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CNN Late Edition with Wolf Blitzer

Ashcroft Discusses War Against al Qaeda; Kerry, Shelby Debate Likelihood of Finding bin Laden; Baer Gives Insight Into CIA

Aired January 20, 2002 - 12:00   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.
WOLF BLITZER, HOST: It's noon in Washington; 9:00 a.m. in Los Angeles; 6:00 p.m. in Paris; and 9:30 p.m. in Kabul, Afghanistan. Wherever you're watching from around the world, thanks for joining us for LATE EDITION.

We'll get to my interview with the U.S. Attorney General John Ashcroft in just a few minutes, but first, this hour's latest developments.

(NEWSBREAK)

BLITZER: And as we're seeing, the president and first lady have returned to the White House from Camp David. The president meeting some friends, some people over at the rope line that's just outside the White House, as he prepares to go inside in the south entrance.

Meanwhile, all of this is taking place as a new warning came this week from the Bush administration that key members of al Qaeda may still be at large. The warning comes with the Justice Department's release of new photographs of five suspected terrorists.

Earlier today, I spoke with the Attorney General John Ashcroft about the U.S. war against terrorism.

(BEGIN VIDEOTAPE)

BLITZER: Attorney General, thanks so much for joining us.

You're in Salt Lake City, in advance of the Winter Olympics, which begin next month. Can you assure all of the world leaders, the athletes, the spectators, when they get there, it's going to be safe?

JOHN ASHCROFT, ATTORNEY GENERAL: We're working very hard. I have never seen an effort to secure an area that is so well integrated that includes, state, federal, the local, national officials, the armed forces, the intelligence agencies, every one from the Secret Service to the FBI.

It is very important. We are going to have 20 heads of state, approximately, come here from foreign lands. There is a 900-square- mile area that will encompass the Olympics.

ASHCROFT: When you have to have mountains involved, we were out at the snow basin which -- where the grand slalom, the downhill races will be held. We've been at the bob sled and luge forum. There are places where the medals will be awarded.

So there are just event after event after event that will require security and they've been working on it for years now. They're working well. The operations are integrated, the communications are integrated, there's an interoperability between the different security forces. And I believe this will be the best-planned security arrangements in the history of mankind. And I believe it will be secure.

We're going to do everything possible to make this the very best Olympic setting.

And of course that's consistent with what America is. America is a place where people have come from all over the world to be recognized for doing well and for their productivity and their merit. And in a way, this Olympic games will mirror what America has been. People will come from all over the world and into this environment, this Olympic environment. And we hope that people do well here and that records are set. But we want it to be done in a setting of peace and security that represents what America stands for.

BLITZER: All right, well, that sounds encouraging. Attorney General, the five terrorist suspects, the videotape that you released earlier this week, do you have reason to believe that any of them are currently in the United States?

ASHCROFT: We do not have any special reason to believe that they're in the United States. We don't have the kind of information that gives us a fix on any of their locations.

These are very, very important individuals. Al-Shib (ph), for instance, who was an unindicted co-conspirator listed in the indictment against Moussaoui, three times tried to get into the United States. It's our belief that he tried to get in to be a part of the suicide bombings on September 11. It's pretty clear that he has that kind of willingness.

And these kinds of statements by way of last will and testament or good-byes to families, in which individuals indicate that they're willing to destroy themselves as they attempt to destroy America and as they attempt to destroy the values of freedom and tolerance and religious freedom and opportunity and free speech that America stands for, these are dangerous individuals.

And frankly, while we've had a tremendous effort that's been an integrated effort between the intelligence communities and the military community and the law enforcement community and the -- all of these efforts working together so that you get things out of the theater of war in Afghanistan that becomes a part of the information that we can use for prevention in the United States of America, we need that kind of integrated effort.

And the people can help be part of that effort, just like the people have helped in the apprehension and prevention of additional terrorists acts. Obviously we saw that on Flight 63 out of Paris destined for Miami when the people became a part of preventing terrorism in a very significant way.

BLITZER: The fact, though, is Osama bin Laden is on the run, his al Qaeda operatives in Afghanistan are on the way. The Taliban supporters have been effectively destroyed in Afghanistan but does al Qaeda, that network, still have the capability of launching terrorist attacks against the United States?

ASHCROFT: You know, when individuals are willing to destroy themselves in the process of trying to destroy you, they're very dangerous.

And we've seen just in the last several weeks with an individual who, Mr. Reid, that we have charged now, boarded an airplane with the intention of blowing up the airplane and blowing up himself.

It doesn't appear that the threat has abated in that respect. And it was the very alert and vigilant action of citizens who are a part of this network, this seamless resistance to terrorism, that resulted in his apprehension.

So I think we have to understand that those threats still exist and that it's very meaningful for the effort we make to be seamless, to be integrated, to get information from perhaps one part of the world, but even the individual citizen to be sensitive and alert to helping to prevent or stop a terrorist from carrying out a threatened activity.

BLITZER: You mentioned the case of Richard Reid, the suspected shoe-bomber. Was this a case -- you said earlier in the week that he was Al-Qaeda-trained.

Was he part of an al Qaeda mission in the United States on that flight from Paris to Miami to blow up that plane as part of an Al- Qaeda-sponsored operation?

ASHCROFT: Well, I can't exactly -- I don't want to discuss the evidence any further than we discussed it previously. But here's an individual who wants to destroy Americans and wants to destroy people by blowing up an airplane.

ASHCROFT: Here is an individual who was trained in al Qaeda camp who, obviously, has the intention of -- whose objectives are the same as the al Qaeda organization.

And I believe that they spent a lot of time over the last several years, training individuals like this. The five tapes that we released are tapes of individuals who appear to be saying to their relatives, "We're prepared to give our lives away in an effort to destroy the values of America -- its freedom, its tolerance and its opportunity."

So I believe that the threat is very real, very significant, and that individual citizens can play a big role in making sure that threat doesn't become a reality. BLITZER: Do you believe there are a lot of -- there are many other Richard Reids out there right now?

ASHCROFT: I don't -- I can't say how many, but we just released the tapes of five individuals who appear to be willing, in every respect, to put their own lives -- well, to literally destroy their own lives, if they can destroy a part of the American value frame that they hate so desperately.

And given the fact that we've got five of them on videotape, it wouldn't surprise me if there are substantially greater number of individuals somewhere who have been through these camps, who maintain the same animus and malice toward what we believe to be important in the world and what freedom-people respect around the world.

It is important to note that the apprehension on Flight 63 was not done by some sort of American effort. These were freedom-loving people of a variety of nationalities who understood that the threat of terrorism is a threat that is worldwide and it threatens people worldwide. And it happens to be focused on America, I think, because the kind of freedom and tolerance, religious liberty and opportunity that's expressed in America, is unique and has been a symbol for freedom and opportunity around the world.

BLITZER: Attorney General, this past week, you announced the charges against the Taliban American, John Walker.

Among other things, a statement issued by a lawyer representing his family said this: "We are disappointed, however, that the government has held and interrogated John for 45 days without allowing him any messages from his family or access to his attorney."

How do you respond to the first part, messages from his family?

ASHCROFT: Well, first of all, I want to say that he has been treated in the way that an individual apprehended in a war situation should have been treated. We've been -- and I commend the Defense Department for their activities in regard to those that they capture.

And this attorney for the family seems to want to suggest that he's somehow an attorney for the individual, Mr. Walker. Mr. Walker specifically, orally and in writing, indicated that he was waiving his rights to an attorney and chose to make statements, which are obviously part of the information that becomes a basis for the complaint which was filed against him.

BLITZER: When...

ASHCROFT: I believe the...

BLITZER: Yes. I was going to say, Mr. Attorney General, when will you take custody of him from the military?

ASHCROFT: Well, your question suggests that we don't have custody of him. I don't want to say when we will or when we won't. I believe that we will transfer him to the United States and we will have him available for the legal processes in the very near future.

BLITZER: This week?

ASHCROFT: I certainly wouldn't rule that out.

BLITZER: And where will he be placed in incarceration while he's here once he gets to the United States, assuming he has don't gotten to the United States yet?

ASHCROFT: For his own security and for reasons of our own security, we'll not be making announcements about his locations certainly in advance of activities.

And we'll do what we do with him based on a respect for his legal rights, but also with respect to the need to make sure that we have secure locations and that we don't impair the security of communities where he might be held.

BLITZER: And just to button this up, once he's here in the United States, he will be allowed to see his attorney and have meetings with his parents and his family?

ASHCROFT: His rights will be completely regarded in that respect. I have always told our staff to think within the limits of the law and within the limits of the Constitution.

We may have to adjust our procedures to do things we haven't done before, but they must always be guided by our respect for our laws and the Constitution. After all, the terrorist is the one who assaults our law and our Constitution.

BLITZER: The detainees, approximately 100 so far but it could go up in terms of major numbers of Taliban, al Qaeda fighters who've been moved to Guantanamo Bay in Cuba, they are under the military's control, not the Justice Department.

You anticipate, though, that they will remain under the military control, rather than transfer to the Justice Department?

ASHCROFT: Well, that's something that I'm not capable of making a comment on at this time. I do think that the -- these are dangerous individuals. We saw that when some of them were being detained in Afghanistan, they were violent, there was an uprising. We know that that resulted in the life of an American being lost, one of our casualties in this conflict.

And I think it's very appropriate for the Department of Defense to be very circumspect and to work hard to make sure that these individuals, who are very dangerous, are appropriately restrained. And I believe that's being done very well, and I commend the secretary of defense for his activities in this respect.

BLITZER: What about the criticism coming from some quarters in Europe, the United Nations, human rights organizations, Amnesty International, earlier this week? I expected Kenneth Roth of Human Rights Watch, who'd said that the way these detainees are being treated at Guantanamo Bay, at the U.S. naval base, was inappropriate, not consistent with the Geneva Conventions.

Listen to what Mr. Roth had to say.

(BEGIN VIDEO CLIP)

KENNETH ROTH, HUMAN RIGHTS WATCH: Secretary of Defense Rumsfeld and others insist that these are not prisoners of war. And there, frankly, he's wrong. The Geneva Conventions require all prisoners to be treated as presumptive prisoners of war until a competent tribunal determines otherwise.

(END VIDEO CLIP)

BLITZER: How would Americans feel if American prisoners were being held in another country and in these cages, for example?

ASHCROFT: Well, let me just say this: that these individuals are being restrained, and properly so. They are terrorists. They are uniquely dangerous. They are individuals who have been participants in the war-crimes setting. When their detention was attempted previously in other settings, they were violent. They killed an American citizen in that process.

And I think we have to be very careful with them. To suggest that these are prisoners of war -- these people are terrorists. They haven't fought like soldiers. They don't wear uniforms. They don't reveal themselves.

This is a part of the conspiracy, where innocent women and children, innocent Americans, were destroyed, not as an act of conventional war, but in the context of what I consider to be war criminality. And war criminals and prisoners of war are different categories of individuals.

And I think it's important for us to make sure that these individuals are properly restrained and that their basic needs are regarded -- they have the right food, they have the right shelter and the right capacity to avoid injury -- but I don't think we're going to be running some sort of facility in the Caribbean at Guantanamo Bay or otherwise that's going to be soft or careless about the lives of the individuals who have to maintain the supervision here. We've already lost one individual as a result of an uprising, we shouldn't lose more.

BLITZER: All right. Let's move on and talk about the anthrax investigation. We're hearing that the U.S. government may be close to learning the source of the anthrax in those anthrax-laced letters sent to, among others, the Senate majority leader, Tom Daschle.

Do you have a good sense right now where that anthrax came from?

ASHCROFT: I'm not prepared to make an announcement about any progress in the anthrax arena. I wish we had made more progress there. We've followed thousands of leads, and we're continuing to do very substantial and significant analysis. But I'm not in a position to announce any significant progress there.

BLITZER: Do you think some word, though, could come out as early as this coming week?

ASHCROFT: I'm not even prepared to make a prediction.

BLITZER: Are you prepared to say what the homeland security director told me last week on this program, that the likely suspicion now is on home-grown domestic American terrorists as opposed to foreign terrorists?

ASHCROFT: Well, I think we've always felt that the anthrax situation was more likely to be someone here in the United States, some disgruntled individual. And a profile, as a matter of fact, was described an individual with scientific capacity. And we went through a number of things that we thought might most likely define that kind of individual. It certainly fits what Governor Ridge has said about this in his previous utterances as well.

BLITZER: As you know, Attorney General, there has been a huge uproar here in the United States over the collapse of Enron, what used to be the seventh-largest corporation in the United States.

Tell us why you decided to recuse yourself, or remove yourself, from the investigation.

ASHCROFT: Well, I made a statement about that that indicated that I would, because of the totality of my relationship -- and everyone knows the public information that when I was in politics I received some political contributions from Enron.

And as a person in the Justice Department, justice has to be antiseptically clean in terms of the way it works in regard to its operation. So I recused myself.

And I made a statement at that time on the recusal. I won't make further statements. I'm confident that the Department of Justice can work very effectively to make sure that justice is achieved here.

BLITZER: Senator Carl Levin was on Face the Nation on CBS earlier today right after you. And he offered some advice to you that I want to play for you so we can get your reaction to what he said. Because he said, just -- if there were anything else in terms of the totality of the contacts with Enron beyond the financial, the political contributions, you should just explain that and move on.

Listen to what Senator Levin had to say.

(BEGIN VIDEO CLIP)

SEN. CARL LEVIN (D), MICHIGAN: To me, it'd be a lot better off for him to just simply say yes or no, and if he did, what those contacts were, just to simply disclose them rather than to try to avoid that kind of disclosure. I must say, I just think it's better for everybody to kind of lay out whatever connections, contacts people had or have.

(END VIDEO CLIP)

BLITZER: What about that advice?

ASHCROFT: Well, I've recused myself. I've indicated very clearly that I'll have no part of the operation. I've made clear that I believe that the Justice Department and its function should be undertaken by others. And I will have no involvement in the matter because of my recusal.

BLITZER: OK, so that's that. Attorney General, I'll let you go. But let me ask you one question.

You're hometown team, the St. Louis Rams, the Green Bay Packers later today. You're now the attorney general of all of the United States. Do you have a dog in this fight?

ASHCROFT: Absolutely.

(LAUGHTER)

I mean, the attorney general of the United States still has ties to the home area. And while I have great respect for Lambeau Field and for the Green Bay Packers, this game is going to be played in St. Louis and I'll be cheering for the Rams with every fiber of my being.

