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Secrets Revealed?; The War on Terror; Pain at the Pump

Aired June 02, 2004 - 11:00   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.


DARYN KAGAN, CNN ANCHOR: Enron energy traders were reportedly caught on tape gloating about the California power crisis. The audio tapes were obtained by "CBS News." The network says the tapes reveal traders talking about how Enron was cashing in on the western power crisis. Utility companies accuse Enron of manipulating the market.
President Bush delivers a commencement address at the Air Force Academy today. Mr. Bush is expected to cast the war in Iraq as the central focus in the battle between terror and freedom. He'll tell graduating cadets that they'll be joining a conflict as significant as World War II or the Cold War. We'll carry the president's speech live at 1:05 p.m. Eastern right here on CNN.

Coming soon to a theater near you, Michael Moore's documentary, "Fahrenheit 9/11." It will hit theaters on June 25. Disney had refused to release the film. It criticizes President Bush over the September 11 attacks. Miramax chiefs Bob and Harvey Weinstein bought the rights and formed a partnership specifically to market the film.

It is just after 11:00 a.m. on the East Coast, 8:00 a.m. on the West Coast. We're at CNN Center in Atlanta. Good morning, once again, I'm Daryn Kagan.

Up first on CNN, more blood shed today in Iraq. The Ministry of Health says that five people were killed and 37 were wounded by a car bomb explosion in Baghdad. The car exploded on a busy street in a northern Baghdad neighborhood.

As an interim government takes shape, the U.S. and Britain are circulating a new draft of a U.N. resolution on Iraq. It makes clear that Iraqi security forces would be under the control of the interim government and the mandate for coalition forces would end by December 2005.

Sources confirm reports that Ahmad Chalabi told Iran that the U.S. had broken the secret code of its intelligence service. Chalabi is the former Iraqi exile who was once a close ally of the U.S. government.

National security correspondent David Ensor is tracking the Ahmad Chalabi story. He is in Washington with more on what that means and how significant this might be for the U.S.

David, good morning.

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT: Daryn, there's an extraordinary amount of detail coming out for a kind of story you normally don't hear about, and the significance, according to the sources I talked to, is very large indeed. Knowledgeable sources confirming that Ahmad Chalabi, the Iraqi immigrated (ph) leader, told an Iranian official that the U.S. had cracked the secret communications code used by Iranian intelligence.

U.S. officials asked some news organizations not to report this development about 10 days ago since it appeared that the Iranians were continuing to use those codes anyway. A source telling me that apparently the Iranians didn't believe Chalabi.

Over the last day, reports have, however, appeared in "The New Yorker," the "New York Times," on CBS that the general charge that Chalabi had provided Iran with critical intelligence information was first reported last month after the Bush administration cut off funding for his organization. Sources say that an Iranian official in Baghdad sent a cable to Tehran, using the broken code, detailing his conversation with Chalabi and the Iraqi's warning that the code had been compromised. That allowed the U.S. to know the valuable intelligence breakthrough had been compromised and who had done it.

As you may know, the U.S. were using sophisticated radar equipment, like this we see here, monitors all kinds of communications around the world. And the National Security Agency, one of the U.S. intelligence agencies, has an awful lot of code breakers working for it.

The FBI has launched an intensive espionage investigation into who might have given Chalabi this information. The "New York -- the "New York Times" reports that the cable from the Iranian in Baghdad reports that Chalabi had said the American who told him about the secret code was -- quote -- "drunk." We haven't been able to confirm that.

The coded cable traffic that the U.S. has access to could have provided U.S. intelligence with valuable information about Iranian informations inside -- Iranian operations, excuse me, inside Iraq and around the world. So this could be a very serious compromise of U.S. national security -- Daryn.

KAGAN: I want to pick up on what you started with there, how getting a look at behind the scenes, very rare indeed. And if you'll just tell the small part of the story about how the Iranians got this information, allegedly, and that how they didn't believe Chalabi, how U.S. -- how American officials were able to monitor that.

ENSOR: Well, the U.S. has been monitoring Iranian intelligence communications, internal communications, according to sources. And when the Iranians were told by Chalabi, according to these sources, that their communications codes have been compromised, the message, which communicated that information from Baghdad to Tehran, was sent with the same code. So therefore, the U.S. was able to monitor the message and knew not only that they had been caught, but also that Ahmad Chalabi, according to this Iranian official, had been the person who had tipped off the Iranian government.

