message to corporate America -- Kitty.

PILGRIM: Jen, when is this case expected to go to trial?

RODGERS: Well, that was one of the other interesting things about today. Ken Lay coming out and saying he wants a speedy trial. He wants to get this over with, he says. It's been a two-and-a-half- year investigation leading up to this point, and he is hoping for a September court date.

PILGRIM: All right. Thanks very much.

Jen Rodgers.

Now Enron's collapse touched Off a massive investigation into corporate crime. Since Enron's bankruptcy filing in 2001, 124 American corporate executives have been charged with criminal activity, but some of the most high-profile offenders have yet to see the inside of a jail cell.

Christine Romans reports.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT (voice-over): After more than two years of scandals tore through corporate America, prosecutors promised justice. Nine hundred forty-eight days now since Enron's bankruptcy, and only 10 executives in all of corporate America are in jail.

PROF. JIM COHEN, FORDHAM UNIVERSITY: The government has not been successful, has not been overwhelmingly successful in getting the verdicts that it wants in a timely manner.

ROMANS: Former star investment banker Frank Quattrone, mistrial. Then a conviction on three obstruction counts.

Tyco's Dennis Kozlowski, also a mistrial. A new trial now set for January, but a judge recently threw out half the charges related to dodging taxes on art.

Tyco former CFO Mark Schwartz, mistrial.

Four former Qwest executives, mistrials and acquittals. That prosecution was supposed to be a showcase of the government's fight against corruption.

Now it's back to square one.

For Ken Lay, it's taken more than two years for an indictment. One former prosecutor isn't surprised.

UNIDENTIFIED MALE: You start at the bottom, you work your way up, you put your evidence in, and eventually -- it may take two-and-a- half years -- you can target the very top people in the company with the testimony that will make that a potential successful case.

ROMANS: Even in successful cases, justice has been uneven. A former HealthSouth CFO pleaded guilty, got five years probation, no jail time there. Similar crime, but Dynegy's tax executive fought his fraud charges, and he got 24 years in prison.

(END VIDEOTAPE)

ROMANS: Still, a victory for the government today in the Adelphia case. After an 18-week trial, the jury found former CEO and founder John Rigas and his son Tim Rigas guilty of conspiracy and fraud -- Kitty.

PILGRIM: Thanks very much.

Christine Romans.

Well, joining me now more for more on Ken Lay's indictment and the crackdown on corporate criminals is our senior legal analyst, Jeffrey Toobin.

And, Jeffrey, thanks for joining us.

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Thank you, Kitty.

PILGRIM: Let's just go through the charges. Eleven counts. One count of conspiracy, two of wire fraud, four securities fraud, one bank fraud, three making false statements to banks. How damaging is this? It sounds very damaging.

TOOBIN: It's enormous. As Christine pointed out, sentences are vast in many of these cases when the defendants go to trial. Under the federal sentencing guidelines, Ken Lay is not looking at years in prison, he is looking at decades in prison, if he's convicted of all these charges.

PILGRIM: Now Andrew Fastow had a plea-bargain. How important is the Fastow testimony?

TOOBIN: He is obviously going to be a critical witness, especially when you consider the complexity of some of these charges. You read through this indictment, and you see things like one of the elements of the criminal conspiracy that Ken Lay is supposedly involved in is that he fraudulently accounted for good will in accounting taxes.

How many people do you think understand that sort of thing? It's going to be difficult to persuade the jury, much less what happened, as well as a criminal conspiracy.

PILGRIM: It's taken two-and-a-half years up until now. Does that imply that the government's case is not good, or does it just speak to the complexity of the issue?

TOOBIN: You know, that really isn't that unusual when you get to these white-collar investigations. Think about the Mike Milken investigation of Drexel. That was comparably complex, and that took about the same amount of time. It always works the same way. The prosecutors start with lower level people, flip them, get them to cooperate against higher-ups.

Obviously, the turning point here was when Andy Fastow started to cooperate. Whether they can get Ken Lay is a very different thing. You know, it's one thing to say Ken Lay was in charge, of course, he knew everything. But they've got to have witnesses. They've got to have documents that say Ken Lay approved this criminal activity. We'll see.

PILGRIM: Yes. And how hard is it to get all this through to a jury to understand it, too?

TOOBIN: As I say, you know, these are accounting concepts that are difficult to understand. It's not going to be easy, and though, you know, everybody is opposed to white-collar crime in general, once you get corporate executives who don't look like the conventional idea of criminals with plausible explanations for their behavior, that's why you get a lot of mistrials, hung juries. It's hard to get 12 people to agree that these people are criminals. It's not that easy.

PILGRIM: You know, the whole sort of popular saying was, you know, why prosecute Martha Stewart when you have Ken Lay? And yet, you know, this is what was said widely, and now you have Ken Lay going to trial, and you say it's not that clean cut.

TOOBIN: It's not that easy. You know, Enron has become the synonym for corporate crime, and, certainly, there was a lot of crime there.

But trials aren't tried in the abstract. They're about evidence. They're about very specific things. Who was the witness who will say I know that Ken Lay had a criminal intent?

That's what these cases are all about, not that they made mistakes, not that they were negligent, but they intended to violate the law. Someone's got to come up and say that in front of a jury. That's hard to do.

PILGRIM: All right. Thanks for shedding some light on it. I wish we could be more -- less complex about it. Thanks very much.

Jeffrey Toobin.

All right. A federal judge today denied Martha Stewart's latest request for a new trial. Stewart's attorney asked for a new trial based on allegations that a government ink expert lied on the witness stand. Now the judge in the case today ruled that it was unlikely this perjury affected the jury's verdict. Now Stewart is expected to be sentenced next week to 10 to 16 months in jail.

Coming up, another surprising development in the mysterious disappearance of a U.S. Marine in Iraq. We'll have a live report.

And the threat of terrorism. New warnings tonight that al Qaeda is plotting an attack aimed at disrupting the presidential elections. Former CIA director James Woolsey will join us.

(COMMERCIAL BREAK)

ANNOUNCER: LOU DOBBS TONIGHT continues. Sitting in for Lou Dobbs, Kitty Pilgrim.

PILGRIM: A major development in the case of a U.S. Marine reported missing in Iraq last month. American officials today said Corporal Hassoun is now at the U.S. Embassy in Beirut, Lebanon. Now officials are trying to find out what happened to Corporal Hassoun after he disappeared in Iraq.

Senior Pentagon Correspondent Jamie McIntyre has the report -- Jamie.

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, Kitty, as you can imagine, there are many questions surrounding the disappearance of Corporal Wassef Hassoun and then his reappearance in Tripoli, Lebanon, 18 days later, questions that will now be directed at him by military investigators.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Corporal Hassoun is safe and currently at the U.S. Embassy compound in Lebanon -- in Beirut. We have no additional information at this time regarding the events that led to his arrival in Lebanon. Investigators continue to look into the circumstances surrounding his situation.

(END VIDEO CLIP)

MCINTYRE: Pentagon sources say before Corporal Hassoun got to the U.S. Embassy in Beirut, Lebanon, it took three tries to arrange a meeting. Officials say eventually Hassoun turned himself over voluntarily.

He is now under military control and faces tough questions from Navy criminal investigators over why he left his unit in Fallujah, Iraq, July 20 and what help he got to travel to Tripoli, Lebanon, over 500 miles away, through Syria 18 days later.

At first, sources said the Marine Corps suspected Hassoun, an Arabic speaker working as a military truck driver, wanted to desert to Lebanon where he was born and still had family.

Now Pentagon sources say investigators are also looking into whether the video purporting to show Hassoun captured and threatened with beheading by an obscure Islamic militant group was real or was it a hoax staged to cover his desertion.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We don't know. I'm saying we don't know, and there's no sense speculating because most of the speculation to this point has been confused, and so we're just not going to contribute to that.

(END VIDEO CLIP)

MCINTYRE: The Pentagon says eventually the investigation into this incident will uncover the facts. Meanwhile, as they said, they're strongly encouraging there be no speculation. If it turned out that Hassoun was a deserter and had deserted in time of war, he would technically face the death penalty -- Kitty.

PILGRIM: All right. Thanks very much.

Jamie McIntyre.

Senior intelligence officials said today that al Qaeda leaders are planning attacks on the United States from hideouts on the border between Afghanistan and Pakistan. Now those officials said Osama bin Laden and his top lieutenants are actively involved in planning terrorist operations. Intelligence agencies are particularly concerned about the possibility of an attack like the Madrid train bombing in March, just before the Spanish general election. Joining me now is former CIA director James Woolsey to talk to us about this.

And thanks very much for joining us, sir.

JAMES WOOLSEY, FORMER CIA DIRECTOR: Good to be with you, Kitty.