BLITZER: Some of your supporters in Wisconsin may not be happy to hear that.

(LAUGHTER)

Attorney General, thanks so much for joining us. Good luck at those Winter Olympic Games.

ASHCROFT: Thank you.

(END VIDEOTAPE)

BLITZER: And when we return, are U.S. forces any closer to tracking down the world's most-wanted man, dead or alive? We'll talk with leading members of the U.S. Senate, John Kerry and Richard Shelby. Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GENERAL TOMMY FRANKS, U.S. CENTRAL COMMAND: Right now, I honestly don't know where he is. But we know this: The world is not a large enough place for him to hide.

(END VIDEO CLIP) BLITZER: General Tommy Franks, the U.S. commander of the military campaign in Afghanistan, commenting on the elusive Osama bin Laden.

Welcome back to LATE EDITION.

We are joined now by two members of the United States Senate: in Boston, Democrat John Kerry of Massachusetts. He serves on the Senate Foreign Relations Committee. And in Birmingham, Alabama, Republican Senator Richard Shelby. He's the vice chairman of the Senate Select Intelligence Committee.

Senators, always good to have both of you on the program.

Senator Kerry, let me begin with you. On Osama bin Laden and his whereabouts, we have heard everything from the president of Pakistan, President Musharraf, suggesting he may be dead from kidney failure, to others saying, including Defense Secretary Donald Rumsfeld, he may still be in Afghanistan. What are you hearing?

SEN. JOHN KERRY (D), MASSACHUSETTS: The same. I mean...

BLITZER: So you have really no hard...

KERRY: It is really, Wolf, it is all speculation. I mean, if anybody knew, we would have him.

The bottom line is that the closest we came was in Tora Bora. I do think some people have asked some questions about how that particular component of the mission sort of played out. But the fact is that it is a difficult place. He is elusive.

I think they are doing the maximum amount right now possible to try to track him down. And it is an extraordinarily hard thing for him to hide somewhere. I mean, over a period of time, I think, he is in trouble.

BLITZER: What about that, Senator Shelby? You are a member of the Intelligence Committee, you get access to certain good information. What do you know about his whereabouts?

SEN. RICHARD SHELBY (R), ALABAMA: Well, we don't know where he is. I agree with John Kerry. If we knew where Osama bin Laden was at the moment, I believe he would either be captured or killed.

But he is on the run. He's been on the run, that is the sad thing about it. But it is difficult, but it's not impossible.

If he is alive -- which I believe he is until you show me the forensic evidence that he is not -- we're going to find him. It is going to be difficult for him to hide for very long. He's an imposing figure. He is wanted. There's a huge reward out there.

I think it is just a question of time. Now, is it going to be next week or next month? I'm not sure. But he is a marked man, I believe. BLITZER: And, Senator Shelby, the suggestion for President Musharraf that he has kidney problems and he may already be dead, is there any intelligence you have seen from any credible source to confirm that?

SHELBY: Not a bit. We have no evidence, just speculation, that he may have been killed. I would not believe he is dead at all until the forensic evidence is brought forth to us.

I believe he is alive. I don't know that.

But, as I said earlier, he is a marked man. The people are after him, our people, other people. And we are going to find him.

But we shouldn't just put all of our resources on Osama bin Laden, because there are a lot more just like him.

BLITZER: And on that specific point, Senator Kerry, what about Mullah Muhammad Omar, the leader of Taliban? The presumption is he is very much alive and he is still in Afghanistan.

KERRY: Well, he is alive. We know that. And we know he is in Afghanistan.

Look, this just underscores the nature of the relationships in the region. I am told that people in Afghanistan wouldn't even recognize him if he walked down the street because of the lack of photographs, the lack of any appearance on television.

He, obviously, has an ability. I mean, look, these are people who change allegiances overnight. I mean, part of the success of this campaign has been the fact that a great deal of money has changed hands. People have their internal rivalries. They have played them out.

And so, again, over a period of time as the new government begins to take hold, as we build a relationship with it. As our people begin, once again, to be in the country over a period of time, I would suggest that Mullah Omar has a problem.

But for the moment, he's able to allude in this period of uncertainty and in this period of very real lack of control of any kind of central government or effort.

BLITZER: Senator Shelby, the next step in the war -- obviously continuing action in Afghanistan -- but there has been a lot of speculation about Somalia, a lot of speculation about the Philippines, Yemen, Sudan perhaps Iraq. Where is this war moving now?

SHELBY: We're not sure, but I think what we have to do is follow the terrorist groups as they try to reassemble wherever they are. And some, like in the Philippines and other countries where there have been strong insurgences there, if the Philippine government asks for our help I think we should give it to them.

SHELBY: We have a special relationship with the Philippines. And as President Bush has said all along, we're going to go after the terrorists wherever they are. We have no choice. This could take years, Wolf. It's going to take a lot of money and, as we have found out, it's going to take a lot of casualties.

BLITZER: Senator Kerry, a poll, a recent poll, a CNN-USA Today Gallup Poll, we asked the American public whether they would support specific action. Look at this: 77 percent said they would support military action against Iraq; 71 percent against Iran, and 62 percent against targets in Somalia.

But it looks like the American public, if the U.S. government decided to do it, would be ready to support military action against Saddam Hussein. Are you?

KERRY: Well, I'm for focusing on Saddam Hussein. I've been saying that for a long period of time. I criticized the prior administration a number of years ago for pulling back from the intensity of focus on the inspections. When Ambassador Butler came back and the United Nations was focused, I thought that was the moment we should have kept the pressure on.

There was no rationale for dropping that pressure then. There is no rationale for not having that pressure on now. On the contrary, there's a greater rationale to have it, because we know, through intelligence, of increasing activities that Saddam Hussein has been involved in with respect to weapons of mass destruction.

I've just come back, as has Dick Shelby, from visiting with leaders in that region and in various parts of the world there. We didn't quite have the same journey.

But I've met with leaders in the Middle East, and it's very clear to me that they have no use particularly for Saddam Hussein. They believe he is dangerous. But they raise some very serious questions about the order of priorities and how we might do what we choose to do in Iraq, and I think there are some serious preconditions to how we begin to focus on him.

One thing, in Israel today, clearly there is a very dangerous situation. And the Palestinian linkages, with respect to the Gulf states, Saudi Arabia, Egypt, other countries of which we rely, are real and important to whatever we might decide to do with respect to Saddam Hussein.

Secondly, there are many ways for us to proceed with respect to Saddam Hussein. That became very clear to me.

So I am absolutely for focusing on this man. His policies are dangerous, he is dangerous. But there are ways to do it that don't amount to some kind of immediate military choice, nor should that be the beginning step. There are other things we need to do first.

BLITZER: OK, Senators, stand by. We're going to continue this conversation on Saddam Hussein, the U.S. relationship with Saudi Arabia, a lot of other issues, including Enron, but we're going to take a quick break.

A lot more to talk about with Senators Shelby and Kerry. They'll also be taking your phone calls. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We're talking with two key members of the United States Senate, Democrat John Kerry of Massachusetts and Republican Richard Shelby of Alabama.

Senator Shelby, on the whole issue of the U.S.-Saudi relationship, a story in the "Washington Post" this past week -- I'm sure you saw it -- suggesting that some top officials in Saudi Arabia want the U.S. military presence to disappear in Saudi Arabia.

If they make that request from the United States, how should the U.S. respond?

SHELBY: I believe that would be a premature request.

You know, if we go back into history of our relationship to the Second World War, and it's really grown since then, with the Saudi government, I've never known them, the high officials, the officials that really matter, to say that they don't want us in Saudi Arabia. We have a strong military cooperative relationship there. I don't anticipate that.

Now, there have always been, Wolf, people in Saudi Arabia, maybe connected with the government, maybe not connected, that always say something about our presence there.

But our presence there has been, I think, very good to help stabilize and protect, from time to time, the interests of the Saudi government as well as our own, having advanced bases there.

I don't believe we're going to leave there unless we're asked to, and I don't believe we are going to be asked to.

BLITZER: Senator Kerry, some of your colleagues in the Senate have said it's an uncomfortable fit, the whole U.S.-Saudi military relationship, given the treatment of women, including American women, who serve there, the diplomatic corps or in the military, and that it's not necessarily something the United States should feel comfortable with.

How do you feel about that?

KERRY: Well, there are many places in the world where there is a discomfort to the match of other kinds of interests.

Clearly, Saudi Arabia presents a challenge, in certain issues. I was there just recently, I met with the top leadership, Crown Prince Abdullah, the foreign minister, Prince Faisal, and others.

They're aware of the difficulties. I mean they are cooperating with us now in a number of different ways, many of which have not met the public eye. I think they're particularly sensitive to the criticisms that have appropriately been made, many of them appropriate, some of them actually incorrect, over the course of the last months.

And I think they're going to try to find ways to both respond to many of those issues, as well as to answer those that they think are appropriate to answer.

But there clearly will be a tension in this relationship as we go forward. There may be a legitimate issue as to whether both of our interests are well-served by the current arrangement militarily. I don't know the answer to that yet.

But they did not say to me, at the time I was there, that this move was under consideration. And I'm not sure that it's on the table as lively as it has been reported, though conceivably something could have changed.

BLITZER: All right.

Senator Shelby, Karl Rove, the president's top political adviser, caused an uproar among Democrats on Friday when he said that, in the election later this year, for the congressional elections, as well as looking down the road, it would be wise to take advantage of the president's popularity in terms of dealing with the war on terrorism.

I want you to listen to what Karl Rove told his fellow Republicans on Friday. Listen to this.

(BEGIN VIDEO CLIP)

KARL ROVE, POLITICAL ADVISER TO PRESIDENT BUSH: We will also go to country on this issue because they trust the Republican Party to do a better job of protecting and strengthening America's military might, and thereby protecting America.

(END VIDEO CLIP)

BLITZER: Democrats argue this is a foul, that it's been a bipartisan support for the war and this should not be an issue in politics.

SHELBY: Well, it's hard to divorce politics from the events of Washington, D.C., and the world.

But I can tell you, most of the political races, congressional races, Senate races, next year, will be based on the individuals, the regional areas and issues. President Bush is very popular because I thought he's brought leadership. But at the end of the day, a person, whether they run in Alabama or Massachusetts, so forth, are going to have to run on their own merits.

And I'm glad that President Bush is doing well. But at the end of the day, if I'm running in Alabama -- I won't be next year -- I'd have to run on my vision, my record and what I stand for.

BLITZER: All right.

Senator Kerry, as far as the American public's perception, there's a recent CNN/USA Today Gallup poll which asks specific questions, which party does a better job on various issues. Look at this: On defense issues, they think Republicans, by a 65-to-24- percent margin, do a better job. On terrorism, Republicans again win, 61 to 23 percent. On world affairs in general, Republicans win 56 to 30 percent.

The Democrats, at least at this point in time, appear to have a problem with the American public on these kinds of issues.

KERRY: I just -- I don't agree with that at all. I mean, I think these kinds of polls at this moment in time are sort of a flash capture of a momentary sense of well-being, if you will. Because the administration is in charge, the president is the one who at the moment commands the bully pulpit and people hear him, and there's no real opposing point of view to that.

I think Karl Rove made an enormous mistake. There is not an ounce of daylight, not an ounce, I mean, not even a fraction sliver, between Republicans and Democrats on the willingness to conduct this war and on the provision of the support in order to do it.

KERRY: And if we were engaged in a campaign or in a debate, it would be interesting to point out that the military that President Bush and Dick Cheney spent so much time degrading when they ran against Al Gore last year is the military that is winning this war.

The military that they said was so badly equipped and incapable of responding to current needs has not had an increase in money during the time the president has been in office in his first year.

This is a military that was trained and prepared over the course of the last eight years.

It is not a Democrat military, it's not a Republican military, it's the United States of America. And this issue should not be politicized. This victory and this course belong to all of us, and we should celebrate it.

BLITZER: All right. Senators, once again, stand by. We have to take another quick break.

We'll continue our discussion with Senators Shelby and Kerry. I'll ask them about Enron. They'll also be taking phone calls. LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION.

We're continuing our conversation with Massachusetts Democratic Senator John Kerry, Alabama Republican Senator Richard Shelby.

Senator Shelby, on the whole Enron investigation a bunch of congressional committees scheduled to begin hearings as early as later this week.

The Democratic congressman from California, Representative Henry Waxman said this about the administration's handling of Enron. Among other things, he said: "This analysis reveals that numerous policies in the White House energy plan are virtually identical to the positions Enron advocated."

How concerned are you about the ties between the Bush administration and the now-collapsed, the now-bankrupt Enron?

SHELBY: Wolf, first of all, I believe Congressman Waxman's totally wrong as far as the policies -- or most of the policies that have been advocated by Enron and the White House position. They're diametrically opposed, especially in the Kyoto protocol and stuff like that.

I believe overall that the White House is handing this quite well.

I believe, though, that we should go to -- follow the evidence on Enron. What happened to such a large company. What caused it to go bankrupt? What caused all this all the stuff, including the accounting firm that audited the company, Arthur Andersen?

I think that there's a lot of unanswered questions. The investigation should go to the bottom of it. And if there's criminal conduct, the Justice Department should find it and prosecute those that do wrong. This is too big a deal.

I think the Bush administration has handled it well, in that they let it go, they did not intervene and told them basically they wouldn't intervene.

BLITZER: This is a case, Senator Kerry, of Enron having contributed lots of money to both Republicans as well as Democrats.

And just for the record, our research shows Senator Shelby received a relatively modest $3,500 from Enron. We showed that you didn't receive anything from Enron.

Do you feel comfortable with what has come out so far from the Bush administration, especially news this week that the Vice President Dick Cheney did raise with the government of India the whole issue of a loan that the Indians owed Enron?

KERRY: Well, look wherever that part of it goes, it goes. I think Washington and Congress and perhaps even the media are perhaps overly focused. I mean, we always get into these frenzies that are kind of "gotcha-oriented."

What comes out of that I don't know. That is not my primary focus. My primary focus is, number one, this is an enormous restatement of why America needs to change the campaign finance system of what access linkages exist with campaign contributions, whether you've got it or didn't get it. And we have to change the way in which we finance our campaigns, this is number one. Number two, there is something that I think must grate with every American, every person who goes to work every day, every person whose taxes are taken out of their check because it's done at the workplace or in the factory. To learn that Enron, this huge company earning all of this money, paid no taxes for four years and had over 690 subsidiaries or 600-plus subsidiaries in the Cayman Islands, brass- plate subsidiaries that are just there to move money away, a luxury never afforded to the average American, that is disgraceful and unacceptable, and I've said for years we have to change that.