You can imagine the kinds of things that the U.S. may have been able to monitor in recent months and years. I don't know how long they've had this code access. But to be losing it is a very serious blow, indeed. It's comparable to the kind of thing that Robert Hanssen is sitting in a jail for doing, vis-a-vis, the Soviet Union. He gave codes away. It's the most serious secret there is.

KAGAN: Well with that, David, are you suggesting that Chalabi could one day find himself sitting in a U.S. prison?

ENSOR: Really not clear, at this point, whether there would be charges against Ahmad Chalabi. But clearly there is a very wide- ranging FBI investigation, very serious investigation, into who could have given Ahmad Chalabi that information.

Now, as you heard me mention,...

KAGAN: David, we're going to have to get -- sorry, we have more information on that (ph).

ENSOR: All right.

KAGAN: The newser (ph) is starting in the Saudi Embassy in Washington, D.C. Let's listen in.

ADEL AL-JUBEIR, SAUDI FOREIGN AFFAIRS ADVISER: ... branches -- five branches under U.N. Security Council Resolution 1267. I am joined by Assistant Secretary of State Wayne Allen (ph) and also by -- Anthony Wayne, and Deputy Assistant Secretary of the Treasury, Juan Zarate. We will make a few minutes of brief comments, and then we will be happy to take your questions.

Just over a year ago, I stood at this podium to talk to you about the horrific al Qaeda attacks in Saudi Arabia. The -- Saudi Arabia has suffered a number of terrorist attacks since. We have lost many of our citizens and our residents and we have lost many of our heroic security officers. But we're determined to crush this evil from our midst and to remove it.

The actions of al Qaeda that we see in the Kingdom have grown more desperate. They have gone from targeting hard targets and high- value targets to targeting the innocent. But as they grow more desperate, our resolve grows stronger, as does our determination. And we have no doubt, God willing, that we will prevail over this evil.

Our leaders are committed to fighting terrorism, regardless of how long it takes. The fight against terrorism, from the Saudi perspective, involves three elements. The first one is to go after the terrorists. We have killed or captured their leaders. We have arrested hundreds of individuals. We have seized their arms. We have seized arms caches. We have arrested hundreds of them and we will continue to do so. Our security forces are getting better, they're getting stronger and they are making the ultimate sacrifice in terms of their lives in order to ensure the safety of our citizens and our residents.

The second area in the war on terrorism, from our perspective, is to go after the mindset that ferments and justifies acts of terrorism. That is unacceptable. It is rejected by our faith. It is rejected by our values and by our traditions. We have worked closely to educate our public. Our religious scholars have spoken out forcefully and continuously to present the true picture of Islam, which is a religion of peace and tolerance, and not one of violence and murder. We have revitalized our education system and we continue to do so. We are working with imams in our mosques to make sure that there is no place in our society for incitement and intolerance.

The third area in the war against terrorism is the one that we're talking about today and that involves going after the finances. And Saudi Arabia has done -- taken tremendous steps in this area. We have put in place new regulations and financial control mechanisms to ensure that people don't take advantage of our financial system or of our charities. We have audited our charities. We have reorganized our charitable work abroad, which brings me to the subject at hand today.

We are setting up one entity to be called the Saudi National Entity for Charitable Work Abroad. This entity will be the sole vehicle through which all private Saudi donations will go to help those in need. The existing entities that used to operate abroad, before we froze external charitable work a year ago, will be dissolved or will have their assets folded into this new entity.

And we're talking about institutions like al-Haramain Islamic Foundation, the Palestinian Funds, the Crossover Relief Fund, the Afghani Relief fund, all of those will be merged into this new entity, which will operate with total transparency. It will be a non- governmental entity. It will have a board of directors. It will have legal oversight, it will have financial oversight and it will operate based on clear policies and procedures.

And, for example, the entity cannot operate in countries without the express permission of the host government. They cannot deal with charities that are not recognized by the host government. They cannot distribute aid in cash. When it comes to financing projects, they have to do it in increments rather than in one lump sum.

The entity will have a board of director composed of our most prominent citizens. They will have a requirement to provide an accounting every three months of the funds that are spent. And they will have a requirement to provide audited statements every year in terms of where the -- how much money was collected and how much money was spent and where was it spent. We do this in order to ensure that the charity of our citizens goes to those who actually need it and that we know where funds go when they leave Saudi Arabia.