PILGRIM: Now there is no who, what, when or where, no specific, and yet the announcement today. Do you think this is too vague to be helpful, or do you think this is extraordinarily helpful?

WOOLSEY: Well, neither. It's probably a little bit helpful. People should know that something may be coming and that al Qaeda is planning something major before our elections. That's been speculated about, and there's been reports about it actually for some time.

I think that it is not very helpful to people in planning and trying to decide what they're going to do. But at least they know a little bit more to be alert, and, sometimes when you're a little bit more alert, you pick up on things that you otherwise might not pick up on.

I think they had to say it. If they had known who, where what and when, they probably would have kept quiet about it and gone into those facts very privately in some detail.

PILGRIM: The color code -- we're not shifting -- at yellow, elevated still. Do you agree with that, or do you think we should maybe switch?

WOOLSEY: There have been enough jokes about the color code and duct tape, I think, that they may be in the mood of saying that they're really not going to go moving those colors around unless there's some very, very specific reason to do so.

PILGRIM: Let me ask your considerably expert opinion. Are we better prepared than we were before September 11 for a large-scale, as they say, attack being planned?

WOOLSEY: Again, I think the answer is somewhat. We're better prepared probably with respect to protection of aircraft. There's still some mistakes made, as in the case of a small plane that got everyone confused here in Washington some weeks ago, but it didn't have its transponder registering on all parts of the government's receivers.

But we -- the Department of Homeland Security announced today they'd given those radiometers to pick up radiation -- hundreds of them to local law enforcement. If there should be a dirty bomb, that sort of thing would be useful. hey have a new command post. They have new communications.

But some of the basic things like dirty bombs in containers on container ships or on rail or attacking toxic chemical transportation in rail cars or something like that are very tough problems, and I don't know that there's been much attention at least effectively paid to improving our resilience in those areas.

PILGRIM: And so you think in certain areas we're largely unprepared?

WOOLSEY: Well, I think there are -- there's planning and thinking going on, but, in a number of these areas, particularly with respect to weapons of mass destruction -- look, smallpox -- they can't even figure out how to get the first responders vaccinated, and, if the first responders are not vaccinated and there's a smallpox outbreak and that would be from terrorism, we're really behind the power curve in trying to get everybody vaccinated in time.

So some of this is just reluctance to take steps that could have problems themselves but would at least be preparatory. Some of it is the problem is really hard. Some things they've made progress on. It's a mixed picture.

PILGRIM: CIA Director George Tenet had his goodbye party today, and now we have an acting direction, John McLaughlin. By his only being an acting director, do you think he's in any way limited. Do you think this is a bad situation? Should we have a permanent director?

WOOLSEY: Well, John McLaughlin is a very able analyst and executive in the intelligence business. He worked for me when I was director in the early and mid-90s. He will do a fine job as acting director.

But at some point -- possibly this fall, possibly next winter -- they need to move after a few months to having a full-time confirmed director. I think it's a political question more than any other whether the administration wants to nominate someone and have a lot of hearings on him or her and the nature of the CIA issues during the middle of the election campaign.

In substantive terms, John McLaughlin can very easily carry on until next winter or beyond if he should be picked to be the permanent director.

PILGRIM: So much focus is being put on the election and, you know, the al Qaeda threat up to the election, the appointment of a permanent director after the election.

Do you think we're sort of taking a wrong time cue here? Shouldn't we be thinking more permanently?

WOOLSEY: Well, it would be fine to nominate someone. A number of the people who have been speculated about, such as Porter Goss, would be very fine directors of Central Intelligence. But I don't think there's a matter of urgency in getting someone in there permanently as long as you have a career officer who's as able as John McLaughlin to serve on an interim enacting basis.

When I stepped down in January of 1995 for several months, my deputy, Admiral Studeman, who was a long time career intelligence professional, did an excellent job. And like McLaughlin, Bill could have been the permanent director if they'd chosen to nominate him.

So, I think we're blessed by somebody as able as McLaughlin. I don't think there's an urgency to move to having a nomination.

PILGRIM: All right. Thanks very much for your insight this evening. Former CIA Director James Woolsey. Thank you.

WOOLSEY: Good to be with you.

PILGRIM: That brings us to the topic of tonight's poll: What do you think is behind the latest terror warnings -- new intelligence, ongoing threat, or playing politics? Cast your vote at CNN.COM/LOU, and we'll bring you the results later in the show.

Now let's take a look at some of your thoughts on the new Kerry- Edwards ticket. And Barbara Piwko of Avondale, Arizona, "On the Pundits who are saying that John Edwards has no experience in foreign relations. Didn't we have an individual running for president four years ago in the same boat?"

John from Rochester, New York, "Who cares if Senator Edwards hasn't served that long in the Senate? Actually, that's a blessing. He's not a long-time Washington insider," and "That's a breath of fresh air."

And Bob Ruris of Irvine, California, "The choice of John Edwards has the experts in the current administration touting how critical it is to have international experience to govern this country. These are the same experts who got virtually everything wrong when it came to Iraq."

And Joshua Tofield wrote in about Edwards' professional career. "The choice of a trial lawyer eliminates any chance of desperately needed tort reform. Kerry should have chosen more wisely in order to help our medical care professionals care for our citizens."

Do send us your thoughts: CNN@ -- LOUDOBBS@CNN.COM.

Still ahead here tonight: Violence intensifies in Iraq, and another five Americans are dead. General David Grange will join us in "Grange on Point."

Plus, Senator Kerry and Edwards campaign in the state where Gore lost the last election. And we'll tell you why they say this year will be different.

Plus, a prominent Republican questions whether Vice President Cheney is doing more harm than good to the GOP ticket. Those stories and much more still ahead here tonight.

(COMMERCIAL BREAK)

PILGRIM: In Iraq today, insurgents killed five American soldiers in a mortar attack on an Iraqi National Guard base. One Iraqi guardsman was also killed. Twenty Americans and three Iraqis were wounded. Brent Sadler reports from Baghdad.

(BEGIN VIDEOTAPE)

BRENT SADLER, CNN CORRESPONDENT: It was during fierce clashes in Samarra -- 60 miles, or some 90 kilometers north of Baghdad -- that the local headquarters of Iraq's National Guard came under heavy mortar fire.

The U.S. Soldiers were killed, and some 20 others injured. (AUDIO GAP) after taking direct hits. The Iraqis also sustained casualties: one killed and three others injured.

Samarra is a hotbed of violence aimed at Iraqi and multinational forces. It's just south of Tikrit, a stronghold of militant ex- regimists, and it lies within the so-called Sunni Triangle that includes Fallujah -- now virtually controlled, say U.S. Military commanders, by armed extremists.

In a further attempt to undermine international support for the U.S.-led mission here, a so far unheard of group of kidnappers released a video of a Filipino hostage, threatening to behead him unless Washington's staunch Asian ally withdraws its troops.

The Philippine military presence here is little more than symbolic, around 50 troops engaged in humanitarian work. But their presence is politically valuable to President George W. Bush.

The authorities in Manila, meanwhile, acted swiftly to calm popular outrage, banning work related travel to Iraq, hoping that, like Turkey recently, they'll be able to negotiate a release.

Brent Sadler, CNN, Baghdad.

(END VIDEOTAPE)

PILGRIM: The insurgent attacks continue in Iraq almost two weeks after the new government took control. As Brent Sadler reported, Fallujah in particular has been a hotbed of terrorist activity.

And joining me now for more on that in "Grange on Point" is General David Grange. And thanks very much for joining us this evening.

BRIG. GENERAL DAVID GRANGE (RET.), CNN MILITARY ANALYST: Good evening.

PILGRIM: Fallujah seems to be what they call a safe haven. What can be done about that?

GRANGE: Well, I think, for right now, nothing. It's going to be contained by coalition forces. The Iraqi Fallujah Brigade will continue to patrol parts of the city with limited success.

They're not recognized by the inhabitants as really legitimate rule of law enforcers, nor will the insurgents or terrorists in the city abide by their guidance, their force, which is very limited.

I think it will only be able to be contained for right now, since the U.S. has taken more of a backseat, but eventually the enclave within the State of Iraq will have to be taken back by the State of Iraq. It cannot be left to flourish for terrorists.

PILGRIM: U.S. troops moved out in April. Do you think they should go back in, or do you think it's more important to let the Iraqis deal with this?

GRANGE: Well, the Iraqis have to deal with it unless they ask the U.S. to assist. I think the U.S. will be involved in airstrikes when they have intelligence on certain targets or even raids by special operation forces, if they have a high-value target like Zawahiri that they think they can take down. But unless the Iraqi government asks, they will not.