And the third thing I think which is also critical is what's happened to the pensions, what's happened to the average workers. The way in which people were misled into believing this company was whole and worth investing in when they didn't.

I don't know why Ken Lay is still the head of this company. I don't understand the psychology, and I think a lot of Americans are outraged by that component of this.

BLITZER: Senator Shelby, we only have a few seconds left, but will this give momentum to enact, to pass campaign finance reform?

SHELBY: I don't think so. I don't see the real connection. I know there are broad allegations here between why we should have campaign reform and the Enron situation. I think we, again, we should get to the bottom of Enron, but I believe it's not the same thing.

KERRY: Could I answer that, Wolf?

BLITZER: Senator Kerry, you already -- you expressed hope that it will result in campaign finance reform legislation, so I think you've answered it already. Unfortunately, we are all out of time.

KERRY: No, I didn't say it would, but I hope it will.

BLITZER: I'm sure you do.

Thanks, Senator Kerry, Senator Shelby. Two different views on campaign finance reform. We appreciate always having both of you on our program.

And when we return, inside the CIA. Could the U.S. spy agency have done more to prevent the September 11 attacks? A former CIA agent has now broken his silence. You'll hear his incredible story when LATE EDITION returns.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION.

Joining us now from New York with some insight on the Central Intelligence Agency is the former agent Robert Baer. He is the author of a new bombshell book entitled, "See No Evil: The True Story of a Ground Soldier in the CIA's Counter-Terrorism Wars."

Mr. Baer, thanks so much for joining us. And let's get right to your book. One of the things you write is this, and I'll put it up on our screen: "September 11 wasn't the result of a single mistake but of a series of them. The Germans failed us, as did the British, French and Saudis. But most of all, we failed ourselves. We didn't have the intelligence we needed or the means for gathering it."

Explain what you mean by that.

ROBERT BAER, AUTHOR: Wolf, the simple fact is that 15 of these suicide bombers were recruited in Saudi Arabia. And the CIA and no intelligence agency in the United States had any sources in Saudi Arabia. It was an unforgivable error on our part.

BLITZER: Well, you're blaming the CIA, with hindsight obviously, for the failure to anticipate September 11?

BAER: I'm not blaming the CIA. I'm blaming the entire U.S. government. Where was Immigrations? Where was FAA? Where was the State Department? Why were they giving so many visas to young Saudis? It was a serious systematic error.

BLITZER: Well, when you look back on your own experiences, what led you to believe that the U.S. government was, as you say in the book, "didn't want to see any evil," see no evil?

BAER: I've seen since the early '80s the United States ignoring terrorism. And it's been growing ever since then, since 1982, since the Israeli invasion of Lebanon. We've turned a blind eye because the casualties were so low until September 11, and now things have to change.

BLITZER: Did you sound the alarm bell when you were an agent, a covert agent working on the outside? You spent 21 years, mostly in the Middle East, trying to infiltrate with your agents that you recruited some of these terrorist organizations.

BAER: Wolf, we all did in the CIA. But the CIA on the ground knew a big attack would eventually come. The CIA predicted it.

I think the mistake was that after the Cold War we started to close down stations all over Europe. That was an enormous mistake which resulted in September 11.

BLITZER: Well, why did the CIA close down those stations? In your book you suggest it was -- they had a romantic love affair with technology, with the technical means of gathering intelligence, rather than what you were doing, getting down in the trenches and trying to recruit spies.

BAER: They did. They relied on satellites. Satellites cannot see inside of a mosque. They cannot see inside of a person's head. We can see what's going on the ground, but the terrorists move around so quickly and so easily that we simply can't follow them with satellites or with telephone intercepts.

BLITZER: And it was just too dangerous, too dirty, too politically difficult to get down and do what you were doing?

BAER: Absolutely. It was political correctness, because if we were to recruit a fundamentalist and he were to go off on his own and kill somebody, not on our orders but by himself, the CIA would pay the price.

BLITZER: One of the things I was fascinated by in reading your book was that you say that you, as a CIA agent, if you had been in Great Britain, in England, in London, you could not go and recruit an agent, somebody in an Islamic mosque, let's say, in some part of England because there is an understanding, an agreement, that the U.S. and Britain have that they don't "spy," quotes, in each other's countries.

BAER: There is a formal agreement there will be no spying on each other's countries. It's well known. I think it's been publicized before. But the problem was, the British didn't protect us.

BLITZER: They didn't get the job done. So you would have wanted to go ahead and get the job done yourself.

All right, Mr. Baer, stand by. This conversation is just beginning. We have a lot more questions to ask you about what's going on inside the CIA today, other actions you took during your two decades inside the CIA. But we're going to take a quick break.

Just ahead, a check of the hour's latest developments. We'll also continue our conversation with Mr. Baer. He'll be taking your phone calls. Then, the Enron fallout. Two former employees of the energy giant tell their story here, live. And two legal experts offer perspective on Enron and more.

It's all ahead in the next hour of LATE EDITION.

(COMMERCIAL BREAK)

BLITZER: This is LATE EDITION, the last word in Sunday talk.

(BEGIN VIDEO CLIP)

PAUL O'NEILL, TREASURY SECRETARY: If anyone at Enron broke the rules, they will be punished.

(END VIDEO CLIP)

BLITZER: The Bush administration promises to do the right thing, as congressional hearings are set to begin on the Enron collapse. We'll talk with two former Enron employees who lost millions.

Plus, we'll examine the legal aspects of the controversy with two experts, former White House special counsel Lanny Davis, and former U.S. Attorney Joe DiGenova.

We'll also ask them about the U.S. crackdown on terror. Is it close to breaking the law? (BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: They can't do it. They shouldn't do it.

(END VIDEO CLIP)

BLITZER: And Bruce Morton examines a politically correct version of September 11 history.

ANNOUNCER: Live from CNN in Washington, this is LATE EDITION with Wolf Blitzer.

BLITZER: Welcome back to LATE EDITION. And we'll get to that, all of that, and much more, and also be taking your phone calls for the former CIA agent Robert Baer in just a few moments.

But first, here is CNN's Carol Lin in Atlanta with a quick check of this hour's latest developments.

(NEWSBREAK)

BLITZER: Now back to our conversation with the former CIA agent Robert Baer. He's the author of the new book "See No Evil: The True Story of a Ground Soldier in the CIA's Counter-Terrorism Wars." Mr. Baer, among other things, you write in the book this, and I'll put it once again up on our screen: "In 1996 Osama bin Laden established a strategic alliance with Iran to coordinate terrorist attacks against the United States."

Is your point that Osama bin Laden was not acting alone in ordering the September 11 attacks?

BAER: Wolf, I don't have any current -- I haven't seen current intelligence on the attacks. But back in '96, bin Laden was establishing alliances across the Middle East and Europe to carry out a comprehensive attack against the United States, including with Iran.

BLITZER: And so, what's the point? Do you believe that the connections with Iran were part of a broader network aimed against the United States? In other words, is Iran involved, in your opinion, with the September 11 attacks?

BAER: I wouldn't be surprised at all. Bin Laden didn't do these attacks by himself. He had some trained experts help him, no question.

BLITZER: And do you believe it's Iran? Because there's been a lot of speculation that perhaps the Iraqis, Saddam Hussein's government, may have been involved.

BAER: The Iranians have generally been better terrorists, and the pro-Iranian groups like Hezbollah -- Imad Mugniyeh, who's been in the news a lot, is someone who could carry out an operation like this, so well-planned, using cells, keeping the secrecy. And the coordination of four airplanes is not easy to do. Somebody like Imad Mugniyeh could carry this out, but bin Laden alone, no, no way. BLITZER: Because, as you know, the top officials in the U.S. government, from the president and the secretary of state, the secretary of defense, the attorney general, they have all said that they have no hard evidence right now to suggest that anyone other than Osama bin Laden was directly responsible for September 11.

BAER: Wolf, I agree with that, but these investigations take years and years to carry out. We're not going to have a definitive report for at least four or five years, with all the elements. And we may eventually find an Iranian connection or a Saudi connection or a Kuwaiti connection somewhere down the line, I wouldn't be surprised.

BLITZER: One of the passages in your book says this: "In 1991, the CIA intentionally shut down its operations in Afghanistan and Saudi Arabia and ignored fundamentalists operating there."

If that is true, why?

BAER: I was assigned to Tajikistan during that period. I could not get a Dari or a Pashtun speaker, the two major languages in Afghanistan, to come out and deal with the refugees.

The feeling in Washington was, Afghanistan was a basketcase, there was nothing we could do about it, it was too complicated, we just have to ignore it, as we did Somalia.

BLITZER: And your whole experience with Iraq in the book is pretty amazing as well. Among other things, you write: "In 1995, the National Security Council intentionally aborted a military coup d'etat against Saddam Hussein, forgoing the last opportunity to get rid of him."

Tell our viewers what happened.

BAER: Wolf, when I was in northern Iraq, a general proposed a classical military coup d'etat against Saddam.

BLITZER: When you say a general, what kind of general?

BAER: He was a former Iraqi general who defected in November 1994. He was a courier to senior military officers in Baghdad and in Tikrit who said they wanted American help -- a sign, any sort of sign that there would be support.

There was no answer from Washington to this proposal for nearly a month. They went ahead, except 36 hours before, I received a message from the White House saying that the operation was compromised and they were on their own, which, for the Iraqis, meant stop. And they did stop.

BLITZER: A lot of your attention in the book deals with Yasser Arafat, the president of the Palestinian Authority. And among other things, you write: "Terrorist organizations operate like the most complicated, interlocking directorate ever created. And at the end of the day a lot of trails converge at the feet of Yasser Arafat."

What exactly are you saying about his role in international terrorism today?

BAER: I can't speak for today. But many of the terrorists that were originally trained in Lebanon in the '80s, in the '70s and '80s under Arafat, and he has kept up a connection with them as with Imad Mugniyeh and this recent incident with the boat. They learned how to carry out operations during the Lebanese Civil War.

BLITZER: And so what are you saying about Arafat?

BAER: I have no conclusions about his current connection with terrorism. I simply don't know.

BLITZER: All right. We have a caller from Florida who wants to ask you a question. Please go ahead with your question for Robert Baer.

CALLER: Yes, Wolf, thank you.

I'm wondering if the recent war effort and attention on the CIA and intelligence has helped or hurt the CIA being able to operate?

BLITZER: Go ahead, Mr. Baer.

BAER: Sir, I think it's helped. I think this was a wake-up call, obviously it was. That is not a surprise.

The CIA is recruiting all over the United States for new case officers. I think a lot of the restrictions are being pulled back. Four or five years and I believe the CIA will come back once again and be able to take terrorism head on.

BLITZER: You also suggest in the book that the investigation of Pan Am Flight 103 may have had political overtones, that certain leads, basically you guys out in the field, were told don't go down that road because it is too politically complicated. What are you suggesting?

BAER: We had an easy conviction against the two Libyans. It was too complicated to go after the Syrian and the Iranian angles. Those leads were dropped. There is no question about it. After the convictions, the Justice Department simply doesn't want to hear any more about Pan Am 103.

BLITZER: Well, in the end, it was Libyan agents who were indicted, one of whom was convicted. So, do you have any reason to believe Syria or Iran were involved in the downing of Pan Am Flight 103?

BAER: My opinion is that Iran in July 1988 contracted -- it's not my opinion, it's a fact -- contracted to bring down an American airplane, passenger airplane. Whether they were involved to bring down Pam Am 103, I'm not certain, but they had that intention at one point.

BLITZER: We have to wrap this up almost. I want to point out to our viewers, Mr. Baer, that you did receive a citation from the CIA director of operations for your work after you retired from the agency over the years.

What was the most dangerous moment of your life when you were out there in the field?

BAER: It was perhaps in Sarajevo. It was continual fighting. I had one of my people shot there in an ambush. It was probably Sarajevo, maybe Beirut during the shellings.

BLITZER: And you found some of those shells got pretty close to you.

BAER: They came -- almost knocked my house down.

BLITZER: Are you surprised by the role that CIA operatives are playing on the ground in Afghanistan right now? Because, buy all accounts, they have been very active.

BAER: I think that's a good thing. We should be back in the field. I think that is good news. And if I were back in the CIA, I would volunteer to go out.

BLITZER: Well, maybe they will take you back if you want to go back.

(LAUGHTER)

Robert Baer, thanks so much for joining us.

We should you point out that George Clooney may be playing you in a movie based on your book. If that happens, we will, of course, be watching that very carefully. Once again the name of book, "See No Evil: The True Story of a Ground Soldier in the CIA's War on Terrorism."

Mr. Baer, thanks so much for joining us.

BAER: Thank you.

BLITZER: And up next, the Enron fallout.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: They betrayed that trust. My life savings is gone.

(END VIDEO CLIP)

BLITZER: Why did the energy giant's failure leave its employees in financial ruin? We'll hear from two former Enron workers when LATE EDITION continues. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION.

When Congress returns next week, the investigations will begin into the collapse of Enron. The company's failure wiped out the retirement savings of many Enron employees.

Joining us now with their personal stories are two of them: Roger Boyce is in Minneapolis. He worked in the field of safety and security. And Janice Farmer is in Orlando, Florida. She was an Enron administrator.

Welcome to both of you.

And let me begin with you, Roger. Tell us your story. How much money did you lose in terms of your retirement savings when Enron went bankrupt?

ROGER BOYCE, FORMER ENRON EMPLOYEE: I lost in excess of $2 million out of my retirement account.

BLITZER: How was that possible? How did it -- what was most that you had, and what happened?

BOYCE: Well, at the peak it was in excess of $2 million, and what happened is, of course, the catastrophic breakdown of Enron over a period of a very few weeks.

BLITZER: Was that entire retirement fund, the whole $2 million, or did you have other money in other companies in other stocks and other investments?

BOYCE: I had other money in a personal account.

BLITZER: So your entire 401(k) or whatever it was called, your pension plan at Enron was in Enron's stock.

BOYCE: Correct.

BLITZER: Why did you do that, why did you keep it in all in Enron stock?