The charity is a part of our faith. And charity is noble. And we are very proud of the contributions that Saudi citizens have made over the years to those less needy. Unfortunately, the true story is often not told. Millions of people around the world have been fed because of Saudi charity. Tens of thousands of orphans have been taken care of because of Saudi charity. Refugees have been provided shelters from the ravages of war because of Saudi charities. Thousands of wells were drilled in arid areas of the world because of Saudi charities. These are the stories that are not told about the charity of Saudi Arabia, for its citizens, and this is something that we take great pride in because it is a noble effort and we want to encourage it. The measures that we take or that we have taken are designed to make sure that charity goes to those that need it, and that nobody can take advantage of the generosity of our citizens.

KAGAN: We've been listening in to Adel al-Jubeir, the Foreign Affairs Adviser to the Crown Prince of Saudi Arabia, making the announcement that Saudi Arabia is going to set up one entity that will process all the funds of international charity coming into Saudi Arabia and going out to other groups. It's meant to fight terrorism, it's meant to put a stop to funding -- to not stop funding appropriate charitable organizations, but to stop funding terrorists abroad.

Let's bring in our Kelli Arena who has been listening in as well.

Kelli, is it significant that the Saudis are setting this up?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well it is -- it is definitely another big step for the Saudis. As you heard, what they are doing is they are dissolving all the charities, most significantly, al-Haramain, which has been a subject of some criticism in recent years. And they are forming a non-governmental, sort of umbrella group, bringing all of -- folding in all the assets of those individual entities into one so that the control structure is very clear with some accounting control, some auditing controls in place.

Obviously an effort by the Saudis, who are still taking some harsh criticism for the fact that there are -- there are some, some here in Congress, some terror experts who believe that the Saudis just not -- have not done enough, especially in the area of financing. Because so much of that money, at least according to law enforcement officials here, does make its way into the wrong hands.

As you heard from Adel al-Jubeir, he said that giving is very much a part of the Muslim culture. It is not something that they are trying to get -- to cast a negative appall over. But they're saying look, you know this goes to good -- this goes to good causes, let's get the money, let's channel it together. I think it's -- I think that it will be perceived as a very positive step.

He also, though, if you heard, Daryn, talked about things before that, besides financing. And said that they are -- the Saudis are going to their imams, are making sure that their education, their teachers and that the school system is not a place where terrorism can foster, where the message is loud and clear that terrorism and terrorist acts are not part of the culture of Islam. Again, lots of criticism that has been directed towards the Saudi school system, towards mosques there, where they feel that terrorism and terrorist acts have been incited.

Back to you -- Daryn.

KAGAN: Kelli Arena, thank you for that. Let's bring in our analyst Peter Bergen to talk about this money trail. And how significant do you believe that is in the Saudis going after terrorism that, as you heard the spokesman describe, they have had to experience more and more over the last year?

PETER BERGEN, CNN TERRORISM ANALYST: Yes, well you remember, Daryn, May 12 of last year, the first attack in Riyadh, that was a tremendous wake-up call for the Saudi. And since then, we've seen a remarkably different posture. I think this, if indeed this one charitable kind of entity that Kelli was talking about is put into place, that's a significant -- a significant move on the war on terrorism, but for the following reason.

You know one of the five pillars of Islam, Daryn, is AKAT, the idea that you should give 2.5 percent of your income to charity. Obviously that's a tremendous amount of money flowing out of Saudi Arabia, 2.5 percent of their sort of gross national product, if you will, going to charity.

So now that this charity will be regulated, won't be just sort of going hither and fither, and certainly al Qaeda was using Saudi charities as a -- as a front. It was also using al Qaeda, these Saudi charities, as a funding mechanism. This kind of thing is a welcome development. How you put this into place exactly remains to be seen, but I think this is a very good step.

KAGAN: Well this comes just days after attack in Khobar, in which the Saudis let three of the terrorists go. So when he talks about that the Saudis are making tremendous steps in fighting terrorism, is that really a fair assessment?

BERGEN: Well I think compared to what the situation was before May 12 of last year, it's night and day. And that's a pretty low bar, by the way. There wasn't much cooperation before May 12 on the 9/11 hijackers, 15 of them, of course, who are -- who are Saudi. There was sort of an ostrich in the sand approach to this whole thing by the Saudis. They were saying -- even Prince Nayef, the Interior Minister, was saying that 9/11 was designed as a plot, one year after 9/11. So there was a lot of denial going on in Saudi Arabia.