PILGRIM: There's some discussion that the Pentagon is reportedly looking at troop withdrawal and a timetable for that, potentially by 2006. How realistic do you think that is based on the level of activity that we've seen in recent weeks?

GRANGE: Well, I think that there's going to be some draw down eventually -- maybe by 2006, could be later. It's very prudent to have plans to increase or decrease the troop levels in that theater of operations right now.

But it's not going to be timed or in effect from timetables. It's going to take place as events occur. For instance, certain conditions are met, like Iraqi military or the police can, in fact, produce a credible force that is viable in certain areas. Until those things happen, I don't think you're going to see much force changing.

PILGRIM: General Grange, what defense do we have about this -- for this tactic, where they take a hostage and demand that troops be withdrawn? Obviously, no countries will comply with this request, and yet it's a very disturbing trend.

Is there any defense, do you think, or any way to deal with this?

GRANGE: The only way really to deal with it is show resolve by not giving in. Because when you give in, then it will just multiply even worse than it is right now. The goal is to obviously is to wear down the resolve of the nations involved. The best tactic is to go down and take out, whenever you can, the insurgents that are causing these kidnappings and atrocities. Just keep the pressure on the enemy.

PILGRIM: Do you think it's important that there's demonstrable progress in some of the infrastructures, such as oil and electricity, and we haven't seen quite as much progress as had been hoped for at the beginning of the end of this conflict. Do you think that it's necessary for the Iraqi population to give full support to the interim government?

GRANGE: Well, they're never going to get full support, but the majority of support is critical. And it's a credibility issue not only for the interim Iraqi government, but the coalition forces, that a viable oil production and export takes place since it's key to the economy, as well as the electronic infrastructure to provide quality of life to the Iraqis.

It must be done. It's a tough security task. Additional efforts have been applied to that task. But, again, linear targets, miles of pipe lines and facilities on land and at sea are very tough to secure.

PILGRIM: Thanks very much for your insight tonight. General David Grange.

GRANGE: Thank you.

PILGRIM: Still ahead tonight, on the campaign trail, in a critical state, John Kerry and John Edwards battle for Florida. We'll have that report.

Also ahead, is the vice president helping or hurting the president's re-election bid? Senior political analyst Bill Schneider looks at the Cheney effect on the Republicans chances.

And good news for American workers tonight, the United States claims a major victory in a trade dispute with China. We'll have a special report.

(COMMERCIAL BREAK)

PILGRIM: The new warning about terrorism before the election came as the Edwards-Kerry ticket campaigned in the battle ground state of Florida. Now senators John Kerry and John Edwards told Florida voters that they have a better plan to protect national security. Kelly Wallace has the report.

(BEGIN VIDEOTAPE)

KELLY WALLACE, CNN CORRESPONDENT (voice-over): In Fort Lauderdale, team Kerry-Edwards tries to stay on message. No, it would not echo charges from some Democrats that the White House is playing politics with terrorism, but, yes, it would hammer away at the Bush- Cheney record on homeland security.

SEN. JOHN KERRY (D-MA) PRESIDENTIAL CANDIDATE: John and I know how to fight a war on terror that doesn't create more terrorists, but makes America safer.

WALLACE: But with homeland security officials saying al Qaeda may mount an attack, hoping to disrupt the election, the Kerry campaign felt it needed to issue a statement that said, in part, "terrorists will not determine the results of this election, the American people will."

And then, back on message: In the place where passions still run deep over the disputed 2000 election, when Al Gore was behind by just 537 votes as the U.S. Supreme Court ordered an end to the recount. John Kerry delighting the crowd with this idea for his running mate's young children.

KERRY: We're sending Jack and Emma Claire down here to help those Republicans in West Palm Beach count those votes.

WALLACE: Polls show this race is neck and neck for Florida's 27 electoral votes, the biggest prize of any battle ground state. And Democrats are hoping John Edwards, with his sunny disposition and small town roots can win over conservative Democrats and independents who voted for George W. Bush in 2000.

SEN. JOHN EDWARDS (D-NC) VICE PRESIDENTIAL CANDIDATE: We share a vision, and we share a set of values. They're the same values that I grew up with in that little town out in the country in North Carolina.

WALLACE: Already, the addition seems to be loosening up the top of the ticket. Here, Kerry jokes about what they have in common.

KERRY: As you know, we both share the first name John. John was selected as "People" magazine's sexiest politician of the year. I read "People" magazine.

WALLACE: From here, team Kerry-Edwards heads to New York City for a star studded concert expected to raise $5 million.

(on camera): Tomorrow, it's off to the battle ground states of West Virginia and New Mexico before wrapping up this tour in Senator Edwards' home state of North Carolina. Kelly Wallace, CNN, Fort Lauderdale, Florida.

(END VIDEOTAPE)

PILGRIM: Senator Edwards' energetic debut on the campaign trail has added to questions about President Bush's running mate. Now this week, a prominent Republican said that President Bush could guarantee his re-election by kicking Vice President Cheney off the ticket. Bill Schneider has the report.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: It's a question that keeps coming up in political circles: Should President Bush dump Dick Cheney? To Democrats, Cheney is scary.

TERRY MCAULIFFE, RNC CHAIRMAN: When they think of Dick Cheney, they think of Halliburton they think -- he is our new Newt Gingrich.

SCHNEIDER: President Bush likes to contrast with the less experienced John Edwards.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Dick Cheney can be president.

SCHNEIDER: The Democrats' response, he is president.

KERRY: He is right that Dick Cheney was ready to take over on day one, and he did, and he has been ever since, folks. SCHNEIDER: Democrats believe Cheney is a liability with voters.

SEN. EDWARD KENNEDY, (D) MASSACHUSETTS: They're also looking for people, a leadership that aren't going to be beholden to special interests. Hello, Dick Cheney, do you hear us now?

SCHNEIDER: There's the continuing squabble between Cheney and the 9/11 commission over intelligence.

RICHARD BEN VENISTE, 9/11 COMMISSION MEMBER: We have reached a conclusion, and that conclusion is Iraq was not involved in 9/11.

SCHNEIDER: There's the potty mouth episode: The crude remark the vice president hurled at a Democratic senator.

UNIDENTIFIED MALE: He ought to go back and get some vocabulary lessons.

SCHNEIDER: Cheney is not a happy warrior. This week, a Republican said it out loud: Bush should dump Cheney.

ALFONSE D'AMATO, (R) FRM. NEW YORK SENATOR: I will shock Republicans and probably get them angry, but I think we could do better.

SCHNEIDER: It's a sign some Republicans are nervous, like they were in 1992 when Bush's father ran for re-election. People urged him to dump Dan Quayle. His response?

GEORGE H.W. BUSH, FRM. PRESIDENT OF THE UNITED STATES: He has been a super vice president, and he will be for another four years.

SCHNEIDER: This President Bush will almost certainly have the same response.

(END VIDEOTAPE)

SCHNEIDER: Why? Because Bush's conservative base loves Cheney and because Cheney embodies this administration's steadfastness in the war on terror.

You know, the Bush campaign has spent a lot of money branding John Kerry as a flip flopper. If Bush were to dump Cheney, Democrats would lose no time saying, look who's the flip flopper now -- Kitty.

PILGRIM: All right, thanks very much. Bill Schneider.

A reminder now to vote in tonight's poll. "What do you think is behind the latest terror warnings?" New intelligence, an ongoing threat, or playing politics? Cast your vote at CNN.com/lou. We'll bring you the results a little later in this show.

Also ahead, a major trade victory over China for one American industry. We'll have the details.

And "Made in America." We'll report on a Chicago-based company that sends its high tech products all over the world, but keeps its work force all over the United States. The story of Rubicon Technology when we return.

(COMMERCIAL BREAK)

PILGRIM: A $2 billion victory tonight for American industry. The United States has settled a massive trade dispute with china and the terms of that settlement are very positive for this country's semiconductor industry and its workers. Bill Tucker reports.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): The agreement ends the first ever world trade organization case against China. Its resolution means that china will no longer impose a discriminatory tax on semiconductors designed or made outside of China, a tax that currently adds 17 percent to the price of semis produced outside of China and only 3 percent on chips produced inside of China. Under the agreement, the tax discrimination will be phased out by April 1st of next year.

ROBERT ZOELLICK, U.S. TRADE REPRESENTATIVE: It's a decision that means that fair treatment for America's high tech exports in a very large but fast-growing Chinese market.

TUCKER: China is the world's third largest consumer of semiconductors. U.S. Factories exported $2 billion worth of chips to China last year. The Semiconductor Industry Association was eager to join with the office of the U.S. Trade Representative in announcing the agreement and underlined what the agreement means to its industry.