BOYCE: I think the aspect of diversification here is certainly an issue. However, I feel the focus of the issue isn't necessarily on diversification, it's what happened to cause it. If we aren't properly informed of what is going on, we can't make intelligent decisions about our investments. I think this is precisely what happened with Enron.

BLITZER: And that $2 million is worth how much today?

BOYCE: Oh, at last, probably about $3,000, something in that magnitude.

BLITZER: $3,000.

BOYCE: Yes.

BLITZER: That's a huge, huge loss.

What's your story, Janice? Let me bring you in. And tell us about your Enron investments. JANICE FARMER, FORMER ENRON EMPLOYEE: My investments were 100 percent in Enron stock in the 401(k) savings plan. And when I retired in November of 2000, I had just under $700,000.

BLITZER: And what do you have now? What is that $700,000 today?

FARMER: I was able to sell my stock before it actually hit the rock bottom. I sold at $4 and a penny, and I received a check for $20,418.

BLITZER: So your stock, your investment, your pension plan went from $700,000 to $20,000, is that right?

FARMER: Yes, sir, that's correct.

BLITZER: Now, to both of you, there were times -- and let me bring you back in, Roger -- where you could have unloaded your Enron stock without -- and made lot of money, right? But you decided not to..

BOYCE: That's correct.

BLITZER: Because it was only in the last few months that they put a hold on your selling out. Obviously all of us are a lot smarter with hindsight. Was there any moment you said to yourself, well, maybe I should unload the $2 million and just take the money and run?

BOYCE: It wouldn't have been the $2 million, but at the time I wanted to unload it is during the lockout period. Then that opportunity was taken away from us, of course.

BLITZER: And just refresh our viewers' memory. When did that happen?

BOYCE: That happened approximately -- there's some difference of opinion on the dates. There were e-mails out, there was letters out and there was information forwarded to us, and some were contradictory, so there's some confusion along that line. But it happened about the middle of October, anywhere from October 17 to 19.

BLITZER: And then the stock was, by then obviously, very much depressed, way below it's -- at one point, it was, what, $90, and then it was way down.

BOYCE: That's correct.

BLITZER: And, Janice, let me read to you an e-mail from what Kenneth Lay said at the end of September -- Kenneth Lay, the chairman, the CEO of Enron, the founder. He said this to the employees one month after he was warned that his company did have some serious financial problems. He said, "My personal belief is that Enron stock is an incredible bargain at current prices, and we will look back a couple of years from now and see the great opportunity that we currently have."

This at a time when he was unloading some of his personal stock and he knew from inside, from some of his top analysts over there, that the entire company was in trouble.

When you see that, when you hear that, knowing how much money you lost, what goes through your mind?

FARMER: Wolf, I think it is becoming increasingly clear that employees and retirees were more than victimized by the Enron executives. We were sacrificed for their own personal gain.

BLITZER: And what about you, Roger?

BOYCE: I certainly want to pick up on what Janice is saying too. I think there's a larger issue, as a good reporter from the "New York Times" described this as a catastrophic meltdown.

FARMER: Yes.

BOYCE: And then it went onto to expand that there are a lot of areas, there were problems in it. And I think there's a lot of accountabilities not only within Enron, but certainly that's primary, but certainly with, as we all know, with Andersen, Arthur Andersen Corporation and what has happened there and the effects of all that type of thing.

But I think there's a lot more than that. I think there's the -- certainly, the regulators, the SEC. They certainly knew that Enron had limited partnerships. They also knew that there was a financial officer in charge of those partnerships.

I think that should have been a red flag with the government regulators to get in there and start looking at it very hard, and they just didn't, didn't perform.

BLITZER: Yes, I just want to bring Janice back in and remind our viewers that we're talking about a company that was, until very recently, the seventh-largest company in the United States, the seventh-largest corporation in the United States with huge projects, huge investments all over the world.

When you take a look at all of this, Janice, right now you're retired, are you still getting the benefits that you need, the medical, the health insurance benefits, for example?

FARMER: We have not been contacted by Enron in order to know for sure whether the health insurance that we got as -- went with our retirement package, we don't know if that's going to remain in effect or if it is in fact going to be canceled. We haven't been able to find out. We have not been able to contact human resources in Houston.

BLITZER: I take it that there is an employee meeting, and a lot of those questions will be answered as early as this coming week.

FARMER: Is that right?

BLITZER: Roger, let me ask you, a lot of people who work for big companies think it's almost patriotic to own the stock of the companies for which they work. You did that, in part, I assume, because you believed in Enron.

BOYCE: Absolutely. The tremendous trust that not only myself but a lot of other employees had in Enron. And this trust was again betrayed as Janice described it. I think this...

BLITZER: You believe the same thing, Janice?

FARMER: Yes, I do.

BLITZER: And people who are working for huge companies out there, huge corporations -- let me begin with you, Janice -- what advice do you have for them if they have a big chunk of their portfolio, their life savings, in the company that they work for?

FARMER: Well, Wolf, it's really difficult to explain where our losses came from. But I believe we, as average Americans, shareholders, trusting in the system, Enron executives let us down, auditors let us down, Wall Street analysts let us down. And the lenders, perhaps using poor judgment and had unsecure loans, they let us down.

But yet in the end, when all the dust is settled, who is going to have the greatest pain? Us. And who is going to have the greatest losses? Us.

BLITZER: Roger, you feel you were naive, like so many other Enron employees, in just assuming the company was on the right track?

BOYCE: I don't think so at all. They demonstrated over many years that they produced exactly what they said they were going to produce. Why wouldn't we believe in them?

And the company was going up. All the analysts, like Janice was describing, were all saying, both internal and external to the company, that the company was growing. And the market was starting to drop.

Is that the time you want to get out when everything looks so positive from every source?

FARMER: Right.

BOYCE: And this is the fable behind the whole thing. If we were given the proper information, which we weren't, from 1997 on...

FARMER: That's correct.

BOYCE: ... about earnings and the internal happenings in the company, we would have made a totally different decision.

FARMER: That's true.

BLITZER: What do both of you do -- let me ask both of you, what do you do now? Beginning with you, Janice, what do you do now?

FARMER: Wolf, I don't know exactly what I'm going to do. I'm just going to have to try to get myself together and just do the best I can.

And if it's my understanding of the legal atmosphere right now, the Enron employees or retirees will have minimum opportunity to recoup their losses, either from the bankruptcy proceedings or from the class action suit. So I don't know exactly what my future holds.

BLITZER: So your $700,000, you walk away with $20,000.

FARMER: Yes, sir.

BLITZER: And, Roger, you walk away with, what $4,000 out of the $2 million that you had at one point. What do you do about that?

BOYCE: Try and move forward. Certainly, we're very angry about this whole issue.

FARMER: Yes.

BOYCE: It should never, never have happened. There was risks that companies should never take, and they took it, and we're the victims.

And I think we've got to move ahead with this thing. I think we move ahead a lot of different ways. One is through Congress.

Congress also, I think, should have assumed responsibility for this whole issue. They were the ones that did not properly administer or create the laws for certainly for -- as far as conflict of interest with Arthur Andersen. They did not give the regulators all the ammunition they needed to move forward.

I think there is a lot of fault here. But I think that we should not be the victims.

FARMER: I agree.

BOYCE: I'm willing to work as a -- for lack of a better term -- a pioneer in working so these things don't happen in the future. But I think we do not want to become the sacrificial victims of this whole issue.

And I think there should be some action, either, like Janice says, either through bankruptcy, through reorganization possibly, if that can happen, or through Congress. I think there's actions that have to be taken.

I'm willing to work with them on that -- those actions. But I also want to see them as a primary focus that we, the victims of this thing -- there are people from Minnesota to Houston, there are people from Oregon to Florida, just like with Janice. This is a national issue with a lot of employees, a lot of retirees. Something has to be done.

BLITZER: All right. Well, our heart goes out to both of you. Obviously, a sad, sad story, the way that your Enron investments obviously disappeared. And we'll see if perhaps some good out of the horrible situation might yet emerge.

I want to thank both of you, Janice Farmer and Roger Boyce, for joining us today.

FARMER: Thank you.

BOYCE: Thank you.

BLITZER: Thank you.

And when we return, with Enron under the microscope, we'll get some legal and political perspective on the case from the former White House special counsel Lanny Davis and the former U.S. attorney Joe DiGenova.

LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: If you have any information, any evidence you would like to bring forward about potential wrongdoing, we will do our best to track it down for you. But other than that, I'd liken it to a fishing expedition.

(END VIDEO CLIP)

BLITZER: The White House press secretary, Ari Fleischer, deflecting suggestions of any Bush administration links to Enron's collapse.

Welcome back to LATE EDITION.

Joining us now, the former White House special counsel Lanny Davis and the former United States attorney Joseph DiGenova.

Thanks to both of you, good friends of LATE EDITION, for joining us today.

Let's begin with the sad story we just heard, Joe, from these two people. What, if anything, can be done to help them?

JOSEPH DIGENOVA, FORMER U.S. ATTORNEY: Well, Wolf, of course there are the civil courts, and there will be many lawsuits filed against Enron executives, Enron the corporation or what's left of it, Arthur Andersen, Vince & Elkins (ph), the law firm involved in this. There will also be SEC investigations, which can help these people.

I think their best bet is going to be suing the executives of Enron to have them disgorge their ill-gotten gains. That's the best way to get some of their money back.

But it's going to be a long, arduous process, which I hope will be helped by the investigative process which is now under way, because this is -- the conduct of the Enron executives, Arthur Andersen is a disgrace.

BLITZER: And, Lanny, as you know, a couple of dozen, if not more or less, of the top Enron executives, over the past few years, cashed in well over a billion dollars and took the money at a time when perhaps they began to suspect the company was built on a house of cards.

LANNY DAVIS, FORMER WHITE HOUSE SPECIAL COUNSEL: You know, during the campaign finance hearings, Senator Lieberman was maybe the author of the best quote, which said, what troubles him is not what is illegal but what is legal.

And an awful lot of what's gone on with Enron is perfectly legal, and I'd like to see the focus on how we fix this system. Bring public disclosure, make sure that the accounting profession reforms itself. That's what the Congress ought to be focusing on.

BLITZER: Do you think Arthur Andersen, the huge accounting firm, one of the most respected in the world, at least until now, is going to survive this?

DIGENOVA: Wolf, that is a very difficult call to make right now. They are going to be seriously challenged. I note that their chairman today on television said that they had hired former Senator John Danforth to do an internal investigation for them. I will only note, he's also an Episcopal priest and may have been hired to give them last rites.

(LAUGHTER)

BLITZER: Let's listen to what Mr. Berardino of Arthur Andersen said earlier today on Meet the Press. Listen to this.

(BEGIN VIDEO CLIP)

JOSEPH BERARDINO, CEO, ARTHUR ANDERSEN: To my knowledge, there is nothing that we have found that was illegal. There have been restatements of the financial statements, which, when we had more information. We have acknowledged, in one case, we did make an error in judgment, and that was corrected. And in another case some information had been withheld that was extremely important to the decision on the accounting.

(END VIDEO CLIP)

BLITZER: Does that sound like a credible answer to you?

DAVIS: It really doesn't. I think Mr. Berardino is trying his best, and he published an ad in the "New York Times," the "Washington Post" to say, we're going to try to get out in front of this.

He ought to be saying, we made serious mistakes, and I'm going to be out front finding those mistakes and leading the cause of reform in the United States Congress.

Instead, there's an awful lot of defensiveness, a lot of legalistic -- I think he's under the very tight leash of lawyers, rather than getting out in front of the story and acknowledging the problems within Arthur Andersen.

DIGENOVA: Wolf, Arthur Andersen is either lying or they're incompetent. Neither option is very good.

BLITZER: And, you know, we've all been around Washington for a long time, all three of us. Have you ever, beginning with you, Joe, seen anything similar to this?

DIGENOVA: No, I have not. I will say this, the accounting industry has done a marvelous job over the last 30 years lobbying against regulation of that industry. If it doesn't occur now, then the political process has clearly broken down, in my opinion.

DAVIS: As Yogi Berra said, though, Wolf, deja vu all over again. As I watch my friend, who I have professional respect for, Ari Fleischer, learning the hard way that he can't stay in the position that he's in. The White House has to be proactive in disclosing the meetings with Vice President Cheney, in finding every document in the 2,500 file cabinets that mention Enron, and putting it out and letting reporters find that story.

BLITZER: We're going to get to that in a moment, but we have a caller who has a question related to all of this.

Go ahead with your question, please.

CALLER: Yes. Hi, Wolf, this is Dean from Norwalk, Connecticut, and I was an employee of Arthur Andersen 25 years ago, and I also spent some time with Enron.

And I would just like to caution everyone to not legislate the opportunity for entrepreneurship. People that invest in Enron stock obviously had the notion that this was going to be a tremendous company, that people were going to make a lot of money, et cetera. And I think that legislating inappropriate legislation for restricting common-stock values and ownership in retirement plans will definitely hurt the entrepreneur spirit, that a lot of employees have no option.

BLITZER: Let's let Lanny respond first.

DAVIS: Wolf, this is not about capitalism or public markets. This is about distortion and deception and obfuscation, and public disclosure is what the reform needs to be, even online public disclosure of financial information. And the accounting profession, as I said earlier, has to look within itself and change what it regards to be appropriate versus inappropriate.

BLITZER: The caller seems to suggest this is capitalism at work, the marketplace. What's wrong with that?

DIGENOVA: Well, in one sense it is capitalism. And that's -- this is part of the process by which we fail sometimes, it isn't a perfect system. But what Lanny said is true, we have to figure out a way to have the accounting profession, which does audits on publicly traded companies, be more accountable to the public, because that's what "certified public accountant" means, that they are providing information that the public can rely on.

Clearly, in the case of Enron, Arthur Andersen did not live up to that fundamental duty of an auditing concern. They failed miserably. Whether it was through negligence or through intentional wrongdoing, only the facts will tell. But we know that they failed in their job. Because that's why -- Enron is bankrupt today, partially because Arthur Andersen did not do its job.

BLITZER: Lanny Davis, you wrote a book once. Both of you, of course, know a lot about damage control...

(LAUGHTER)

... here in Washington. You have been involved. You wrote a book that was entitled, and I will read it precisely, "Truth to Tell: Tell It Early, Tell It All, Tell It Yourself," advice that you had for your former boss, Bill Clinton, during his dark moments of impeachment and Monica Lewinsky.