That denial was no longer tenable after May 12 of last year. There have been several attacks, killing scores of people, directed at Westerners, but also anybody who cooperates with Westerners in the Kingdom. And as you mention, this last attack, where three of the attackers got away. So it is a very different posture in the past year, a lot of work remains to be done.

KAGAN: And we'll be watching it. Peter Bergen and Kelli Arena, thank you, in D.C.

And while terrorists may be trying to target oil interests in Saudi Arabia and abroad, OPEC says it's trying to keep it flowing. We'll show you what a meeting of the group could mean for us here in the U.S. That's coming up next.

And alleged lies, the murder case and the mistress. We'll show you what may be to come as day two of the Scott Peterson trial gets under way.

(COMMERCIAL BREAK)

KAGAN: Let's check some market numbers at 19 past the hour. The Dow is up 5 points. The Nasdaq is in negative territory. It is down 9 points. More on that just ahead.

But the numbers we want to talk about right now are world oil prices. They are inching down a bit today after hitting record highs on Tuesday. Both Saudi Arabia and the United Arab Emirates are pledging to pump more oil as OPEC meets in Beirut tomorrow. The Saudi oil minister says that he wants to see prices stabilize at $22 to $28 a barrel. Compare that to $42 in New York trading following the attack on oil workers in Khobar. Experts say that terror fears are adding anywhere from $9 to $15 to a barrel of crude.

So did you notice when you filled up this morning, maybe just a little bit, the government says that gas prices fell about a half a smidgen last week, down about a penny, to an average of $2.05 a gallon?

Chris Lawrence looking for any sign of falling prices. They don't want the sky to be falling in Hammond, Indiana, but the gas prices to be falling -- Chris.

CHRIS LAWRENCE, CNN CORRESPONDENT: Yes, and, Daryn, it's going to take more than a lot -- a lot of those pennies are going to have to add up to make a difference with what people have been paying over the past few days and weeks. You know we've just been out here talking to people constantly about how much they're paying for gas.

Your pockets look a little bit lighter right now.

UNIDENTIFIED FEMALE: They are a little bit lighter. The gas prices have increased so much that having an SUV makes it very difficult. As you can see, paying over $30.

LAWRENCE: But you're still driving.

UNIDENTIFIED FEMALE: You have to. It's a need. And we need gas and cheaper prices.

LAWRENCE: Yes. OK, well, we may get a little cheaper prices. That may be some relief coming over here.

And, Angie Ramos (ph), you run this gas station. And what have you heard from people as the gas just kept going up and up and up? What did people tell you?

ANGIE RAMOS, GAS STATION OPERATOR: Well, I really can't say what they tell me on camera, and I won't repeat it to begin with, but they're really upset at the way the gas goes up and down, up and down. It's like they never could depend on what they're going to be spending on gas and how many it's going to cost them each day just to get by, to get to and from work. LAWRENCE: Yes. So I see we're at about $2.09, $2.19, $2.29 here in Hammond right now. Can we count on that to stay that way for the rest of the day or the next few days?

RAMOS: I would say no, because I mean, like I said, it goes up and down. So I can get a phone call right now and tell me to jack up 10 cents more, or I can tell them -- they could tell me to go down. So it just all depends on when they call me and say move the prices.

LAWRENCE: All right. Well, hopefully those prices are going to be going down, not up, Daryn. People could really use a break here, especially heading into the summer months.

Back to you.

KAGAN: All right, Chris, thank you so much from Hammond, Indiana.

Parts of Florida are going up in flames, but is an end finally in sight for days of wildfires? That, plus your weather picture, is up next.

(COMMERCIAL BREAK)

KAGAN: A 3,000-acre brushfire has shut a 60-mile stretch of Alligator Alley across the Florida Everglades today. Visibility on Interstate 75 is zero in some spots. A similar-size fire is burning in northern Florida, near the border with Georgia.

They could certainly use some help from Mother Nature, perhaps a shower or two. Is that in the cards?

Here is Jacqui Jeras -- Jacqui.

JACQUI JERAS, CNN METEOROLOGIST: Yes. Hey, Daryn.

(WEATHER REPORT)

KAGAN: Which means it's going to be a good hair day in Phoenix.

JERAS: Yes, lovely.

KAGAN: That dry weather.

JERAS: All straight.

KAGAN: Yes, no frizz. Thank you -- Jacqui.

JERAS: OK.

KAGAN: It was a shocking story that threatened to sink the Kerry campaign, the only problem, apparently it wasn't true. Now the woman at the center is fighting back and taking on those willing to report a rumor. That's coming up.

