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One of 11 Missing Egyptian Exchange Students Arrested; Interview With BP America President Bob Malone

Aired August 09, 2006 - 15:00   ET

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

KYRA PHILLIPS, CNN ANCHOR: All right, we're not going to go to break.
We're going to get straight to Jeanne Meserve, working that story for us about those Egyptian students that have disappeared. One has been arrested. The FBI is looking for the others.

Jeanne, what do you know?

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Well, we're told by two law enforcement sources that they have found two others, that two have been found in the state of New Jersey, this just shortly after the arrest of one of the students in Minneapolis was announced by authorities. In that instance, it was Eslam Ibrahim Mohamed El-Dessouki, a 21-year- old Egyptian.

We do not yet have names, ages, or know much about the circumstances of the arrests of those that were picked up in New Jersey -- these, of course, three of the 11 Egyptian students who went missing after arriving at JFK Airport in New York, and entering the country on student visas. They had been bound for an exchange program at Montana State University. However, they did not show, and so were reported to the government.

The government is looking for them. And, as I say, they now have found three of the 11 -- Kyra.

PHILLIPS: All right, Jeanne, thanks.

Well, we're seeing the face of Hezbollah. On this 29th day of the Middle East crisis, here's what we know.

Lebanese TV has aired another message from Hezbollah leader Hassan Nasrallah. He rejects a U.N. resolution to end the fighting, but supports sending Lebanese troops to southern Lebanon. He also says that Israeli attacks have not weakened his group's ability to fire rockets.

Israel isn't backing down either. Today, the security cabinet OKed a far deeper ground offensive. But it might hold off, for now, to give diplomacy of a chance.

On that front, France is acknowledging Arab insistence on a quick Israeli pullout. But the U.S. isn't so sure. Diplomats are still hoping to vote on some sort of resolution tomorrow. Now, as we mentioned -- all right, stop fighting and go home, that's what Lebanon and its Arab allies want Israel to do -- and fast. They're making the case at the U.N., which is still trying to hammer out a resolution to end the four-week war.

Among those Arab voices is Arab League Secretary General Amr Moussa, who joined me earlier on LIVE FROM.

(BEGIN VIDEOTAPE)

PHILLIPS: I was taking a look at -- at what you have agreed to, a fair resolution. You asked for the withdrawal of -- of the Israeli army behind the Blue Line, and the return of displaced -- those that have been displaced to their villages.

Now, if that were to happen, is there a guarantee that Hezbollah would no longer fire rockets into Israel?

AMR MOUSSA, ARAB LEAGUE SECRETARY GENERAL: Well, we are working now in order to reach a consensus, draft a resolution, based on the new developments that have started by the new decision by the Lebanese government to redeploy 15,000 Lebanese troops of the Lebanese army, in addition to the UNIFIL -- which is the U.N. force over there, beefed up -- in order to guarantee that quiet will reign in the south, with the withdrawal of the Israeli forces and building up a package that would launch a process that would end the current crisis.

PHILLIPS: But there -- could there be a guarantee, though, that Hezbollah would stop firing....

MOUSSA: The...

PHILLIPS: ... rockets?

MOUSSA: The guarantee should be mutual, that the Israeli army would stop bombarding the Lebanese cities, and the -- the whole thing comes to a -- a cessation of hostilities, as the Security Council draft resolution...

PHILLIPS: You...

MOUSSA: ... is now saying.

PHILLIPS: And you also asked for the release of Lebanese and Israeli prisoners and detainees through the International Committee of the Red Cross.

Now, how do you make sure that terrorists are not being released back on the street? How do you make sure that those prisoners that are being released legitimately should be released?

MOUSSA: Well, we're talking about prisoners, Lebanese prisoners, in -- in Israel, and the two abductees. So, we will have to talk about a package, a general package, that would include this step two on both sides, in addition to the movement or the moving-in of the UNIFIL and the Israel -- the Lebanese army. PHILLIPS: But would the International Committee of the Red Cross actually look at rap sheets, backgrounds, and understand what type of prisoner this is and -- and what type of background that they have?

MOUSSA: Well, we need the good offices of the Red Cross. And it could play a role in this, in the question of exchange of the prisoners and the abductees.

(END VIDEOTAPE)

PHILLIPS: Well, the Security Council still hopes to vote on something tomorrow.