Is this White House, the current White House, accepting your advice?

DAVIS: First of all, let me say that in my White House, where I worked, we didn't accept my advice. So, we made many of the same mistakes that Ari Fleischer -- and it's not his fault. He is surrounded by people who are thinking the way we did, which is, "why feed the beast? Why make the story worse? There is no story here. It's unfair. We don't have to put out all these documents."

My advice to this White House -- and as I have said, I have great professional respect for Karen Hughes and Ari Fleischer -- "Put it all out now. It's coming out anyway. Life is unfair. Post-Enron you have no choice. Vice President Cheney, whatever constitutional principle you're defending, everybody you met with, every piece of paper, hand it to all the reporters and get it over with."

DIGENOVA: I agree with that, Wolf, and here is why. I think what the Clinton administration did for Enron was terrific. I think helping on the project in India, the power plant, worrying about the loan that wasn't going to be repaid by Enron, which was guaranteed by the United States government because India wasn't going to pay Enron what it owed -- I think that is what they should do.

I think the fact that Dick Cheney said to the Indian ambassador, what's the status of your payment to Enron -- perfectly legitimate. It's what our government should do. It should defend American business both here and overseas.

Get it all out.

I don't believe this is a political scandal. I believe it is an accounting scandal, a legal scandal, and a corporate corruption scandal. But if the information doesn't come out from government officials, it will become an artificial political scandal.

DAVIS: Could I just add one other thing. Right now, the Bush White House has nothing to worry about politically. There is no sign of a quid pro quo. They turned Ken Lay down. All the facts are on their side.

The only thing that is negative is their failure to be pro active in putting out all this paper and all this information. So, the question is, why not do it?

BLITZER: All right, we're going to pick that point up, but we're going to take a quick break.

A lot more to talk about with two of the best in Washington when it comes to damage control and other legal matters, Lanny Davis and Joe DiGenova. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We're continuing our conversation with the former White House special counsel Lanny Davis and the former United States attorney Joseph DiGenova.

The only time I remembered, Joe -- and my thanks to Bill Schneider, who reminded me -- when a president and a White House accepted, Lanny Davis, your advice, "get it out, get it immediately out, get the worst news out right away, do it yourself," was Ronald Reagan Iran-Contra. He sent Ed Meese into the briefing room. Ed Meese told a stunned nation, we sold arms to Iran. Everything after that, you know, was sort of -- couldn't have been as bad as that.

DIGENOVA: Insofar as it was with the president that was true. And in fact, the key thing is always to make sure that the presidency can function, and the way to do that is through transparency and by making sure that everybody in the White House understands that that's what the president wants. And I'm sure that's what President Bush wants, and that's what President Reagan wanted.

And I agree with Lanny, this is the way -- if people want to do control, forget spin control, if they want to control the environment, they control it by just getting information out.

BLITZER: But both of you are lawyers, attorneys, and very good attorneys. And, Lanny, you know from your experience in the White House when you dealt with the attorneys there, the lawyers in the White House, when you said get it out, their initial instinct, all lawyers' instincts, certainly defense attorneys, is, you don't volunteer anything, you just answer the questions that you're asked.

DAVIS: Well, since I'm an attorney, I appreciate those concerns. But I used to say if you're a private attorney and you tell your client I have a hot document that hurts our case, let's send it to the other side, that's malpractice. When you're in the White House, that's exactly what you should do. Because in an atmosphere where there is subpoenas, that document's going to come out sometime. You might as well put it out yourself and then say, by the way, no quid pro quo, there's nothing here.

BLITZER: And there's a dozen subcommittees and committees in Congress getting ready to hold hearings, investigations. There's a momentous that develops.

Look at these numbers in a recent CNN-USA Today Gallup poll. We asked the American public what do you think of the actions of Bush administration officials? Illegal, 10 percent think something illegal was done; 36 percent believe something unethical was done; 28 percent, nothing wrong was done.

But if you look at the first two, almost 50 percent think either something illegal or unethical was done by the Bush administration. It seems that the perception at least among almost half of the public is they did something wrong, they better do something about it.

DIGENOVA: Well, I think that's understandable given the fact that little people have been hurt in this case, and that is these employees, as just happened on your show, are out telling their stories.

And Enron did have these relationships with Republicans and Democrats all over the country. And of course, you know, as a result of that, there will be sort of ethos that sort of evolves around this and people are going to have sentiments about it. That's why it's important to get the story out.

For example, as I was saying earlier about things that people do, former Treasury Secretary Rubin made a phone call, just before Enron went under, to the Treasury Department to ask whether or not they thought it was a good idea for the Treasury Department to contact the credit rating agencies to not downgrade Enron's bonds. That call doesn't bother me. He was the -- Rubin is the chairman of the executive committee of Citibank which is the largest lender to Enron. That call doesn't bother me.

But it did get out there eventually. It didn't come out right away. I think would've been better on the first day if Mr. Rubin had put them out. He's no longer in government.

The White House should learn from that. They should put everything out, every document. If it involves internal advice, there ought to be some caveats about releasing documents that might be covered by some sort of legitimate privilege. But that ought to be a secondary issue to getting the story out.

BLITZER: Lanny Davis, you worked in the White House. I remember, I used to cover the White House. Ken Lay and top Enron officials had contacts with the Clinton White House, as well. There were intimate relation going on, in terms of asking for help in all sorts of projects.

What do you know about those relations? How often was Ken Lay, the CEO of Enron, on the phone with Clinton administration officials? DAVIS: Well, I do remember several stories that developed because of Ken Lay asking for help from the Clinton White House and the Clinton White House trying to at least find out what the problem was, and there was a big campaign contributions that were connected with that.

There's nothing wrong in American politics with big donors being able to call politicians. A lot of people are shocked by that. But we need full disclosure of those contacts, and I think there's nothing wrong.

BLITZER: Should your former Clinton colleagues come forward now and release everything, all the exchanges, all the relationships, the contacts they had with Ken Lay and Enron.

DAVIS: I'd like -- we did so much of that, I'd like to at least leave them alone for a while and let's look at the present. And let's get the Bush administration and members of Congress to fully disclose all these contacts.

Joe and I were talking in the holding room here that the answer here is really full disclosure. American people can judge whether there's a quid pro quo between money and asking for something. But this Bush White House so far has shown no evidence that there was a quid pro quo. So they shouldn't worry about it, and get all the information.

DIGENOVA: In fact, I think it's important to note that the Bush White House did nothing for Enron, except say "We're not going to do anything."

BLITZER: Lanny, it's called the green room, not the holding room.

(LAUGHTER)

You've been on television enough times.

DAVIS: No, that's in Guantanamo. The holding room is in Guantanamo.

(LAUGHTER)

BLITZER: We have a caller from North Carolina.

Go ahead with your question, please.

CALLER: Yes, thank you so much. My question then is that, first I'll make the observation that it appears that the problem arose because of a lack of arm's length maintained between Enron and the auditing firm.

What if the SEC were to simply require that all publicly traded companies would be required to switch auditing companies, say, every other year, something like on a 2-year cycle, something along those lines, so that every third year at least a different set of auditors would be looking at the historical and current information?

DIGENOVA: First of all, it's a very good idea. And it is precisely what the accounting profession has fought for 30 years. They have internal guidelines that suggest that it is not wise for an accounting firm to stay too long at a big client.

But let's remember, Andersen was getting a million dollars a month, $500,000 in accounting fees, $500,000 in consulting fees from Enron. That is not a client you give up. It just isn't a client you give up.

BLITZER: Some of the best advice out there is from our callers, our viewers of LATE EDITION.

What do you think of that advice?

DAVIS: Well, I think it's good advice, but it's really more complicated than that. The accounting rules themselves have to be changed.

For example, what caused Enron to go down is still being done in the public marketplace, where offshore entities, off-balance-sheet entities are created to disguise debts and losses.

DAVIS: And there is no requirement right now, clear requirement, that they have to be reported publicly and even consolidated on the financial sheets.

Those rules have been driven by an accounting profession that's concerned about public disclosure because their clients don't want it. That's what Senator Lieberman, Congressman Tauzin and the Congress should be focusing on.

BLITZER: All right. Stand by, we're going to take another quick break.

A lot more to talk about when we come back, more phone calls for Joe DiGenova and Lanny Davis. LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. We are talking with the former White House special counsel Lanny Davis and the former United States attorney Joe DiGenova.

Joe, one of the attorneys for Enron employees had an interesting proposal the other day. I want you to listen to what he had to say.

DIGENOVA: Sure.

(BEGIN VIDEO CLIP)

ELI GOTTESDIENER, LAWYER FOR ENRON EMPLOYEES: You know what Washington owes them? They owe them a retirement income security law, not a company stock promotion law. The way the law is written now, it encourages employers like Kenneth Lay to load their employees up with stock and to snooker them with promises of great growth.

(END VIDEO CLIP)

BLITZER: Should the law be changed?

DIGENOVA: I think one of the things we need -- I'm not an expert on the Employees' Retirement Income Security Act, ARISA, but I do know this. As part of the investigation, Congress should look at any types of enticement that exist in retirement law to ensure that they are spread out so this type of concentration in an individual employee's portfolio does not leave them open to this type of disaster.

BLITZER: Because right now, companies can tax benefits by giving stock to their employees.

DAVIS: I just have two other ideas. One is that we ought to be sure that there isn't a lockout period arbitrarily imposed, and that happened here. While executives were selling, the employees were locked in.

The second thing I like is disclosure, disclosure, disclosure. Anytime an executive sells stock, there ought to be a requirement there is notice to every employee, so that they know the top guys are selling, and they perhaps can sell themselves. At the very time there were people selling, Ken Lay was telling employees, "We are doing great, don't sell."

BLITZER: And they always give some excuse. "They have to sell. They don't have any other choice. They need to do it, otherwise they lose their options" and all of this.

Let's move on and talk about the Taliban American, John Walker. Were you surprised at the charges that the attorney general leveled against him -- stopping short of treason, stopping short of something that could have justified the death penalty?

DIGENOVA: No, Wolf, and the reason is very simple. These were the preliminary charges brought against Mr. Walker in what is called a complaint. It is just like an affidavit in support of an arrest warrant. There is going to be a grand jury process now.

And, Wolf, when this over he could very well be charged with treason or with a number of offenses which could have death penalty. So this process is just beginning.

BLITZER: What do you say about that, Lanny?

DAVIS: It may surprise you or others, but I think this should have been tried in a military tribunal. I agree with Joe Lieberman. I don't understand why the Bush administration and the Justice Department chose to prosecute John Walker.

BLITZER: Because he is an American citizen. You would had to strip him of his U.S. citizenship in order to justify putting him before a military tribunal. DAVIS: Well, I think that there is at least an argument to be made that the rules should be different for John Walker. I think that the problem with this going to be national security considerations, and that we are going to to decide do we publicize everything and compromise our case against him, or at least have something where the public aspect of it is compromised.

BLITZER: I think Lieberman suggested that Zacarias Moussaoui, who is not an American citizen, be put before a military tribunal. In that case, the Justice Department said, bring him before a federal court.

DIGENOVA: I agree with Senator Lieberman on Zacarias Moussaoui. To me, Moussaoui's case is the perfect case for a military tribunal to be used on United States soil.

I do think that we'll see the military tribunals used. They will probably be set up in Guantanamo for various people there and for various Taliban officials who are ultimately caught and brought back to Guantanamo. And I probably think that Fidel Castro has already been told that and is probably being handsomely paid for agreeing to go along with it.

DAVIS: Let me correct. Joe Lieberman did refer to the other case. But what I was referring to, I'm worried that Walker, in a public setting, that we may have to compromise some of our national security issues. And we ought to take a look at whether parts of that trial needs to be in camera rather than in public.

DIGENOVA: And there is a law that would allow that. And Lanny is absolutely right, because, as a result of the trials in New York and the Southern District of both the World Trade Center bombing and the embassy bombings, al Qaeda learned secret information that they would not have otherwise learned because of a public trial, including information about the engineering structure of the World Trade Center.

BLITZER: Before I let you go, we only have a few seconds, Joe. Two high-profile trials in the Northern Virginia federal court, Zacarias Moussaoui, John Walker, coming up. Can that district just outside of Washington, D.C., handle both at the same time?

DIGENOVA: They can. It is a superb courthouse with a great set of judges, fine prosecutors, good defense bar. Everything will be fine there, as long as there are excellent security precautions, because all the witnesses, all the judges, all the jurors, all of the defense attorneys, all the prosecutors, ultimately will be targets of al Qaeda.

BLITZER: All right, we're going to leave it right there. Joe DiGenova, Lanny Davis with a lot of good advice to our viewers and to officials in the White House and elsewhere. Thanks to you both for joining us.

DAVIS: Thanks, Wolf.

BLITZER: Appreciate it. And up next, some thoughts from Bruce Morton.

(BEGIN VIDEO CLIP)

BRUCE MORTON, CNN CORRESPONDENT: Three New York firefighters, raising an American flag in the wreckage of the World Trade Center. Fine photograph, no controversy there.

(END VIDEO CLIP)

BLITZER: Honoring the heroes of September 11. Is accuracy being sacrificed?

(COMMERCIAL BREAK)

BLITZER: And this reminder for our North American viewers: Immediately following LATE EDITION, it's Business Unusual with Willow Bay. Business Unusual coming up at 3 p.m. Eastern, noon Pacific.

And now Bruce Morton shares some thoughts about a controversial version of September 11 history.

(BEGIN VIDEOTAPE)

MORTON: It started with the now famous photograph taken by Tom Franklin for the Record newspaper in Hackensack, New Jersey, on September 11. Three New York firefighters raising an American flag in the wreckage of the World Trade Center. Fine photograph, no controversy there.

The arguing came later when the fire department, wanting to memorialize what had happened that day, commissioned a sculpture.

It was modeled on Franklin's photograph, but not exactly. The statue veered toward political correctness; one white firefighter, one black, one Hispanic -- though since Hispanics come in all colors, it's unclear what a "Hispanic look" might be.

In fact, the three firefighters in the photo are white. And the department is mostly white, 2.7 percent black, the Associated Press reports, 3.2 percent Hispanic. And most of the 343 firefighters who died in the disaster were white too.

So the sculpture came under attack. Distorting history in the interest of political correctness.