(COMMERCIAL BREAK) 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 June 2, 2004 - 11:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DARYN KAGAN, CNN ANCHOR: Enron energy traders were reportedly caught on tape gloating about the California power crisis. The audio tapes were obtained by "CBS News." The network says the tapes reveal traders talking about how Enron was cashing in on the western power crisis. Utility companies accuse Enron of manipulating the market.
President Bush delivers a commencement address at the Air Force Academy today. Mr. Bush is expected to cast the war in Iraq as the central focus in the battle between terror and freedom. He'll tell graduating cadets that they'll be joining a conflict as significant as World War II or the Cold War. We'll carry the president's speech live at 1:05 p.m. Eastern right here on CNN.

Coming soon to a theater near you, Michael Moore's documentary, "Fahrenheit 9/11." It will hit theaters on June 25. Disney had refused to release the film. It criticizes President Bush over the September 11 attacks. Miramax chiefs Bob and Harvey Weinstein bought the rights and formed a partnership specifically to market the film.

It is just after 11:00 a.m. on the East Coast, 8:00 a.m. on the West Coast. We're at CNN Center in Atlanta. Good morning, once again, I'm Daryn Kagan.

Up first on CNN, more blood shed today in Iraq. The Ministry of Health says that five people were killed and 37 were wounded by a car bomb explosion in Baghdad. The car exploded on a busy street in a northern Baghdad neighborhood.

As an interim government takes shape, the U.S. and Britain are circulating a new draft of a U.N. resolution on Iraq. It makes clear that Iraqi security forces would be under the control of the interim government and the mandate for coalition forces would end by December 2005.

Sources confirm reports that Ahmad Chalabi told Iran that the U.S. had broken the secret code of its intelligence service. Chalabi is the former Iraqi exile who was once a close ally of the U.S. government.

National security correspondent David Ensor is tracking the Ahmad Chalabi story. He is in Washington with more on what that means and how significant this might be for the U.S.

David, good morning.

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT: Daryn, there's an extraordinary amount of detail coming out for a kind of story you normally don't hear about, and the significance, according to the sources I talked to, is very large indeed. Knowledgeable sources confirming that Ahmad Chalabi, the Iraqi immigrated (ph) leader, told an Iranian official that the U.S. had cracked the secret communications code used by Iranian intelligence.

U.S. officials asked some news organizations not to report this development about 10 days ago since it appeared that the Iranians were continuing to use those codes anyway. A source telling me that apparently the Iranians didn't believe Chalabi.

Over the last day, reports have, however, appeared in "The New Yorker," the "New York Times," on CBS that the general charge that Chalabi had provided Iran with critical intelligence information was first reported last month after the Bush administration cut off funding for his organization. Sources say that an Iranian official in Baghdad sent a cable to Tehran, using the broken code, detailing his conversation with Chalabi and the Iraqi's warning that the code had been compromised. That allowed the U.S. to know the valuable intelligence breakthrough had been compromised and who had done it.

As you may know, the U.S. were using sophisticated radar equipment, like this we see here, monitors all kinds of communications around the world. And the National Security Agency, one of the U.S. intelligence agencies, has an awful lot of code breakers working for it.

The FBI has launched an intensive espionage investigation into who might have given Chalabi this information. The "New York -- the "New York Times" reports that the cable from the Iranian in Baghdad reports that Chalabi had said the American who told him about the secret code was -- quote -- "drunk." We haven't been able to confirm that.

The coded cable traffic that the U.S. has access to could have provided U.S. intelligence with valuable information about Iranian informations inside -- Iranian operations, excuse me, inside Iraq and around the world. So this could be a very serious compromise of U.S. national security -- Daryn.

KAGAN: I want to pick up on what you started with there, how getting a look at behind the scenes, very rare indeed. And if you'll just tell the small part of the story about how the Iranians got this information, allegedly, and that how they didn't believe Chalabi, how U.S. -- how American officials were able to monitor that.

ENSOR: Well, the U.S. has been monitoring Iranian intelligence communications, internal communications, according to sources. And when the Iranians were told by Chalabi, according to these sources, that their communications codes have been compromised, the message, which communicated that information from Baghdad to Tehran, was sent with the same code. So therefore, the U.S. was able to monitor the message and knew not only that they had been caught, but also that Ahmad Chalabi, according to this Iranian official, had been the person who had tipped off the Iranian government.