Well, Israel his the southern suburbs of Beirut today, even as a top U.S. diplomat made a surprise visit.

CNN Beirut bureau chief Brent Sadler reports.

Hey, Brent.

BRENT SADLER, CNN BEIRUT BUREAU CHIEF: Hey, Kyra.

First of all, news coming out of Beirut tonight, the leader of Hezbollah, Hassan Nasrallah, has given a defiant statement, just shown on television a short time ago. It's the first time we have heard the Hezbollah leader reacting to that draft resolution that is circulating in the New York chambers there.

Now, this is what Hassan Nasrallah had to say about a widening, a possibly widening, Israeli conflict.

(BEGIN VIDEO CLIP)

HASSAN NASRALLAH, HEZBOLLAH LEADER (through translator): You will not stay in our land. If you enter there, we will force you out by force. We will liberate our dear southern land. We will transfer it as a graveyard to the Zionists. All those who will fight you at the front lines will fight you with bravery and wait for you at every village, at every hill or valley, at any stage.

Thousands of mujahedeen are waiting for you who are ready, are determined, brave.

(END VIDEO CLIP)

SADLER: A chilling warning to the Israelis there. It is thought that Nasrallah is still in Lebanon.

Also, as that war of words ratchets up, Kyra, we saw the Lebanese capital, earlier today, come under attack for the fourth straight day. Again, it was Nasrallah's former stronghold in the southern suburbs of Beirut that appeared to be the focus of these strikes.

Those strikes happened at the same time -- or, rather, not far away from where there was heavy loss of life from a previous Israeli strike, the day before. This was against the district known as Shiah. Latest confirmed deaths are 41 and at least 60 people injured from that one attack.

Also today, Middle East Envoy from the United States David Welsh was in town, trying to liaise with the Lebanese government and key leaders here on how Lebanon's attitude toward that draft resolution can be -- perhaps be better dovetailed into what's being discussed in New York.

And, also today, many more leaflets dropped from Israeli planes over a variety of areas -- some of them telling people that they should leave, as Israel perhaps prepares to expand its military operations in the south of the country, and, also, many more leaflets really hammering home the propaganda message, says the Israeli Defense Forces, that Hezbollah is to blame for this whole war -- Kyra.

PHILLIPS: Brent Sadler live from Beirut -- thanks, Brent.

Israeli ground troops poised to gain more ground, barring a diplomatic breakthrough.

CNN's Matthew Chance is near the Israeli-Lebanese border -- Matthew.

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Kyra, thanks very much.

And you may be able to hear behind me the crashing thud of artillery shells, as they pound Hezbollah positions in southern Lebanon, because, even though the Israeli cabinet, the security cabinet, has said that it's holding off, it's -- the -- actually, the prime minister said he's holding off the issuing of the order to expand those military operations in southern Lebanon -- I can tell you, on the border, here, just a few hundred yards from the territory of Lebanon, there has been a dramatic upswing in the amount of military activity that we have been witnessing.

Certainly, over the past -- past several hours, we have been seeing hundreds of Israeli troops pour across that border to join the 10,000 to 12,000 of their fellow soldiers already there from Israel on Lebanese territory, battling in very close combat situations, we understand, with Hezbollah guerrillas.

It's proving to be a very tough battle, indeed -- getting word from soldiers who are coming out of the battle zone, telling us the kind of experiences they have had, saying how well-prepared, how well- trained, how dug in the Hezbollah guerrillas are. It certainly is proving a tough fight. They're suffering a number of casualties, Hezbollah and the Israelis, as well, though, because of the censorship laws here, I'm not permitted to tell you how many casualties the Israeli army has suffered today.

But it has been considerable.

(GUNS FIRING)

CHANCE: You can hear these guns opening up right behind me now. Again, the situation is very tense along this border, with Israeli troops really pushing deeper and deeper into Lebanese territory from this point in northern Israel -- Kyra.

PHILLIPS: Why do you think it has picked up, just the action behind you, since we last talked? Is there anything specific going on that they're trying to -- to target?

CHANCE: Well, it's -- it's not altogether clear, that -- they're not telling us exactly what their objective is here, in -- in terms of the -- the immediate coming hours, coming days.

But certainly, this does seem to be part of a wider, a sort of growing attempt to establish a more stronger foothold inside southern Lebanon, which could potentially be converted into a buffer zone, across the north of the Israeli border, in Lebanese territory, a buffer zone that could be handed over to a robust force that would be able to disarm Hezbollah, and basically pick up the policing duties that Israel will be conducting when it's inside south Lebanon right now.

