Return to Transcripts main page

Paula Zahn Now

Terror Attacks Kill 70 in Iraq; Inside Look at America's Top Spies

Aired April 21, 2004 - 20:00   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.


PAULA ZAHN, CNN ANCHOR: Good evening and welcome. I'm Paula Zahn.
It is Wednesday, April 21, 2004.

(BEGIN VIDEOTAPE)

ZAHN (voice-over): Shattered buildings, crumpled cars and destroyed lives. Even children's school buses weren't spared. Who is behind the latest terrorism in southern Iraq?

Plus, an exclusive inside look at what America's top spies have on America's top enemies.

UNIDENTIFIED MALE: There is going to be a free flow of information and exchange so that, as information comes in, information can be shared and acted upon.

ZAHN: And they were bullish on stocks, but sold their women brokers short. Now Merrill Lynch pays the price for years of sexual discrimination.

(END VIDEOTAPE)

ZAHN: Also ahead tonight, outrage prompts the U.N. to look into billions of dollars in alleged corruption.

And in politics, questions about one of John Kerry's Purple Hearts. More on that later.

First, though, the headlines you need to know right now.

A senior official in Saudi Arabia blames al Qaeda for today's suicide bombing in Riyadh. Four people died, 148 wounded.

Back home here, after touring tornado damage in the central part of the state, the Illinois governor today declared four counties a disaster area, searchers in Utica recovered eight bodies from the rubble of a tavern that collapsed when the storm hit last night.

A source familiar with the Michael Jackson case tells CNN that there may be a grand jury decision sometime this week. Jurors are investigating child molestation allegations against Jackson and will decide whether there is enough evidence to indict him.

"In Focus" tonight, massive explosions, young schoolchildren killed, and a cease-fire that could be falling apart. In the Iraqi city of Basra, well coordinated suicide bombings killed 68 people, including some kindergartners and high school students on their way to class. In Fallujah, gunfire has broken the relative peace, as Marines are once again fighting Iraqi insurgents.

Baghdad bureau chief Jane Arraf joins us now with the very latest.

Good evening, Jane.

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: Good evening, Paula.

You know, a lot of Iraqis had been wondering whether this lull in suicide bombing that had become fairly regular occurrence here meant they had ended. And this morning in Basra during rush hour, they got a horrifying answer. Now, this is unprecedented in the second biggest city in Iraq. It has been relatively calm there.

But this morning at rush hour -- and rush hour there starts pretty early due to the heat, as children were going to school in minibuses, and police were showing up for work, simultaneous suicide bombs. It appears to be five of them in police stations and a police recruitment center.

And among the dead, horrifyingly, schoolgirls on their way to school, some of them kindergarten children, horrifying scenes in hospitals among the wounded as well. And, as that was happening in Basra, fighting resuming again as insurgents attacked Marines in the western city of Fallujah west of Baghdad where that city has essentially been under siege with the U.S. trying to put down an insurgency.

Marines say that they have killed 27 people there. Three Marines were wounded in fighting yesterday and today. And what it does essentially is partly break a cease-fire. The cease-fire means that the Marines had agreed not to resume offensive operations. They say they're just responding to being attacked, but if this continues, they will hit back hard -- Paula.

ZAHN: So give us a broad perspective of how this violence in the south actually is affecting the insurgency movement to the north of there.

ARRAF: Well, it really unsettles things. It unsettles Iraqis certainly and it puts everyone off-balance, because one of the things we have seen really is that whoever is behind this, and it seems to be a combination now of foreign fighters and Iraqi insurgents, are really changing tactics. And it is very hard to predict where that will come from.

You'll remember not so long ago it was really rocket-propelled grenade attacks against coalition forces. And that turned into homemade bombs and then suicide bombs, kidnappings. And now what we're seeing is the violence apparently migrating south. It had been very calm there. And it has hit everyone with a great deal of shock -- Paula. ZAHN: Jane Arraf, thanks so much for the update.

Now, as the violence increased in Iraq, congressional lawmakers today pressured the Bush administration to further explain its strategy there. They especially want details on the planned transfer of power on June 30. The White House has said it can and will happen as planned.

Senate Majority Whip Mitch McConnell, chairman of the Foreign Operations Subcommittee of the Appropriations Committee, joined me a little bit earlier this evening.

(BEGIN VIDEOTAPE)

ZAHN: ... committee and the Appropriations Committee joins us now from Washington.

Welcome, sir.

SEN. MITCH MCCONNELL (R), KENTUCKY: Glad to be with you, Paula.

ZAHN: There's some -- thank you -- 70 days until the June 30 deadline. And even some members of your own party are saying that that date is arbitrary and should potentially be pushed back. Do you have any doubts about that deadline and whether it can be met?

MCCONNELL: Well, I think the deadline is important to keep because it is a symbol that we're not there to occupy Iraq, that we're there to help them realize their dreams.

And so what happens on June 30 is symbolically very important. What it means is that we're ending our political control. We stay there for security purposes on the military side, but we end our political control. We appoint an ambassador. The president has recommended John Negroponte. We open an embassy there, which is the normal way you deal with a foreign country. And we move to the next step. And the next step is an assembly is being put together with the advice and assistance of Mr. Brahimi of the U.N.

And that assembly will draft a constitution which will be voted on by the Iraqi people sometime next year, leading to their own elections before 2005 is over. So it is important to to have this step along the way to complete political transition.

ZAHN: And, of course, you would have to concede there are a lot of question marks surrounding that assembly you refer to.

And let's listen to something that Press Secretary Scott McClellan had to say about that earlier today.

(BEGIN VIDEO CLIP)

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: On June 30, that will be the day to transfer sovereignty to an interim representative body that Mr. Brahimi has been talking about. And he's going to be coming back with more specifics as he said in May on that interim representative body.

(END VIDEO CLIP)

ZAHN: So, Senator, you have everyone from Ambassador Bremer to the president of the United States saying they're not too sure what this assembly is going to look like. Can you shed any light of what it ultimately will look like?

MCCONNELL: Well, it sounds very similar to the stages we went through in the United States prior to the forming of our Constitution, which was subsequently ratified by enough of the colonies to go into effect.

It is an interim step on the way to a Constitution submitted to the Iraqi people for approval and then elections carried out, pursuant to that Constitution. And all of this, Paula, will have occurred in under two years, which is truly a remarkably short time span. But it is important to go down that path because it underscores to the Iraqi people that we're not there to control their country. We're there for no other reason other than to get rid of the Saddam Hussein regime that murdered 300,000 of them during the quarter century he was in power and to give them a chance to realize their dreams and aspirations.

ZAHN: So you're not troubled by the fact that no one seems to have a clear idea of what this group might look like?

MCCONNELL: Well, I think the time to have a clear idea is on June the 30th. And I'm sure that we'll have a representative group, Mr. Brahimi of the U.N. totally involved in this, accustomed to putting together the pieces in a new democratic experiment.

He'll have all of the various groups adequately represented and they will move toward drafting a constitution which will then be voted on by the Iraqi people and then they will elect their own government, all in a very short time span, Paula. And our involvement there will be to deal with the security side, which our military is doing a very skillful job of.

ZAHN: On to my final question now. Ken Pollack, our CNN analyst, who is up next, is saying that in the short term, the U.S. is going to need anywhere from 40,000 to 60,000 additional troops on the ground in Iraq. What do you think?

MCCONNELL: We think the new troops that Iraq needs should be Iraqi troops. And the sooner we get their military up to speed, the better off their own country will be.

ZAHN: And what happens if they can't cut it? Do you to foresee a scenario where 40,000 to 60,000 additional American troops might be required on the ground?

MCCONNELL: No, they have to be able to cut it. After all, it is their country. And they have to be able ultimately to deal with the security aspects of Iraq. It is their -- it is their country. They need to be able to do that and I'm confident they will be able to. ZAHN: Senator Mitch McConnell, thanks for your time tonight. Appreciate it.

MCCONNELL: Thank you.

(END VIDEOTAPE)

ZAHN: And the number of troops needed in Iraq was just of the many things scrutinized today by the Senate Foreign Relations Committee.

As promised, here now Ken Pollack, CNN analyst and director of research for the Saban Center For Middle East Policy at Brookings Institution. He joins us from Washington.

Always good to see you. Welcome.

KENNETH POLLACK, CNN ANALYST: Thank you, Paula.