GEORGE SCALISE, PRESIDENT, SEMICONDUCTOR INDUSTRY ASSOCIATION: We now have and have had for many years over 50 percent of the worldwide market. We plan to continue to have that kind of market leadership. In addition to that, about 70 percent of our manufacturing of high technology wafer capability is here in the U.S. And with that, about 70 percent of our employees. So, we're going to continue to make investments as a consequence of this agreement, and we'll continue to employ more people here in the U.S.

TUCKER: An issue that's become increasingly important and pointed with the export of high tech workers to countries like India and China.

(END VIDEOTAPE)

TUCKER: The administration today calls the agreement good news, and it would appear to be just that. Critics, however, wonder about the enforcement. Now, trade officials say compliance will be monitored in China by the industry as well as U.S. government officials -- Kitty.

PILGRIM: All right. Thanks very much, Bill Tucker.

Now our "Made in America" series. Our look at companies which choose to keep jobs right here in the United States. And tonight a Chicago-based company, Rubicon Technology. The company makes sapphire crystals that used in some very recognizable places.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): The Chicago company makes sapphire crystals, the same gem stone used in jewelry. But these are used in electronic light called light emitting diodes or LEDs. That technology is used in traffic lights, cell phones, and even the Nasdaq sign in New York. Rubicon's CEO hopes LEDs may someday replace the every daylight bulb.

CHRIS MOFFITT, CEO RUBICON TECHNOLOGY: The white LEDs will use one-tenth of the power of a traditional bulb or tube. And will last for 10,000 hours rather than 1,000 or 2,000 hours.

SYLVESTER: Rubicon has been able to go up against industry big names like Honeywell because it has streamlined its manufacturing process. It has a trade secret formula for growing the sapphires in a furnace, which gets half as hot as the sun's surface. The sapphire is sliced into circles no thicker than a business card, then polished and shipped off to its customers, most of whom are in Asia. The company's owner would not consider moving operations overseas because the skilled workers he needs are here in the United States.

MOFFITT: We need a consistent high quality water supply. We need a very consistent high quality power supply. And the most important thing is that we need a good pool of skilled machinists in the manufacturing processes.

SYLVESTER: And Rubicon values its 125 employees. The private company covers 100 percent of the health benefits and offers all employees stock options.

MOFFITT: They realize it's not just punching a clock and being here on time. There's an appeal to it, which is, if I work hard and stay the course, there's a potential payoff at the end.

SYLVESTER: Rubicon's CEO won't share the formula for making the sapphire crystals, but will share his competitive advantage. It's his American employees trained to stay on the cusp of technology that allow the company to make a quality product.

Lisa Sylvester, CNN, Chicago.

(END VIDEOTAPE)

PILGRIM: "Tonight's thought" is on patriotism. "Patriotism is not short, frenzied outbursts of emotion, but the tranquil and steady dedication of a lifetime." Those are the words of politician and diplomat Adial Stevenson.

Still head, the results of "Tonight's Poll." But first a reminder to check the Web site for the complete list of companies we've confirmed to be exporting America. Cnn.com/lou.

(COMMERCIAL BREAK)

PILGRIM: Now the results of "Tonight's Poll." Four percent of you think new intelligence is behind the latest terror warnings, 6 percent say ongoing threat, 90 percent say playing politics.

Thanks for joining us tonight. Please join us tomorrow. Richard Falkenrath former deputy of Homeland Security advisor will join us.

For all us here, good night from New York.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com


Aired July 8, 2004 - 18:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KITTY PILGRIM, GUEST HOST: Tonight, the government says it has information that al Qaeda is planning a large-scale attack to disrupt the presidential election.
(BEGIN VIDEO CLIP)

TOM RIDGE, SECRETARY OF HOMELAND SECURITY: This is sobering information about those who wish to do us harm.

(END VIDEO CLIP)

PILGRIM: Tonight, I will talk with former CIA director James Woolsey about the terrorist threat to this country and what we can do to protect ourselves.

Plus, former Enron CEO Ken Lay pleads not guilty to 11 criminal charges, among them securities fraud, wire fraud, and making false statements.

(BEGIN VIDEO CLIP)

KEN LAY, FORMER ENRON CHAIRMAN AND CEO: I firmly reject any notion that I engaged in any wrongful or criminal activity.

(END VIDEO CLIP)

PILGRIM: Insurgents kill five American soldiers in Iraq. Tonight General David Grange will give me his assessment of the strength of the insurgents in Grange on Point.

And a U.S. Marine reported missing in Iraq is tonight at the American embassy in Beirut, but there are many unanswered questions about what happened to Corporal Wassef Hassoun.

ANNOUNCER: This is LOU DOBBS TONIGHT for Thursday, July 8. Here now for an hour of news, debate and opinion, sitting in for Lou Dobbs who is on vacation, Kitty Pilgrim.

PILGRIM: Good evening.

Tonight, a new and disturbing warning that al Qaeda plans a major attack on the United States. Homeland Security Secretary Tom Ridge said al Qaeda wants to disrupt the democratic process before the November elections. Ridge said he has no specific intelligence about an attack. The nation's color-coded threat level will remain elevated at yellow for now.

Justice Correspondent Kelli Arena reports -- Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Kitty, this is the second such warning the public has received. If you remember, it was just six weeks ago that the FBI director and attorney general said intelligence suggested al Qaeda was moving forward with a plan to attack, but then, too, there were no specifics.

Well, today, Secretary Ridge explained that, while the intelligence does not offer a time, place or method, he still considers it very credible.

(BEGIN VIDEO CLIP)

RIDGE: We are basically laying out before the general public the kind of information that we've received, and it's not us -- these are not conjectures or mythical statements we are making. These are pieces of information that we could trace comfortably to sources that we deem to be credible.

(END VIDEO CLIP)

ARENA: But critics say warnings like today's do little to help the public.

(BEGIN VIDEO CLIP)

MICHAEL GREENBERGER, UNIVERSITY OF MARYLAND LAW SCHOOL: With these high-profile, periodic press conferences sort of calling every -- all hands on deck, that you do run the risk of crying wolf, and I think that's a danger that the administration faces.

(END VIDEO CLIP)

ARENA: Senior officials say recent intelligence shows that al Qaeda leaders along the Afghanistan-Pakistan border continue to give orders directing planned attacks, including Osama bin Laden and his number two, Ayman al Zawahiri.

Officials say al Qaeda remains interested in targeting locations that they have struck in the past and they maintain an interest in either attacking aircraft or using airplanes as weapons.

In addition, there is intelligence indicating that al Qaeda is looking at hitting transportation systems. Officials are particularly concerned about the use of truck and car bombs which could be used to destroy bridges, tunnels and other targets -- Kitty.

PILGRIM: All right. Thanks very much.

Kelli Arena.

Now the White House said it's prudent to raise public awareness about the terrorist threat, but some Democrats questioned the timing of the announcement. Those Democrats suggested the warning is designed to overshadow the Kerry-Edwards campaign.

White House Correspondent Suzanne Malveaux has our report -- Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Kitty, this terrorist warning really immediately drew fire from the skeptics who are saying that the Bush administration is engaged in fear mongering. There was one group that put out a release. They believe that this -- the timing of this announcement was to overshadow the Kerry-Edwards ticket, that that has been attracting a lot of attention the last 24 to 48 hours.

Now a lot of Bush administration officials describe the scenario as damned if you do, damned if you don't. They say that while the information is not specific, that it is credible, and they dismiss these accusations that they are trying to bolster the wartime president during elections by using these type of terrorist threats.

(BEGIN VIDEO CLIP)

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: We have an obligation, regardless of the time of year or what year we are in, to protect the American people and keep them informed about what we are doing to provide for their safety and security. And, when we receive credible information like we have regarding the increased risk that we face, we believe it's important to keep the American people informed.

(END VIDEO CLIP)

MALVEAUX: And the Homeland Security Department has offered briefings to both of the campaigns, and all four of the candidates have a Secret Service detail.

The Kerry campaign, however, took this opportunity to make the case here that they believe the Bush administration is not doing enough to protect the homeland, that they did not commit the kinds of resources that are necessary to do that.

They put out a statement, a part of that statement saying "Our crucial intelligence and military resources are overstretched abroad, and our homeland security effort at home is underfunded and poorly managed."

Now, Kitty, you could imagine that both Republicans and Democrats looking at this through a political prism through this election season, both of them trying to gain the upper hand on this very volatile issue -- Kitty.

PILGRIM: Thanks very much.

Suzanne Malveaux.

CIA and FBI officials gave leading senators a private briefing about the al Qaeda threat. Senate Majority Leader Bill Frist said there's no reason for panic or paralysis, but Democratic Senator Charles Schumer said the information is troubling and worrisome. Congressional Correspondent Ed Henry reports -- Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Kitty, you're right. In that closed briefing, a lot of senators afterwards came out saying that they were very concerned about what they heard in there.

