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Congress Looks at New Abu Ghraib Images; West Chester Mourns Nick Berg

Aired May 12, 2004 - 14:00 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.

(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There is no justification for the brutal execution of Nicholas Berg, no justification whatsoever.

(END VIDEO CLIP)

KYRA PHILLIPS, CNN ANCHOR: Outrage at the murder of an American at the hands of terrorists. Just how safe are U.S. citizens in Iraq?

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: I'm Ed Henry on Capitol Hill. Behind closed doors at this hour members of Congress are poring over the new photos and videos that document more Iraqi prison abuses.

PHILLIPS: Trading on tragedy, graphic images become coveted collectibles. Should this really be kid stuff?

MILES O'BRIEN, CNN ANCHOR: Paying at the pump, $3 and up? And no signs of coming down. What's fueling the rise in prices?

From the CNN Center in Atlanta, I'm Miles O'Brien.

PHILLIPS: And I'm Kyra Phillips. This hour of CNN's LIVE FROM... starts right now.

PHILLIPS: For their eyes only. Scores of unreleased pictures and a video clip of Iraqi inmates abused and degraded by some of their American captors. The eyes doing the viewing belong to U.S. lawmakers, but the Pentagon is calling the shots. CNN congressional correspondent Ed Henry brings us all into focus on Capitol Hill -- Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Kyra, there's high drama on Capitol Hill. This explosive story is getting more intriguing now. As members of Congress in both chambers -- it was supposed to only be senators today, but we had some news this morning where House members are now being brought into the loop. Both chambers now viewing these new photos and videos that document more abuses in the Iraqi prison.

We have members of Congress poring through it for a limited time. For example, in the Senate, just in the last half hour, we saw Pentagon officials bring in briefcases, dark briefcases, these photos and videos. They brought it up to S407 in the Capitol, that's a secure room normally reserved for classified briefings. What's happening is members of Congress are seeing a slide show that shows about 1000 photos. Only 300 to 400, we're told, deal directly with the investigation, document more abuses. Most of the photos are unrelated to the investigation. But members of Congress can see a slide show in the Senate. It will run from 2:00 to 5:00 p.m. in this secure room.

But also there will be hard copies of the photos, separate tables. One table we're told will have the investigative photos that are critical and another table that will have maybe some of the more pornographic photos that are not directly related to the investigation.

For example, insiders say that some of the photos show soldiers having sex with one another. If members of Congress do not want to see some of the more perverse photos that are not related to the investigation, they can skip over those. The key is they cannot bring staffers, they cannot make copies. All of this is being done so that the Pentagon keeps complete control of the photos at all times.

Members of Congress in both parties do not want Congress handling these and then actually taking custody and deciding how they'll be distributed or whether they'll be distributed. They'll be given back to the Pentagon in the Senate, for example, at 5:00 p.m. The House may run a little longer because you have more members there. They will go back to the Pentagon.

The next big question will be what will the Pentagon do with them? There was a camp earlier this week of lawmakers in both parties saying, get this out, stop the drip, drip, drip of this scandal. But I can tell you that this morning at the House Republican conference meeting, a GOP leadership source tells CNN that several Republican lawmakers stood up and said that given this tragic death of Nicholas Berg yesterday, that releasing these photos now could inflame the situation even more and put more American lives at risk.

That dovetails with something CNN producer Ted Barrett heard yesterday from House Armed Services Chairman Duncan Hunter. That Republican congressman said as well, he's very concerned that if these photos are released by the Pentagon later this week, it could inflame the situation, make it worse and put more lives at risk. That's where we stand right now -- Kyra.

PHILLIPS: Ed Henry on Capitol Hill, thanks so much.

And the U.S. soldier who may be the most closely identified with the Abu Ghraib scandal says that she was just following orders. In a TV interview, Private First Class Lynndie England says she was told to pose in staged photographs for the purpose of intimidating other inmates from whom the U.S. wanted information.

England won't say who gave the orders.

(BEGIN VIDEO CLIP)

PFC. LYNNDIE ENGLAND, U.S. ARMY: Told to stand there, give a thumbs up, smile, stand behind all the naked Iraqis in the pyramid, take a picture.

UNIDENTIFIED REPORTER: Who told you to do that?

ENGLAND: Persons in my higher chain of command.

(END VIDEO CLIP)

PHILLIPS: England is one of seven troops facing criminal charges and one of at least four to face court martial.

The former commander of all the MPs at Abu Ghraib says that she was forced to turn over the reins to military intelligence. Brigadier General Janis Karpinski was relieved of her command and formally admonished when the scandal came to light. Her confidential comments arising from the Pentagon's own investigation, cite a power struggle that Pentagon policymakers are publicly denying. "The Washington Post" reports that Karpinski says ground force commander Ricardo Sanchez and Karpinski's replacement at Abu Ghraib, Geoffrey Miller: "overruled her concerns about the military intelligence takeover and the use of deadly force." The Pentagon's report, nevertheless, concludes that Karpinski bore responsibility over MPs' conduct.

O'BRIEN: Defense Secretary Donald Rumsfeld went to Capitol Hill today for a previously scheduled hearing on war funding, but lawmakers, of course, more interested in photos of abuse than dollars and cents. Let's go live to the Pentagon and our correspondent, Barbara Starr.

Hello, Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Hello to you, Miles. Well, Defense Secretary Donald Rumsfeld was trying to offer first an impassioned defense of the war in Afghanistan and Iraq.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: I understand concern. By golly, I've got it. But I look at Afghanistan, 25 million people liberated, women voting, able to go to a doctor. And I look at Iraq, and all I can say is I hope it comes out well. And I believe it will. And we're going to keep at it.

(END VIDEO CLIP)

STARR: But that didn't stop General Richard Myers, chairman of the giant chiefs of staff, from addressing the issue about the prison abuse. And he offered a really amazing assessment of the military police unit that was at Abu Ghraib Prison.

(BEGIN VIDEO CLIP)

GEN. RICHARD MYERS, CHMN., JOINT CHIEFS OF STAFF: This was a unit that had issues with just adhering to the Army's standards. They didn't have standardized uniforms, they were allowed to carry guns in their civilian clothes when they were off duty. They had things written on their cap. They didn't particularly want to salute. This was a unit that had those exact -- so the first thing you do is you replace the leadership of the unit. They have done that.

(END VIDEO CLIP)

STARR: And General Myers giving some pretty amazing indications there of some of the lack of leadership, lack of discipline, military discipline in that military police unit at Abu Ghraib prison. And finally an update on the military justice process against those seven soldiers now facing legal action for their actions at Abu Ghraib Prison in Baghdad today.

It was announced that there will be two more court martials. They will be against Sergeant Javal Davis and Staff Sergeant Ivan "Chip" Frederick, two more court-martials. The first court martial, Miles, of course, against Specialist Jeremy Sivits begins in Baghdad next week -- Miles.

O'BRIEN: Barbara, I just talked a few moments ago with the attorney for Lynndie England who, heretofore, has not been charged, but of course, is pictured in all of these. And he said one of the big problems he's running into in all of this is that a lot of the people that he'd like to depose, get some testimony from, are with OGAs, meaning intelligence units, and they won't provide the names. How are these people going to be defended if that's the response from the military?

STARR: Well, this is something actually that Army Military Intelligence is well aware of. They know that these people are contending that they were ordered by others to do it. And what they're trying to investigate now through the process is who ordered them?

When these young soldiers say somebody told them to do it, they're trying to identify the name, the unit, where these people came from. All of this is part of the further investigation. Secretary Rumsfeld pointing out at that Capitol Hill hearing today that there are five or six additional investigations going on, and that he at least certainly expects more allegations and possibly more charges against more people, all of this, Miles, far from over.

O'BRIEN: Barbara Starr at the Pentagon -- Kyra.

PHILLIPS: Now to the shock and outrage over the beheading of Nicholas Berg. His body is heading home to the U.S. today. In the ghastly video of his beheading, militants linked to al Qaeda said the killing was in part retaliation for the abuse of Iraqi prisoners. Berg was a civilian in Iraq looking for work, unable to find it, he was preparing to return home when he was kidnapped.

(BEGIN VIDEO CLIP)

DAN SENOR, COALITION SPOKESMAN: Mr. Berg had registered with U.S. Consular Affairs in Iraq. He had no affiliation, however, with the coalition. He was here -- is it our understanding that he was here of his own accord, did not work for the Coalition Provisional Authority, and we do not believe that he worked for any Coalition Provisional Authority contractors. (END VIDEO CLIP)

PHILLIPS: Offering condolences and vowing to track the killers down, the White House is condemning the beheading of Berg. President Bush spoke on the White House South Lawn just a short time ago.