ZAHN: First of all, your reaction to some of what Senator McConnell just said, that he's confident by June 30 through the help of the U.N.'s Mr. Brahimi that you will put together a group that is representative of all Iraqis and sovereignty will be accomplished. Do you share that optimism?

POLLACK: I confess that I'm somewhat more pessimistic than the senator. I certainly hope he's right.

I will say that I am glad that the administration has finally gone to the U.N. and that they are allowing Mr. Brahimi to try to broker because, in all honesty, I don't think anyone else could do it. But I think we have to recognize that at this very late date with all of the problems that we have already encountered in trying to put together some kind of a new interim government and all the problems that we unfortunately are helping to create by going after Muqtada al- Sadr at this point in time and going into Fallujah, it is going to be very hard for Brahimi to do this. I think it's a little like pulling a rabbit out of his hat. I just hope he can.

ZAHN: I know you believe that April has been more than just a bad month. Jane Arraf reporting that you see the violence migrating to the south. You're seeing a distinct change in tactics. And you view all of these things as a warning. A warning of what?

POLLACK: Well, I think, Paula, it is most importantly -- it is a warning of several things. But I think the most important thing is that we are starting to lose the support of the Iraqi people.

It is not the case that the Iraqi people have turned against us. I think that the polls are continuing to show that most Iraqis really do still want reconstruction to work and they're still being patient with us. But the most striking thing about the events of the last few weeks was how many supporters Muqtada al-Sadr seems to have had in the south that our Coalition Provisional Authority was completely unaware of. And by all accounts these are people who started out supporting the reconstruction, but over the course of last 12 months have been disappointed so many times in how the U.S. has handled things that they're going over to Muqtada al-Sadr not because they believe in what he stands for, but because of what he stands against, namely the United States.

ZAHN: So are you basically saying then that they have no acknowledgement of any of the progress that has been made in Iraq in terms of some improvements in the infrastructure, the electric grid, schools open now in many parts of the country that weren't open until recently?

POLLACK: Paula, you're putting your finger on some important facts there. And it is absolutely true that there is progress being made in Iraq.

And I don't want anyone to think that everything that we're doing there has just been an unmitigated disaster. The fact of the matter is, there has been real progress. But for most Iraqis, they measure the progress against both their expectations and where they were a year ago. And in both cases, they often find the United States is not living up to what they expected.

In some cases, we haven't even gotten back to where they were under Saddam, in other cases, that we simply haven't delivered on the promises we made to them early on.

ZAHN: And one last question for you, then. What do you consider to be the single greatest failure with the reconstruction process?

POLLACK: I think the single greatest failure is our failure to provide day-to-day security for the Iraqis. They still do not feel safe in their homes or in their streets and that is what is crippling every other aspect of the reconstruction. We have got to get a grip on that.

ZAHN: Ken, thanks so much for joining us tonight. Appreciate it.

POLLACK: Thank you, Paula.

ZAHN: The U.N.'s oil-for-food program was supposed to help starving Iraqis, but was it used to create a slush fund for Saddam Hussein and dozens of countries? And was the U.N. involved?

And sex discrimination by a Wall Street giant, women brokers who claim their careers were crushed. They have won a major victory against Merrill Lynch. We'll meet one of those women.

And we'll be taking you deep inside CIA headquarters for an exclusive look at an incredible new system designed to prevent another 9/11.

And a major decision in the Kobe Bryant rape case, it involves Bryant's accuser. We'll tell you what happened. (COMMERCIAL BREAK)

ZAHN: Today saw the start of a worldwide investigation that has the potential to embarrass the U.N. and the scandalize governments and businesses from perhaps as many as 46 countries.

The Security Council of the United Nations unanimously voted to look into billions of dollars worth of alleged corruption in the U.N.'s oil-for-food program in Saddam Hussein's Iraq.

Let's get started tonight with senior U.N. correspondent Richard Roth -- hi, Richard.

RICHARD ROTH, CNN SENIOR U.N. CORRESPONDENT: Hello, Paula.

Well, Paul Volcker, the former chairman of the U.S. Federal Reserve Board, is going to lead an investigation, an outside investigation, into just what happened in the massive complicated oil- for-food plan between the United Nations and Iraq.

It is a very complicated story. But, basically, Volcker is now going to try to get to the bottom of exactly what happened. He's going to lead a three person team with a big staff. Kofi Annan on his left there appointed him, but it took a lot of media pressure and pressure from the Iraqi Governing Council to get to this point. Volcker, though, will have no subpoena power, relying on voluntary cooperation from governments and countries.

(BEGIN VIDEO CLIP)

PAUL VOLCKER, OIL FOR FOOD INVESTIGATIVE PANEL: I'm not the FBI. I'm not the CIA. I'm not an official agency of any government. I don't have the police powers that come naturally to a government. So you have got to conduct the investigation with the cooperation of people that have authority.

(END VIDEO CLIP)

ROTH: One person the panel may want to talk to Benon Sevan, the former director of the U.N. oil-for-food program. His name turned up on a list in an Iraqi newspaper of receiving hundreds of thousands of dollars worth of oil vouchers along with other former diplomats and countries. Sevan strongly denies that he or the oil-for-food program were involved with corruption.

On Capitol Hill today, another hearing about the oil-for-food program. One adviser from the Iraqi Governing Council denounced the U.N. and had this stark warning.

(BEGIN VIDEO CLIP)

CLAUDE HANKES-DRIELSMA, IRAQI GOVERNING COUNCIL: The very fact that Saddam Hussein, the U.N. and certain members of the Security Council could conceal such a scam from the world should send shivers down every spine in this room.

(END VIDEO CLIP)

ROTH: Some of the countries, though, that Volcker may want to look at certainly were well aware of the prospects for corruption, the Americans, the British, Paula, they looked at every contract that was worked out. Volcker's first report may come in three months. An outside expert told us a real probe would take two years -- Paula.

ZAHN: Richard Roth, thanks for the broad view.

Joining me now to talk more about the oil-for-food scandal and its potential impact on the U.N.'s credibility is Mort Zuckerman. He's editor in chief of "U.S. News and World Report."

Welcome.

MORT ZUCKERMAN, EDITOR IN CHIEF, "U.S. NEWS & WORLD REPORT": Thank you.

ZAHN: How serious are these allegations?

ZUCKERMAN: Well, I think they're very serious because they go to the heart of the U.N.'s role, not only as the sort of institution that captures the moral and idealistic sort of hopes of the world to play a role in the sort of implementation of peace, but also whether or not they will have any credibility in whatever they do in Iraq, because it directly goes to the issue of whether or not the funds that were intended to limit Saddam's power, to help the people get food and medicine, were then in turn used to sustain Saddam in power, which in fact is what a lot of experts believe.

ZAHN: What is the most egregious thing we know now beyond a shadow of a doubt in advance of this full-blown investigation?

ZUCKERMAN: What we know now is that at least two countries, namely France and Russia, were given such extraordinary opportunities to make money below the table off of the sale of oil from Iraq. Russia got 2.5 billions barrels of oil at preferred prices. France got 165 million barrels of oil.

In addition to which, the head of the program at the U.N., Benon Sevan, has now been implicated in this thing. He apparently got 11.5 million barrels of oil at preferred prices. And at this point you have to ask yourself what were their motives in this whole thing? It is an outrage to have all of these people, these countries implicated. Did the opposition of France and Russia to the role of the United States in Iraq come from their personal financial gains?

ZAHN: That's what I want to ask you. Did they get bought? Is that why France and Russia had the strongest opposition to this war?

ZUCKERMAN: You know, as I believe, no matter how cynical you are, it is difficult to keep up to the French.

They clearly and particularly Chirac had very long and close associations with Saddam Hussein. The Osirak nuclear reactor, which he actually led in the sale to Saddam Hussein when he represented France, is known as the Os-Chirac nuclear reactor. He was the only person that Saddam Hussein visited when he went to France and got the most effusive praise from Jacques Chirac.

And a lot of people believe that Saddam Hussein was involved in funding Jacques Chirac's political career at various stages. So there are all kinds of suspicions about it. And frankly those suspicions are shared by very high officials in the British and American government.

ZAHN: There are also people out there who believe that some of your anger should be directed at both the Bush and Clinton administration. They believe that both of these administrations turned a blind eye to some of this activity to keep the sanctions program in place.