History gets distorted a lot, of course. Winners of wars usually tell of them differently from how the losers might have. But this touched a nerve. A thousand or so firefighters signed a protesting petition.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: They're changing history. They're trying to rewrite a historical picture. They can't do it. They shouldn't do it.

(END VIDEO CLIP)

MORTON: The story went national. Newspapers editorialized. The Asheville, North Carolina, Citizen Times spoke for many when it wrote, "If the department wants to use this photograph, it should depict it accurately." But went on to add, "It is shameful that we are engaged is such a demoralizing controversy less than six months after a tragedy that brought us together as a nation where differences of skin color or religious preference didn't matter." Not all the way together, clearly.

Bill Bradley has said more than once, as a senator and then a Democratic presidential candidate...

(BEGIN VIDEO CLIP)

BILL BRADLEY: Slavery was our original sin, just as race remains our unresolved dilemma.

(END VIDEO CLIP)

MORTON: September 11 hasn't changed that.

The fire department has dropped plans for the statue, saying it will look for some other kind of memorial. One firefighter said, "Maybe it's too soon for that. I think we still have a lot of open wounds."

I'm Bruce Morton.

(END VIDEOTAPE)

BLITZER: Thank you, Bruce.

And now it's time for you, our viewers, to share your thoughts.

One viewer, Marion (ph) from Canada, writes this: "I think he, President Musharraf, is trying to protect himself because he knows bin Laden is in Pakistan and is afraid if the United States finds out, Pakistan will suffer the same fate as Afghanistan."

And Dick from Venezuela writes: "When are we going to realize that the conflict between Israel and Palestine is basically a religious conflict over territory with no final solution foreseeable? It is a war without end."

And for our international viewers, World News is next.

For our North American audience, stay tuned. Another hour of LATE EDITION. We'll hear from the former head of American Airlines. Do new security measures translate into real safety for you?

And our very opinionated panel weighs in on the big issues of the week in our "Final Round".

LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

BLITZER: This is LATE EDITION, the last word in Sunday talk.

(BEGIN VIDEO CLIP)

NORMAN MINETA, TRANSPORTATION SECRETARY: And we will do everything humanly possible to keep these promises.

(END VIDEO CLIP)

BLITZER: U.S. airlines meet the deadline for new security measures. But are the skies safer? We'll ask the former head of American Airlines, Bob Crandall, and two aviation experts.

And our new "Final Round". You've got the questions, our panel has the answers.

Welcome back.

On Friday, the airline industry began screening all checked passenger bags. It's one of several new aviation security measures that are being implemented in response to the September 11 terror attacks.

Joining us now from Palm City, Florida, to talk about the security challenges facing the airline industry is Robert Crandall. He's the former chairman and CEO of American Airlines.

Mr. Crandall, welcome to LATE EDITION. Thanks for joining us.

And let's get right to the new security measures enacted on Friday. The deadline was Friday to screen all checked baggage. Will that make a difference?

ROBERT CRANDALL, FORMER CHAIRMAN AND CEO, AMERICAN AIRLINES: Oh, I think no doubt, Wolf. In fact, the airlines, most of the airlines started a few days before Friday, which is why Friday went by with very few glitches.

So now we've got every bag being screened in one of several ways.

We are using intelligence, the airlines are using intelligence collaboratively with various federal agencies much more sensibly than was true before September 11. And I think the whole aviation system today is dramatically safer and more secure than it was before September 11, and it's going to keep getting better.

BLITZER: But the definition in the word "screen," to screen checked baggage it seems to be a floating, evolving definition. Some places it means matching the bag to a passenger. Other places it means going through an expensive X-ray machine. Other places dogs sniff the baggage.

It seems to be open to interpretation. Isn't that a problem?

CRANDALL: No, as matter of fact, it's not open to interpretation, Wolf. The law says that every bag must be screened, meaning one of several ways. You can use EDS systems, you can use dogs, you can use hand search, you can use other unspecified technology.

The law also says that by the end the of the year every bag has to go through EDS, and EDS is so-called explosive detection system.

So what you've got between now and then is a mix of methods by which every bag is screened. By the end of the year, you're going to have a common method by which every bag is screened.

And additionally, and I think this is very important, you've also got a lot more intensive, much more intelligent use of intelligence data so that we can look for those people who are likely to represent a threat.

So overall, I think we've moved very quickly. I think we've made great progress, and I think we'll continue to make still more progress in the year ahead.

BLITZER: When you talk about intelligence data, checking people who might represent a threat, are you suggesting profiling?

CRANDALL: Oh absolutely, but I'm the not suggesting ethnic or racial profiling. But I think we -- to be sensible, we have got to focus on those people whose behavior -- the way they buy their ticket, when they show up for the flight, where they have traveled in the recent past -- we clearly have got to focus our resources on those people most likely to be a threat.

And I would point out to everyone that that's exactly what the Israelis do. They are much admired for the excellence of their aviation security system, and they use intelligence in very intensive ways. And I hope we're going to be sensible and move in that same direction just as quickly as we can.

BLITZER: But, as you know, El Al, the Israeli national airline, which is obviously a much smaller airline than any of the major U.S. airlines, the screeners there -- those who engage in profiling, they do have special security precautions for different ethnic backgrounds. For example, Arab passengers go through a much greater hurdle before they get on the plane then, let's say, Israelis.

CRANDALL: Well, I think that may or may not be true, Wolf, but I think if you look at what the Israelis do, they've established, for example, a trusted-traveler program. They do a very intensive background check on an individual. They then give that individual a biometric identification, a thumb print, an iris print, a voice print, so that that person can be identified absolutely when he or she gets to the airport.

And those who travel on that trusted-traveler identity -- and I believe that includes some Arabs as well as Israelis and people of our nationalities -- can move through the El Al security process much more expeditiously than those who do not. And I think that kind of an approach makes sense in every security system. It certainly makes sense in our aviation security system here.

BLITZER: So you think the major U.S. airlines should have these trusted-traveler ID cards that they give after they've checked out individuals with all sorts of information, credit checks, jobs and everything else?

CRANDALL: Yes, I think we should move in that direction, Wolf. I think, most importantly, that will improve security by allowing us to focus our security resources on those who are most likely to be a threat. And after all, I think that's what we all want.

The aviation system, if it's going to aid the economy, as it can, is going to have to be both safe and secure and easy and convenient to use. And we ought to do all the things we can to make that happen.

BLITZER: Some individuals have suggested that that trusted- traveler ID card might, in effect, be almost like a national ID card, a violation of individual's privacy and basic rights. So you're not concerned about that?

CRANDALL: Well, Wolf, I think we need to look at it this way.

CRANDALL: Flying is a discretionary activity. You don't have to fly. If you wish to fly and if you wish to enjoy the benefits of moving expeditiously through the airport, then I think we should offer the option: Subject yourself to a very intensive security check, and then you can have the benefits of the trusted-traveler program.

And if you do not wish to do that, you don't have to give up any of those elements of privacy that you choose to hold private to yourself.

Seems to me that that safeguards both the system and the individual.

BLITZER: And it's strictly a voluntary decision.

Let's take a caller from California who has a question for you, Mr. Crandall. Let's listen in.

Go ahead, California.

CALLER: Hi, Wolf. I want to thank American Airlines for their support of the Kate Chris Foundation (ph).

My question involves the...

(CROSSTALK)

BLITZER: Unfortunately, we don't have a caller there. We have somebody else.

But let's move on, Mr. Crandall, and talk about the whole issue of having that baggage screened and matched only on first legs of flights. What do you say to those who say that doesn't do any security on the connecting flights? CRANDALL: Well, what I would say is that the details of what's being done -- I mean, everybody acknowledges that bags are being matched only on original flights.

But I think you've got to make a pretty long stretch to perceive that not matching bags on every connecting flight represents much of a security risk.

After all, Wolf, you know, we've got some balance here. You've got to have a system, if you want the economy of the United States to continue to enjoy all the benefits that free and easy travel give it, you've got to have some kind of balance.

Now, I think we've got a very good compromise which balances between security on the one hand and convenience on the other. Anybody can go through the system and say, well, here's a weakness and here's a weakness and here's a weakness. I don't think you're going to have a perfect system. I think we've got a very good one.

BLITZER: Who's going to pay for all these tightened security measures when all is said and done? The passenger? The general public out there? Or the government? Or the airline industry itself?

CRANDALL: Well, Wolf, everything gets paid for by the passenger. The government has explicitly rejected the idea of paying for it out of general tax revenues.

My personal opinion is, because the aviation industry and travel is so important to the United States, we ought to pay for security out of general tax revenues. The government has rejected that and has imposed an additional fee on every passenger.

So the bottom line is, the passenger is going to pay. And when you next travel, or when one of the people watching next travels, look at the number and look at the number of dollars that are in there, in terms of fees and taxes, you'll see it is very substantial.

BLITZER: Mr. Crandall, thanks for your expertise. Thanks for joining us on LATE EDITION.

CRANDALL: Good to see you, Wolf. Thanks very much for having me.

BLITZER: You're welcome.

And when we return, two perspectives on the best way to achieve even safer skies. We'll hear from the widow of a Pan Am Flight 103 victim and from a former airline security director. LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIPS)

UNIDENTIFIED MALE: I have no problems with it. It's for our security. If that's what they deem, we follow. UNIDENTIFIED FEMALE: I don't think they can put in too tough a measure. They're welcome to go through anything I have at any point. So, yes, my safety is worth my time.

(END VIDEO CLIPS)

BLITZER: Two passengers on Friday commenting on the increased security at the nation's airports.

Welcome back to LATE EDITION. We're continuing our conversation about aviation safety.

Joining us from Miami is Victoria Cummock. Her husband, John, was killed in the explosion of Pan Am Flight 103 over Lockerbie, Scotland. She is also a former member of the Aviation Safety and Security Commission. And in Minneapolis, Douglas Laird. He's the former security director for Northwest Airlines.

Welcome to both of you.

And let me begin with you, Victoria. These latest -- these latest security precautions, the screening of all checked baggage on Friday. Do you believe this is really going to make a difference when all is said and done?

VICTORIA CUMMOCK, PAN AM FLIGHT 103 WIDOW: Wolf, what happened on Friday was a good first step in terms of aviation security. But sadly, I feel it was a small step when actually very large steps need to be given at this point.

We have over 3,000 Americans that have been killed by attacks on terrorists, and we need to do much, much more than is currently being done.

BLITZER: Well, give us what specific -- one example of something, Victoria, that you want done right away.

CUMMOCK: Well, I think bag matching is a really great efficiency type of move. But it does not tell you what is exactly inside of a bag. And until we have the technology out there, the mass deployment of explosive detection technology, we're leaving bag matching and actually security in the hands of a force that's not a really professional force.

BLITZER: Mr. Laird, many people have made that point that Victoria just made, that the bag matching in and of itself won't stop a suicide bomber who is ready to die from putting an explosive in his or her checked baggage and boarding that flight.

DOUGLAS LAIRD, FORMER SECURITY DIRECTOR, NORTHWEST: That in fact is true. But I think you need to look at the totality of the situation. The Congress, I believe, did a wonderful thing -- it was long overdue -- but they did dictate in the law that by the end of this year, all checked luggage, domestic luggage, be processed by EDS. And I think that's a key point that people tend to overlook. They confuse EDS with standard X-ray. EDS is the technology that has to be used to find bombs in suitcases. The government, I think, has acted responsibly in that they have said we will do interim steps waiting to achieve 100 percent EDS.

If people demanded that there be 100 percent passenger bag match, even on connecting flights, we would have a real problem between now and the end of the year. So I think it's a logical answer to a difficult question.

BLITZER: Are you confident, Victoria, that that EDS system, 100 percent of the checked bags going through that by the end of the year, that that will prevent the possibility of a bomb being placed aboard an airplane?

CUMMOCK: Well, Wolf, I think that explosive detection technology is one of many different ways that we can secure the flying public. I think in addition to that, we need to ensure that everything that's being loaded onboard a plane is secure.

Every day the airlines load tons of cargo with passengers, as well as tons of mail. The anthrax letter, the Unabomber bombs are loaded on with passengers every day of the week. And there are no steps right now requiring the airlines to look and see what's inside those items.

In addition, the force -- the security force, we're not talking about the security force like El Al has. These are not professional security individuals that have been trained. And the fact that we still don't have criminal background checks on them and have not had the professionalizing of this force by training and knowing who these people are so they can actually do a profile or decide who to match a bag too -- frankly, I don't think a sky cab would know if bin Laden hit him with their car.

BLITZER: All right. Well, let's pick up both of those points with Mr. Laird.

First of all, the business of cargo and mail. Will that be fully screened in these new explosive machines by the end of the year?

LAIRD: No, it will not. The problem is that the portal opening on those machines is not large enough to handle most cargo. Keeping in mind that cargo, on the larger aircraft in particular, is loaded in containers. And those containers will not fit through the machines.

I think it's important, though, to make a clarification. And that is, earlier, Mr. Crandall mentioned the trusted passenger. You also have the corollary, and that's the trusted cargo provider. I think there is many ways, using biometric, as I said earlier, that we can track who the people are that are travelling. We could track who the people are that are submitting cargo.

A lot of talk has been made of biometrics and chip cards. And I think it's important to remember, before we make a final decision -- or the government makes a final decision, let's make certain we're using the right technology.

For example, people are talking of chip cards. They are somewhat expensive. Particularly issued in the billions of people. I think a lot of time should be spent looking, for example, at the two- dimensional barcode.

Other technologies can help. For example, metal detectors can clarify whether you have a razor blade or a quarter in your pocket. We need to look at technology, as well as the human factor.

BLITZER: And very briefly, Mr. Laird, the whole issue of having background checks for everyone involved in dealing with the airline industry to make sure that a terrorist doesn't get through the web someplace as far as, for example, screeners are concerned.

LAIRD: I'm not certain that that's a priority in my mind, for the simple reason you would have somebody under the system as an employee that had a clean record.

However, I think it should be done because you have to do everything you can do. And the government is requiring that be done and they are going to do background checks on all airport employees. That is going to be done.

BLITZER: Let's take a caller from New Jersey. Go ahead, please.

QUESTION: Hi, Wolf.

BLITZER: Yes.

QUESTION: This is Jennifer Halgroup (ph) from Red Bank, New Jersey. How are you this afternoon?

BLITZER: Go ahead with your question.

QUESTION: My question is where does the responsibility lay? Is it with the government? Is it with the FAA? Is it with the airlines? Sometimes you think that people quickly run to say that the airlines failed them, but isn't that more with the FAA and how reactive they have been with their policies?