Now, it -- it gave a warm welcome to the idea of a Lebanese force being deployed there, Israel did, but it did have these concerns that it would not be a force that was strong enough, that was robust enough, to disarm Hezbollah. And that is why we have seen this threat to -- to expand the military operations in south Lebanon, to really create the conditions in which either the Lebanese army, or the Lebanese army backed with a multinational force, can actually take on the role of disarming Hezbollah in that territory -- Kyra.

PHILLIPS: All right, Matthew Chance, right there on the Israeli- Lebanon border, appreciate it.

Hezbollah is on the front lines, but it didn't get there alone, Syria and Iran are the group's biggest benefactors, especially Iran, whose president wants to wipe Israel off the map.

CNN's Aneesh Raman has been granted rare access to the Iranian capital. He joins me now via broadband.

Aneesh, is Iran coming forward and talking at all about supporting Hezbollah with weapons?

ANEESH RAMAN, CNN CORRESPONDENT: Not at all.

In fact, we have heard firm denials, Kyra, from public officials here in Tehran, saying that they only support Hezbollah in a spiritual sense, that Hezbollah is an offspring of the Shia revolution that happened in Iran, when it was formed, back in the early 1980s, Hezbollah.

We did hear the firmest statement, in terms of any operational connection, coming in an interview that was done by a reformist newspaper in Tehran with a former Iranian envoy to Damascus, who was in that post back in 1982. He says, as -- at that time, he oversaw some three -- 30 -- sorry -- training courses of Hezbollah fighters, each with about 300 fighters in them. We haven't heard from him since in public comments, but that's been the firmest link we have had between Hezbollah and Iran made by any official, former or otherwise, here in the capital -- Kyra.

PHILLIPS: All right, Aneesh Raman, live from Tehran via broadband, appreciate it.

All right. We're talking about attacks and arrests and more murders in Iraq now -- the targets, civilians and journalist.

CNN's Harris Whitbeck gives us the big picture now from Baghdad.

(BEGIN VIDEOTAPE)

HARRIS WHITBECK, CNN CORRESPONDENT: There are conflicting reports about an explosion that occurred in the town of Baquba, just north of Baghdad today. That explosion occurred near a mosque, killing four people and wounding 16 others. All of the victims are civilians.

According to local police, the bomb was caused by either a Katyusha rocket that was fired in the area or by a bombmaker, a clandestine bombmaker, working near that area.

Meanwhile, the identities of two more Iraqi journalists who were killed were released today. Apparently, these journalists were killed on Monday, and their bodies were found later in Baghdad. According to the Iraqi Federation of Journalists, 135 Iraqi journalists have been killed while working since the U.S.-led invasion three years ago.

The U.S. military in Baghdad released information about the kidnapping of U.S. freelance journalist Jill Carroll. She was kidnapped in January and released 82 days later. Military spokesmen in Baghdad talked about the circumstances that led a group of Marines in Fallujah to a house that it -- it is believed was used by the kidnappers to detain Carroll.

MAJ. GEN. WILLIAM CALDWELL, U.S. ARMY SPOKESMAN, COALITION FORCES IN IRAQ: They, in fact, coming into this house, did look for and did find and neutralized devices that had been set intentionally to, in fact, inflict harm on them if they entered the home.

So, they were able to defuse those. And, going in, they did find two hostages, two kidnap victims in this home here, which they were able to free and return them back to their families.

WHITBECK: And interviews with those detainees apparently led Marines to three other houses in the area that were being used as safe houses by the kidnappers.

Harris Whitbeck, CNN, Baghdad.

(END VIDEOTAPE)

PHILLIPS: Well, Jill Carroll plans to tell her story in print only. Editors at "The Christian Science Monitor" say that we can read all about it in an 11-part series to set -- it's set to begin, rather, on Monday. Dave Cook, the paper's Washington, D.C., bureau chief, says that reliving the story was painful for Jill, and she's worried about retribution aimed at her colleagues in Baghdad, her family, and even herself.

Well, the biggest oil field in the United States, some of it, or all of it, soon to be shut down. This will affect you a little or a lot. I am going to talk with the president of BP America. He joins me from Alaska when LIVE FROM continues.