You can imagine the kinds of things that the U.S. may have been able to monitor in recent months and years. I don't know how long they've had this code access. But to be losing it is a very serious blow, indeed. It's comparable to the kind of thing that Robert Hanssen is sitting in a jail for doing, vis-a-vis, the Soviet Union. He gave codes away. It's the most serious secret there is.

KAGAN: Well with that, David, are you suggesting that Chalabi could one day find himself sitting in a U.S. prison?

ENSOR: Really not clear, at this point, whether there would be charges against Ahmad Chalabi. But clearly there is a very wide- ranging FBI investigation, very serious investigation, into who could have given Ahmad Chalabi that information.

Now, as you heard me mention,...

KAGAN: David, we're going to have to get -- sorry, we have more information on that (ph).

ENSOR: All right.

KAGAN: The newser (ph) is starting in the Saudi Embassy in Washington, D.C. Let's listen in.

ADEL AL-JUBEIR, SAUDI FOREIGN AFFAIRS ADVISER: ... branches -- five branches under U.N. Security Council Resolution 1267. I am joined by Assistant Secretary of State Wayne Allen (ph) and also by -- Anthony Wayne, and Deputy Assistant Secretary of the Treasury, Juan Zarate. We will make a few minutes of brief comments, and then we will be happy to take your questions.

Just over a year ago, I stood at this podium to talk to you about the horrific al Qaeda attacks in Saudi Arabia. The -- Saudi Arabia has suffered a number of terrorist attacks since. We have lost many of our citizens and our residents and we have lost many of our heroic security officers. But we're determined to crush this evil from our midst and to remove it.

The actions of al Qaeda that we see in the Kingdom have grown more desperate. They have gone from targeting hard targets and high- value targets to targeting the innocent. But as they grow more desperate, our resolve grows stronger, as does our determination. And we have no doubt, God willing, that we will prevail over this evil.

Our leaders are committed to fighting terrorism, regardless of how long it takes. The fight against terrorism, from the Saudi perspective, involves three elements. The first one is to go after the terrorists. We have killed or captured their leaders. We have arrested hundreds of individuals. We have seized their arms. We have seized arms caches. We have arrested hundreds of them and we will continue to do so. Our security forces are getting better, they're getting stronger and they are making the ultimate sacrifice in terms of their lives in order to ensure the safety of our citizens and our residents.

The second area in the war on terrorism, from our perspective, is to go after the mindset that ferments and justifies acts of terrorism. That is unacceptable. It is rejected by our faith. It is rejected by our values and by our traditions. We have worked closely to educate our public. Our religious scholars have spoken out forcefully and continuously to present the true picture of Islam, which is a religion of peace and tolerance, and not one of violence and murder. We have revitalized our education system and we continue to do so. We are working with imams in our mosques to make sure that there is no place in our society for incitement and intolerance.

The third area in the war against terrorism is the one that we're talking about today and that involves going after the finances. And Saudi Arabia has done -- taken tremendous steps in this area. We have put in place new regulations and financial control mechanisms to ensure that people don't take advantage of our financial system or of our charities. We have audited our charities. We have reorganized our charitable work abroad, which brings me to the subject at hand today.

We are setting up one entity to be called the Saudi National Entity for Charitable Work Abroad. This entity will be the sole vehicle through which all private Saudi donations will go to help those in need. The existing entities that used to operate abroad, before we froze external charitable work a year ago, will be dissolved or will have their assets folded into this new entity.

And we're talking about institutions like al-Haramain Islamic Foundation, the Palestinian Funds, the Crossover Relief Fund, the Afghani Relief fund, all of those will be merged into this new entity, which will operate with total transparency. It will be a non- governmental entity. It will have a board of directors. It will have legal oversight, it will have financial oversight and it will operate based on clear policies and procedures.

And, for example, the entity cannot operate in countries without the express permission of the host government. They cannot deal with charities that are not recognized by the host government. They cannot distribute aid in cash. When it comes to financing projects, they have to do it in increments rather than in one lump sum.

The entity will have a board of director composed of our most prominent citizens. They will have a requirement to provide an accounting every three months of the funds that are spent. And they will have a requirement to provide audited statements every year in terms of where the -- how much money was collected and how much money was spent and where was it spent. We do this in order to ensure that the charity of our citizens goes to those who actually need it and that we know where funds go when they leave Saudi Arabia.