What do you think about that, Victoria?

BLITZER: Yes, that's a good question. Go ahead, Victoria.

CUMMOCK: I think it's up to our government to protect us from attacks, and not an industry. Every time we buy an airline ticket there is a 10 percent ticket tax and there is $7 billion in the aviation trust fund.

The government needs to protect its citizens whether it's onboard a plane or anywhere else, and not start abdicating their responsibility to an industry that is bottom-line oriented.

BLITZER: Victoria, what do you say about Mr. Laird's suggestion that the cargo industry have the equivalent of the honorable travelers, the good travelers card to make sure they don't sneak some bombs aboard the cargo or the mail?

CUMMOCK: Well, right now when I call up to send an overnight package, unless it's done on Fed Ex or UPS, they will consider any shipper a known individual, when, in fact, that shipper's picking up for me that I might decide I'm going to send two pounds of (UNINTELLIGIBLE) rather than two blouses to my sister in Miami or New York.

So, the way that it is designated as a known shipper or a known traveler, if the identification of the person is not accurate, we are profiling the wrong person. And that's one the problems with the profiling system.

El Al profiles at the airport as well as beforehand. Profiling, if you leave it in hands of a sky cab or an automated profile with an identification that could have been lost or stolen, they might be profiling Wolf Blitzer and someone else with your stolen ID is going to show up at the airport, and we are going to leave it in the hands of a sky cab who is going to have to decide whether that terrorist is Wolf Blitzer, the good guy that we have already profiled and we want to let onboard a plane. And I don't think that's a really efficient way of securing the flying public.

BLITZER: Mr. Laird, El Al does a lot of cargo business as well. I assume they check every piece of cargo going to gets on an El Al plane some way. Isn't there some technology that can check every piece of cargo, every piece of mail before it gets on a U.S. plane?

LAIRD: Before I address that issue, when I talked about known shippers, Ms. Cummock referenced going and sending a package. There is not a problem X-raying or EDS-ing packages. The problem is a large container of many, many boxes or a car on a pallet, a container of fish and that sort of things. Those are very difficult to screen. There are no really good technologies I'm aware of today that can do that in a timely manner.

CUMMOCK: Well, maybe consideration should be given to banning hazardous material or dangerous cargo or questionable cargo that can't be scanned and keep that away from the flying public.

The FAA's priority should to be to protect the flying public, not to look for ways to continue to grow an industry at the expense of the flying public.

LAIRD: Well, let me continue on the El Al question and cargo. I think if you compare the amount of cargo moved by U.S. carriers, U.S. flight carriers and El Al, the contract was very great.

Furthermore, the commission that Ms. Cummock served on, as well as the TWA 100, referred to as the Gore commission, both stated that one of the important issues in dealing with terrorism against aviation is that it has to be done by the government.

They did not bomb -- I'm sorry, they did not Pan Am 103, they bombed the tail on the airplane. The same thing with 800. So, therefore the government does have a responsibility and should step up to that responsibility.

BLITZER: Is it a good idea, Victoria Cummock, for the flight attendants and the pilots on commercial airliners in the United States to be armed?

CUMMOCK: No, I think security should be left in the hands of the professional. When you look at countries that take security seriously, they have federalized the process or put in it hand of law enforcement.

I really feel if we want to do a decent job in securing the flying public and stop frustrating them, we can't keep going through the motions with people who are unqualified and untrained to provide this function.

We need to get the professionals involved, give them the right training and the right technology in order to see what is on board the planes and who is getting on board a plane.

BLITZER: Victoria Cummock and Douglas Laird, thanks to both of you for joining us on LATE EDITION. Very good, thoughtful information both of you provided. Appreciate it very much.

LAIRD: Thank you.

BLITZER: Thank you.

And just ahead, we'll check the hour's latest developments and then the "Final Round". Our panel weighs in on the big stories of the week. We'll also be looking for your phone calls and your e-mail.

LATE EDITION's "Final Round" is coming up.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION's "Final Round".

Joining me today, Julianne Malveaux, she's a syndicated columnist; Peter Beinart, the editor of the "New Republic"; Jonah Goldberg of the National Review Online; and Robert George, columnist for the "New York Post."

And we begin with the latest on the Enron collapse.

Earlier today, Senator Carl Levin of Michigan questioned the Attorney General John Ashcroft's refusal to answer questions on the totality of his relationship with Enron.

(BEGIN VIDEO CLIPS)

LEVIN: It would be a lot better off for him to just simply say yes or no, and if he did, what those contacts were, just to simply disclose them.

ASHCROFT: I've made clear that I believe that the Justice Department and its functions should be undertaken by others, and I will have no involvement in the matter because of my recusal.

(END VIDEO CLIPS)

BLITZER: Julianne, is the attorney general hiding behind his recusal? Has he got anything to hide?

JULIANNE MALVEAUX, SYNDICATED COLUMNIST: He may not have anything to hide, but he needs to speak up. I mean, there are 4,000 people who lost their jobs, 20,000 who lost their pensions.

He seems to have only gotten a campaign contribution, $55,000, that's why he recused himself. But if he knows more, he needs to say so, and if he doesn't, he should simply say, "I have no other contacts."

The fact is, everyone's going to be called on to disclose on this one, and the attorney general sets a horrible example when he just says he won't.

BLITZER: Jonah?

JONAH GOLDBERG, NATIONAL REVIEW ONLINE: I can't help but think that this is something of a fishing expedition. And it's sort of -- it reminds me of how everyone went after Ashcroft on the military tribunals issue, even though that was Don Rumsfeld's decision, simply because the Democrats like to demonize John Ashcroft.

I should...

MALVEAUX: Doesn't it remind you of Whitewater?

GOLDBERG: Actually, not at all. Then again, this isn't a corrupt land deal from Arkansas.

But regardless, the point is -- and I guess I should recuse myself, in one sense, in that my wife happens to be a senior aide to the attorney general, and they take this recusal thing very, very seriously.

(CROSSTALK)

PETER BEINART, "THE NEW REPUBLIC": But there is actually one Whitewater connection which I think it interesting, and it shows that there are costs to getting rid of the independent counsel law.

I mean, the independent counsel law had lots of problems. Democrats and Republicans both hated it. But what you want an investigation to do is to clear the air.

It very well may be, in fact, I would put my money on the fact the Bush administration is fine here, but a Justice Department investigation, because of the links of this administration to Enron, cannot clear the air. An independent counsel would have.

ROBERT GEORGE, "NEW YORK POST": I mean, the fact is, Ashcroft almost on day one when Enron exploded, he said, I took money from Enron, and I'm going to recuse myself from any kind of investigation.

I think Levin just throwing this out there suggests more of the partisan bickering aspect, rather than a looking to actually getting to the truth of what's going on.

BLITZER: But the simplest way to end it for the attorney general, is to just say, no, there was nothing else there, or there was something else there...

MALVEAUX: Exactly.

BLITZER: But instead of saying, "I've recused myself, I'm not going to comment on it," doesn't that open up the door for reporters and for investigators to simply start going down that fishing expedition?

GOLDBERG: But then, whatever John Ashcroft says, it doesn't matter, John Ashcroft could say, you know, I was in a nunnery at the time, and they're going to make a huge issue out of it. It doesn't matter.

BLITZER: All right.

MALVEAUX: But, Jonah, the fact is that there are two different things here. The whole issue of the recusal and the issue of what he knows.

People are going to be asking questions about everyone, from George W. Bush down, because of the number of people who have gone from having a million bucks in their pension plan to having $10,000.

BLITZER: We heard from two of them today.

All right. Let's move on. More on Enron. We're going to continue this conversation.

The Bush administration insists it's been up-front about its association with Enron, but the Democratic Party chairman, Terry McAuliffe, you won't be surprised to hear, disagrees.

(BEGIN VIDEO CLIP)

TERRY MCAULIFFE, CHAIRMAN, DEMOCRATIC NATIONAL COMMITTEE: The president tomorrow should call Ari Fleischer into the Oval Office and say, quit embarrassing this administration, quit going to the White House podium every day and saying we've disclosed everything. If they will disclose everything, fine. They are making it the political issue.

(END VIDEO CLIP)

BLITZER: What about that, Peter, are the Democrats, in this particular case, going too far in blasting the White House?

BEINART: Actually, they're not going nearly far enough. This is a political issue, but not because of what happened in the last three months, but because of what happened over the last few years.

It's a political issue because there was a massive failure of government oversight. It was a failure of government oversight because mostly -- not only, but mostly -- Republicans and conservatives tried to get the government out of regulating some very important things. That's a huge scandal.

BLITZER: That would be Democrats too, because there used to be a Democrat administration.

(CROSSTALK)

BEINART: It was, but it was mostly a conservative Republican idea, because that's the conservative, warped understanding of the free market...

(LAUGHTER)

... that regulation undermines the free market. It was, ideologically, it was a conservative push. Any honest conservative...

(CROSSTALK)

GEORGE: Also, because Clinton of course was a New Democrat, he went along with that conservative philosophy.

BEINART: To some degree, yes, but it was a Clinton appointee, Arthur Levitt, who tried to stop some of this outrageous work that the accounting firms were doing -- consulting. And it was mostly Republican money that stopped it, and Republican politicians.

(CROSSTALK)

BLITZER: Let's let Jonah -- the warped nature of the Republicans...

(LAUGHTER)

GOLDBERG: Look, two things.

One, I think Peter has put his finger on one important point of this, which is that this is not going to work as a Republican-Democrat scandal, because there are too many Democrats...

(CROSSTALK)

GOLDBERG: I know, well, but this is my interpretation of your otherwise sagacious point...

(LAUGHTER)

... is that this is not a Democrat-Republican scandal, in the sense that you can't say that this is a venal, sort of corruption thing, because there are too many Democrats who are too deep in this, from Lieberman -- this happened -- the transgression started in 1997 under the Clinton administration's watch. It's too difficult, too muddy.

There is a good left-right argument to have, between lovers of the free market versus lovers of the Leviathan state.

(CROSSTALK)

BEINART: ... better understanding of what makes the free market work.

(LAUGHTER)

BLITZER: Wait a minute. Let's Julianne...

MALVEAUX: You know, the deregulation movement started in the Reagan administration, when they said, we want to deregulate. And the SEC has a lot less power than it once had.

You're right about one thing. Democrats had their fingers in the Kool-Aid too. 70 percent of the United States Senate got some money from Enron, one way or another.

Enron is the best argument I've seen in a very long time for campaign finance reform.

BLITZER: Julianne, you forget the Jimmy Carter administration.

GOLDBERG: Wolf, thank you very much.

BLITZER: Some deregulation even began under Jimmy Carter, and we'll talk about that on another occasion. Stand by, we have more Enron. This story simply won't go away.

In fact, this week it's won our dubious honor of Quote of the Week. The Enron vice president Sharon Watkins (ph) sent an internal memo to the chairman Ken Lay saying this, quote: "I am incredibly nervous that we will implode in a wave of accounting scandals. We are under too much scrutiny. And there are probably one or two disgruntled redeployed employees who know enough about the funny accounting to get us in trouble."

Jonah, can Arthur Andersen survive all of this?

GOLDBERG: There was an accountant the other day in the "New York Times" who said it's 50/50. I think it's -- the odds are much worse against Arthur Andersen.

Generally, in lawsuits, when a company loses -- devalues its stock value only 10 or 20 percent, the auditing firm that was responsible for that revaluation gets sued for a big chunk of that.

There's no Enron left. There are no pockets left in Enron to raid. So Enron is the only guy, when the music stopped, with any money. And this is a limited partnership. It's the kind of thing -- very hard to see how they survive.

BLITZER: If you were an employee of Arthur Andersen and you had stock or whatever in Arthur Andersen, would you trying to unload that right now?

MALVEAUX: Oh absolutely. I mean, a couple of the real big questions that are asked are, who was Arthur Andersen signaling when? I mean, you had the employees with the stock freeze. They could not sell the stock in their pension fund while the corporate executives were dumping theirs daily. So, Arthur Andersen is absolute possible for a class action lawsuit.

GOLDBERG: And then another 85,000 jobs lost, which, if we're going to bemoan all those people who -- there's a huge crime in all these people losing their jobs with Enron, we should also keep in mind that this investigation...

BEINART: That's why it should have been stopped before it happened.

GEORGE: The real, the real threat to Arthur Andersen right now is the state's -- the state regulators getting involved. Connecticut actually suspended Arthur Andersen for some problems in the mid-'90s. New York is also looking into these things.

If Arthur Andersen gets suspended in New York, given it being the seat of the financial markets, it's going to go under.

BLITZER: Are there going to be a lot of accountants looking for work pretty soon?

BEINART: Yes. And the real problem is that these accountant firms a lot of times are no longer accounting firms. More of their money is actually made at consulting. That's the real, I think, ideological, intellectual fraud that's going on here.

Until, I think, all of the big accounting firms actually go back and make a choice -- either be consulting firms or be accounting firms, don't try to do them both, given that they're inherently corrupting -- I think we're not going to get beyond this.

GOLDBERG: The irony, of course, is that Andersen consulting was upset that they had to change their name to Accenture, and now they're kind of happy about it.

(LAUGHTER)

BLITZER: We're just beginning this conversation. We have a lot more coming up. We'll be back with your phone calls for our panel, your e-mail as well. LATE EDITION's "Final Round" will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to our "Final Round".

We have an e-mail question from Theresa (ph) in Carver (ph), Massachusetts. Let's put it up on the screen. "I am appalled at the various human rights groups being concerned about the treatment of prisoners being held in Cuba. Aren't these prisoners the same type of men that beat, kicked and bit CIA agent Mike Spann to death?" MALVEAUX: You know, it's a question where it's tempting to go retaliation. It's tempting to say they did it and so, you know, we're going to do it too.

But the fact is that our country is one that is founded on human rights. We haven't always delivered them, but we should. And people should be concerned about what's happening to the people in Cuba. I'm not saying give them filet mignon, but treat them decently.

BEINART: You know, what's interesting is that the human rights groups have said we are very concerned about the status of these prisoners, they're not considered prisoners of war.

But when you talk about specifics, when they actually ask them what are the abuses that we are committing on these guys, they don't really have very much to say. In fact, we're ordering an whole shipload of Korans.

So while I'm concerned, I do think we need to treat them well, I actually don't see where the evidence comes from.