(COMMERCIAL BREAK)

PHILLIPS: Well, a pipeline leaks. Oil traders freak. Gas prices, well, reek. You would think that someone would be paying attention to those vitally important oil lines on Alaska's north coast.

But, CNN's Bob Franken reports, for the most part, you would think wrong.

(BEGIN VIDEOTAPE)

BOB FRANKEN, CNN NATIONAL CORRESPONDENT (voice-over): The only pipeline that has any significant federal regulation is Alyeska, the huge pressurized superhighway, in effect, that gets the crude oil from energy company feeder lines at Prudhoe Bay on the state's North Slope, and rushes it 800 miles to the huge tanker ships at Valdez port.

And, because of that regulation, Alyeska scrubs out all the residue about every two weeks.

But the feeder lines, like British Petroleum's are not regulated -- no maintenance plan required, no federal government oversight, until there's a leak. And critics charge, BP has taken full advantage of that.

ATHAN MANUEL, OFFSHORE DRILLING EXPERT, SIERRA CLUB: They seem to have a real black -- blind spot when it comes to just some of the maintenance that needs to be done up there.

FRANKEN: BP says, it "continuously reevaluates its inspection programs."

Since a leak revealed extensive corrosion in March, Congress has been considering legislation that would impose maintenance standards on the company's feeder lines.

White House Press Secretary Tony Snow said yesterday, the administration is already developing new regulations, but the federal government's first priority right now is to step in and look for alternate sources of oil.

SAMUEL BODMAN, U.S. ENERGY SECRETARY: That's part of the -- we are the -- if you will, we're the counterpunchers. We respond to the needs of -- of industry, if there are supply disruptions. This certainly qualifies as a supply disruption. FRANKEN (on camera): No one, including BP, knows how long this current disruption is going to last. The regulators are planning to try and make sure there's no next time.

Bob Franken, CNN, Washington.

(END VIDEOTAPE)

PHILLIPS: Well, the Alaska oil field shutdown ask big, big effects worldwide, and big concerns over the reliability of the North American supply.

Bob Malone is the president and chairman of BP America. He joins me live from Anchorage.

Sir, I appreciate you joining us today.

BOB MALONE, CHAIRMAN & PRESIDENT, BP AMERICA: My pleasure, Kyra.

PHILLIPS: Well, I want to get right to -- I want to get your response from the governor. This just crossed the wires. We were able to confirm it.

Governor -- Alaska's governor instituting a hiring freeze now, because of the millions of dollars he says that Alaska is losing daily due to this shutdown of your oil field there. He's also going on to say that he's asking the attorney general to investigate the state's right to hold BP fully accountable for losses to the state.

What's your reaction to that?

MALONE: Well, we recognize that there will be a number of investigations on this incident, as we look back at the learnings from -- from what happened over the weekend. We're focused looking forward right now at what we can do to maintain the production that we currently have of 200,000 barrels a day, and how quickly we can get the eastern side of the field back into production.

PHILLIPS: And I -- I recognize what you're doing right there at this point. But let's just backtrack to the widespread corrosion that was reported two years ago. We have seen various memos that have been released in various newspapers. Your engineers and your corrosion experts, where were they? And what did they do at that time, when BP was told about these problems?

MALONE: Well, we have -- we spend, in any given year, about $200 million on integrity management. A third of that is in corrosion control.

We have, on any given day, as many as 225 people taking readings on the pipelines on the North Slope of the Alaska. In fact, we take about 100,000 X-rays every year of the pipeline. We have an outstanding group of professionals that are working each and every day to assure us of that, that these pipelines are safe, and that we're controlling corrosion on the North Slope.

PHILLIPS: So -- so, what happen...

MALONE: What...

PHILLIPS: Now, you're saying $200 million. You're saying readings on a regular basis, X-rays. So, what happened on May 22, 2004, when this memo came across, saying: Look, I'm concerned about safety, health, threats to the environment at Prudhoe Bay, Alaska?

So, what was done? All that money, all those checks and balances, was that happening at that time?

MALONE: Well, I'm not familiar with this exact concern you're expressing.

But, when we receive a concern -- and we do receive them -- we always give them to the proper people in Alaska, if this is the case, to address that issue. So, I would assume that this was addressed, documented, and that we would have acted upon -- if there was enough information for us to act upon, we would have modified our program based on that concern, if it highlighted that we had a shortcoming.