In particular, one Democratic senator said that he believed, based on what he heard, the current state of alert is in its worst state since 9/11 currently right now.

A second senator said he felt that it was ominous about the potential for more attacks this summer and in the fall leading up to the election.

But, as you mentioned, Senate Majority Leader Bill Frist tried to calm everyone down. Here's what he said.

(BEGIN VIDEO CLIP)

SEN. BILL FRIST (R), MAJORITY LEADER: There is obviously no reason for panic or no reason for paralysis, but the fact that general intelligence is that the country is at some increased risk between now and the time of the presidential election. It is important for people to be aware of that.

(END VIDEO CLIP)

HENRY: And, Kitty, Democrats also tried to score some political points here. Today, they were saying that they believe the Republicans in the Senate are wasting time on issues like a bill right now that stalled that would limit lawsuits.

Also, next week, Senate Republicans expected to bring up a constitutional amendment banning same-sex marriage. Democrats say that, given this concern about homeland security, Republicans should be focusing on that instead of these other issues.

Here's what Senator Hillary Clinton had to say.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D), NEW YORK: We have an appropriations bill standing in line for homeland security that we cannot get to the floor. Instead, we are engaged in these nonsensical, feudal, parliamentary, political, partisan games. It is a shame, and it reflects on all of us, but it most reflects on the majority leadership of this body.

(END VIDEO CLIP)

HENRY: Now an aide to Senate Majority Leader Bill Frist said, in fact, Republicans have been trying to bring up this homeland security spending bill for weeks, that Democrats are the ones who are blocking. Obviously, as you can imagine, the charges and countercharges are flying fast and furious.

The bottom line is that aides to Senator Frist say it's Democrats who are playing politics with homeland security -- Kitty.

PILGRIM: Thanks very much.

Ed Henry.

Shocking new details today about a security scare in Washington during Ronald Reagan's funeral. Police evacuated hundreds of people from the Capitol Hill building when a suspicious plane approached the area. The plane was carrying Kentucky's governor to the funeral, but air defense commanders had no information about the aircraft, and officers nearly ordered fighter jets to shoot the plane down.

A leading congressman today said he is appalled by the lack of coordination among government agencies.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It's both alarming and unacceptable that, after some two-and-a-half years since September 11, the federal and local agencies involved in airspace control and security still have not resolved some simple coordinations, communications and training issues that were highlighted by this incident.

(END VIDEO CLIP)

PILGRIM: Later, a top official an the Federal Aviation Administration testified that new procedures are now in place to prevent such an incident from happening again.

Still ahead, former Enron CEO Ken Lay faces an 11-count criminal indictment. Lay strongly denies he's guilty of any wrongdoing, and Senior Legal Analyst Jeffrey Toobin will join me.

Intelligence officials say Osama bin Laden is personally planning new attacks on the United States. Former CIA director James Woolsey is my guest.

And missing Marine Wassef Hassoun is safe in the U.S. Embassy in Beirut tonight, but there still is a mystery about what happened to him in Iraq.

(COMMERCIAL BREAK)

PILGRIM: Former Enron Chairman and CEO Kenneth Lay today pleaded not guilty to 11 criminal charges related to the company's collapse in late 2001. Now the charges against Lay include insider trading, securities fraud and wire fraud, and, if convicted, he could face up to 175 years in prison.

Jen Rodgers joins us tonight from Houston -- Jen.

JEN RODGERS, CNN CORRESPONDENT: Kitty, a very busy and dramatic day here in Houston for Ken Lay.

It started quite early, around 6:00 a.m. Central Time, when he turned himself into the FBI. We are told then he was photographed and fingerprinted, then the short drive over to the federal courthouse. He then entered the back of the courthouse in handcuffs.

He then made his initial appearance up here on the seventh floor of the courthouse. At that time, he entered his plea saying "Not Guilty, Your Honor," in a very loud voice.

Now he was released on $500,000 worth of bond. The government actually asked for $6 million, but, again, a release on a $500,000 bond. He left the courthouse hand in hand with his wife Linda Lay.

They then went to a press conference that they had set up at a downtown Houston hotel just in the shadow of Enron's headquarters. It was a wide-ranging press conference, very rare.

He spoke for about 30 minutes answering questions from reporters, talking about Enron's demise and the impact on him and his family as well and also talking about placing some of the blame, saying he takes the responsibility being the man at the very top of the corporate ladder, but that other people, specifically Andrew Fastow, the former CFO who is cooperating with the government and pled guilty already, is to blame as well.

(BEGIN VIDEO CLIP)

LAY: You have a lot of senior officers that have a lot of authority in which you place enormous trust, and, in the process of doing that in over 30 some years, I found that for the most part, those that I put in those positions and I entrusted to those positions have, in fact, justified that trust.

Clearly, in this case, there was at least one, Andy Fastow, that betrayed that trust and betrayed it very, very badly, and that caused an enormous amount of damage at Enron and ultimately caused Enron's collapse.

(END VIDEO CLIP)

RODGERS: Michael Ramsey, Ken Lay's attorney, calling the indictment this week a stretch, but, in Washington, D.C., where the Department of Justice and the FBI had their own press conference, they called it a milestone and a message to corporate America -- Kitty.

PILGRIM: Jen, when is this case expected to go to trial?

RODGERS: Well, that was one of the other interesting things about today. Ken Lay coming out and saying he wants a speedy trial. He wants to get this over with, he says. It's been a two-and-a-half- year investigation leading up to this point, and he is hoping for a September court date.

PILGRIM: All right. Thanks very much.

Jen Rodgers.

Now Enron's collapse touched Off a massive investigation into corporate crime. Since Enron's bankruptcy filing in 2001, 124 American corporate executives have been charged with criminal activity, but some of the most high-profile offenders have yet to see the inside of a jail cell.

Christine Romans reports.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT (voice-over): After more than two years of scandals tore through corporate America, prosecutors promised justice. Nine hundred forty-eight days now since Enron's bankruptcy, and only 10 executives in all of corporate America are in jail.

PROF. JIM COHEN, FORDHAM UNIVERSITY: The government has not been successful, has not been overwhelmingly successful in getting the verdicts that it wants in a timely manner.

ROMANS: Former star investment banker Frank Quattrone, mistrial. Then a conviction on three obstruction counts.

Tyco's Dennis Kozlowski, also a mistrial. A new trial now set for January, but a judge recently threw out half the charges related to dodging taxes on art.

Tyco former CFO Mark Schwartz, mistrial.

Four former Qwest executives, mistrials and acquittals. That prosecution was supposed to be a showcase of the government's fight against corruption.

Now it's back to square one.

For Ken Lay, it's taken more than two years for an indictment. One former prosecutor isn't surprised.

UNIDENTIFIED MALE: You start at the bottom, you work your way up, you put your evidence in, and eventually -- it may take two-and-a- half years -- you can target the very top people in the company with the testimony that will make that a potential successful case.

ROMANS: Even in successful cases, justice has been uneven. A former HealthSouth CFO pleaded guilty, got five years probation, no jail time there. Similar crime, but Dynegy's tax executive fought his fraud charges, and he got 24 years in prison.

(END VIDEOTAPE)

ROMANS: Still, a victory for the government today in the Adelphia case. After an 18-week trial, the jury found former CEO and founder John Rigas and his son Tim Rigas guilty of conspiracy and fraud -- Kitty.

PILGRIM: Thanks very much.

Christine Romans.

Well, joining me now more for more on Ken Lay's indictment and the crackdown on corporate criminals is our senior legal analyst, Jeffrey Toobin.

And, Jeffrey, thanks for joining us.

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Thank you, Kitty.

PILGRIM: Let's just go through the charges. Eleven counts. One count of conspiracy, two of wire fraud, four securities fraud, one bank fraud, three making false statements to banks. How damaging is this? It sounds very damaging.

TOOBIN: It's enormous. As Christine pointed out, sentences are vast in many of these cases when the defendants go to trial. Under the federal sentencing guidelines, Ken Lay is not looking at years in prison, he is looking at decades in prison, if he's convicted of all these charges.

PILGRIM: Now Andrew Fastow had a plea-bargain. How important is the Fastow testimony?

TOOBIN: He is obviously going to be a critical witness, especially when you consider the complexity of some of these charges. You read through this indictment, and you see things like one of the elements of the criminal conspiracy that Ken Lay is supposedly involved in is that he fraudulently accounted for good will in accounting taxes.

How many people do you think understand that sort of thing? It's going to be difficult to persuade the jury, much less what happened, as well as a criminal conspiracy.