BLITZER: All right. Let's move on to talk about -- let's talk about China, U.S.-Chinese relations. Chinese intelligence officials claim they found listening devices aboard a U.S.-made plane bought for the president, Jiang Zemin's official use.

Secretary of State Colin Powell refused to comment on this subject today, and he seemed unconcerned.

(BEGIN VIDEO CLIP)

COLIN POWELL, SECRETARY OF STATE: We have been in touch with the Chinese government. They were delighted when we notified them that President Bush would be available next month to travel to China, and they gave us an instantaneous response: "Welcome, come on ahead." So we're looking forward to that trip, and I don't expect anything to derail that trip.

(END VIDEO CLIP)

BLITZER: OK. Robert, is this a big issue in U.S.-China relations, or not going to be a big issue, the alleged bugging of the Chinese Air Force One by the U.S.?

GEORGE: I'm shocked, simply shocked, that the United States may be spying on China, considering China is probably and most definitely spying on us.

This isn't a big deal at all. You know, as Ronald Reagan said, "Trust, but verify." The United States and China can still work together economically even though they are obviously going to be spying on each other.

BLITZER: Peter?

BEINART: But this is stupid. MALVEAUX: But the bottom line is this is economic.

BEINART: This is also very stupid, though. Because it seems from the press reports, and they may be wrong, that Boeing didn't know about this. And so then what the United States government has done has put a very, very major U.S. corporation in a terrible, terrible position that will make it harder for Boeing to sell planes to governments around the world. I think that was really the blunder here.

GOLDBERG: Do you really think...

(CROSSTALK)

MALVEAUX: I mean, that's an interesting point. But I -- you see, when the United States and China are trading so freely, there are many, many people who would not like to see the level of trading, would not like to have seen China get most-favored nation. The reason why we swallowed all our human rights concerns was because this is 25 percent of the world's population.

And so this is trade at the end of the day and this doesn't jeopardize anything. It's a blip.

BLITZER: Let's let Jonah weigh in.

GOLDBERG: I think that's basically right. And it was revealed in the early 1990s that the French were spying on American executives when they were flying on Air France. And to date, despite all of my insistences, we have not bombed Paris. So, you know, life will go on.

(LAUGHTER)

BLITZER: Life goes on. It was exactly, of course, one year ago today, one year ago today, George W. Bush was sworn in as our 43rd president.

Julianne, give the president a grade during year one.

MALVEAUX: C. I'll give him a B+ for international, and I will give him a D for domestic. So it's about a C.

BLITZER: Jonah?

GOLDBERG: I think he started with a solid B, and after September 11, he pulled it up to an A-, to an A.

BLITZER: Peter?

BEINART: I'd also give him a C. On the war he's been good, but probably a Democrat would have been the same. The tax cut will haunt us for years and years to come.

GEORGE: I have to give him an A. Even aside from the war, he got his two primary domestic pieces of agenda, tax cuts and education pushed through. I think it's been remarkable. BLITZER: I don't think his year...

MALVEAUX: But he didn't get what he wanted on education. He didn't get that charter school -- I mean, he didn't get that school choice stuff he talked about throughout the entire campaign. And quite frankly, the tax cut was not what he wanted, and he's going to pay for it.

GEORGE: It was a heck of a lot closer than what the Democrats wanted. I mean, he got basically two-thirds of the tax cut, and I think that was impressive.

BLITZER: All right, let's move on and bring in this point. The presidential adviser Karl Rove angered many Democrats when he said on Friday that the American people think Republicans will do a better job protecting the country. Democratic chairman Terry McAuliffe responded to Rove's comments earlier today.

(BEGIN VIDEO CLIP)

TERRY MCAULIFFE, DNC CHAIRMAN: This is the time for unity, not disunity. And he should never give remarks that could be interpreted that he is trying to divide our nation, divide our parties. I think it's an affront to the integrity of the military all over the world.

(END VIDEO CLIP)

BLITZER: Did Karl Rove mess up?

GEORGE: Slightly. I mean, the fact is, the Democrats have been supporting the president on the war.

But the truth of the matter is, the American people, in survey after survey, just tend to default to Republicans when it comes to things like national defense and security. So I think that was always going to be there anyway.

BEINART: Let me defend Karl Rove here. What he said was perfectly legitimate, in my view. Of course Republicans want voters to vote for Republicans because they think they're better on terrorism.

Democrats are acting pure here, but the Democrats have been doing exactly the same thing.

What they need is a substantive answer about why they have a foreign policy that's better.

MALVEAUX: But you know what, Peter, I mean, this is a case where the Republicans can go all the off the reservation. They can make the war an issue, but they really shouldn't say that it is. I mean, they can do it subtly, they can do it all kinds of ways.

BEINART: And that's just hypocrisy.

MALVEAUX: But by throwing it out there like that what they are pretty much saying is that Democrats are not loyalists, Democrats are not patriots. And that's not fair.

BEINART: No, I don't think that's what they're saying at all.

GOLDBERG: Well, I think that's sort of absurd. We've had dozens of presidents in United States history run explicitly incredibly negative campaigns about war. We had Eisenhower running about pulling us out of Korea. We had Lincoln. The Lincoln campaign in 1860 was viciously about the war on all sides. Hubert Humphrey, Richard Nixon, all of these guys have always run explicitly making foreign policy the issue.

The reason why it won't work as a huge issue is because the Democrats have actually supported the president.

So it's perfectly fine for the Republicans to say Bush has been a great leader. But that doesn't mean it's going to make this huge divisive thing. And the idea that it's somehow questioning the loyalty of Democrats is just weird.

MALVEAUX: Well, that's what it sounds like to me.

GEORGE: It's a lot harder to make that case though in midterm elections when you've got two parties that are both supportive of the war. Obviously, back in Vietnam when there was a split in the country, you had clear ideological divisions. You don't have them on the war right now.

MALVEAUX: But this is the kind of rhetoric that comes from the Republicans that I think is just is off-putting. It's like the president saying "over his dead body." I mean, that's over-reaching. "Over my dead body," you know, we're going to make this issue. I think that they could pull the country together a lot better by just toning the rhetoric down a bit. I'd still disagree with them, but they would have toned the rhetoric down.

BEINART: I mean, it's Karl Rove at a party meeting. This is not exactly the State of the Union address, you know.

BLITZER: Well, Peter, do you think it's smart politics for the Democrats to do as they've been doing, praise the president when it comes to fighting the war, international issues, but hammer him when it comes to domestic issues?

BEINART: Yes, the Democrats' problem is not the war. Jonah's right, that's not going to be a big issue. The Democrats won big last fall even though the war had just broken out.

The Democrats' problem is they can't get their act together on what they want to say about this tax cut. Half the party is saying repeal it. The other part is saying we don't even want to discuss it. That's a disaster for the party. It needs to get its act together, have one line on the tax cut.

And I think it should be repealed.

BLITZER: Yes, we heard a lot of Democrats walking away from Senator Kennedy's proposal earlier this week...

(CROSSTALK)

GEORGE: Of course, you've got the -- you've got the 12 Democrats who voted for it in the Senate and six of them who are running for reelection.

MALVEAUX: Well, they voted for it -- they voted for it pre-9-11, though, Robert. And that's the issue, is whether or not we can afford the same kind of tax cuts with a deficit that we could have afforded when we had a surplus.

BEINART: And, Robert, let me tell you, Democrats can be wrong too.

(LAUGHTER)

BLITZER: All right.

GEORGE: I'll agree with you on that.

(LAUGHTER)

MALVEAUX: Not as wrong.

(LAUGHTER)

BLITZER: We have to take another quick break. Our lightning round is coming up next. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Another busy week in Washington. Time now for our lightning round where we look ahead at the coming week's events.

Tomorrow, the holiday celebrating, of course, the life and work of Martin Luther King, Jr.

Is there a successor right now to the civil rights leader, Peter?

BEINART: Politically there is, and it's Al Sharpton. But morally, that's a disaster, because our civil rights leader for today needs to move the discussion beyond race to economic justice, and Sharpton can never do that.

MALVEAUX: You know what, I don't think that Sharpton -- we'll never have "a" civil rights leader again. Jesse Jackson, Hugh Price, that generation is the last generation of single focus of civil rights leaders.

I do agree with you on the economic justice piece, but I think that you look to the National Black NBA Association and folks like my younger sister, Antoinette, who heads that up. You look at...

BEINART: My sister's on that, too.

(LAUGHTER)

MALVEAUX: So, look at some of the other business organizations, as well as the fact that you will find black leaders in accounting and technology and all kinds of other places. We're not going to have "one" ever again.

GEORGE: Well, what's really happened here is that the protest model which King used remarkably is really now obsolete. When you have Dick Parsons having a leadership position at AOL-Time Warner, Stanley O'Neill at Merrill Lynch, when you have black leaders taking really large roles within society, the old model is gone. And we need to find really new leaders in business and other professions.

GOLDBERG: Yes, I think that's all right. I mean, the moment is gone, and that's basically a good thing. Martin Luther King was a man for the moment like all great men are and that moment is gone because, in large part, because he succeeded.

BLITZER: All right. Perhaps as early this week, the FBI may release some additional information about the suspected anthrax terrorist.

Any possibility he will be the caught any time soon?

GOLDBERG: Well, if it's Peter, definitely.

(LAUGHTER)

I have no idea. Who knows? I mean, the profile may work. The FBI has not exactly batted a 1,000 the last couple of years. So, we'll see. I don't know.

BLITZER: Are you confident?

MALVEAUX: Actually, Jonah, you know, you and Peter both fit the profile, but they won't be doing racial profiling this time. They're not going to stop all the white guys with PhDs.

BEINART: No, I got a C in chemistry. I'm not...

(LAUGHTER)

GEORGE: I think the -- I mean, the fact is, look how long it took them to catch the Unabomber, and that was because his brother ended up turning him in. It could be short; it could be years before they...

GOLDBERG: And we had that picture of Unabomber...

GEORGE: Him or her.

(CROSSTALK)

BLITZER: I was going to move on and talk about President Bush. He's going to be delivering a major speech, at least the White House calls it a major speech, on the economy on Tuesday. Are we expecting any bombshells in this speech?

GOLDBERG: I have actually talked to some people who have been working on it, and my understanding is that they are going to lay out -- there's not enough room in the State of the Union for a full-blown exposition on the economy, and this is where they are going to do it.

And I'm not sure what they have to do so succeed, because it's very interesting -- the one thing that we've learned is that the best way to avoid taking a lot of heat for a recession is to have a war. And the media hasn't been beating up Bush on the recession. The recession is not an issue like it was in 1990. So, we will see.

BLITZER: Julianne?

MALVEAUX: He's going to have to pay attention to the little people. He needs to get off the tax cut bandwagon. I know that he won't.

But you've got with the Enron case, for example -- it's not the only example. We've lost over a million jobs in the past several months. You've got unemployment rates that are unprecedently high, 10.2 percent among African-Americans, about 5-6 percent overall. He's going to have to talk to the people who have been affected by the recession.

It's been a dual recession. Some people are the not feeling it at all, but many are feeling it very closely.

GEORGE: I don't think he has to back away from the tax cut. He, basically has to show that he's not just the war president, that he is in command of the economy. And basically he has to just lay out a vision for what comes next.

BEINART: I don't think there is anything he can possibly say, because the real problem is that long-term interest rates are not coming down that much, and that's because the deficit is exploding. And who is responsible for that? In large part, it's George W. Bush.

BLITZER: All right. It's only about a week or two ago the president and Massachusetts Senator Ted Kennedy were best friends, but Kennedy's call to delay tax cuts earlier this week was, of course, not welcomed by the president.

Jonah, can this relationship be saved?

GOLDBERG: Only if you want it to, and why you would, I have no idea.

Everyone is making fun of the Bush administration for saying that getting rid of these tax cuts is a tax hike. Well, these are the same people who consistently say that whenever they cut the rate of increase in a government program, that's a devastating cut...

BEINART: Yes, but conservatives say the opposite. So if liberals are lying, so are conservatives. GOLDBERG: Look, if I promise you you get a raise as of next month, and you've been planning on it, and then all of a sudden I say you're not going to get it...

(CROSSTALK)

MALVEAUX: ... didn't get it. And the fact is that you can't promise tax cuts...

GOLDBERG: It's been factored into all sorts of things in the economy.

MALVEAUX: But I'm not sure, Wolf, if this is a friendship at all. This was mutual use, mutual use over a little popcorn. I mean, these guys were never...

BLITZER: But education is a big issue.

GEORGE: No, no, the things is -- no, you don't understand. Of course they're going to be still pals. This is manna from heaven for Republicans to hear. Ted Kennedy, who has always been the epitome of big-government, tax-and-spend liberalism, saying we should take away the cut. I think the Bush administration is sending hosannahs up to Massachusetts right now.

BEINART: On education, Bush is big-government person. The education bill is something that Ted Kennedy legitimately loved. That's why they get along. On taxes, they don't.

BLITZER: The whole relationship was a strange relationship. These are...

MALVEAUX: I don't think it's a relationship. Like I said, I think it was mutual use.

BLITZER: You don't think there is any good chemistry between the president and the senator?

MALVEAUX: Well, you know, I mean, chemistry in context. There could have been chemistry before but they had no need for the chemistry until he was the president -- mutual use.

BLITZER: They did get an educational bill through, and that was the president's top domestic priority. He can thank Ted Kennedy for getting it through.

MALVEAUX: But he didn't get what he wanted with that bill, Wolf.

GOLDBERG: He wanted a photo op with Ted Kennedy, and he wanted to be able to run on education issues. He got both of those things.

GEORGE: He wanted to show that he is a bipartisan president, and Ted Kennedy gave him that. And he actually got a lot more in terms of accountability and so forth than you would imagine.

BLITZER: That's the last word of the "Final Round". GEORGE: Well, thank you.

BLITZER: Robert, you get that every week.

MALVEAUX: He plans on it.

(LAUGHTER)

(CROSSTALK)

MALVEAUX: Good to be here.

BLITZER: Thank you very much, Julianne.

And thanks to all of our "Final Round".

That's your LATE EDITION for Sunday, January 20. Please join us again next Sunday, every Sunday at noon Eastern.

And during the week, of course, I'll see you twice a day, at both 5:00 and 7:00 p.m. Eastern, two editions of Wolf Blitzer Reports.

Until then, thanks very much for watching. I'm Wolf Blitzer in Washington.

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