(BEGIN VIDEO CLIP)

BUSH: I want to express my condolences to the family and friends of Nicholas Berg. Nicholas Berg was an innocent civilian who was in Iraq to help build a free Iraq. There is no justification for the brutal execution of Nicholas Berg, no justification whatsoever.

The actions of the terrorists who executed this man remind us of the nature of the few people who want to stop the advance of freedom in Iraq. Their intention is to shake our will. Their intention is to shake our confidence.

Yet by their actions, they remind us of how desperately parts of the world need free societies and peaceful societies. And we will complete our mission. We will complete our task.

(END VIDEO CLIP)

O'BRIEN: It is hard to fathom the nightmare the Berg family is now enduring. Relatives of Nick Berg say he was in Iraq to help people. His father collapsed upon hearing how his son died. Residents in his home town are appalled over this horrific killing, as are we all.

Maria Hinojosa is in West Chester, Pennsylvania.

(BEGIN VIDEOTAPE)

MARIA HINOJOSA, CNN CORRESPONDENT (voice-over): The tiny photograph of 26-year-old Nick Berg is taped to the old mailbox of his neighbor's home in suburban Philadelphia. Inside the home, though, there was only anguish. His parents were informed of his death Monday, but didn't know it had been videotaped by his executioners until Tuesday.

BRUCE HAUSER, BERG FAMILY FRIEND: Let's keep this family in prayer. Let's hold this family up. Realistically, it was Nick Berg, it could have been one of our own. And really Nick was just like one of my own.

HINOJOSA: Family and friends described Nick Berg as smart, funny and idealistic. Back in late December, he decided to go to Iraq to look for work repairing communications towers. But his reasons for going appeared to be more than just for money or adventure, according to his father who spoke on Sunday, before he knew of his son's death.

MICHAEL BERG, NICK BERG'S FATHER: But he just really wanted to be part of something that was important. He supported the administration's being in Iraq. He supported everything that they were doing. And he wanted to help. And he wanted to help in a positive way by building rather than breaking down.

HINOJOSA: Nick Berg stayed in Iraq until February 1. Then he went back again on March 14. Unable to find work, he planned to come home, calling his parents every day as his departure neared. Then on March 24, communication ended. Within days the FBI showed up at this house and told the Bergs their son had been picked up by the Iraqi police in Mosul and was transferred to U.S. authorities. That was all the information they got.

Frustrated, the Bergs went to federal court and sued Donald Rumsfeld and the Department of Defense for holding their son without due process. The next day, April 6, Berg was released. He told his parents he would try to get out of Iraq as fast as he could. But after April 9, there was no further word from him.

(on camera): The Berg family is now awaiting word on when the body of their son Nick Berg will arrive in the United States at Dover Air Force Base. Pennsylvania Senator Arlen Specter requesting from the Department of Defense to allow the family to be at Dover Air Force Base when the body arrives.

Maria Hinojosa, CNN, West Chester, Pennsylvania.

(END VIDEOTAPE)

PHILLIPS: The taped murder of an American citizen in Iraq raises more questions about the safety of workers in a war zone. We'll talk to a man who has been there.

And they save lives, so why aren't side air bags standard equipment in your car? A new push to put them in.

PHILLIPS: On the cutting edge. A sneak peek at what the computer gaming freaks in your family will have on their wish list, straight ahead.

(COMMERCIAL BREAK)

PHILLIPS: An American citizen with a sense of adventure and a desire to help, brutally slaughtered in Iraq. That's the perception that Americans are getting about Nick Berg. Reaction across the country to his killing ranges from sadness to disgust to outrage. Chris Lawrence is in the heartland gauging feedback. He's in Charlevoix, Michigan -- Chris.

CHRIS LAWRENCE, CNN CORRESPONDENT: Yes, Kyra, we've heard a little bit of everything that you just mentioned. And it is funny, being here in this small town, a lot of people have said that looking out on this beautiful spring day and seeing the beautiful lake that they look out at, all afternoon it is hard to reconcile that view with some of the images that they've been seeing coming out of Iraq.

Cindy Supernaw (ph), you've seen a lot of what's been happening over the past few days and weeks. Your reaction of what you've seen from Iraq? UNIDENTIFIED FEMALE: Well, I think that the beheading of a civilian who actually went over just to help rebuild Iraq is a horrible atrocity. I just think that these people who have done that, they're horrible. They're common criminals. And I hope that we can use our justice system to prosecute them. That's really all I can tell you is I just think it is absolutely horrible. And I just hope that they can catch who did it.

LAWRENCE: Also with her, Sarah Gaidem (ph), and you've also seen a lot of what's been coming out of Iraq. Do you think there's any correlation between the American prisoner abuse scandal and what we saw or heard yesterday about Nicholas Berg?

UNIDENTIFIED FEMALE: I think it's a tragedy of violence breeding violence and war escalating and turning good people into bad people on all sides. And we need to find a way to stop this, change course, because clearly our course is one that is creating depths of anger in the Middle East and confusion and a lack of understanding of how to behave on our poor GIs that are trapped in this maelstrom of violence. It needs to stop. And it has to -- an American stamp needs to be removed from this.

LAWRENCE: So you're saying Americans need to get out of Iraq, is that what you're saying?

UNIDENTIFIED FEMALE: I feel that as long as it looks to Iraqis as if we are imperialists, we are going to be less safe. If we can internationalize this and bring in the U.N. and turn things over to the Iraqis, we're going to be in better shape.

LAWRENCE: All right.

UNIDENTIFIED MALE: I think it also reaffirms our goals as to why we're there and that hopefully we can achieve our goals over there.

LAWRENCE: Obviously, a lot of very different opinions here. Small town but not short of opinions. And obviously it shows that Americans are paying attention to what's going on in Iraq, which could be a very big issue over the next months to come as we lead up and head into the fall election.

Kyra, Miles, back to you.

PHILLIPS: Chris Lawrence, thanks so much.

O'BRIEN: Record setting prices at the pump, what's behind them? And more importantly, when will they come down? We'll drive that one home just ahead.

And free beer. A hockey team scheme to fill the seats with Homer Simpsons or something. But the whole idea is falling flat with a group of mothers.

(COMMERCIAL BREAK)

O'BRIEN: Well, you may be glad to hear gas prices are expected to finally quit climbing in June. Of course, you may be broke by then. But anyway, the likely peak above $2 a gallon. CNN's Chris Huntington has been looking into just what's driving record prices at the pumps.

(BEGIN VIDEOTAPE)

CHRIS HUNTINGTON, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Americans are fuming at the pumps.

UNIDENTIFIED FEMALE: I think the gas prices are ridiculous.

UNIDENTIFIED MALE: I'm not very happy with it.

UNIDENTIFIED FEMALE: It seems like it's high all around the country, but particularly here in San Francisco.

HUNTINGTON: According to the Department of Energy, the national average price for unleaded regular is now $1.94 a gallon. That's the highest price in history and 45 cents more than a year ago. And the DOE projects that next month the average price will top $2 a gallon. In California, which requires special gas formulations, $2 a gallon would be a bargain.

GUY F. CARUSO, ENERGY INFORMATION ADMINISTRATION: The main heart of the matter is supply/demand, both at the crude oil level and our global system, and also more specifically the gasoline market in this country.

HUNTINGTON: Demand for gasoline is running at a record pace. And SUVs are a major factor. Gasoline supplies are a bit tighter as well, and that's because imports are down as overseas refineries shift their production to the new, cleaner burning fuels required by laws in the United States.

And crude oil prices, which account for nearly half of the cost of a retail gallon of gas, are up 50 percent in the past year as the global economic rebound has boosted demand. But oil analyst Fadel Gheit insists that fear over supply interruptions is another factor driving crude prices higher.

FADEL GHEIT, OPPENHEIMER & CO.: Eighty percent or more of the spike in oil prices in the last year or so was basically because of fear.

HUNTINGTON: Last week's terrorist attack at the Saudi oil port of Yanbu further fueled those fears. As for gasoline prices, Gheit points out that U.S. refiners are benefiting from supply concerns to book record profits. One of the leading U.S. refiners says wholesale prices are high only because demand is outstripping supply. But Gheit insists there's plenty of gasoline to go around.

GHEIT: There is absolutely no gasoline shortage or tight supply, whatever. Is it all perception.