ZUCKERMAN: No, it is not -- they wanted to keep the sanctions program in place. The question is, did they turn a blind eye to reviewing these contracts.

ZAHN: Do you think they did?

ZUCKERMAN: There are two different stories about it. Some say that they were viewing all of the contracts. My information is that they reviewed those contracts that involved the possibility of equipment being sent to Saddam Hussein and to Iraq that might have dual-use capabilities and therefore might enhance Saddam's weapons capabilities.

ZAHN: How outraged should the American public be about this?

ZUCKERMAN: Well, I think it goes very much to the heart of the issue of the integrity of the U.N. in terms of getting involved in this whole process with Iraq, which has been quite controversial.

The United States is probably the country that has the most skepticism about the U.N. If we find out it is just another bureaucracy serving itself, I think it is going to do even more damage to the hopes that many people have and to the conference you have in the role of the U.N.

ZAHN: How about from American taxpayers' point of view?

ZUCKERMAN: Yes. No, it's from every point of view. We are supporting actually 22 percent of the budget of the U.N. Are we going to be standing by and allowing this to continue if it turns out they were just like -- the U.N. got $1.9 billion in administrative fees, which may or may not be fair. But all I can tell you is, I know I could have administered that program for slightly less.

ZAHN: You think so?

ZUCKERMAN: I think so, a dollar less, $2, something less than $1.9 billion over seven or eight years I think could have been done.

ZAHN: We'll bring you back on another night to walk us through the paces how you would have done it. (CROSSTALK)

ZAHN: Mort Zuckerman, thank you for your time tonight.

It is one of the latest intelligence weapons in the war on terror. We'll go behind closed doors for an exclusive look at the agency that keeps a covert eye on our enemies.

And the Kerry camp open military records and unleashes brand new ads. We're going to ask "CROSSFIRE" hosts Paul Begala and Robert Novak what this could do for John Kerry's campaign.

(COMMERCIAL BREAK)

ZAHN: ... 9/11 Commission so far is that when it came to sharing intelligence, agencies such as the FBI and the CIA rarely got it right. They weren't able to connect the dots. Since the 9/11 attacks, there has been a new and urgent initiative to get everyone in the intelligence community on the same page.

National security correspondent David Ensor has an exclusive look at just how the federal government is trying to make that happen.

(BEGIN VIDEOTAPE)

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): It is an experiment cobbled together a year ago in temporary offices at the CIA. The urgent mission of the Terrorist Threat Integration Center is to make the FBI, CIA, Homeland Security and other agencies share everything they know about terrorists, a response to the failures to communicate before the 9/11 attacks.

In his first television interview, Director John Brennan told CNN the experiment is working. By comparing FBI and CIA data, he says, TTIC has already identified dangerous terrorists.

JOHN BRENNAN, DIRECTOR, TTIC: And so now we have those names on watch lists.

ENSOR (on camera): From its temporary headquarters here at the CIA, TTIC run a government-only top-secret Web site with about 3.5 million terrorism related documents on it. About 2,500 people worldwide have the clearances necessary to log on.

(voice-over): The goal is to make sure the next time an FBI field agent writes a memo like the one from Phoenix in 2001 warning about Middle Eastern men training to fly passenger jets, that memo will get to every U.S. official who should know about it.

BRENNAN: When that agent in the field, whether they're in Phoenix or whether they're overseas, pushes that button and it arrives at their headquarters, we see it at the same time, the same exact time.

ENSOR: But our traditionally turf conscious agencies really sharing everything with TTIC? Do they have the computers to do so? Not all the bosses believe it.

GEORGE TENET, CIA DIRECTOR: We need to make sure that the domestic data shows up. And we need to keep pressure to make sure that happens. Otherwise, you're going to have a lot of data and no left hand to meet the right hand.

ENSOR: And the staff director of the joint congressional intelligence inquiry says TTIC analysts don't always get the raw intelligence from the CIA and others.

ELEANOR HILL, FORMER STAFF DIRECTOR, 9/11 CONGRESSIONAL COMMISSION: We heard that time and again during our inquiry, complaints from analysts that could not do their job without access to that raw intelligence.

ENSOR: But Brennan insists, from the interrogation reports on al Qaeda prisoner Khalid Shaikh Mohammed, to FBI wiretaps, his people can see the raw material that they need to.

BRENNAN: I and the analysts in TTIC can see whatever we need that is going to shed light into the threat of terrorism.

ENSOR: Right now, TTIC is based at CIA headquarters, but at the end of May, the center plans to move to one of the most secure buildings ever devised.

BRENNAN: It is being built to in far excess of Oklahoma City standards in terms of its durability, its strength.

ENSOR: The new building is the Tyson's Corner, Virginia, area, officials say. Sources say but officials will not confirm that this is the building that will house a state-of-the-art operations center for TTIC, along with the FBI and CIA's counterterrorism staffs.

BRENNAN: There is going to be no dividing walls between TTIC and CIA and FBI officers. There is going to be a free flow of information and exchange so that as information comes in, information can be shared and acted upon.

ENSOR (on camera): Do you think that another September 11 attack could happen?

BRENNAN: I think that we have positioned this country the best way possible to prevent another occurrence. I am not of the mind that another attack is inevitable.

ENSOR (voice-over): Not inevitable, but the possibility, Brennan admits, sometimes keeps him awake at night.

David Ensor, CNN, Langley, Virginia.

(END VIDEOTAPE)

ZAHN: Wall Street's biggest name in stocks is ordered to pay a huge fine for sex discrimination. We're going to talk with one woman who says she was a victim of bias. And we're going to tell you why a major ruling in the Kobe Bryant case could make his defense much more difficult.

And John Kerry might not be where he is today if he hadn't been so critical of the Vietnam War 33 years ago. Tomorrow, we're going to look at how it shaped the candidate.

(COMMERCIAL BREAK)

ZAHN: Welcome back. Here are some of the headlines you need to know now. President Bush and Vice President Cheney set the date for their joint appearance before the 9/11 committee. They will answer the committee's questions together a week from tomorrow. The session will be private. The president and vice president will not be under oath.

They're about as thick as a pencil, highly radioactive and they are missing. Two nuclear fuel rods cannot be accounted for at a nuclear power plant in Vermont. The governor says he's, quote, "very concerned." Engineers are still searching the storage pool where the rods were kept.

In Washington, Federal Reserve Chairman Alan Greenspan says interest rates, quote, "must rise at some point." He was testifying before a congressional committee. Greenspan says the economy is now on the rebound.

This week women working in the financial industry scored a major legal victory in the battle against sexual discrimination. Monday a panel of arbitrators found Merrill Lynch the largest Wall Street broker has systemically held back the careers of qualified women. Merrill has already paid out more than $100 million in settlements. But Monday one woman was awarded $2.2 million in damages, the largest single award yet. Hydie Sumner is that woman. She joins us from San Antonio. And with us from Chicago now Mary Stowell, one of Hydie Sumner's attorneys. Welcome to both of you.

So Hydie, let's talk a little bit about your start at Merrill Lynch. You were hired in San Antonio, you came in with an MBA and eight years of experience in the field. How were you discriminated against?

HYDIE SUMNER, WON SEX DISCRIMINATION CASE AGAINST MERRILL LYNCH: I was discriminated against a number of ways. For example, I came in to be hired on management track and while other male peers were given client accounts, referrals, call-ins and walk-ins, I was told I had to build my business on my own. Additionally I was forced to move office locations. I was there six years and had to sit in approximately ten different locations. I switched sales assistants 13 different times. I just basically didn't get management support.

ZAHN: In addition to that, you say you experienced sexual harassment. What happened?

SUMNER: Yes, I did. It happened on several levels. There was an office environment where men openly made sexist comments, told jokes, the manager of the firm in particular did that. And if things were reported, either by myself or other women, they were ignored. They were denied and women became targets of being labeled troublemaker. For example I was identified as being emotional, bitchy and named a man hater. All I was trying to do was suggest that they not conduct inappropriate behavior like they were.

ZAHN: Is it true you were given a way out of this through a proposition?

SUMNER: I was on the management track and the next hurdle I had to go to the management assessment center was to be sponsored by my manager. And at one point after building my business on my own, doing every management task he asked of me, he told me if I would do favors for him, he could make my career. At that point I told him I don't do favors.

ZAHN: It was very clear to you what he was asking you to do.