The charity is a part of our faith. And charity is noble. And we are very proud of the contributions that Saudi citizens have made over the years to those less needy. Unfortunately, the true story is often not told. Millions of people around the world have been fed because of Saudi charity. Tens of thousands of orphans have been taken care of because of Saudi charity. Refugees have been provided shelters from the ravages of war because of Saudi charities. Thousands of wells were drilled in arid areas of the world because of Saudi charities. These are the stories that are not told about the charity of Saudi Arabia, for its citizens, and this is something that we take great pride in because it is a noble effort and we want to encourage it. The measures that we take or that we have taken are designed to make sure that charity goes to those that need it, and that nobody can take advantage of the generosity of our citizens.

KAGAN: We've been listening in to Adel al-Jubeir, the Foreign Affairs Adviser to the Crown Prince of Saudi Arabia, making the announcement that Saudi Arabia is going to set up one entity that will process all the funds of international charity coming into Saudi Arabia and going out to other groups. It's meant to fight terrorism, it's meant to put a stop to funding -- to not stop funding appropriate charitable organizations, but to stop funding terrorists abroad.

Let's bring in our Kelli Arena who has been listening in as well.

Kelli, is it significant that the Saudis are setting this up?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well it is -- it is definitely another big step for the Saudis. As you heard, what they are doing is they are dissolving all the charities, most significantly, al-Haramain, which has been a subject of some criticism in recent years. And they are forming a non-governmental, sort of umbrella group, bringing all of -- folding in all the assets of those individual entities into one so that the control structure is very clear with some accounting control, some auditing controls in place.

Obviously an effort by the Saudis, who are still taking some harsh criticism for the fact that there are -- there are some, some here in Congress, some terror experts who believe that the Saudis just not -- have not done enough, especially in the area of financing. Because so much of that money, at least according to law enforcement officials here, does make its way into the wrong hands.

As you heard from Adel al-Jubeir, he said that giving is very much a part of the Muslim culture. It is not something that they are trying to get -- to cast a negative appall over. But they're saying look, you know this goes to good -- this goes to good causes, let's get the money, let's channel it together. I think it's -- I think that it will be perceived as a very positive step.

He also, though, if you heard, Daryn, talked about things before that, besides financing. And said that they are -- the Saudis are going to their imams, are making sure that their education, their teachers and that the school system is not a place where terrorism can foster, where the message is loud and clear that terrorism and terrorist acts are not part of the culture of Islam. Again, lots of criticism that has been directed towards the Saudi school system, towards mosques there, where they feel that terrorism and terrorist acts have been incited.

Back to you -- Daryn.

KAGAN: Kelli Arena, thank you for that. Let's bring in our analyst Peter Bergen to talk about this money trail. And how significant do you believe that is in the Saudis going after terrorism that, as you heard the spokesman describe, they have had to experience more and more over the last year?

PETER BERGEN, CNN TERRORISM ANALYST: Yes, well you remember, Daryn, May 12 of last year, the first attack in Riyadh, that was a tremendous wake-up call for the Saudi. And since then, we've seen a remarkably different posture. I think this, if indeed this one charitable kind of entity that Kelli was talking about is put into place, that's a significant -- a significant move on the war on terrorism, but for the following reason.

You know one of the five pillars of Islam, Daryn, is AKAT, the idea that you should give 2.5 percent of your income to charity. Obviously that's a tremendous amount of money flowing out of Saudi Arabia, 2.5 percent of their sort of gross national product, if you will, going to charity.

So now that this charity will be regulated, won't be just sort of going hither and fither, and certainly al Qaeda was using Saudi charities as a -- as a front. It was also using al Qaeda, these Saudi charities, as a funding mechanism. This kind of thing is a welcome development. How you put this into place exactly remains to be seen, but I think this is a very good step.

KAGAN: Well this comes just days after attack in Khobar, in which the Saudis let three of the terrorists go. So when he talks about that the Saudis are making tremendous steps in fighting terrorism, is that really a fair assessment?

BERGEN: Well I think compared to what the situation was before May 12 of last year, it's night and day. And that's a pretty low bar, by the way. There wasn't much cooperation before May 12 on the 9/11 hijackers, 15 of them, of course, who are -- who are Saudi. There was sort of an ostrich in the sand approach to this whole thing by the Saudis. They were saying -- even Prince Nayef, the Interior Minister, was saying that 9/11 was designed as a plot, one year after 9/11. So there was a lot of denial going on in Saudi Arabia.