HUNTINGTON: There may be some relief in sight. Saudi Arabia says it will urge OPEC to boost crude oil production and offshore refiners are increasing production of new grades of gasoline. By the way, current gas prices adjusted for inflation are about the same as those our grandparents paid in the 1950s.

(END VIDEOTAPE)

HUNTINGTON: Now prices here in Midtown New York City are already well above $2 a gallon. And they're heading even higher. Downtown in Manhattan, at the New York Mercantile Exchange, spot prices right now on the wholesale market have gone up another 4 cents, Miles, to a record level, about $1.36 wholesale. So you're going to see that price shoot right through to the pumps very, very soon.

O'BRIEN: Chris Huntington in New York, thank you very much.

(MARKET REPORT)

O'BRIEN: Welcome back to the CNN Center in Atlanta. This is LIVE FROM. And I'm Miles O'Brien.

KYRA PHILLIPS, CNN ANCHOR: And I'm Kyra Phillips.

Here's what is all new this half-hour. Risk factor in Iraq: Do civilian workers know what they're getting into? We're going to talk about that.

O'BRIEN: Grim reality becomes child's play, trading cards depicting not sports heroes, but kids caught in the crossfire.

But first, the top stories that we're following for you.

PHILLIPS: In Washington, Senate members head to a secure room in the Capitol. They have three hours to look at new photos and video documenting more abuse of Iraqi prisoners. Georgia Senator Saxby Chambliss says that the pictures are much worse than already made public. Members of the House will also have a chance the see those images.

Defense Secretary Donald Rumsfeld was on Capitol Hill again today. But instead of a planned hearing on increased military spending, senators grilled Rumsfeld on interrogation techniques. Rumsfeld says the Pentagon lawyers approved methods such as sleep deprivation and dietary changes, as well as rules permitting prisoners to be made to assume stress positions.

Terrorists say that they beheaded American Nicholas Berg in revenge for Iraqi prisoner abuse. But Berg's family is also blaming the U.S. government for contributing to his death. They say Berg was kept in Iraq until hostilities escalated. U.S. officials say Berg was never in their custody. But Berg's brother, David, tells reporters that the family had gotten e-mails from Berg in which he made clear he was held by U.S. forces at one point.

In Gaza, witnesses say at least five Israeli soldiers were killed in their armored vehicle while patrolling the Rafah refugee camp. Shortly after that deadly explosion, an Israeli helicopter fired missiles and Israeli tanks rolled into the area. No casualties have been reported by Palestinian sources.

The death of American Nick Berg has made the risks facing civilian contractors in Iraq shockingly clear, as if we didn't need to know about that already. We've seen so many cases of it.

To talk about that, we're joined by retired Sergeant Major Eric Haney.

Eric, good to have you with us.

RETIRED SGT. MAJ. ERIC HANEY, U.S. ARMY: Good afternoon.

O'BRIEN: First of all, let's talk about how many Nick Bergs are out there, how many small, independent guys out there trying to do business in any way, shape or form in Iraq?

HANEY: Almost none, a small, small, tiny handful.

The contractors over there are contracted by the U.S. government, most of these under large corporations, Halliburton's Kellogg, Brown, Root, subsidiaries, and then smaller corporations that subcontract from there.

O'BRIEN: And, generally speaking -- and we can't make any sweeping statements here -- but generally, the larger the group, the more likely they would have a security apparatus along with that.

HANEY: Well, it works this way. A lot of the contractors are there performing security functions. So they're armed. These are guys, my old comrades, former special forces, Rangers and all those sorts, who understand this world and that's part of their business. They've done it before in the military. They're just doing it in civilian clothes.

On the other side are the contractors performing services for the military. Let's say they're driving trucks or delivering water, food, ammunition, this sort of thing. And they're going along protected by military formations, because they're doing jobs that the military needs performed.

O'BRIEN: So individuals or small business owners who go over there do so at great peril.

HANEY: They're nuts if they do that. Very few people are going to go about doing that.

They need to be sponsored if they're going to. There are all sorts of business opportunities that can be found through government sources for anyone who wants to go. I have the e-mails daily from both people looking for people and folks looking for work: Eric, how do I get there?

And we just connect them up with where they need to go.

O'BRIEN: So, in other words, if they go under the umbrella of some other large organization perhaps a safer bet? HANEY: A safer bet, but I'll give you this.

A week before last, an old comrade of mine who was a former Delta Force member and a Ranger was killed. He was a contractor. A week prior to that, another very, very close friend was hit in an ambush, four tires blown out, cut the fuel line to his vehicle. Thankfully, he knew what to do and he got out of the ambush and survived. It's dangerous no matter who is there.

O'BRIEN: And these are people who are trained to be in these situations.

HANEY: These are guys who have been doing it for 30 years.

O'BRIEN: Yes. Of course, what we saw in Fallujah, these were security contractors who were...

HANEY: Exactly.

O'BRIEN: ... taken out of their car and their bodies desecrated. It really underscores the point that even those at the highest level of training are at great peril as well.

HANEY: It's a dangerous place. It's a combat zone. All of these things are going to happen. They are going to continue to happen.

O'BRIEN: Now, the Berg family in the midst of their grief, they get a wide berth from all of us, I'm sure. But the fact is that fingers are being pointed at the U.S. government, why didn't the U.S. government do more to protect Nick Berg. What is the responsibility of the government in that kind of environment?

HANEY: I really don't know. I don't see that there's a responsibility, specifically, to protect an individual who comes in and says, I'm going to look around and see if I can find work.

It would be like if I went and said, I think I'm going to go fishing in the Tigris River. What level of responsibility is there? I think it is very, very little. Remember, these are operations that are going on. A military commander can't be diverted from his genuine operations to provide protection for a tourist or someone just seeking business.

O'BRIEN: Tourism, that's a quaint notion there in Iraq at this point.

HANEY: It's a funny one. It is.

O'BRIEN: But I suppose there are other individuals out there who would like to try to ply a trade in Iraq.

HANEY: Certainly.

O'BRIEN: As narrow a group as that would be. And, obviously, the message from you is loud and clear. HANEY: Yes.

Find the connection here. There are lots of opportunities. There are lot of connections that can be made. Go to the government sources. You'll find that amount of work. A lot of these guys going over performing contracts pull one tour and they say, hey, not for me. I'm going to back home. I want to survive.

O'BRIEN: Eric Haney, some good words of caution there, former special forces.

HANEY: Hopefully so, yes.

O'BRIEN: All right, thank you very much. Appreciate it.

PHILLIPS: All right, in other news, are you trying to quit smoking? Well, you can move to New York City. Folks in the Big Apple seem to have unlocked the secret to kicking the habit.

O'BRIEN: Free beer, Kyra.

(LAUGHTER)

PHILLIPS: I don't drink beer. What are you talking about?

O'BRIEN: Oh, all right. It's enough to make you want to watch a hockey game, isn't it?

(CROSSTALK)

PHILLIPS: All right, I'll start drinking beer.

O'BRIEN: Yes. We'll tell you where that's happening.

PHILLIPS: And the hot trading cards in the Middle East, no cartoon heroes or sports stars here. Intifada images are the must- haves.

(WEATHER UPDATE)

(COMMERCIAL BREAK)

PHILLIPS: News across America now.

Far fewer people are lighting up in the Big Apple. A new survey shows the number of adult smokers in New York dropped by more than 100,000 last year. Officials say higher tobacco taxes and the city's smoking ban in bars are behind the drop.

Free beer for a year. Hey, we're a poet, didn't even know it. Actually, it is just for the hockey season. The Tampa Bay Lightning is trying to boost attendance next season by offering free beer to season ticket holders. Police and Mothers Against Drunk Driving call that deal irresponsible.

And side air bags could soon come -- or come to be standard in all cars. Federal transportation officials want to improve protection in side-impact crashes. Automakers and safety advocates will have a few months to comment before the proposal becomes final.

All right, what's on the cutting edge in computer games? Kyra, listen up now. E3 is going on. And I know you're curious about what's going on with "Zelda," right? The largest electronic gaming show is under way.

CNN technology correspondent Daniel Sieberg had the misfortune to have to go and cover this. And I hear even last night he was at the Playboy Mansion. He's out there on an excellent adventure.

Dan Sieberg, fill us in on everything you know.

DANIEL SIEBERG, CNN TECHNOLOGY CORRESPONDENT: I did draw that straw again. Who knows how that happened.

But, yes, the E3 is officially under way here in L.A. It just opened a little over an hour ago. Expecting about 60,000 people here. But before it all started, the media actually got a sneak preview of what the big three console makers are going to be showcasing here at E3. We're talking about Microsoft, Sony and Nintendo.