SUMNER: It was very clear. It was very clear. Again, I had done every task he asked of me. There was body language. There was an eye contact. And when he saw the shock on my face, there was a visual reaction and verbal comment that he knew he had crossed the line.

ZAHN: So were you disgusted? What was your immediate reaction?

SUMNER: I was -- I was shocked. I was surprised. I had come in. He paid me a very low salary to start. Even after I've had eight years in the investment banking field. I had done everything he asked of me. Management task wise. I did that without pay. I have since discovered the men were paid for doing similar functions. And I was just shocked that that's what it came down to. I don't operate that way. I never have operated that way.

ZAHN: Mary, before we move on to two statements from Merrill Lynch, just give us the broad view on how wide of a problem this was at Merrill Lynch from your perspective.

MARY STOWELL, ATTORNEY FOR HYDIE SUMNER, CHICAGO: Well, the arbitrators found that it was a class wide pattern of practice, of sex discrimination against female brokers in pay and in management opportunities. So the problem was company wide for women brokers at the firm.

ZAHN: Let me put up on the screen a couple of statements that Merrill Lynch sent to us today. Quote, the first one says, "the firm described in the panel's decision is not today's Merrill Lynch. We agree and regret that nearly a decade ago, there was inappropriate behavior in the San Antonio office. It should not have occurred and would not be tolerated today. We have taken a number of steps to address issues raised in this litigation."

And here is a portion of another statement that came from Merrill Lynch chairman and CEO Stan O'Neal to his staff. Quote, "regardless of how long ago I think it is important for you to know how offended I am that this conduct ever occurred. I'm offended that any employee would have to be subjected to demeaning work environment whether because of their gender as in this case or because of ethnic background, race, religion, or any other quality that defines who we are as individuals."

Are you confident changes have been made at Merrill Lynch to prevent this from happening again?

STOWELL: Well, we have to define the -- this, what is this. I think Merrill Lynch would address the allegations of sex harassment in a far more constructive manner than it did in this case. And in this case Hydie was awarded $500,000 in punitive damages and that was in part because she was retaliated against for making allegations of sex discrimination as did other women. And there is a long story about that, which I won't go into here but Merrill Lynch's human resources department was shocking. And their support of the harassment that went on in the San Antonio office. So to be fair to Merrill Lynch, I do think that they would address the sex harassment in a much more constructive fashion.

ZAHN: All right. We're going to have to leave it there and move on to get another perspective. Mary Stowell, Hydie Sumner, thank you for sharing your story with us tonight.

STOWELL: You're welcome.

ZAHN: We'll take a closer look at what this means for women in the financial industry and where they stand today. Betty Spence is president of the National Association of Female Executives, one of the largest professional women's organizations in the country. We just heard about the problems of Merrill Lynch that they say they addressed and that one of the guests suggests that she hopes means will never happen again to women. How big of a problem has this been across the board in the financial industry?

BETTY SPENCE, PRESIDENT, NATL. ASSOC. OF FEMALE EXECUTIVES: It has been a very serious problem. I'm very glad we're addressing it here tonight because it has been a problem that not a lot of people have been talking about, it's been sort of behind the scenes. There was a study done in 2001 by Catalyst which -- in which one-third of the women on Wall Street who took part in the study said they had been sexually harassed.

ZAHN: That's staggering.

SPENCE: One third of them. More than half said they were believed they were being paid less for equal work.

ZAHN: And certainly we're not just talking about the financial industry. We've heard these reports and cries for help from other businesses where women work as well. My question to you, when these companies see that $100 million has been paid out in settlements that has to put the fear of God in the human resources department. Doesn't it? What do you think the impact ultimately is?

SPENCE: Well, Merrill Lynch, I'm sure, has already taken steps as the attorney just pointed out. Any company that is facing the stick of a lawsuit or a settled suit such as this one is going to start making changes, and Merrill Lynch probably now is one of the best places on Wall Street to work, because the suit began five, six years ago, so the changes have been made.

ZAHN: And you've got to hope that this has a kind of a ripple effect on these other companies?

SPENCE: It does have a ripple effect. Companies that are smart know that if they are taking care of these kinds of problems early, if they are doing the compensation surveys to make sure that the women and men are being paid equally and are looking to make sure that the women are getting the good clients, so that they're going to be able to compete equally with the men, these are the companies that are succeeding.

ZAHN: Betty Spence, we've got to leave it there. Thanks for spending some time with us tonight.

SPENCE: Thank you.

(END VIDEOTAPE)

ZAHN: We'll take a short break here. Kobe Bryant's defense against rape charges just got tougher. We're going to look at why a judge's decision could force a major change of strategy.

And the Kerry campaign releases some of the candidate's military records. But will that be enough to satisfy his critics?

(COMMERCIAL BREAK)

ZAHN: The defense of the Kobe Bryant case was handed a major setback today by the judge. In ruling on a pre-trial motion, the judge said Bryant's defense team will not have access to his accuser's medical and psychological records. With me now, CNN senior legal analyst Jeffrey Toobin, who has been following this very closely. How big of a setback is this?

JEFFREY TOOBIN, CNN SR. LEGAL ANALYST: It is a setback. There is a lot more litigation, there is a lot more to go here.

But the issue right here is her medical records. She was in the hospital in February and May of 2003. And remember, the incident itself took place in June, so it's right before.

She was treated by mental health professionals in some way. The defense argued is that because she discussed her treatment with a variety of people, she waived her privilege, that these records should now longer be secret because she talked about her treatment. The judge today said no, just because you talk about your treatment with your mother, for example, doesn't mean that you waived your privilege. I think it's sort of a common sense decision. So the defense doesn't...

ZAHN: So you (UNINTELLIGIBLE) with the judge, then? TOOBIN: Absolutely. I think the judge made the only decision he could. So the records themselves will not be turned over to the defense.

ZAHN: But that does not mean that the defense team doesn't talk about her sexual history.

TOOBIN: Absolutely. There are a lot more issues, mostly involving the rape shield law, which the defense is claiming does not prevent them from going into whether this woman had sex with other people in the period immediately around when this incident with Kobe Bryant took place. That decision has nothing to do with what was decided today. And that's going to be a much better issues, I think, for the defense.

ZAHN: But take us where the defense team would be taking a jury with that. The suggestion that this was a woman who was promiscuous?

TOOBIN: Well, not really.

ZAHN: Someone that put herself in a situation to have this happen to her?

TOOBIN: I don't think that's -- that they would be allowed to do that. Because that really is what the rape shield law is about. Some sort of woman is a type of woman who has, you know, loose sex. That is what rape shield laws have really prevented. But...

ZAHN: I know, but this defense team has been very aggressive...

TOOBIN: They have...

ZAHN: ... at moving around the edges of the rape shield law.

TOOBIN: That's right, but if there are injuries, for example, to her and her private parts, and the defense can show that she was having sex with other people in the period immediately around the time when she had this incident with Kobe Bryant, then they probably would be able to get into the other sexual encounters, because they could...

ZAHN: But that's still leading you to the same place, is it not?

TOOBIN: Well, I mean, that's what the prosecution is arguing. But I think -- you know, in fairness to Kobe Bryant, I mean, if there is a potential other source of these injuries, how can the defense not be allowed to point that out to the jury? It is a tough call. I mean, there are really opposing principles at work here. And the judge has got to balance them. But if Kobe Bryant's freedom is at stake and he can point to specific encounters that may have produced specific injuries, I think he's got to be able to prove that.

ZAHN: So you think that would be fair?

TOOBIN: I think that would be fair. But this is an example, of these medical reports, which is decided today, I think that was too far field. There is no good claim. I think that just because you talk about your medical history with your mother, you waived all privacy -- that was silly.

ZAHN: So take us through the next couple of steps.

TOOBIN: Well, now we're going to see a lot more litigation about the rape shield law. What is admissible, what isn't. It's very methodical. This judge is doing this in an organized way. But it is -- you know, this trial is not going to happen before summer.

ZAHN: Let's move back to Michael Jackson land. CNN reported...

TOOBIN: We're waiting -- we're waiting with baited breath, yes.

ZAHN: Well, you never know what is going to happen around that -- the circus surrounding it, the coverage of this. CNN told just about the time we got on the air that a grand jury decision is expected sometime this week.