PHILLIPS: All right, I -- I will give it to you directly.

"May 22, 2004, Chuck Hamel, advocate for BP workers in Alaska, took the charges directly to Dr. Walter Massey, chairman of the environment committee of BP's nonexecutive board of directors. In that letter, Mr. Hamel told Dr. Massey that, in the previous four years, BP employees and contract workers had brought to him concerns about safety, health and threats to the environment there at Prudhoe Bay."

Then, it goes on to say that "The workers told Mr Hamel that BP's Houston lawyer went to Alaska with questions that seemed aimed more at identifying whistle-blowers than uncovering corrosion."

MALONE: BP encourages our employees or the public to raise concerns. And we have no interest in who is raising that concern, only giving us sufficient information that we can address those concerns.

I am aware of the letter that Dr. Massey received. I'm aware that -- that BP in Alaska took necessary action to look at that, to document, to find out was there an issue, what they need to modify, and brought that to closure, based upon the information that they were given.

PHILLIPS: And I think a lot of people, Mr. Malone, are -- are looking at how much money is made here from high oil prices, and they're sitting back thinking, wow, looking at -- at the state of -- of -- of the situation right now. Why wasn't this money used just for basic maintenance? Even when those complaints were filed, where was that money going?

MALONE: We spend $200 million a year on integrity management, which is maintenance of our infield pipelines, as well as the transit lines where we had the problem. What occurred over the weekend is, we have found that there is something we did not anticipate finding, which is a bacteria that is growing in the pipeline. It eats the oil and secretes a substance which is acidic, that is causing -- caused the hole in the pipeline. That is what happened in March.

What we did was, we pigged the line over the weekend last week. And we found that we had corrosion. And it was BP's integrity management system that detected these problems. And we shut down the field, in order to protect the environment and before anything catastrophic could occur.

We spend the necessary money that we feel is necessary to have an -- a world-class corrosion program. But what we found is, we have had a gap. We didn't realize these mic -- these -- this microbiology, or the biological growth, which is essentially a bacteria, were growing in this line.

PHILLIPS: Mr. Malone, hold...

MALONE: You...

PHILLIPS: Hold that thought. We just got to get a quick break in. I don't want to cut you off. I want to come right back to you.

Stay with us. We will be right back.

(COMMERCIAL BREAK)

PHILLIPS: We are continuing our conversation about the Alaska oil field shutdown that's causing a big effect worldwide.

The president and chairman of BP America, Bob Malone, joining me live from Anchorage.

Sir, I, once again, appreciate you staying with us to get through that break.

You were talking about this bacteria that you found in the pipeline that's causing this corrosion. Tell me what you're doing right now to combat this problem. And do you have a ballpark date, or a specific date, to when you think you can get this problem fixed?

MALONE: Well, Kyra, recently, there has been a lot of discussion about what we're going to do to look back at what went wrong. And we will need to do that. And they will be plenty of investigations. We -- and looking in the rearview mirror and learning from what has happened.

My focus right now, and that of BP, is to find out if we can safely continue to operate the west side of the field that's currently producing 200,000 barrels a day. We have got over 100 people up on that pipeline right now, running X-rays, to see if BP feels it's safe to continue operating.

If so, we will make that decision between Friday and Monday. If so, we would continue producing 200,000 barrels a day. Once we have completed that work, we will join a team that's currently working on the east side of the field, which is the 200,000 barrels that we have shut in, and we will put an effort there to see how quickly we can safely bring production back on the east side of the field.

That's my focus right now, is to get the production safely back into the system.

PHILLIPS: Are you concerned, just with the history of the company, and now this issue with the pipeline, that there could be something else that you come across, that there could be something else that -- that is deteriorating, and it hasn't been addressed properly, or something that might have slipped through the various X- rays, and checks, and the billions of dollars that you said that go into trying to keep these areas safe and effective?

MALONE: Well, our -- our chief executive, John Browne, appointed me to a position about two months ago. And the purpose of that was to put increased focus on BP America, with the charge to make sure that all of our operations are world-class.

For the months leading up to the incident on the North Slope, I have been going facility by facility, meeting with both the management and with the workers in -- inside those facilities, talking about safety and operational integrity, and personally assuring myself, with the team that I have with me, that our operations are being run with our values in mind, which is around safety and an operational integrity.