At the Microsoft event, they were talking a lot about their Xbox live service which allows you to play games online. They were even talking about the possibility of video chat. They also showed some footage from "Halo 2," much anticipated sequel of perhaps the most popular game for the Xbox. One of the executives even had the release date tattooed on his arm. November 9 is when that will be coming out.

They also announced they will be partnering with EA for their sports titles. This will allow people to play EA games online with Xbox live. They had some athletes in attendance, including the legendary boxer Muhammad Ali, to support this move with EA and Xbox, Muhammad Ali got quite an ovation. "Madden" being a huge game that you can now play with Xbox. A couple other games, including "Fable."

Now, at Sony, they talked more about the PSP, the PlayStation Portable. This is going to allow people to not only play games, but also play movies and music on the go. You can see it there. It would have actually its own type of format, the universal media disc, which Sony is going to be putting together. It is coming out some time in the beginning of next year, they say before March.

We're seeing some of the game footage here from the PSP. So that's the first time that Sony is going to get into this portable gaming market. "Gran Turismo 4" a big, popular driving game they showed at Sony as well. "Ratchet & Clank." "Up Your Arsenal," yes, that's the actual name of the game, a fun game.

And now we're going to talk about Nintendo, though. They moved into the -- they've been in the handheld market for a long time, everybody knows that, with the GameBoy. But they're not sitting back while Sony is going ahead with the PSP. They showed the Nintendo DS, which has the dual screen. That has a game screen on the top and a game screen on the bottom, allowing developers to do a bunch of different things, have a map of one game and the game play on the bottom.

Lots to talk about, "Mario," "Legends of Zelda," "Metroid Prime." These are very recognizable game titles for fans of Nintendo. So that was really the buzz between the big three console makers, Miles, before the show even got started.

O'BRIEN: All right, I got to ask you a question, Daniel, because if you're not a 9- or 10-year-old boy, you don't know a lot of what you're just talking about. Is the industry there doing anything to be a little more inclusive of girls? I've had a real hard time finding stuff for Connery (ph). She likes horses. There's one game for horses and that's it. Then there's this kind of dumb Barbie game. Do you see more girl stuff?

SIEBERG: Yes, Barbie games. You know, Mary-Kate and Ashley have their own game as well, the Olsen twins.

(CROSSTALK)

O'BRIEN: No, don't call them the twins. Do not call them the twins. It's Mary-Kate and Ashley. You'll get in trouble.

SIEBERG: OK. Well, I didn't get that memo.

O'BRIEN: Go ahead.

(LAUGHTER)

SIEBERG: But there are lots of games here that are sort of targeted to everybody. Believe it or not, there are a lot of women here. However, they're also part of the game or they are what's known as booth babes here.

PHILLIPS: Booth babes.

(LAUGHTER)

SIEBERG: But one game that does have women in it is the Playboy game. And we were actually at the Playboy Mansion, I think, as you pointed out earlier. Last night, there was a Playboy party, which was mainly for media. So it's not like we were celebrities or anything like that.

PHILLIPS: Oh, yes, Daniel

(CROSSTALK)

SIEBERG: But they did show the Playboy game. I think we're seeing some shots of me playing the game. The game is going to be coming out in November. The whole idea is that you play as Hef in the game. You can actually play any different era in the more than 50 years that Playboy has been around for. It's very much like sort of sim game, a simulated game.

O'BRIEN: Oh, yes.

SIEBERG: There will be, we should say, topless nudity in the game. The rating is not yet out.

(CROSSTALK)

O'BRIEN: Great.

SIEBERG: Big surprise, but you also will be able to do photo shoots all kinds of stuff, build up your empire. Go party.

O'BRIEN: This is a real classy group of guys that are producing these things, isn't it?

PHILLIPS: Yes.

O'BRIEN: It's wonderful. All right, Daniel Sieberg.

SIEBERG: They had fun developing that game, let me just tell you.

O'BRIEN: Thanks for raising the cultural bar here at CNN LIVE FROM. We appreciate it.

SIEBERG: Any time. Any time.

O'BRIEN: All right.

PHILLIPS: All right. They call it higher ed, but do they mean higher cost? We'll talk about the sticker shock for college students and their parents.

O'BRIEN: And the trading card craze in, of all places, Nablus, it is not baseball or basketball stars in these cards. We have that story.

(COMMERCIAL BREAK)

PHILLIPS: Ah, it's graduation time across America. Of course, you've heard of college seniors graduating with honors.

But, as CNN's Kitty Pilgrim reports, many of them are graduating with a lot of debt, too.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Rachel Kay is packing up for the summer after her first year at Occidental College in Los Angeles, a private college that costs more than $37,000 a year. She gets about a quarter of the money from achievement scholarships, takes out another quarter of the tuition in loans and works in the summer. But she says her family still feels the financial burden. Her sister is going to a state school next year because it's cheaper.

RACHEL KAY, STUDENT, OCCIDENTAL COLLEGE: I think my sister kind of felt like she almost couldn't apply to a private school or a most expensive school because she knew it would be too much of a burden and so that kind of influenced her choice on where she was going to apply to. PILGRIM: The college says the middle-class kids bear a new burden.

MAUREEN MCRAE LEVY, DIRECTOR, FINANCIAL AID, OCCIDENTAL COLLEGE: If you have a $20,000 income you're going to get a lot of financial aid to come to college but the people in the middle are getting squeezed out.

PILGRIM: Private college tuition has shot up 14 percent in the last year and state schools have seen tuition hikes of 6 percent. The average federal grant used to cover 98 percent tuition at a state college, but even the maximum Pell grant now covers only 41 percent of tuition, fees, room and board. Students make up the difference by borrowing and the amounts of debt are staggering, averaging $18,000 but it can go higher.

DAN MOTE, PRESIDENT, UNIVERSITY OF MARYLAND: It's very easy to find students graduating from the University of Maryland, for example, with $30,000 and $40,000 worth of debt at the bachelor level. Debt levels of this scale aren't manageable.

PILGRIM: Sixty-four percent of students now graduate with debt, double the number from eight years ago.

Kitty Pilgrim, CNN, New York.

(END VIDEOTAPE)

PHILLIPS: Well, the college board says that total costs at four- year state schools are taking nearly 20 percent of the income of middle-class families. Increases in both public and private colleges are at historic highs. And state funding for education has been falling.

(FINANCIAL UPDATE)

O'BRIEN: We're learning more today about Nick Berg's time in Iraq. He's the American shown beheaded in a terrorist videotape. We'll have the latest at the top of the hour.

PHILLIPS: Nuns accused of abuse by former students at the Boston School For the Deaf.

O'BRIEN: And the strange tale of UFOs spotted over Mexico. That's the video. We'll try to explain it all for you in a little bit.

(COMMERCIAL BREAK)

O'BRIEN: In the West Bank, Palestinian children are engrossed in a new hobby that is gaining a lot of popularity. Palestinians say it shows their painful reality. Israeli say it encourages violence.

CNN's John Vause has details for us.

(BEGIN VIDEOTAPE) JOHN VAUSE, CNN CORRESPONDENT (voice-over): For children in Nablus, it's been all the craze for months, collecting cards to paste in an album or swap among friends. But these are not photos of football stars or baseball heroes. They're graphic, violent images from the Palestinian side of this bloody conflict.

"This is my favorite," Kareem (ph) told me, "because this boy was resisting the occupation when he was shot." For half a shekel, about 10 cents, children buy a set of four cards. They aim to collect all 229 to fill what is called the intifada album. Those who finish first can win computers, bicycles and Walkmans.

UNIDENTIFIED MALE (through translator): This is a photo of a Palestinian youth killed by the Israelis. His body is being carried by his friends.

VAUSE: Majdi El-Taher (ph) is the man behind the album.

UNIDENTIFIED MALE (through translator): We chose images that show everyday life of Palestinians in the intifada. We were sensitive not to use pictures that are painful for kids.

LOTHIAN: In this small factory, using an old printing press, Taher says they have printed an astonishing 15 million cards. There are plans for a new album by year's end.

UNIDENTIFIED MALE (through translator): This book is writing our history. It reflects the daily lives of Palestinians, the pain of Palestinian children. And every person should be allowed to show their pain.

LOTHIAN: The album has been criticized in the Israeli media as encouraging a culture of martyrdom, turning children into suicide bombers. The publisher, though, says the popularity of the cards is a reflection of the experiences of Palestinian children growing up surrounded by conflict. And perhaps what is worse, he says, for many of these children, the only future they can see is in the cards.