TOOBIN: Right. The grand jury has been meeting in Santa Barbara for some time. By all indications their deliberations appear to be wrapping up. It looks like not today, possibly tomorrow. And whether he's the only defendant that they're looking into or other defendants, we don't know. But certainly...

ZAHN: Take off your journalist hat for a moment. You're a former prosecutor.

TOOBIN: Yes.

ZAHN: Do you believe that an indictment will come down here?

TOOBIN: Grand jurors are the play things of prosecutors. If the prosecutor wants an indictment, he'll get an indictment. Every indication we've had from this office is that this -- this prosecutor wants an indictment. Chances are he'll get it.

ZAHN: But you're not so sure there is a very strong case here?

TOOBIN: That's a very different question. You know the old saying is that any prosecutor who wants to could get an indictment of a ham sandwich if he wanted. So it's not -- the grand jury is not really an independent check on the prosecutor. But a conviction is a very different story from an indictment. How is that for dodging your question?

ZAHN: I think that's very good. I'm trying to think if you fit in that category, more (UNINTELLIGIBLE) sandwich, more tuna salad.

TOOBIN: I don't know.

ZAHN: We'll let you go. Thanks, Jeffrey.

The president's campaign will unleash a storm of new campaign ads. His opponent is ready to return fire. We're going to give you some of the previews of ads that will hit the airwaves.

(COMMERCIAL BREAK) ZAHN: In the presidential ad wars both the Bush and Kerry campaigns have new commercials ready to go. Also the Kerry campaign is scrambling to diffuse questions about the senator's Vietnam war record. In Washington to talk politics are two the host of CNN's "CROSSFIRE," Paul Begala and Robert Novak.

(BEGIN VIDEOTAPE)

ZAHN: Good to see both of you.

PAUL BEGALA, "CROSSFIRE": Thank you, Paula.

ROBERT NOVAK, "CROSSFIRE": Thank you, Paula.

ZAHN: Let's start off tonight by looking at how the Bush campaign continues to pummel John Kerry for being a waffler. Here is a part of one of the campaign's latest ads.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: "The Wall Street Journal" said Kerry's tax plan would mean increasing the tax burden again, which would likely kill the recovery.

UNIDENTIFIED MALE: On Iraq, "The Washington Post" says Kerry's attempts to weave a thread connecting and justifying his positions are unconvincing.

(END VIDEO CLIP)

ZAHN: Some of the polls we look at would suggest the defining of John Kerry has some traction and it is hurting him.

How does this change the perception?

BEGALA: Well, he needs to do a little political jujitsu. The president says I change too often on issues, well I have changed as the facts have changed. My problem with Mr. Bush is he doesn't change enough. He sees 8 million Americans out of work and says stay the course, don't change our economic policy. I want to change it. He sees 42 million without health insurance, he says don't change anything, stay the course. I want to change it. He says 135,000 guys in Iraq, without enough armor, without enough allies, he says great stay the course. I want to change it.

So, embrace the change, John Kerry, and make yourself the candidate of change. I think it could work for him.

ZAHN: Will it work for him?

NOVAK: What interests me is I have heard not for months, for a year that this time the Democrats say we're not going to let the Republicans define our candidate. And I said, yes, I would like to see how that works out. Well, they have defined the candidate. They haven't ppummeled him. What they have done is they've taken newspaper editorials, and some from liberal newspapers and described him. I think it has been a very clever campaign.

DOBBS: Let's look at another ad now out by the Kerry campaign where John Kerry does directly attack the president on the issue of Iraq. Let's watch together.

(BEGIN VIDEO CLIP)

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: Let me tell you exactly what I would do to change the situation in Iraq. I would immediately reach out to the international community and sharing the burden, the risk, because they also have a stake in the outcome of what is happening in Iraq.

(END VIDEO CLIP)

ZAHN: Bob Novak, isn't that what the president is saying too?

NOVAK: It is exactly what he's saying. That's the whole problem with John Kerry. When you get beyond the (UNINTELLIGIBLE) of what a terrible guy Bush is, there is so little difference in the substance of how they would approach the problem and what he would do if he was in this president and of course did vote for the resolution. The problem of having the international community charge share the burden is you can go to Berlin and Paris all you want and you're not going to get any troops from Iraq. So it is a rather unconvincing ad in my opinion.

ZAHN: Want to weigh in on that, Paul?

BEGALA: I think -- nobody, except maybe President Bush's wonderful mother believes that he could actually get foreign troops to come in. He is fairly or not the most hated American president around the world in recent memory. John Kerry made the point on "Meet The Press" this weekend with Tim Russert that maybe we need a new face to make the case. I have done campaigns all around the world. And right now, if you want to succeed in a free country's election around the world you have to attack Bush.

ZAHN: Got a question for you, Bob Novak, John Kerry's campaign releasing his records from the Vietnam War, will this, you think, stop this story?

NOVAK: I think the story has got very few legs. I think it is a bogus issue. I think the Democrats brought it on themselves when they started all this silly stuff about whether many, many years ago George W. Bush went to his national guard drills in Alabama and went into the records. I think the American people couldn't care less about this kind of thing about what George W. Bush did in the national guard and whether the wound that John Kerry got was a legitimate wound, whether he -- went home too early, it is a phony issue. The press just loves this. News media loves it, but the American public doesn't like these issues, and they ought to lay off of it.

ZAHN: All gentlemen, We're going to leave it there tonight.

Paul Begala, Robert Novak, of CNN's "CROSSFIRE," thank you, both. (END VIDEOTAPE)

ZAHN: And we'll be right back.

(COMMERCIAL BREAK)

ZAHN: That wraps it up for all us here this evening. Thanks so much for being with us tonight.

Tomorrow night, the training is available, so why are so few of the nations pilots choosing to carry a gun. We'll talking with a pilot who lost both of his parents on 9/11.

Thanks again for joining us tonight. "LARRY KING LIVE" is next. Have a good night.

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 April 21, 2004 - 20:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: Good evening and welcome. I'm Paula Zahn.
It is Wednesday, April 21, 2004.

(BEGIN VIDEOTAPE)

ZAHN (voice-over): Shattered buildings, crumpled cars and destroyed lives. Even children's school buses weren't spared. Who is behind the latest terrorism in southern Iraq?

Plus, an exclusive inside look at what America's top spies have on America's top enemies.

UNIDENTIFIED MALE: There is going to be a free flow of information and exchange so that, as information comes in, information can be shared and acted upon.

ZAHN: And they were bullish on stocks, but sold their women brokers short. Now Merrill Lynch pays the price for years of sexual discrimination.

(END VIDEOTAPE)

ZAHN: Also ahead tonight, outrage prompts the U.N. to look into billions of dollars in alleged corruption.

And in politics, questions about one of John Kerry's Purple Hearts. More on that later.

First, though, the headlines you need to know right now.

A senior official in Saudi Arabia blames al Qaeda for today's suicide bombing in Riyadh. Four people died, 148 wounded.

Back home here, after touring tornado damage in the central part of the state, the Illinois governor today declared four counties a disaster area, searchers in Utica recovered eight bodies from the rubble of a tavern that collapsed when the storm hit last night.

A source familiar with the Michael Jackson case tells CNN that there may be a grand jury decision sometime this week. Jurors are investigating child molestation allegations against Jackson and will decide whether there is enough evidence to indict him.

"In Focus" tonight, massive explosions, young schoolchildren killed, and a cease-fire that could be falling apart. In the Iraqi city of Basra, well coordinated suicide bombings killed 68 people, including some kindergartners and high school students on their way to class. In Fallujah, gunfire has broken the relative peace, as Marines are once again fighting Iraqi insurgents.

Baghdad bureau chief Jane Arraf joins us now with the very latest.

Good evening, Jane.

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: Good evening, Paula.

You know, a lot of Iraqis had been wondering whether this lull in suicide bombing that had become fairly regular occurrence here meant they had ended. And this morning in Basra during rush hour, they got a horrifying answer. Now, this is unprecedented in the second biggest city in Iraq. It has been relatively calm there.

But this morning at rush hour -- and rush hour there starts pretty early due to the heat, as children were going to school in minibuses, and police were showing up for work, simultaneous suicide bombs. It appears to be five of them in police stations and a police recruitment center.

And among the dead, horrifyingly, schoolgirls on their way to school, some of them kindergarten children, horrifying scenes in hospitals among the wounded as well. And, as that was happening in Basra, fighting resuming again as insurgents attacked Marines in the western city of Fallujah west of Baghdad where that city has essentially been under siege with the U.S. trying to put down an insurgency.