PHILLIPS: Bob Malone, president and chairman of BP America, appreciate your time.

MALONE: I'm happy to be here.

PHILLIPS: Israel, Lebanon, the United Nations, all on the receiving end of a message from the Bush administration today -- the president is at his ranch in Crawford, Texas.

Our White House correspondent Suzanne Malveaux is just down the road.

Hey, Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, hey, Kyra.

We saw the press secretary, Tony Snow, very briefly on camera, because he, essentially, is trying to get the -- the message across that President Bush is still engaged in this Middle East process here, in the conflict, in trying to get a U.N. Security Council resolution passed as quickly as possible.

Now, Snow refused to say that it was at an impasse, these negotiations, but he did acknowledge that there were still differences that they have to bridge here. Don't want to oversimplify the matter here, but the bottom line is, the difference here is that -- whether Israeli troops immediately withdraw, whether or not you have got an international force that goes in.

The Lebanese are insisting here they want Israeli troops out as quickly as possible, but the United States, the French and others are saying, look, we want a multinational force to come in at first, then the Israelis pull out. That way, there won't be some sort of power vacuum. That is the sticking point here and that is something the administration says is not negotiable.

(BEGIN VIDEO CLIP)

TONY SNOW, WHITE HOUSE PRESS SECRETARY: We know at this point that we still have some work to do. Furthermore, we also know that the Lebanese army, while an absolutely essential part of any solution, is not itself independently capable of dealing with the problem, at least not yet, and one of the goals is to make sure that in time, the Lebanese government and its authorities have the ability to do it.

(END VIDEO CLIP)

MALVEAUX: So, Kyra, what is happening now, essentially what you have is behind the scenes diplomacy. The French trying to finesse the language here to satisfy the Lebanese government. To say, look, we are going to try to bring that multinational force in as quickly as possible and have Israelis pull out but we cannot have a delay where we allow Hezbollah to rearm or regain strength.

It is unclear just how long this process is going to take and to further complicate the matter, of course, is what we heard from Israel today, expanding its offensive military operations for some 30 days, Kyra.

PHILLIPS: Suzanne Malveaux in Crawford, thanks.

More Americans oppose the war in Iraq, a new CNN poll conducted by Opinion Research Corporation puts the anti-war faction at 60 percent, the highest so far, 61 percent believe at least some U.S. troops should be withdrawn by the end of the year. But only a quarter want all troops out by year's end.

Americans are evenly divided on whether the U.S. will win the war, 47 percent say yes, 48 percent say no.

A fallen star. Hear what former Ohio State Buckeye player Maurice Clarett is in trouble for now. More LIVE FROM straight ahead.

(COMMERCIAL BREAK)

PHILLIPS: Help is on the way. Italy and France send firefighters to Spain where more than 110 wildfires are burning. Most in forests, many reportedly were arson. High winds and dry conditions aren't helping either. The same is true in neighboring Portugal. Well in Washington State, the fire is said to be a long way from controlled. It's burned more than 300 acres and at least nine homes just north of Spokane. About 50 more homes have been evacuated.

Well, the hotter it is, the dryer it is, the greater the fire danger. Jacqui Jeras watching hot spots from the new CNN Weather Center, Jacqui.

(WEATHER REPORT)

PHILLIPS: Love you, Jacqui.

All right, say it ain't so Joe. As leading Democrats throw their support behind Connecticut primary winner Ned Lamont, incumbent Senator Joe Lieberman says he's not quitting. The Lieberman campaign filed papers this morning to get on the November ballot as an independent, hoping to keep the seat that he's held since 1989.

(BEGIN VIDEO CLIP)

SOLEDAD O'BRIEN, CNN ANCHOR: Why in a nutshell do you think you lost?

SEN. JOE LIEBERMAN (D), CONNECTICUT: Well, it was real close, so the good news is I was closing, closed more than ten points from a poll last week, so we're just going to keep on going from that direction and win in November.

But why? It was clear to me all along that this, that if I had an opponent who had money, as this one did, they could make this or would try to make it into a referendum on George Bush and the Iraq war, both of which are intensely unpopular among Democrats. And they would try to convince the Connecticut Democrats to send a message on those two matters, rather than focus on which one of us, Joe Lieberman or Ned Lamont, would do a better job as senator from Connecticut and they just barely, through a lot of distortion, Soledad, were able to do that.