John Vause, CNN, Nablus.

(END VIDEOTAPE)

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

Aired May 12, 2004 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There is no justification for the brutal execution of Nicholas Berg, no justification whatsoever.

(END VIDEO CLIP)

KYRA PHILLIPS, CNN ANCHOR: Outrage at the murder of an American at the hands of terrorists. Just how safe are U.S. citizens in Iraq?

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: I'm Ed Henry on Capitol Hill. Behind closed doors at this hour members of Congress are poring over the new photos and videos that document more Iraqi prison abuses.

PHILLIPS: Trading on tragedy, graphic images become coveted collectibles. Should this really be kid stuff?

MILES O'BRIEN, CNN ANCHOR: Paying at the pump, $3 and up? And no signs of coming down. What's fueling the rise in prices?

From the CNN Center in Atlanta, I'm Miles O'Brien.

PHILLIPS: And I'm Kyra Phillips. This hour of CNN's LIVE FROM... starts right now.

PHILLIPS: For their eyes only. Scores of unreleased pictures and a video clip of Iraqi inmates abused and degraded by some of their American captors. The eyes doing the viewing belong to U.S. lawmakers, but the Pentagon is calling the shots. CNN congressional correspondent Ed Henry brings us all into focus on Capitol Hill -- Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Kyra, there's high drama on Capitol Hill. This explosive story is getting more intriguing now. As members of Congress in both chambers -- it was supposed to only be senators today, but we had some news this morning where House members are now being brought into the loop. Both chambers now viewing these new photos and videos that document more abuses in the Iraqi prison.

We have members of Congress poring through it for a limited time. For example, in the Senate, just in the last half hour, we saw Pentagon officials bring in briefcases, dark briefcases, these photos and videos. They brought it up to S407 in the Capitol, that's a secure room normally reserved for classified briefings. What's happening is members of Congress are seeing a slide show that shows about 1000 photos. Only 300 to 400, we're told, deal directly with the investigation, document more abuses. Most of the photos are unrelated to the investigation. But members of Congress can see a slide show in the Senate. It will run from 2:00 to 5:00 p.m. in this secure room.

But also there will be hard copies of the photos, separate tables. One table we're told will have the investigative photos that are critical and another table that will have maybe some of the more pornographic photos that are not directly related to the investigation.

For example, insiders say that some of the photos show soldiers having sex with one another. If members of Congress do not want to see some of the more perverse photos that are not related to the investigation, they can skip over those. The key is they cannot bring staffers, they cannot make copies. All of this is being done so that the Pentagon keeps complete control of the photos at all times.

Members of Congress in both parties do not want Congress handling these and then actually taking custody and deciding how they'll be distributed or whether they'll be distributed. They'll be given back to the Pentagon in the Senate, for example, at 5:00 p.m. The House may run a little longer because you have more members there. They will go back to the Pentagon.

The next big question will be what will the Pentagon do with them? There was a camp earlier this week of lawmakers in both parties saying, get this out, stop the drip, drip, drip of this scandal. But I can tell you that this morning at the House Republican conference meeting, a GOP leadership source tells CNN that several Republican lawmakers stood up and said that given this tragic death of Nicholas Berg yesterday, that releasing these photos now could inflame the situation even more and put more American lives at risk.

That dovetails with something CNN producer Ted Barrett heard yesterday from House Armed Services Chairman Duncan Hunter. That Republican congressman said as well, he's very concerned that if these photos are released by the Pentagon later this week, it could inflame the situation, make it worse and put more lives at risk. That's where we stand right now -- Kyra.

PHILLIPS: Ed Henry on Capitol Hill, thanks so much.

And the U.S. soldier who may be the most closely identified with the Abu Ghraib scandal says that she was just following orders. In a TV interview, Private First Class Lynndie England says she was told to pose in staged photographs for the purpose of intimidating other inmates from whom the U.S. wanted information.

England won't say who gave the orders.

(BEGIN VIDEO CLIP)

PFC. LYNNDIE ENGLAND, U.S. ARMY: Told to stand there, give a thumbs up, smile, stand behind all the naked Iraqis in the pyramid, take a picture.

UNIDENTIFIED REPORTER: Who told you to do that?

ENGLAND: Persons in my higher chain of command.

(END VIDEO CLIP)

PHILLIPS: England is one of seven troops facing criminal charges and one of at least four to face court martial.

The former commander of all the MPs at Abu Ghraib says that she was forced to turn over the reins to military intelligence. Brigadier General Janis Karpinski was relieved of her command and formally admonished when the scandal came to light. Her confidential comments arising from the Pentagon's own investigation, cite a power struggle that Pentagon policymakers are publicly denying. "The Washington Post" reports that Karpinski says ground force commander Ricardo Sanchez and Karpinski's replacement at Abu Ghraib, Geoffrey Miller: "overruled her concerns about the military intelligence takeover and the use of deadly force." The Pentagon's report, nevertheless, concludes that Karpinski bore responsibility over MPs' conduct.

O'BRIEN: Defense Secretary Donald Rumsfeld went to Capitol Hill today for a previously scheduled hearing on war funding, but lawmakers, of course, more interested in photos of abuse than dollars and cents. Let's go live to the Pentagon and our correspondent, Barbara Starr.

Hello, Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Hello to you, Miles. Well, Defense Secretary Donald Rumsfeld was trying to offer first an impassioned defense of the war in Afghanistan and Iraq.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: I understand concern. By golly, I've got it. But I look at Afghanistan, 25 million people liberated, women voting, able to go to a doctor. And I look at Iraq, and all I can say is I hope it comes out well. And I believe it will. And we're going to keep at it.

(END VIDEO CLIP)

STARR: But that didn't stop General Richard Myers, chairman of the giant chiefs of staff, from addressing the issue about the prison abuse. And he offered a really amazing assessment of the military police unit that was at Abu Ghraib Prison.

(BEGIN VIDEO CLIP)

GEN. RICHARD MYERS, CHMN., JOINT CHIEFS OF STAFF: This was a unit that had issues with just adhering to the Army's standards. They didn't have standardized uniforms, they were allowed to carry guns in their civilian clothes when they were off duty. They had things written on their cap. They didn't particularly want to salute. This was a unit that had those exact -- so the first thing you do is you replace the leadership of the unit. They have done that.

(END VIDEO CLIP)

STARR: And General Myers giving some pretty amazing indications there of some of the lack of leadership, lack of discipline, military discipline in that military police unit at Abu Ghraib prison. And finally an update on the military justice process against those seven soldiers now facing legal action for their actions at Abu Ghraib Prison in Baghdad today.

It was announced that there will be two more court martials. They will be against Sergeant Javal Davis and Staff Sergeant Ivan "Chip" Frederick, two more court-martials. The first court martial, Miles, of course, against Specialist Jeremy Sivits begins in Baghdad next week -- Miles.

O'BRIEN: Barbara, I just talked a few moments ago with the attorney for Lynndie England who, heretofore, has not been charged, but of course, is pictured in all of these. And he said one of the big problems he's running into in all of this is that a lot of the people that he'd like to depose, get some testimony from, are with OGAs, meaning intelligence units, and they won't provide the names. How are these people going to be defended if that's the response from the military?

STARR: Well, this is something actually that Army Military Intelligence is well aware of. They know that these people are contending that they were ordered by others to do it. And what they're trying to investigate now through the process is who ordered them?

When these young soldiers say somebody told them to do it, they're trying to identify the name, the unit, where these people came from. All of this is part of the further investigation. Secretary Rumsfeld pointing out at that Capitol Hill hearing today that there are five or six additional investigations going on, and that he at least certainly expects more allegations and possibly more charges against more people, all of this, Miles, far from over.

O'BRIEN: Barbara Starr at the Pentagon -- Kyra.

PHILLIPS: Now to the shock and outrage over the beheading of Nicholas Berg. His body is heading home to the U.S. today. In the ghastly video of his beheading, militants linked to al Qaeda said the killing was in part retaliation for the abuse of Iraqi prisoners. Berg was a civilian in Iraq looking for work, unable to find it, he was preparing to return home when he was kidnapped.

(BEGIN VIDEO CLIP)

DAN SENOR, COALITION SPOKESMAN: Mr. Berg had registered with U.S. Consular Affairs in Iraq. He had no affiliation, however, with the coalition. He was here -- is it our understanding that he was here of his own accord, did not work for the Coalition Provisional Authority, and we do not believe that he worked for any Coalition Provisional Authority contractors. (END VIDEO CLIP)

PHILLIPS: Offering condolences and vowing to track the killers down, the White House is condemning the beheading of Berg. President Bush spoke on the White House South Lawn just a short time ago.