Marines say that they have killed 27 people there. Three Marines were wounded in fighting yesterday and today. And what it does essentially is partly break a cease-fire. The cease-fire means that the Marines had agreed not to resume offensive operations. They say they're just responding to being attacked, but if this continues, they will hit back hard -- Paula.

ZAHN: So give us a broad perspective of how this violence in the south actually is affecting the insurgency movement to the north of there.

ARRAF: Well, it really unsettles things. It unsettles Iraqis certainly and it puts everyone off-balance, because one of the things we have seen really is that whoever is behind this, and it seems to be a combination now of foreign fighters and Iraqi insurgents, are really changing tactics. And it is very hard to predict where that will come from.

You'll remember not so long ago it was really rocket-propelled grenade attacks against coalition forces. And that turned into homemade bombs and then suicide bombs, kidnappings. And now what we're seeing is the violence apparently migrating south. It had been very calm there. And it has hit everyone with a great deal of shock -- Paula. ZAHN: Jane Arraf, thanks so much for the update.

Now, as the violence increased in Iraq, congressional lawmakers today pressured the Bush administration to further explain its strategy there. They especially want details on the planned transfer of power on June 30. The White House has said it can and will happen as planned.

Senate Majority Whip Mitch McConnell, chairman of the Foreign Operations Subcommittee of the Appropriations Committee, joined me a little bit earlier this evening.

(BEGIN VIDEOTAPE)

ZAHN: ... committee and the Appropriations Committee joins us now from Washington.

Welcome, sir.

SEN. MITCH MCCONNELL (R), KENTUCKY: Glad to be with you, Paula.

ZAHN: There's some -- thank you -- 70 days until the June 30 deadline. And even some members of your own party are saying that that date is arbitrary and should potentially be pushed back. Do you have any doubts about that deadline and whether it can be met?

MCCONNELL: Well, I think the deadline is important to keep because it is a symbol that we're not there to occupy Iraq, that we're there to help them realize their dreams.

And so what happens on June 30 is symbolically very important. What it means is that we're ending our political control. We stay there for security purposes on the military side, but we end our political control. We appoint an ambassador. The president has recommended John Negroponte. We open an embassy there, which is the normal way you deal with a foreign country. And we move to the next step. And the next step is an assembly is being put together with the advice and assistance of Mr. Brahimi of the U.N.

And that assembly will draft a constitution which will be voted on by the Iraqi people sometime next year, leading to their own elections before 2005 is over. So it is important to to have this step along the way to complete political transition.

ZAHN: And, of course, you would have to concede there are a lot of question marks surrounding that assembly you refer to.

And let's listen to something that Press Secretary Scott McClellan had to say about that earlier today.

(BEGIN VIDEO CLIP)

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: On June 30, that will be the day to transfer sovereignty to an interim representative body that Mr. Brahimi has been talking about. And he's going to be coming back with more specifics as he said in May on that interim representative body.

(END VIDEO CLIP)

ZAHN: So, Senator, you have everyone from Ambassador Bremer to the president of the United States saying they're not too sure what this assembly is going to look like. Can you shed any light of what it ultimately will look like?

MCCONNELL: Well, it sounds very similar to the stages we went through in the United States prior to the forming of our Constitution, which was subsequently ratified by enough of the colonies to go into effect.

It is an interim step on the way to a Constitution submitted to the Iraqi people for approval and then elections carried out, pursuant to that Constitution. And all of this, Paula, will have occurred in under two years, which is truly a remarkably short time span. But it is important to go down that path because it underscores to the Iraqi people that we're not there to control their country. We're there for no other reason other than to get rid of the Saddam Hussein regime that murdered 300,000 of them during the quarter century he was in power and to give them a chance to realize their dreams and aspirations.

ZAHN: So you're not troubled by the fact that no one seems to have a clear idea of what this group might look like?

MCCONNELL: Well, I think the time to have a clear idea is on June the 30th. And I'm sure that we'll have a representative group, Mr. Brahimi of the U.N. totally involved in this, accustomed to putting together the pieces in a new democratic experiment.

He'll have all of the various groups adequately represented and they will move toward drafting a constitution which will then be voted on by the Iraqi people and then they will elect their own government, all in a very short time span, Paula. And our involvement there will be to deal with the security side, which our military is doing a very skillful job of.

ZAHN: On to my final question now. Ken Pollack, our CNN analyst, who is up next, is saying that in the short term, the U.S. is going to need anywhere from 40,000 to 60,000 additional troops on the ground in Iraq. What do you think?

MCCONNELL: We think the new troops that Iraq needs should be Iraqi troops. And the sooner we get their military up to speed, the better off their own country will be.

ZAHN: And what happens if they can't cut it? Do you to foresee a scenario where 40,000 to 60,000 additional American troops might be required on the ground?

MCCONNELL: No, they have to be able to cut it. After all, it is their country. And they have to be able ultimately to deal with the security aspects of Iraq. It is their -- it is their country. They need to be able to do that and I'm confident they will be able to. ZAHN: Senator Mitch McConnell, thanks for your time tonight. Appreciate it.

MCCONNELL: Thank you.

(END VIDEOTAPE)

ZAHN: And the number of troops needed in Iraq was just of the many things scrutinized today by the Senate Foreign Relations Committee.

As promised, here now Ken Pollack, CNN analyst and director of research for the Saban Center For Middle East Policy at Brookings Institution. He joins us from Washington.

Always good to see you. Welcome.

KENNETH POLLACK, CNN ANALYST: Thank you, Paula.

ZAHN: First of all, your reaction to some of what Senator McConnell just said, that he's confident by June 30 through the help of the U.N.'s Mr. Brahimi that you will put together a group that is representative of all Iraqis and sovereignty will be accomplished. Do you share that optimism?

POLLACK: I confess that I'm somewhat more pessimistic than the senator. I certainly hope he's right.

I will say that I am glad that the administration has finally gone to the U.N. and that they are allowing Mr. Brahimi to try to broker because, in all honesty, I don't think anyone else could do it. But I think we have to recognize that at this very late date with all of the problems that we have already encountered in trying to put together some kind of a new interim government and all the problems that we unfortunately are helping to create by going after Muqtada al- Sadr at this point in time and going into Fallujah, it is going to be very hard for Brahimi to do this. I think it's a little like pulling a rabbit out of his hat. I just hope he can.

ZAHN: I know you believe that April has been more than just a bad month. Jane Arraf reporting that you see the violence migrating to the south. You're seeing a distinct change in tactics. And you view all of these things as a warning. A warning of what?

POLLACK: Well, I think, Paula, it is most importantly -- it is a warning of several things. But I think the most important thing is that we are starting to lose the support of the Iraqi people.

It is not the case that the Iraqi people have turned against us. I think that the polls are continuing to show that most Iraqis really do still want reconstruction to work and they're still being patient with us. But the most striking thing about the events of the last few weeks was how many supporters Muqtada al-Sadr seems to have had in the south that our Coalition Provisional Authority was completely unaware of. And by all accounts these are people who started out supporting the reconstruction, but over the course of last 12 months have been disappointed so many times in how the U.S. has handled things that they're going over to Muqtada al-Sadr not because they believe in what he stands for, but because of what he stands against, namely the United States.

ZAHN: So are you basically saying then that they have no acknowledgement of any of the progress that has been made in Iraq in terms of some improvements in the infrastructure, the electric grid, schools open now in many parts of the country that weren't open until recently?

POLLACK: Paula, you're putting your finger on some important facts there. And it is absolutely true that there is progress being made in Iraq.

And I don't want anyone to think that everything that we're doing there has just been an unmitigated disaster. The fact of the matter is, there has been real progress. But for most Iraqis, they measure the progress against both their expectations and where they were a year ago. And in both cases, they often find the United States is not living up to what they expected.

In some cases, we haven't even gotten back to where they were under Saddam, in other cases, that we simply haven't delivered on the promises we made to them early on.

ZAHN: And one last question for you, then. What do you consider to be the single greatest failure with the reconstruction process?

POLLACK: I think the single greatest failure is our failure to provide day-to-day security for the Iraqis. They still do not feel safe in their homes or in their streets and that is what is crippling every other aspect of the reconstruction. We have got to get a grip on that.