That denial was no longer tenable after May 12 of last year. There have been several attacks, killing scores of people, directed at Westerners, but also anybody who cooperates with Westerners in the Kingdom. And as you mention, this last attack, where three of the attackers got away. So it is a very different posture in the past year, a lot of work remains to be done.

KAGAN: And we'll be watching it. Peter Bergen and Kelli Arena, thank you, in D.C.

And while terrorists may be trying to target oil interests in Saudi Arabia and abroad, OPEC says it's trying to keep it flowing. We'll show you what a meeting of the group could mean for us here in the U.S. That's coming up next.

And alleged lies, the murder case and the mistress. We'll show you what may be to come as day two of the Scott Peterson trial gets under way.

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KAGAN: Let's check some market numbers at 19 past the hour. The Dow is up 5 points. The Nasdaq is in negative territory. It is down 9 points. More on that just ahead.

But the numbers we want to talk about right now are world oil prices. They are inching down a bit today after hitting record highs on Tuesday. Both Saudi Arabia and the United Arab Emirates are pledging to pump more oil as OPEC meets in Beirut tomorrow. The Saudi oil minister says that he wants to see prices stabilize at $22 to $28 a barrel. Compare that to $42 in New York trading following the attack on oil workers in Khobar. Experts say that terror fears are adding anywhere from $9 to $15 to a barrel of crude.

So did you notice when you filled up this morning, maybe just a little bit, the government says that gas prices fell about a half a smidgen last week, down about a penny, to an average of $2.05 a gallon?

Chris Lawrence looking for any sign of falling prices. They don't want the sky to be falling in Hammond, Indiana, but the gas prices to be falling -- Chris.

CHRIS LAWRENCE, CNN CORRESPONDENT: Yes, and, Daryn, it's going to take more than a lot -- a lot of those pennies are going to have to add up to make a difference with what people have been paying over the past few days and weeks. You know we've just been out here talking to people constantly about how much they're paying for gas.

Your pockets look a little bit lighter right now.

UNIDENTIFIED FEMALE: They are a little bit lighter. The gas prices have increased so much that having an SUV makes it very difficult. As you can see, paying over $30.

LAWRENCE: But you're still driving.

UNIDENTIFIED FEMALE: You have to. It's a need. And we need gas and cheaper prices.

LAWRENCE: Yes. OK, well, we may get a little cheaper prices. That may be some relief coming over here.

And, Angie Ramos (ph), you run this gas station. And what have you heard from people as the gas just kept going up and up and up? What did people tell you?

ANGIE RAMOS, GAS STATION OPERATOR: Well, I really can't say what they tell me on camera, and I won't repeat it to begin with, but they're really upset at the way the gas goes up and down, up and down. It's like they never could depend on what they're going to be spending on gas and how many it's going to cost them each day just to get by, to get to and from work. LAWRENCE: Yes. So I see we're at about $2.09, $2.19, $2.29 here in Hammond right now. Can we count on that to stay that way for the rest of the day or the next few days?

RAMOS: I would say no, because I mean, like I said, it goes up and down. So I can get a phone call right now and tell me to jack up 10 cents more, or I can tell them -- they could tell me to go down. So it just all depends on when they call me and say move the prices.

LAWRENCE: All right. Well, hopefully those prices are going to be going down, not up, Daryn. People could really use a break here, especially heading into the summer months.

Back to you.

KAGAN: All right, Chris, thank you so much from Hammond, Indiana.

Parts of Florida are going up in flames, but is an end finally in sight for days of wildfires? That, plus your weather picture, is up next.

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KAGAN: A 3,000-acre brushfire has shut a 60-mile stretch of Alligator Alley across the Florida Everglades today. Visibility on Interstate 75 is zero in some spots. A similar-size fire is burning in northern Florida, near the border with Georgia.

They could certainly use some help from Mother Nature, perhaps a shower or two. Is that in the cards?

Here is Jacqui Jeras -- Jacqui.

JACQUI JERAS, CNN METEOROLOGIST: Yes. Hey, Daryn.

(WEATHER REPORT)

KAGAN: Which means it's going to be a good hair day in Phoenix.

JERAS: Yes, lovely.

KAGAN: That dry weather.

JERAS: All straight.

KAGAN: Yes, no frizz. Thank you -- Jacqui.

JERAS: OK.

KAGAN: It was a shocking story that threatened to sink the Kerry campaign, the only problem, apparently it wasn't true. Now the woman at the center is fighting back and taking on those willing to report a rumor. That's coming up.

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