(BEGIN VIDEO CLIP)

BUSH: I want to express my condolences to the family and friends of Nicholas Berg. Nicholas Berg was an innocent civilian who was in Iraq to help build a free Iraq. There is no justification for the brutal execution of Nicholas Berg, no justification whatsoever.

The actions of the terrorists who executed this man remind us of the nature of the few people who want to stop the advance of freedom in Iraq. Their intention is to shake our will. Their intention is to shake our confidence.

Yet by their actions, they remind us of how desperately parts of the world need free societies and peaceful societies. And we will complete our mission. We will complete our task.

(END VIDEO CLIP)

O'BRIEN: It is hard to fathom the nightmare the Berg family is now enduring. Relatives of Nick Berg say he was in Iraq to help people. His father collapsed upon hearing how his son died. Residents in his home town are appalled over this horrific killing, as are we all.

Maria Hinojosa is in West Chester, Pennsylvania.

(BEGIN VIDEOTAPE)

MARIA HINOJOSA, CNN CORRESPONDENT (voice-over): The tiny photograph of 26-year-old Nick Berg is taped to the old mailbox of his neighbor's home in suburban Philadelphia. Inside the home, though, there was only anguish. His parents were informed of his death Monday, but didn't know it had been videotaped by his executioners until Tuesday.

BRUCE HAUSER, BERG FAMILY FRIEND: Let's keep this family in prayer. Let's hold this family up. Realistically, it was Nick Berg, it could have been one of our own. And really Nick was just like one of my own.

HINOJOSA: Family and friends described Nick Berg as smart, funny and idealistic. Back in late December, he decided to go to Iraq to look for work repairing communications towers. But his reasons for going appeared to be more than just for money or adventure, according to his father who spoke on Sunday, before he knew of his son's death.

MICHAEL BERG, NICK BERG'S FATHER: But he just really wanted to be part of something that was important. He supported the administration's being in Iraq. He supported everything that they were doing. And he wanted to help. And he wanted to help in a positive way by building rather than breaking down.

HINOJOSA: Nick Berg stayed in Iraq until February 1. Then he went back again on March 14. Unable to find work, he planned to come home, calling his parents every day as his departure neared. Then on March 24, communication ended. Within days the FBI showed up at this house and told the Bergs their son had been picked up by the Iraqi police in Mosul and was transferred to U.S. authorities. That was all the information they got.

Frustrated, the Bergs went to federal court and sued Donald Rumsfeld and the Department of Defense for holding their son without due process. The next day, April 6, Berg was released. He told his parents he would try to get out of Iraq as fast as he could. But after April 9, there was no further word from him.

(on camera): The Berg family is now awaiting word on when the body of their son Nick Berg will arrive in the United States at Dover Air Force Base. Pennsylvania Senator Arlen Specter requesting from the Department of Defense to allow the family to be at Dover Air Force Base when the body arrives.

Maria Hinojosa, CNN, West Chester, Pennsylvania.

(END VIDEOTAPE)

PHILLIPS: The taped murder of an American citizen in Iraq raises more questions about the safety of workers in a war zone. We'll talk to a man who has been there.

And they save lives, so why aren't side air bags standard equipment in your car? A new push to put them in.

PHILLIPS: On the cutting edge. A sneak peek at what the computer gaming freaks in your family will have on their wish list, straight ahead.

(COMMERCIAL BREAK)

PHILLIPS: An American citizen with a sense of adventure and a desire to help, brutally slaughtered in Iraq. That's the perception that Americans are getting about Nick Berg. Reaction across the country to his killing ranges from sadness to disgust to outrage. Chris Lawrence is in the heartland gauging feedback. He's in Charlevoix, Michigan -- Chris.

CHRIS LAWRENCE, CNN CORRESPONDENT: Yes, Kyra, we've heard a little bit of everything that you just mentioned. And it is funny, being here in this small town, a lot of people have said that looking out on this beautiful spring day and seeing the beautiful lake that they look out at, all afternoon it is hard to reconcile that view with some of the images that they've been seeing coming out of Iraq.

Cindy Supernaw (ph), you've seen a lot of what's been happening over the past few days and weeks. Your reaction of what you've seen from Iraq? UNIDENTIFIED FEMALE: Well, I think that the beheading of a civilian who actually went over just to help rebuild Iraq is a horrible atrocity. I just think that these people who have done that, they're horrible. They're common criminals. And I hope that we can use our justice system to prosecute them. That's really all I can tell you is I just think it is absolutely horrible. And I just hope that they can catch who did it.

LAWRENCE: Also with her, Sarah Gaidem (ph), and you've also seen a lot of what's been coming out of Iraq. Do you think there's any correlation between the American prisoner abuse scandal and what we saw or heard yesterday about Nicholas Berg?

UNIDENTIFIED FEMALE: I think it's a tragedy of violence breeding violence and war escalating and turning good people into bad people on all sides. And we need to find a way to stop this, change course, because clearly our course is one that is creating depths of anger in the Middle East and confusion and a lack of understanding of how to behave on our poor GIs that are trapped in this maelstrom of violence. It needs to stop. And it has to -- an American stamp needs to be removed from this.

LAWRENCE: So you're saying Americans need to get out of Iraq, is that what you're saying?

UNIDENTIFIED FEMALE: I feel that as long as it looks to Iraqis as if we are imperialists, we are going to be less safe. If we can internationalize this and bring in the U.N. and turn things over to the Iraqis, we're going to be in better shape.

LAWRENCE: All right.

UNIDENTIFIED MALE: I think it also reaffirms our goals as to why we're there and that hopefully we can achieve our goals over there.

LAWRENCE: Obviously, a lot of very different opinions here. Small town but not short of opinions. And obviously it shows that Americans are paying attention to what's going on in Iraq, which could be a very big issue over the next months to come as we lead up and head into the fall election.

Kyra, Miles, back to you.

PHILLIPS: Chris Lawrence, thanks so much.

O'BRIEN: Record setting prices at the pump, what's behind them? And more importantly, when will they come down? We'll drive that one home just ahead.

And free beer. A hockey team scheme to fill the seats with Homer Simpsons or something. But the whole idea is falling flat with a group of mothers.

(COMMERCIAL BREAK)

O'BRIEN: Well, you may be glad to hear gas prices are expected to finally quit climbing in June. Of course, you may be broke by then. But anyway, the likely peak above $2 a gallon. CNN's Chris Huntington has been looking into just what's driving record prices at the pumps.

(BEGIN VIDEOTAPE)

CHRIS HUNTINGTON, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Americans are fuming at the pumps.

UNIDENTIFIED FEMALE: I think the gas prices are ridiculous.

UNIDENTIFIED MALE: I'm not very happy with it.

UNIDENTIFIED FEMALE: It seems like it's high all around the country, but particularly here in San Francisco.

HUNTINGTON: According to the Department of Energy, the national average price for unleaded regular is now $1.94 a gallon. That's the highest price in history and 45 cents more than a year ago. And the DOE projects that next month the average price will top $2 a gallon. In California, which requires special gas formulations, $2 a gallon would be a bargain.

GUY F. CARUSO, ENERGY INFORMATION ADMINISTRATION: The main heart of the matter is supply/demand, both at the crude oil level and our global system, and also more specifically the gasoline market in this country.

HUNTINGTON: Demand for gasoline is running at a record pace. And SUVs are a major factor. Gasoline supplies are a bit tighter as well, and that's because imports are down as overseas refineries shift their production to the new, cleaner burning fuels required by laws in the United States.

And crude oil prices, which account for nearly half of the cost of a retail gallon of gas, are up 50 percent in the past year as the global economic rebound has boosted demand. But oil analyst Fadel Gheit insists that fear over supply interruptions is another factor driving crude prices higher.

FADEL GHEIT, OPPENHEIMER & CO.: Eighty percent or more of the spike in oil prices in the last year or so was basically because of fear.

HUNTINGTON: Last week's terrorist attack at the Saudi oil port of Yanbu further fueled those fears. As for gasoline prices, Gheit points out that U.S. refiners are benefiting from supply concerns to book record profits. One of the leading U.S. refiners says wholesale prices are high only because demand is outstripping supply. But Gheit insists there's plenty of gasoline to go around.

GHEIT: There is absolutely no gasoline shortage or tight supply, whatever. Is it all perception.

HUNTINGTON: There may be some relief in sight. Saudi Arabia says it will urge OPEC to boost crude oil production and offshore refiners are increasing production of new grades of gasoline. By the way, current gas prices adjusted for inflation are about the same as those our grandparents paid in the 1950s.