ZAHN: Ken, thanks so much for joining us tonight. Appreciate it.

POLLACK: Thank you, Paula.

ZAHN: The U.N.'s oil-for-food program was supposed to help starving Iraqis, but was it used to create a slush fund for Saddam Hussein and dozens of countries? And was the U.N. involved?

And sex discrimination by a Wall Street giant, women brokers who claim their careers were crushed. They have won a major victory against Merrill Lynch. We'll meet one of those women.

And we'll be taking you deep inside CIA headquarters for an exclusive look at an incredible new system designed to prevent another 9/11.

And a major decision in the Kobe Bryant rape case, it involves Bryant's accuser. We'll tell you what happened. (COMMERCIAL BREAK)

ZAHN: Today saw the start of a worldwide investigation that has the potential to embarrass the U.N. and the scandalize governments and businesses from perhaps as many as 46 countries.

The Security Council of the United Nations unanimously voted to look into billions of dollars worth of alleged corruption in the U.N.'s oil-for-food program in Saddam Hussein's Iraq.

Let's get started tonight with senior U.N. correspondent Richard Roth -- hi, Richard.

RICHARD ROTH, CNN SENIOR U.N. CORRESPONDENT: Hello, Paula.

Well, Paul Volcker, the former chairman of the U.S. Federal Reserve Board, is going to lead an investigation, an outside investigation, into just what happened in the massive complicated oil- for-food plan between the United Nations and Iraq.

It is a very complicated story. But, basically, Volcker is now going to try to get to the bottom of exactly what happened. He's going to lead a three person team with a big staff. Kofi Annan on his left there appointed him, but it took a lot of media pressure and pressure from the Iraqi Governing Council to get to this point. Volcker, though, will have no subpoena power, relying on voluntary cooperation from governments and countries.

(BEGIN VIDEO CLIP)

PAUL VOLCKER, OIL FOR FOOD INVESTIGATIVE PANEL: I'm not the FBI. I'm not the CIA. I'm not an official agency of any government. I don't have the police powers that come naturally to a government. So you have got to conduct the investigation with the cooperation of people that have authority.

(END VIDEO CLIP)

ROTH: One person the panel may want to talk to Benon Sevan, the former director of the U.N. oil-for-food program. His name turned up on a list in an Iraqi newspaper of receiving hundreds of thousands of dollars worth of oil vouchers along with other former diplomats and countries. Sevan strongly denies that he or the oil-for-food program were involved with corruption.

On Capitol Hill today, another hearing about the oil-for-food program. One adviser from the Iraqi Governing Council denounced the U.N. and had this stark warning.

(BEGIN VIDEO CLIP)

CLAUDE HANKES-DRIELSMA, IRAQI GOVERNING COUNCIL: The very fact that Saddam Hussein, the U.N. and certain members of the Security Council could conceal such a scam from the world should send shivers down every spine in this room.

(END VIDEO CLIP)

ROTH: Some of the countries, though, that Volcker may want to look at certainly were well aware of the prospects for corruption, the Americans, the British, Paula, they looked at every contract that was worked out. Volcker's first report may come in three months. An outside expert told us a real probe would take two years -- Paula.

ZAHN: Richard Roth, thanks for the broad view.

Joining me now to talk more about the oil-for-food scandal and its potential impact on the U.N.'s credibility is Mort Zuckerman. He's editor in chief of "U.S. News and World Report."

Welcome.

MORT ZUCKERMAN, EDITOR IN CHIEF, "U.S. NEWS & WORLD REPORT": Thank you.

ZAHN: How serious are these allegations?

ZUCKERMAN: Well, I think they're very serious because they go to the heart of the U.N.'s role, not only as the sort of institution that captures the moral and idealistic sort of hopes of the world to play a role in the sort of implementation of peace, but also whether or not they will have any credibility in whatever they do in Iraq, because it directly goes to the issue of whether or not the funds that were intended to limit Saddam's power, to help the people get food and medicine, were then in turn used to sustain Saddam in power, which in fact is what a lot of experts believe.

ZAHN: What is the most egregious thing we know now beyond a shadow of a doubt in advance of this full-blown investigation?

ZUCKERMAN: What we know now is that at least two countries, namely France and Russia, were given such extraordinary opportunities to make money below the table off of the sale of oil from Iraq. Russia got 2.5 billions barrels of oil at preferred prices. France got 165 million barrels of oil.

In addition to which, the head of the program at the U.N., Benon Sevan, has now been implicated in this thing. He apparently got 11.5 million barrels of oil at preferred prices. And at this point you have to ask yourself what were their motives in this whole thing? It is an outrage to have all of these people, these countries implicated. Did the opposition of France and Russia to the role of the United States in Iraq come from their personal financial gains?

ZAHN: That's what I want to ask you. Did they get bought? Is that why France and Russia had the strongest opposition to this war?

ZUCKERMAN: You know, as I believe, no matter how cynical you are, it is difficult to keep up to the French.

They clearly and particularly Chirac had very long and close associations with Saddam Hussein. The Osirak nuclear reactor, which he actually led in the sale to Saddam Hussein when he represented France, is known as the Os-Chirac nuclear reactor. He was the only person that Saddam Hussein visited when he went to France and got the most effusive praise from Jacques Chirac.

And a lot of people believe that Saddam Hussein was involved in funding Jacques Chirac's political career at various stages. So there are all kinds of suspicions about it. And frankly those suspicions are shared by very high officials in the British and American government.

ZAHN: There are also people out there who believe that some of your anger should be directed at both the Bush and Clinton administration. They believe that both of these administrations turned a blind eye to some of this activity to keep the sanctions program in place.

ZUCKERMAN: No, it is not -- they wanted to keep the sanctions program in place. The question is, did they turn a blind eye to reviewing these contracts.

ZAHN: Do you think they did?

ZUCKERMAN: There are two different stories about it. Some say that they were viewing all of the contracts. My information is that they reviewed those contracts that involved the possibility of equipment being sent to Saddam Hussein and to Iraq that might have dual-use capabilities and therefore might enhance Saddam's weapons capabilities.

ZAHN: How outraged should the American public be about this?

ZUCKERMAN: Well, I think it goes very much to the heart of the issue of the integrity of the U.N. in terms of getting involved in this whole process with Iraq, which has been quite controversial.

The United States is probably the country that has the most skepticism about the U.N. If we find out it is just another bureaucracy serving itself, I think it is going to do even more damage to the hopes that many people have and to the conference you have in the role of the U.N.

ZAHN: How about from American taxpayers' point of view?

ZUCKERMAN: Yes. No, it's from every point of view. We are supporting actually 22 percent of the budget of the U.N. Are we going to be standing by and allowing this to continue if it turns out they were just like -- the U.N. got $1.9 billion in administrative fees, which may or may not be fair. But all I can tell you is, I know I could have administered that program for slightly less.

ZAHN: You think so?

ZUCKERMAN: I think so, a dollar less, $2, something less than $1.9 billion over seven or eight years I think could have been done.

ZAHN: We'll bring you back on another night to walk us through the paces how you would have done it. (CROSSTALK)

ZAHN: Mort Zuckerman, thank you for your time tonight.

It is one of the latest intelligence weapons in the war on terror. We'll go behind closed doors for an exclusive look at the agency that keeps a covert eye on our enemies.

And the Kerry camp open military records and unleashes brand new ads. We're going to ask "CROSSFIRE" hosts Paul Begala and Robert Novak what this could do for John Kerry's campaign.

(COMMERCIAL BREAK)

ZAHN: ... 9/11 Commission so far is that when it came to sharing intelligence, agencies such as the FBI and the CIA rarely got it right. They weren't able to connect the dots. Since the 9/11 attacks, there has been a new and urgent initiative to get everyone in the intelligence community on the same page.

National security correspondent David Ensor has an exclusive look at just how the federal government is trying to make that happen.

(BEGIN VIDEOTAPE)

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): It is an experiment cobbled together a year ago in temporary offices at the CIA. The urgent mission of the Terrorist Threat Integration Center is to make the FBI, CIA, Homeland Security and other agencies share everything they know about terrorists, a response to the failures to communicate before the 9/11 attacks.

In his first television interview, Director John Brennan told CNN the experiment is working. By comparing FBI and CIA data, he says, TTIC has already identified dangerous terrorists.

JOHN BRENNAN, DIRECTOR, TTIC: And so now we have those names on watch lists.