PILGRIM: It's taken two-and-a-half years up until now. Does that imply that the government's case is not good, or does it just speak to the complexity of the issue?

TOOBIN: You know, that really isn't that unusual when you get to these white-collar investigations. Think about the Mike Milken investigation of Drexel. That was comparably complex, and that took about the same amount of time. It always works the same way. The prosecutors start with lower level people, flip them, get them to cooperate against higher-ups.

Obviously, the turning point here was when Andy Fastow started to cooperate. Whether they can get Ken Lay is a very different thing. You know, it's one thing to say Ken Lay was in charge, of course, he knew everything. But they've got to have witnesses. They've got to have documents that say Ken Lay approved this criminal activity. We'll see.

PILGRIM: Yes. And how hard is it to get all this through to a jury to understand it, too?

TOOBIN: As I say, you know, these are accounting concepts that are difficult to understand. It's not going to be easy, and though, you know, everybody is opposed to white-collar crime in general, once you get corporate executives who don't look like the conventional idea of criminals with plausible explanations for their behavior, that's why you get a lot of mistrials, hung juries. It's hard to get 12 people to agree that these people are criminals. It's not that easy.

PILGRIM: You know, the whole sort of popular saying was, you know, why prosecute Martha Stewart when you have Ken Lay? And yet, you know, this is what was said widely, and now you have Ken Lay going to trial, and you say it's not that clean cut.

TOOBIN: It's not that easy. You know, Enron has become the synonym for corporate crime, and, certainly, there was a lot of crime there.

But trials aren't tried in the abstract. They're about evidence. They're about very specific things. Who was the witness who will say I know that Ken Lay had a criminal intent?

That's what these cases are all about, not that they made mistakes, not that they were negligent, but they intended to violate the law. Someone's got to come up and say that in front of a jury. That's hard to do.

PILGRIM: All right. Thanks for shedding some light on it. I wish we could be more -- less complex about it. Thanks very much.

Jeffrey Toobin.

All right. A federal judge today denied Martha Stewart's latest request for a new trial. Stewart's attorney asked for a new trial based on allegations that a government ink expert lied on the witness stand. Now the judge in the case today ruled that it was unlikely this perjury affected the jury's verdict. Now Stewart is expected to be sentenced next week to 10 to 16 months in jail.

Coming up, another surprising development in the mysterious disappearance of a U.S. Marine in Iraq. We'll have a live report.

And the threat of terrorism. New warnings tonight that al Qaeda is plotting an attack aimed at disrupting the presidential elections. Former CIA director James Woolsey will join us.

(COMMERCIAL BREAK)

ANNOUNCER: LOU DOBBS TONIGHT continues. Sitting in for Lou Dobbs, Kitty Pilgrim.

PILGRIM: A major development in the case of a U.S. Marine reported missing in Iraq last month. American officials today said Corporal Hassoun is now at the U.S. Embassy in Beirut, Lebanon. Now officials are trying to find out what happened to Corporal Hassoun after he disappeared in Iraq.

Senior Pentagon Correspondent Jamie McIntyre has the report -- Jamie.

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, Kitty, as you can imagine, there are many questions surrounding the disappearance of Corporal Wassef Hassoun and then his reappearance in Tripoli, Lebanon, 18 days later, questions that will now be directed at him by military investigators.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Corporal Hassoun is safe and currently at the U.S. Embassy compound in Lebanon -- in Beirut. We have no additional information at this time regarding the events that led to his arrival in Lebanon. Investigators continue to look into the circumstances surrounding his situation.

(END VIDEO CLIP)

MCINTYRE: Pentagon sources say before Corporal Hassoun got to the U.S. Embassy in Beirut, Lebanon, it took three tries to arrange a meeting. Officials say eventually Hassoun turned himself over voluntarily.

He is now under military control and faces tough questions from Navy criminal investigators over why he left his unit in Fallujah, Iraq, July 20 and what help he got to travel to Tripoli, Lebanon, over 500 miles away, through Syria 18 days later.

At first, sources said the Marine Corps suspected Hassoun, an Arabic speaker working as a military truck driver, wanted to desert to Lebanon where he was born and still had family.

Now Pentagon sources say investigators are also looking into whether the video purporting to show Hassoun captured and threatened with beheading by an obscure Islamic militant group was real or was it a hoax staged to cover his desertion.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We don't know. I'm saying we don't know, and there's no sense speculating because most of the speculation to this point has been confused, and so we're just not going to contribute to that.

(END VIDEO CLIP)

MCINTYRE: The Pentagon says eventually the investigation into this incident will uncover the facts. Meanwhile, as they said, they're strongly encouraging there be no speculation. If it turned out that Hassoun was a deserter and had deserted in time of war, he would technically face the death penalty -- Kitty.

PILGRIM: All right. Thanks very much.

Jamie McIntyre.

Senior intelligence officials said today that al Qaeda leaders are planning attacks on the United States from hideouts on the border between Afghanistan and Pakistan. Now those officials said Osama bin Laden and his top lieutenants are actively involved in planning terrorist operations. Intelligence agencies are particularly concerned about the possibility of an attack like the Madrid train bombing in March, just before the Spanish general election. Joining me now is former CIA director James Woolsey to talk to us about this.

And thanks very much for joining us, sir.

JAMES WOOLSEY, FORMER CIA DIRECTOR: Good to be with you, Kitty.

PILGRIM: Now there is no who, what, when or where, no specific, and yet the announcement today. Do you think this is too vague to be helpful, or do you think this is extraordinarily helpful?

WOOLSEY: Well, neither. It's probably a little bit helpful. People should know that something may be coming and that al Qaeda is planning something major before our elections. That's been speculated about, and there's been reports about it actually for some time.

I think that it is not very helpful to people in planning and trying to decide what they're going to do. But at least they know a little bit more to be alert, and, sometimes when you're a little bit more alert, you pick up on things that you otherwise might not pick up on.

I think they had to say it. If they had known who, where what and when, they probably would have kept quiet about it and gone into those facts very privately in some detail.

PILGRIM: The color code -- we're not shifting -- at yellow, elevated still. Do you agree with that, or do you think we should maybe switch?

WOOLSEY: There have been enough jokes about the color code and duct tape, I think, that they may be in the mood of saying that they're really not going to go moving those colors around unless there's some very, very specific reason to do so.

PILGRIM: Let me ask your considerably expert opinion. Are we better prepared than we were before September 11 for a large-scale, as they say, attack being planned?

WOOLSEY: Again, I think the answer is somewhat. We're better prepared probably with respect to protection of aircraft. There's still some mistakes made, as in the case of a small plane that got everyone confused here in Washington some weeks ago, but it didn't have its transponder registering on all parts of the government's receivers.

But we -- the Department of Homeland Security announced today they'd given those radiometers to pick up radiation -- hundreds of them to local law enforcement. If there should be a dirty bomb, that sort of thing would be useful. hey have a new command post. They have new communications.

But some of the basic things like dirty bombs in containers on container ships or on rail or attacking toxic chemical transportation in rail cars or something like that are very tough problems, and I don't know that there's been much attention at least effectively paid to improving our resilience in those areas.

PILGRIM: And so you think in certain areas we're largely unprepared?

WOOLSEY: Well, I think there are -- there's planning and thinking going on, but, in a number of these areas, particularly with respect to weapons of mass destruction -- look, smallpox -- they can't even figure out how to get the first responders vaccinated, and, if the first responders are not vaccinated and there's a smallpox outbreak and that would be from terrorism, we're really behind the power curve in trying to get everybody vaccinated in time.

So some of this is just reluctance to take steps that could have problems themselves but would at least be preparatory. Some of it is the problem is really hard. Some things they've made progress on. It's a mixed picture.

PILGRIM: CIA Director George Tenet had his goodbye party today, and now we have an acting direction, John McLaughlin. By his only being an acting director, do you think he's in any way limited. Do you think this is a bad situation? Should we have a permanent director?

WOOLSEY: Well, John McLaughlin is a very able analyst and executive in the intelligence business. He worked for me when I was director in the early and mid-90s. He will do a fine job as acting director.

But at some point -- possibly this fall, possibly next winter -- they need to move after a few months to having a full-time confirmed director. I think it's a political question more than any other whether the administration wants to nominate someone and have a lot of hearings on him or her and the nature of the CIA issues during the middle of the election campaign.

In substantive terms, John McLaughlin can very easily carry on until next winter or beyond if he should be picked to be the permanent director.

PILGRIM: So much focus is being put on the election and, you know, the al Qaeda threat up to the election, the appointment of a permanent director after the election.

Do you think we're sort of taking a wrong time cue here? Shouldn't we be thinking more permanently?