(END VIDEOTAPE)

HUNTINGTON: Now prices here in Midtown New York City are already well above $2 a gallon. And they're heading even higher. Downtown in Manhattan, at the New York Mercantile Exchange, spot prices right now on the wholesale market have gone up another 4 cents, Miles, to a record level, about $1.36 wholesale. So you're going to see that price shoot right through to the pumps very, very soon.

O'BRIEN: Chris Huntington in New York, thank you very much.

(MARKET REPORT)

O'BRIEN: Welcome back to the CNN Center in Atlanta. This is LIVE FROM. And I'm Miles O'Brien.

KYRA PHILLIPS, CNN ANCHOR: And I'm Kyra Phillips.

Here's what is all new this half-hour. Risk factor in Iraq: Do civilian workers know what they're getting into? We're going to talk about that.

O'BRIEN: Grim reality becomes child's play, trading cards depicting not sports heroes, but kids caught in the crossfire.

But first, the top stories that we're following for you.

PHILLIPS: In Washington, Senate members head to a secure room in the Capitol. They have three hours to look at new photos and video documenting more abuse of Iraqi prisoners. Georgia Senator Saxby Chambliss says that the pictures are much worse than already made public. Members of the House will also have a chance the see those images.

Defense Secretary Donald Rumsfeld was on Capitol Hill again today. But instead of a planned hearing on increased military spending, senators grilled Rumsfeld on interrogation techniques. Rumsfeld says the Pentagon lawyers approved methods such as sleep deprivation and dietary changes, as well as rules permitting prisoners to be made to assume stress positions.

Terrorists say that they beheaded American Nicholas Berg in revenge for Iraqi prisoner abuse. But Berg's family is also blaming the U.S. government for contributing to his death. They say Berg was kept in Iraq until hostilities escalated. U.S. officials say Berg was never in their custody. But Berg's brother, David, tells reporters that the family had gotten e-mails from Berg in which he made clear he was held by U.S. forces at one point.

In Gaza, witnesses say at least five Israeli soldiers were killed in their armored vehicle while patrolling the Rafah refugee camp. Shortly after that deadly explosion, an Israeli helicopter fired missiles and Israeli tanks rolled into the area. No casualties have been reported by Palestinian sources.

The death of American Nick Berg has made the risks facing civilian contractors in Iraq shockingly clear, as if we didn't need to know about that already. We've seen so many cases of it.

To talk about that, we're joined by retired Sergeant Major Eric Haney.

Eric, good to have you with us.

RETIRED SGT. MAJ. ERIC HANEY, U.S. ARMY: Good afternoon.

O'BRIEN: First of all, let's talk about how many Nick Bergs are out there, how many small, independent guys out there trying to do business in any way, shape or form in Iraq?

HANEY: Almost none, a small, small, tiny handful.

The contractors over there are contracted by the U.S. government, most of these under large corporations, Halliburton's Kellogg, Brown, Root, subsidiaries, and then smaller corporations that subcontract from there.

O'BRIEN: And, generally speaking -- and we can't make any sweeping statements here -- but generally, the larger the group, the more likely they would have a security apparatus along with that.

HANEY: Well, it works this way. A lot of the contractors are there performing security functions. So they're armed. These are guys, my old comrades, former special forces, Rangers and all those sorts, who understand this world and that's part of their business. They've done it before in the military. They're just doing it in civilian clothes.

On the other side are the contractors performing services for the military. Let's say they're driving trucks or delivering water, food, ammunition, this sort of thing. And they're going along protected by military formations, because they're doing jobs that the military needs performed.

O'BRIEN: So individuals or small business owners who go over there do so at great peril.

HANEY: They're nuts if they do that. Very few people are going to go about doing that.

They need to be sponsored if they're going to. There are all sorts of business opportunities that can be found through government sources for anyone who wants to go. I have the e-mails daily from both people looking for people and folks looking for work: Eric, how do I get there?

And we just connect them up with where they need to go.

O'BRIEN: So, in other words, if they go under the umbrella of some other large organization perhaps a safer bet? HANEY: A safer bet, but I'll give you this.

A week before last, an old comrade of mine who was a former Delta Force member and a Ranger was killed. He was a contractor. A week prior to that, another very, very close friend was hit in an ambush, four tires blown out, cut the fuel line to his vehicle. Thankfully, he knew what to do and he got out of the ambush and survived. It's dangerous no matter who is there.

O'BRIEN: And these are people who are trained to be in these situations.

HANEY: These are guys who have been doing it for 30 years.

O'BRIEN: Yes. Of course, what we saw in Fallujah, these were security contractors who were...

HANEY: Exactly.

O'BRIEN: ... taken out of their car and their bodies desecrated. It really underscores the point that even those at the highest level of training are at great peril as well.

HANEY: It's a dangerous place. It's a combat zone. All of these things are going to happen. They are going to continue to happen.

O'BRIEN: Now, the Berg family in the midst of their grief, they get a wide berth from all of us, I'm sure. But the fact is that fingers are being pointed at the U.S. government, why didn't the U.S. government do more to protect Nick Berg. What is the responsibility of the government in that kind of environment?

HANEY: I really don't know. I don't see that there's a responsibility, specifically, to protect an individual who comes in and says, I'm going to look around and see if I can find work.

It would be like if I went and said, I think I'm going to go fishing in the Tigris River. What level of responsibility is there? I think it is very, very little. Remember, these are operations that are going on. A military commander can't be diverted from his genuine operations to provide protection for a tourist or someone just seeking business.

O'BRIEN: Tourism, that's a quaint notion there in Iraq at this point.

HANEY: It's a funny one. It is.

O'BRIEN: But I suppose there are other individuals out there who would like to try to ply a trade in Iraq.

HANEY: Certainly.

O'BRIEN: As narrow a group as that would be. And, obviously, the message from you is loud and clear. HANEY: Yes.

Find the connection here. There are lots of opportunities. There are lot of connections that can be made. Go to the government sources. You'll find that amount of work. A lot of these guys going over performing contracts pull one tour and they say, hey, not for me. I'm going to back home. I want to survive.

O'BRIEN: Eric Haney, some good words of caution there, former special forces.

HANEY: Hopefully so, yes.

O'BRIEN: All right, thank you very much. Appreciate it.

PHILLIPS: All right, in other news, are you trying to quit smoking? Well, you can move to New York City. Folks in the Big Apple seem to have unlocked the secret to kicking the habit.

O'BRIEN: Free beer, Kyra.

(LAUGHTER)

PHILLIPS: I don't drink beer. What are you talking about?

O'BRIEN: Oh, all right. It's enough to make you want to watch a hockey game, isn't it?

(CROSSTALK)

PHILLIPS: All right, I'll start drinking beer.

O'BRIEN: Yes. We'll tell you where that's happening.

PHILLIPS: And the hot trading cards in the Middle East, no cartoon heroes or sports stars here. Intifada images are the must- haves.

(WEATHER UPDATE)

(COMMERCIAL BREAK)

PHILLIPS: News across America now.

Far fewer people are lighting up in the Big Apple. A new survey shows the number of adult smokers in New York dropped by more than 100,000 last year. Officials say higher tobacco taxes and the city's smoking ban in bars are behind the drop.

Free beer for a year. Hey, we're a poet, didn't even know it. Actually, it is just for the hockey season. The Tampa Bay Lightning is trying to boost attendance next season by offering free beer to season ticket holders. Police and Mothers Against Drunk Driving call that deal irresponsible.

And side air bags could soon come -- or come to be standard in all cars. Federal transportation officials want to improve protection in side-impact crashes. Automakers and safety advocates will have a few months to comment before the proposal becomes final.

All right, what's on the cutting edge in computer games? Kyra, listen up now. E3 is going on. And I know you're curious about what's going on with "Zelda," right? The largest electronic gaming show is under way.

CNN technology correspondent Daniel Sieberg had the misfortune to have to go and cover this. And I hear even last night he was at the Playboy Mansion. He's out there on an excellent adventure.

Dan Sieberg, fill us in on everything you know.

DANIEL SIEBERG, CNN TECHNOLOGY CORRESPONDENT: I did draw that straw again. Who knows how that happened.

But, yes, the E3 is officially under way here in L.A. It just opened a little over an hour ago. Expecting about 60,000 people here. But before it all started, the media actually got a sneak preview of what the big three console makers are going to be showcasing here at E3. We're talking about Microsoft, Sony and Nintendo.