O'BRIEN: If an election is about voters sending a message, why aren't you taking that message and saying, I'm out, I lost?

LIEBERMAN: Well, the last thing I represent is the status quo. I've always represented progress and you only make progress, not by making noise and playing to the extremes in our country, but by saying what you truly believe and then working with members of the other party to get something done and the people of America are fed up, the people of Connecticut are fed up by all the partisanship in Washington that stands in the way of us solving some of their problems, health care, energy, environmental protection, jobs, education. I could go on, and I'm fighting on for that cause.

(END VIDEO CLIP)

PHILLIPS: Well, Lamont, a millionaire cable TV executive said that he'd prefer Lieberman not to stay in the race, but he believes his win proves that Connecticut voters are ready for something different.

(BEGIN VIDEO CLIP)

O'BRIEN: Why do you think you won, in a nutshell?

NED LAMONT (D), CONN. SENATE CANDIDATE: I think we won because the people of Connecticut want to bring real change to Washington, D.C. They don't like stay the course in Iraq and I think they want to change course in this country. They think we ought to start investing in this country again, investing in schools, investing in clean energy and investing in healthcare for everybody.

O'BRIEN: Do you think there's a bigger message here in your victory? Is it a referendum, as some people had suggested, on the war in Iraq? Is it a message to incumbents, watch out, we want you out? Is it a message about President Bush and his declining popularity? What is it?

LAMONT: I think it's a lot about Connecticut. There's a sense they want their senator coming back to the state, listening to them, hearing what they have to say, being responsive. I aim to do that. I'm going to go down to Washington, D.C., I'm going to try and change things.

I had fun last night. I asked everybody how many lobbyists are there for every single Congressman in Washington, D.C.? And everybody shouted 63, 63 lobbyists for every Congressman. So I think our message is getting through.

(END VIDEO CLIP)

PHILLIPS: Well, today Democratic Senate leaders Harry Reid and Chuck Schumer put their weight behind Lamont, so too did Connecticut's other Democratic senator, Chris Dodd, who campaigned for Lieberman in the primary.

A hit, then a miss for Cynthia McKinney. The Georgia Democratic Congresswoman, best known to many from her scuffle with a Capitol Hill cop, was retired by voters last night at least for now. In a rambling concession speech, McKinney invoked John F. Kennedy and uncorked on George W. Bush. She's also pretty peeved at the media and electronic voting machines.

(BEGIN VIDEO CLIP)

REP. CYNTHIA MCKINNEY (D), GEORGIA: Electronic voting machines are a threat to our democracy. So, let the word go out -- we aren't going to tolerate any more stolen elections.

(END VIDEO CLIP)

PHILLIPS: Well, during the campaign, Hank Johnson called McKinney an embarrassment and vowed to be a less divisive figure. He now goes on to face Republican Catherine Davis in the heavily Democratic district. Little relief at the Big Dig. Traffic is flowing again on an eastbound tunnel ramp to the Boston Airport. It was closed for almost a month after concrete ceiling panels from a nearby tunnel fell on a car and crushed a woman inside. Inspectors insist the newly reopened ramp is safe, but other tunnels could stay closed for months.

As a teenager, Maurice Clarett was a football star of national proportions. But as his performance in the 2002 Fiesta Bowl has fated, Clarett's troubles are grown. The latest run-in was this morning in Columbus, Ohio. The former Ohio State phenom was arrested after a highway chase.

Police say he had four loaded guns and was wearing a bullet-proof vest. Officers used mace to control him because a stun gun couldn't penetrate the vest. Clarett is awaiting trial already on robbery and weapons charges dating back to New Year's Day.

Cleaning up or cleaning out? A woman who used to take care of nursing hem residents may be moving to another institution -- jail. Police in Lawrence, Massachusetts, say this surveillance videotape shows a nursing home caretaker rummaging through patients' belongings and stealing money.

The hidden camera was installed after residents complained that a $1,000 in cash and Social Security checks had disappeared since June. The caretaker could face two-and-a-half years in prison if she is convicted.

Well, can you hear me now? Britain's Prince Charles may be wondering in light of a royal wiretap investigation. We'll tell you who's under suspicion when LIVE FROM continues.

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PHILLIPS: Well, maybe these two used to go together like a horse and carriage, but now, they're more like the Hatfields and McCoys -- make that Charles and Diana. When this celebu-split goes to court, Paul McCartney will be represented by the same barrister who argued for Prince Charles in the royal divorce.