WOOLSEY: Well, it would be fine to nominate someone. A number of the people who have been speculated about, such as Porter Goss, would be very fine directors of Central Intelligence. But I don't think there's a matter of urgency in getting someone in there permanently as long as you have a career officer who's as able as John McLaughlin to serve on an interim enacting basis.

When I stepped down in January of 1995 for several months, my deputy, Admiral Studeman, who was a long time career intelligence professional, did an excellent job. And like McLaughlin, Bill could have been the permanent director if they'd chosen to nominate him.

So, I think we're blessed by somebody as able as McLaughlin. I don't think there's an urgency to move to having a nomination.

PILGRIM: All right. Thanks very much for your insight this evening. Former CIA Director James Woolsey. Thank you.

WOOLSEY: Good to be with you.

PILGRIM: That brings us to the topic of tonight's poll: What do you think is behind the latest terror warnings -- new intelligence, ongoing threat, or playing politics? Cast your vote at CNN.COM/LOU, and we'll bring you the results later in the show.

Now let's take a look at some of your thoughts on the new Kerry- Edwards ticket. And Barbara Piwko of Avondale, Arizona, "On the Pundits who are saying that John Edwards has no experience in foreign relations. Didn't we have an individual running for president four years ago in the same boat?"

John from Rochester, New York, "Who cares if Senator Edwards hasn't served that long in the Senate? Actually, that's a blessing. He's not a long-time Washington insider," and "That's a breath of fresh air."

And Bob Ruris of Irvine, California, "The choice of John Edwards has the experts in the current administration touting how critical it is to have international experience to govern this country. These are the same experts who got virtually everything wrong when it came to Iraq."

And Joshua Tofield wrote in about Edwards' professional career. "The choice of a trial lawyer eliminates any chance of desperately needed tort reform. Kerry should have chosen more wisely in order to help our medical care professionals care for our citizens."

Do send us your thoughts: CNN@ -- LOUDOBBS@CNN.COM.

Still ahead here tonight: Violence intensifies in Iraq, and another five Americans are dead. General David Grange will join us in "Grange on Point."

Plus, Senator Kerry and Edwards campaign in the state where Gore lost the last election. And we'll tell you why they say this year will be different.

Plus, a prominent Republican questions whether Vice President Cheney is doing more harm than good to the GOP ticket. Those stories and much more still ahead here tonight.

(COMMERCIAL BREAK)

PILGRIM: In Iraq today, insurgents killed five American soldiers in a mortar attack on an Iraqi National Guard base. One Iraqi guardsman was also killed. Twenty Americans and three Iraqis were wounded. Brent Sadler reports from Baghdad.

(BEGIN VIDEOTAPE)

BRENT SADLER, CNN CORRESPONDENT: It was during fierce clashes in Samarra -- 60 miles, or some 90 kilometers north of Baghdad -- that the local headquarters of Iraq's National Guard came under heavy mortar fire.

The U.S. Soldiers were killed, and some 20 others injured. (AUDIO GAP) after taking direct hits. The Iraqis also sustained casualties: one killed and three others injured.

Samarra is a hotbed of violence aimed at Iraqi and multinational forces. It's just south of Tikrit, a stronghold of militant ex- regimists, and it lies within the so-called Sunni Triangle that includes Fallujah -- now virtually controlled, say U.S. Military commanders, by armed extremists.

In a further attempt to undermine international support for the U.S.-led mission here, a so far unheard of group of kidnappers released a video of a Filipino hostage, threatening to behead him unless Washington's staunch Asian ally withdraws its troops.

The Philippine military presence here is little more than symbolic, around 50 troops engaged in humanitarian work. But their presence is politically valuable to President George W. Bush.

The authorities in Manila, meanwhile, acted swiftly to calm popular outrage, banning work related travel to Iraq, hoping that, like Turkey recently, they'll be able to negotiate a release.

Brent Sadler, CNN, Baghdad.

(END VIDEOTAPE)

PILGRIM: The insurgent attacks continue in Iraq almost two weeks after the new government took control. As Brent Sadler reported, Fallujah in particular has been a hotbed of terrorist activity.

And joining me now for more on that in "Grange on Point" is General David Grange. And thanks very much for joining us this evening.

BRIG. GENERAL DAVID GRANGE (RET.), CNN MILITARY ANALYST: Good evening.

PILGRIM: Fallujah seems to be what they call a safe haven. What can be done about that?

GRANGE: Well, I think, for right now, nothing. It's going to be contained by coalition forces. The Iraqi Fallujah Brigade will continue to patrol parts of the city with limited success.

They're not recognized by the inhabitants as really legitimate rule of law enforcers, nor will the insurgents or terrorists in the city abide by their guidance, their force, which is very limited.

I think it will only be able to be contained for right now, since the U.S. has taken more of a backseat, but eventually the enclave within the State of Iraq will have to be taken back by the State of Iraq. It cannot be left to flourish for terrorists.

PILGRIM: U.S. troops moved out in April. Do you think they should go back in, or do you think it's more important to let the Iraqis deal with this?

GRANGE: Well, the Iraqis have to deal with it unless they ask the U.S. to assist. I think the U.S. will be involved in airstrikes when they have intelligence on certain targets or even raids by special operation forces, if they have a high-value target like Zawahiri that they think they can take down. But unless the Iraqi government asks, they will not.

PILGRIM: There's some discussion that the Pentagon is reportedly looking at troop withdrawal and a timetable for that, potentially by 2006. How realistic do you think that is based on the level of activity that we've seen in recent weeks?

GRANGE: Well, I think that there's going to be some draw down eventually -- maybe by 2006, could be later. It's very prudent to have plans to increase or decrease the troop levels in that theater of operations right now.

But it's not going to be timed or in effect from timetables. It's going to take place as events occur. For instance, certain conditions are met, like Iraqi military or the police can, in fact, produce a credible force that is viable in certain areas. Until those things happen, I don't think you're going to see much force changing.

PILGRIM: General Grange, what defense do we have about this -- for this tactic, where they take a hostage and demand that troops be withdrawn? Obviously, no countries will comply with this request, and yet it's a very disturbing trend.

Is there any defense, do you think, or any way to deal with this?

GRANGE: The only way really to deal with it is show resolve by not giving in. Because when you give in, then it will just multiply even worse than it is right now. The goal is to obviously is to wear down the resolve of the nations involved. The best tactic is to go down and take out, whenever you can, the insurgents that are causing these kidnappings and atrocities. Just keep the pressure on the enemy.

PILGRIM: Do you think it's important that there's demonstrable progress in some of the infrastructures, such as oil and electricity, and we haven't seen quite as much progress as had been hoped for at the beginning of the end of this conflict. Do you think that it's necessary for the Iraqi population to give full support to the interim government?

GRANGE: Well, they're never going to get full support, but the majority of support is critical. And it's a credibility issue not only for the interim Iraqi government, but the coalition forces, that a viable oil production and export takes place since it's key to the economy, as well as the electronic infrastructure to provide quality of life to the Iraqis.

It must be done. It's a tough security task. Additional efforts have been applied to that task. But, again, linear targets, miles of pipe lines and facilities on land and at sea are very tough to secure.

PILGRIM: Thanks very much for your insight tonight. General David Grange.

GRANGE: Thank you.

PILGRIM: Still ahead tonight, on the campaign trail, in a critical state, John Kerry and John Edwards battle for Florida. We'll have that report.

Also ahead, is the vice president helping or hurting the president's re-election bid? Senior political analyst Bill Schneider looks at the Cheney effect on the Republicans chances.

And good news for American workers tonight, the United States claims a major victory in a trade dispute with China. We'll have a special report.

(COMMERCIAL BREAK)

PILGRIM: The new warning about terrorism before the election came as the Edwards-Kerry ticket campaigned in the battle ground state of Florida. Now senators John Kerry and John Edwards told Florida voters that they have a better plan to protect national security. Kelly Wallace has the report.

(BEGIN VIDEOTAPE)

KELLY WALLACE, CNN CORRESPONDENT (voice-over): In Fort Lauderdale, team Kerry-Edwards tries to stay on message. No, it would not echo charges from some Democrats that the White House is playing politics with terrorism, but, yes, it would hammer away at the Bush- Cheney record on homeland security.

SEN. JOHN KERRY (D-MA) PRESIDENTIAL CANDIDATE: John and I know how to fight a war on terror that doesn't create more terrorists, but makes America safer.

WALLACE: But with homeland security officials saying al Qaeda may mount an attack, hoping to disrupt the election, the Kerry campaign felt it needed to issue a statement that said, in part, "terrorists will not determine the results of this election, the American people will."