At the Microsoft event, they were talking a lot about their Xbox live service which allows you to play games online. They were even talking about the possibility of video chat. They also showed some footage from "Halo 2," much anticipated sequel of perhaps the most popular game for the Xbox. One of the executives even had the release date tattooed on his arm. November 9 is when that will be coming out.

They also announced they will be partnering with EA for their sports titles. This will allow people to play EA games online with Xbox live. They had some athletes in attendance, including the legendary boxer Muhammad Ali, to support this move with EA and Xbox, Muhammad Ali got quite an ovation. "Madden" being a huge game that you can now play with Xbox. A couple other games, including "Fable."

Now, at Sony, they talked more about the PSP, the PlayStation Portable. This is going to allow people to not only play games, but also play movies and music on the go. You can see it there. It would have actually its own type of format, the universal media disc, which Sony is going to be putting together. It is coming out some time in the beginning of next year, they say before March.

We're seeing some of the game footage here from the PSP. So that's the first time that Sony is going to get into this portable gaming market. "Gran Turismo 4" a big, popular driving game they showed at Sony as well. "Ratchet & Clank." "Up Your Arsenal," yes, that's the actual name of the game, a fun game.

And now we're going to talk about Nintendo, though. They moved into the -- they've been in the handheld market for a long time, everybody knows that, with the GameBoy. But they're not sitting back while Sony is going ahead with the PSP. They showed the Nintendo DS, which has the dual screen. That has a game screen on the top and a game screen on the bottom, allowing developers to do a bunch of different things, have a map of one game and the game play on the bottom.

Lots to talk about, "Mario," "Legends of Zelda," "Metroid Prime." These are very recognizable game titles for fans of Nintendo. So that was really the buzz between the big three console makers, Miles, before the show even got started.

O'BRIEN: All right, I got to ask you a question, Daniel, because if you're not a 9- or 10-year-old boy, you don't know a lot of what you're just talking about. Is the industry there doing anything to be a little more inclusive of girls? I've had a real hard time finding stuff for Connery (ph). She likes horses. There's one game for horses and that's it. Then there's this kind of dumb Barbie game. Do you see more girl stuff?

SIEBERG: Yes, Barbie games. You know, Mary-Kate and Ashley have their own game as well, the Olsen twins.

(CROSSTALK)

O'BRIEN: No, don't call them the twins. Do not call them the twins. It's Mary-Kate and Ashley. You'll get in trouble.

SIEBERG: OK. Well, I didn't get that memo.

O'BRIEN: Go ahead.

(LAUGHTER)

SIEBERG: But there are lots of games here that are sort of targeted to everybody. Believe it or not, there are a lot of women here. However, they're also part of the game or they are what's known as booth babes here.

PHILLIPS: Booth babes.

(LAUGHTER)

SIEBERG: But one game that does have women in it is the Playboy game. And we were actually at the Playboy Mansion, I think, as you pointed out earlier. Last night, there was a Playboy party, which was mainly for media. So it's not like we were celebrities or anything like that.

PHILLIPS: Oh, yes, Daniel

(CROSSTALK)

SIEBERG: But they did show the Playboy game. I think we're seeing some shots of me playing the game. The game is going to be coming out in November. The whole idea is that you play as Hef in the game. You can actually play any different era in the more than 50 years that Playboy has been around for. It's very much like sort of sim game, a simulated game.

O'BRIEN: Oh, yes.

SIEBERG: There will be, we should say, topless nudity in the game. The rating is not yet out.

(CROSSTALK)

O'BRIEN: Great.

SIEBERG: Big surprise, but you also will be able to do photo shoots all kinds of stuff, build up your empire. Go party.

O'BRIEN: This is a real classy group of guys that are producing these things, isn't it?

PHILLIPS: Yes.

O'BRIEN: It's wonderful. All right, Daniel Sieberg.

SIEBERG: They had fun developing that game, let me just tell you.

O'BRIEN: Thanks for raising the cultural bar here at CNN LIVE FROM. We appreciate it.

SIEBERG: Any time. Any time.

O'BRIEN: All right.

PHILLIPS: All right. They call it higher ed, but do they mean higher cost? We'll talk about the sticker shock for college students and their parents.

O'BRIEN: And the trading card craze in, of all places, Nablus, it is not baseball or basketball stars in these cards. We have that story.

(COMMERCIAL BREAK)

PHILLIPS: Ah, it's graduation time across America. Of course, you've heard of college seniors graduating with honors.

But, as CNN's Kitty Pilgrim reports, many of them are graduating with a lot of debt, too.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Rachel Kay is packing up for the summer after her first year at Occidental College in Los Angeles, a private college that costs more than $37,000 a year. She gets about a quarter of the money from achievement scholarships, takes out another quarter of the tuition in loans and works in the summer. But she says her family still feels the financial burden. Her sister is going to a state school next year because it's cheaper.

RACHEL KAY, STUDENT, OCCIDENTAL COLLEGE: I think my sister kind of felt like she almost couldn't apply to a private school or a most expensive school because she knew it would be too much of a burden and so that kind of influenced her choice on where she was going to apply to. PILGRIM: The college says the middle-class kids bear a new burden.

MAUREEN MCRAE LEVY, DIRECTOR, FINANCIAL AID, OCCIDENTAL COLLEGE: If you have a $20,000 income you're going to get a lot of financial aid to come to college but the people in the middle are getting squeezed out.

PILGRIM: Private college tuition has shot up 14 percent in the last year and state schools have seen tuition hikes of 6 percent. The average federal grant used to cover 98 percent tuition at a state college, but even the maximum Pell grant now covers only 41 percent of tuition, fees, room and board. Students make up the difference by borrowing and the amounts of debt are staggering, averaging $18,000 but it can go higher.

DAN MOTE, PRESIDENT, UNIVERSITY OF MARYLAND: It's very easy to find students graduating from the University of Maryland, for example, with $30,000 and $40,000 worth of debt at the bachelor level. Debt levels of this scale aren't manageable.

PILGRIM: Sixty-four percent of students now graduate with debt, double the number from eight years ago.

Kitty Pilgrim, CNN, New York.

(END VIDEOTAPE)

PHILLIPS: Well, the college board says that total costs at four- year state schools are taking nearly 20 percent of the income of middle-class families. Increases in both public and private colleges are at historic highs. And state funding for education has been falling.

(FINANCIAL UPDATE)

O'BRIEN: We're learning more today about Nick Berg's time in Iraq. He's the American shown beheaded in a terrorist videotape. We'll have the latest at the top of the hour.

PHILLIPS: Nuns accused of abuse by former students at the Boston School For the Deaf.

O'BRIEN: And the strange tale of UFOs spotted over Mexico. That's the video. We'll try to explain it all for you in a little bit.

(COMMERCIAL BREAK)

O'BRIEN: In the West Bank, Palestinian children are engrossed in a new hobby that is gaining a lot of popularity. Palestinians say it shows their painful reality. Israeli say it encourages violence.

CNN's John Vause has details for us.

(BEGIN VIDEOTAPE) JOHN VAUSE, CNN CORRESPONDENT (voice-over): For children in Nablus, it's been all the craze for months, collecting cards to paste in an album or swap among friends. But these are not photos of football stars or baseball heroes. They're graphic, violent images from the Palestinian side of this bloody conflict.

"This is my favorite," Kareem (ph) told me, "because this boy was resisting the occupation when he was shot." For half a shekel, about 10 cents, children buy a set of four cards. They aim to collect all 229 to fill what is called the intifada album. Those who finish first can win computers, bicycles and Walkmans.

UNIDENTIFIED MALE (through translator): This is a photo of a Palestinian youth killed by the Israelis. His body is being carried by his friends.

VAUSE: Majdi El-Taher (ph) is the man behind the album.

UNIDENTIFIED MALE (through translator): We chose images that show everyday life of Palestinians in the intifada. We were sensitive not to use pictures that are painful for kids.

LOTHIAN: In this small factory, using an old printing press, Taher says they have printed an astonishing 15 million cards. There are plans for a new album by year's end.

UNIDENTIFIED MALE (through translator): This book is writing our history. It reflects the daily lives of Palestinians, the pain of Palestinian children. And every person should be allowed to show their pain.

LOTHIAN: The album has been criticized in the Israeli media as encouraging a culture of martyrdom, turning children into suicide bombers. The publisher, though, says the popularity of the cards is a reflection of the experiences of Palestinian children growing up surrounded by conflict. And perhaps what is worse, he says, for many of these children, the only future they can see is in the cards.

John Vause, CNN, Nablus.

(END VIDEOTAPE)

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