And Heather Mills? Well, she signed up with the firm that helped the late Princess of Wales win a settlement worth $32 million. Given McCartney's estimated fortune of $1.5 billion, Mills should wind up with a big ticket to ride.

Talk about your palace intrigue. Somebody may have been listening in on the people who work for Britain's Prince Charles. Investigators are rounding up the usual suspects, in other words, reporters for the British tabloids.

CNN's Isha Sesay reports from London.

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ISHA SESAY, CNN CORRESPONDENT (voice-over): The British tabloids are famous for their obsession with the royal family but rarely has it reached this level. Three men have been arrested on suspicion of tapping the phones of staff working for Prince Charles. They include Clive Goodman, the royal editor of the "News of the World," a top- selling Sunday tabloid.

RICHARD FITZWILLIAMS, ROYAL WATCHER: Royal stories command probably more money than almost anything you could think of. We're obsessed by celebrities. The British monarchy is the world's most high-profile institution of its sort, and if you get details about individual members -- and there have been cases before where this has happened -- that are embarrassing, well, they make worldwide news.

SESAY: Scotland Yard said in a statement on Tuesday police launched an investigation after concerns were reported to the Met's Royalty Protection Department by members of the royal household at Clarence House. Clarence House is Prince Charles' official residence. His spokesman won't comment on the investigation.

Police say the investigation is being handled by the antiterrorist branch as the claims have potential security implications. They also believe that public figures beyond the royal household may have had their phones intercepted.

(on camera): The royals, of course, are no strangers to security breaches. Before this latest episode, there was Camilla-gate. Back in 1989, an intimate late-night phone conversation between Prince Charles and Camilla, then Mrs. Parker Bowles, was recorded.

Then in 2003, a tabloid reporter managed to infiltrate Buckingham Palace and serve as a footman for two whole months, this coming ahead of a state visit by President Bush.

And, of course, you'll remember the Batman and Robin saga. Just two years ago, in 2004, a campaigner from the group Fathers for Justice scaled a balcony of the palace just behind me to stage his protest. Authorities were not amused.

(voice-over): A former press secretary to the queen says the relationship between the media and the royals will never be an easy one.

DICKY ARBITER, FORMER ROYAL AIDE: They are aware that they are targets, so, yes, they will continue having a love-hate relationship. They know the job's got to be done, but they don't want to be stalked and they will sort of take note of what has happened and probably themselves take one step back as well.

SESAY: As much as the media did after Diana's death, but that didn't last. Such is the tabloid competition for news and gossip about the royal family.

Isha Sesay, CNN, London.

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PHILLIPS: Well, when we come back, hear from the crew of the next American mission to space. More LIVE FROM, straight ahead. (COMMERCIAL BREAK)

PHILLIPS: All right, Fred, what are you working for us?

FREDRICKA WHITFIELD, CNN CORRESPONDENT: All right. We're getting some new pictures in right now. I want to show you what we have. It's nighttime video of this new, expanded offensive that Israel had been promising for southern Lebanon for Hezbollah guerrillas. You're looking at live pictures right now and hearing some of those rocket-fire attacks there, living up to its promise of intensifying the assault there of Hezbollah there in southern Lebanon.

Of course, this live picture now taking place in Matula (ph), south Lebanon. And when we get any more information about how long they will plan to carry out these heavy attacks, just starting just moments ago at nightfall now, we'll be able to bring that to you -- Kyra.

PHILLIPS: All right, we'll follow those live pictures, Fred. Thanks so much.

Also, the closing bell is straight ahead with our Susan Lisovicz. We'll be right back.

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PHILLIPS: Picking up the pace in space. Just a month after the first shuttle mission in almost a year, NASA's getting ready for another launch. Atlantis could go up as early as August 27th, and the crew is rehearsing at Kennedy Space Center. The commander says it will be a busy mission.

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CMDR. BRENT JETT, ASTRONAUT: I think the most challenging thing for us on this flight is going to be our timeline. We've put together a very aggressive first five or six days of the flight. We did that deliberately. It's probably the most aggressive timeline that's been flown on the shuttle ever.

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PHILLIPS: On the to do list, resuming construction on the International Space Station for the first time since the Columbia disaster three-and-half years ago.

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