And then, back on message: In the place where passions still run deep over the disputed 2000 election, when Al Gore was behind by just 537 votes as the U.S. Supreme Court ordered an end to the recount. John Kerry delighting the crowd with this idea for his running mate's young children.

KERRY: We're sending Jack and Emma Claire down here to help those Republicans in West Palm Beach count those votes.

WALLACE: Polls show this race is neck and neck for Florida's 27 electoral votes, the biggest prize of any battle ground state. And Democrats are hoping John Edwards, with his sunny disposition and small town roots can win over conservative Democrats and independents who voted for George W. Bush in 2000.

SEN. JOHN EDWARDS (D-NC) VICE PRESIDENTIAL CANDIDATE: We share a vision, and we share a set of values. They're the same values that I grew up with in that little town out in the country in North Carolina.

WALLACE: Already, the addition seems to be loosening up the top of the ticket. Here, Kerry jokes about what they have in common.

KERRY: As you know, we both share the first name John. John was selected as "People" magazine's sexiest politician of the year. I read "People" magazine.

WALLACE: From here, team Kerry-Edwards heads to New York City for a star studded concert expected to raise $5 million.

(on camera): Tomorrow, it's off to the battle ground states of West Virginia and New Mexico before wrapping up this tour in Senator Edwards' home state of North Carolina. Kelly Wallace, CNN, Fort Lauderdale, Florida.

(END VIDEOTAPE)

PILGRIM: Senator Edwards' energetic debut on the campaign trail has added to questions about President Bush's running mate. Now this week, a prominent Republican said that President Bush could guarantee his re-election by kicking Vice President Cheney off the ticket. Bill Schneider has the report.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: It's a question that keeps coming up in political circles: Should President Bush dump Dick Cheney? To Democrats, Cheney is scary.

TERRY MCAULIFFE, RNC CHAIRMAN: When they think of Dick Cheney, they think of Halliburton they think -- he is our new Newt Gingrich.

SCHNEIDER: President Bush likes to contrast with the less experienced John Edwards.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Dick Cheney can be president.

SCHNEIDER: The Democrats' response, he is president.

KERRY: He is right that Dick Cheney was ready to take over on day one, and he did, and he has been ever since, folks. SCHNEIDER: Democrats believe Cheney is a liability with voters.

SEN. EDWARD KENNEDY, (D) MASSACHUSETTS: They're also looking for people, a leadership that aren't going to be beholden to special interests. Hello, Dick Cheney, do you hear us now?

SCHNEIDER: There's the continuing squabble between Cheney and the 9/11 commission over intelligence.

RICHARD BEN VENISTE, 9/11 COMMISSION MEMBER: We have reached a conclusion, and that conclusion is Iraq was not involved in 9/11.

SCHNEIDER: There's the potty mouth episode: The crude remark the vice president hurled at a Democratic senator.

UNIDENTIFIED MALE: He ought to go back and get some vocabulary lessons.

SCHNEIDER: Cheney is not a happy warrior. This week, a Republican said it out loud: Bush should dump Cheney.

ALFONSE D'AMATO, (R) FRM. NEW YORK SENATOR: I will shock Republicans and probably get them angry, but I think we could do better.

SCHNEIDER: It's a sign some Republicans are nervous, like they were in 1992 when Bush's father ran for re-election. People urged him to dump Dan Quayle. His response?

GEORGE H.W. BUSH, FRM. PRESIDENT OF THE UNITED STATES: He has been a super vice president, and he will be for another four years.

SCHNEIDER: This President Bush will almost certainly have the same response.

(END VIDEOTAPE)

SCHNEIDER: Why? Because Bush's conservative base loves Cheney and because Cheney embodies this administration's steadfastness in the war on terror.

You know, the Bush campaign has spent a lot of money branding John Kerry as a flip flopper. If Bush were to dump Cheney, Democrats would lose no time saying, look who's the flip flopper now -- Kitty.

PILGRIM: All right, thanks very much. Bill Schneider.

A reminder now to vote in tonight's poll. "What do you think is behind the latest terror warnings?" New intelligence, an ongoing threat, or playing politics? Cast your vote at CNN.com/lou. We'll bring you the results a little later in this show.

Also ahead, a major trade victory over China for one American industry. We'll have the details.

And "Made in America." We'll report on a Chicago-based company that sends its high tech products all over the world, but keeps its work force all over the United States. The story of Rubicon Technology when we return.

(COMMERCIAL BREAK)

PILGRIM: A $2 billion victory tonight for American industry. The United States has settled a massive trade dispute with china and the terms of that settlement are very positive for this country's semiconductor industry and its workers. Bill Tucker reports.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): The agreement ends the first ever world trade organization case against China. Its resolution means that china will no longer impose a discriminatory tax on semiconductors designed or made outside of China, a tax that currently adds 17 percent to the price of semis produced outside of China and only 3 percent on chips produced inside of China. Under the agreement, the tax discrimination will be phased out by April 1st of next year.

ROBERT ZOELLICK, U.S. TRADE REPRESENTATIVE: It's a decision that means that fair treatment for America's high tech exports in a very large but fast-growing Chinese market.

TUCKER: China is the world's third largest consumer of semiconductors. U.S. Factories exported $2 billion worth of chips to China last year. The Semiconductor Industry Association was eager to join with the office of the U.S. Trade Representative in announcing the agreement and underlined what the agreement means to its industry.

GEORGE SCALISE, PRESIDENT, SEMICONDUCTOR INDUSTRY ASSOCIATION: We now have and have had for many years over 50 percent of the worldwide market. We plan to continue to have that kind of market leadership. In addition to that, about 70 percent of our manufacturing of high technology wafer capability is here in the U.S. And with that, about 70 percent of our employees. So, we're going to continue to make investments as a consequence of this agreement, and we'll continue to employ more people here in the U.S.

TUCKER: An issue that's become increasingly important and pointed with the export of high tech workers to countries like India and China.

(END VIDEOTAPE)

TUCKER: The administration today calls the agreement good news, and it would appear to be just that. Critics, however, wonder about the enforcement. Now, trade officials say compliance will be monitored in China by the industry as well as U.S. government officials -- Kitty.

PILGRIM: All right. Thanks very much, Bill Tucker.

Now our "Made in America" series. Our look at companies which choose to keep jobs right here in the United States. And tonight a Chicago-based company, Rubicon Technology. The company makes sapphire crystals that used in some very recognizable places.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): The Chicago company makes sapphire crystals, the same gem stone used in jewelry. But these are used in electronic light called light emitting diodes or LEDs. That technology is used in traffic lights, cell phones, and even the Nasdaq sign in New York. Rubicon's CEO hopes LEDs may someday replace the every daylight bulb.

CHRIS MOFFITT, CEO RUBICON TECHNOLOGY: The white LEDs will use one-tenth of the power of a traditional bulb or tube. And will last for 10,000 hours rather than 1,000 or 2,000 hours.

SYLVESTER: Rubicon has been able to go up against industry big names like Honeywell because it has streamlined its manufacturing process. It has a trade secret formula for growing the sapphires in a furnace, which gets half as hot as the sun's surface. The sapphire is sliced into circles no thicker than a business card, then polished and shipped off to its customers, most of whom are in Asia. The company's owner would not consider moving operations overseas because the skilled workers he needs are here in the United States.

MOFFITT: We need a consistent high quality water supply. We need a very consistent high quality power supply. And the most important thing is that we need a good pool of skilled machinists in the manufacturing processes.

SYLVESTER: And Rubicon values its 125 employees. The private company covers 100 percent of the health benefits and offers all employees stock options.

MOFFITT: They realize it's not just punching a clock and being here on time. There's an appeal to it, which is, if I work hard and stay the course, there's a potential payoff at the end.

SYLVESTER: Rubicon's CEO won't share the formula for making the sapphire crystals, but will share his competitive advantage. It's his American employees trained to stay on the cusp of technology that allow the company to make a quality product.

Lisa Sylvester, CNN, Chicago.

(END VIDEOTAPE)

PILGRIM: "Tonight's thought" is on patriotism. "Patriotism is not short, frenzied outbursts of emotion, but the tranquil and steady dedication of a lifetime." Those are the words of politician and diplomat Adial Stevenson.

Still head, the results of "Tonight's Poll." But first a reminder to check the Web site for the complete list of companies we've confirmed to be exporting America. Cnn.com/lou.

(COMMERCIAL BREAK)

PILGRIM: Now the results of "Tonight's Poll." Four percent of you think new intelligence is behind the latest terror warnings, 6 percent say ongoing threat, 90 percent say playing politics.

Thanks for joining us tonight. Please join us tomorrow. Richard Falkenrath former deputy of Homeland Security advisor will join us.

For all us here, good night from New York.

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