ENSOR (on camera): From its temporary headquarters here at the CIA, TTIC run a government-only top-secret Web site with about 3.5 million terrorism related documents on it. About 2,500 people worldwide have the clearances necessary to log on.

(voice-over): The goal is to make sure the next time an FBI field agent writes a memo like the one from Phoenix in 2001 warning about Middle Eastern men training to fly passenger jets, that memo will get to every U.S. official who should know about it.

BRENNAN: When that agent in the field, whether they're in Phoenix or whether they're overseas, pushes that button and it arrives at their headquarters, we see it at the same time, the same exact time.

ENSOR: But our traditionally turf conscious agencies really sharing everything with TTIC? Do they have the computers to do so? Not all the bosses believe it.

GEORGE TENET, CIA DIRECTOR: We need to make sure that the domestic data shows up. And we need to keep pressure to make sure that happens. Otherwise, you're going to have a lot of data and no left hand to meet the right hand.

ENSOR: And the staff director of the joint congressional intelligence inquiry says TTIC analysts don't always get the raw intelligence from the CIA and others.

ELEANOR HILL, FORMER STAFF DIRECTOR, 9/11 CONGRESSIONAL COMMISSION: We heard that time and again during our inquiry, complaints from analysts that could not do their job without access to that raw intelligence.

ENSOR: But Brennan insists, from the interrogation reports on al Qaeda prisoner Khalid Shaikh Mohammed, to FBI wiretaps, his people can see the raw material that they need to.

BRENNAN: I and the analysts in TTIC can see whatever we need that is going to shed light into the threat of terrorism.

ENSOR: Right now, TTIC is based at CIA headquarters, but at the end of May, the center plans to move to one of the most secure buildings ever devised.

BRENNAN: It is being built to in far excess of Oklahoma City standards in terms of its durability, its strength.

ENSOR: The new building is the Tyson's Corner, Virginia, area, officials say. Sources say but officials will not confirm that this is the building that will house a state-of-the-art operations center for TTIC, along with the FBI and CIA's counterterrorism staffs.

BRENNAN: There is going to be no dividing walls between TTIC and CIA and FBI officers. There is going to be a free flow of information and exchange so that as information comes in, information can be shared and acted upon.

ENSOR (on camera): Do you think that another September 11 attack could happen?

BRENNAN: I think that we have positioned this country the best way possible to prevent another occurrence. I am not of the mind that another attack is inevitable.

ENSOR (voice-over): Not inevitable, but the possibility, Brennan admits, sometimes keeps him awake at night.

David Ensor, CNN, Langley, Virginia.

(END VIDEOTAPE)

ZAHN: Wall Street's biggest name in stocks is ordered to pay a huge fine for sex discrimination. We're going to talk with one woman who says she was a victim of bias. And we're going to tell you why a major ruling in the Kobe Bryant case could make his defense much more difficult.

And John Kerry might not be where he is today if he hadn't been so critical of the Vietnam War 33 years ago. Tomorrow, we're going to look at how it shaped the candidate.

(COMMERCIAL BREAK)

ZAHN: Welcome back. Here are some of the headlines you need to know now. President Bush and Vice President Cheney set the date for their joint appearance before the 9/11 committee. They will answer the committee's questions together a week from tomorrow. The session will be private. The president and vice president will not be under oath.

They're about as thick as a pencil, highly radioactive and they are missing. Two nuclear fuel rods cannot be accounted for at a nuclear power plant in Vermont. The governor says he's, quote, "very concerned." Engineers are still searching the storage pool where the rods were kept.

In Washington, Federal Reserve Chairman Alan Greenspan says interest rates, quote, "must rise at some point." He was testifying before a congressional committee. Greenspan says the economy is now on the rebound.

This week women working in the financial industry scored a major legal victory in the battle against sexual discrimination. Monday a panel of arbitrators found Merrill Lynch the largest Wall Street broker has systemically held back the careers of qualified women. Merrill has already paid out more than $100 million in settlements. But Monday one woman was awarded $2.2 million in damages, the largest single award yet. Hydie Sumner is that woman. She joins us from San Antonio. And with us from Chicago now Mary Stowell, one of Hydie Sumner's attorneys. Welcome to both of you.

So Hydie, let's talk a little bit about your start at Merrill Lynch. You were hired in San Antonio, you came in with an MBA and eight years of experience in the field. How were you discriminated against?

HYDIE SUMNER, WON SEX DISCRIMINATION CASE AGAINST MERRILL LYNCH: I was discriminated against a number of ways. For example, I came in to be hired on management track and while other male peers were given client accounts, referrals, call-ins and walk-ins, I was told I had to build my business on my own. Additionally I was forced to move office locations. I was there six years and had to sit in approximately ten different locations. I switched sales assistants 13 different times. I just basically didn't get management support.

ZAHN: In addition to that, you say you experienced sexual harassment. What happened?

SUMNER: Yes, I did. It happened on several levels. There was an office environment where men openly made sexist comments, told jokes, the manager of the firm in particular did that. And if things were reported, either by myself or other women, they were ignored. They were denied and women became targets of being labeled troublemaker. For example I was identified as being emotional, bitchy and named a man hater. All I was trying to do was suggest that they not conduct inappropriate behavior like they were.

ZAHN: Is it true you were given a way out of this through a proposition?

SUMNER: I was on the management track and the next hurdle I had to go to the management assessment center was to be sponsored by my manager. And at one point after building my business on my own, doing every management task he asked of me, he told me if I would do favors for him, he could make my career. At that point I told him I don't do favors.

ZAHN: It was very clear to you what he was asking you to do.

SUMNER: It was very clear. It was very clear. Again, I had done every task he asked of me. There was body language. There was an eye contact. And when he saw the shock on my face, there was a visual reaction and verbal comment that he knew he had crossed the line.

ZAHN: So were you disgusted? What was your immediate reaction?

SUMNER: I was -- I was shocked. I was surprised. I had come in. He paid me a very low salary to start. Even after I've had eight years in the investment banking field. I had done everything he asked of me. Management task wise. I did that without pay. I have since discovered the men were paid for doing similar functions. And I was just shocked that that's what it came down to. I don't operate that way. I never have operated that way.

ZAHN: Mary, before we move on to two statements from Merrill Lynch, just give us the broad view on how wide of a problem this was at Merrill Lynch from your perspective.

MARY STOWELL, ATTORNEY FOR HYDIE SUMNER, CHICAGO: Well, the arbitrators found that it was a class wide pattern of practice, of sex discrimination against female brokers in pay and in management opportunities. So the problem was company wide for women brokers at the firm.

ZAHN: Let me put up on the screen a couple of statements that Merrill Lynch sent to us today. Quote, the first one says, "the firm described in the panel's decision is not today's Merrill Lynch. We agree and regret that nearly a decade ago, there was inappropriate behavior in the San Antonio office. It should not have occurred and would not be tolerated today. We have taken a number of steps to address issues raised in this litigation."

And here is a portion of another statement that came from Merrill Lynch chairman and CEO Stan O'Neal to his staff. Quote, "regardless of how long ago I think it is important for you to know how offended I am that this conduct ever occurred. I'm offended that any employee would have to be subjected to demeaning work environment whether because of their gender as in this case or because of ethnic background, race, religion, or any other quality that defines who we are as individuals."

Are you confident changes have been made at Merrill Lynch to prevent this from happening again?

STOWELL: Well, we have to define the -- this, what is this. I think Merrill Lynch would address the allegations of sex harassment in a far more constructive manner than it did in this case. And in this case Hydie was awarded $500,000 in punitive damages and that was in part because she was retaliated against for making allegations of sex discrimination as did other women. And there is a long story about that, which I won't go into here but Merrill Lynch's human resources department was shocking. And their support of the harassment that went on in the San Antonio office. So to be fair to Merrill Lynch, I do think that they would address the sex harassment in a much more constructive fashion.

ZAHN: All right. We're going to have to leave it there and move on to get another perspective. Mary Stowell, Hydie Sumner, thank you for sharing your story with us tonight.

STOWELL: You're welcome.

ZAHN: We'll take a closer look at what this means for women in the financial industry and where they stand today. Betty Spence is president of the National Association of Female Executives, one of the largest professional women's organizations in the country. We just heard about the problems of Merrill Lynch that they say they addressed and that one of the guests suggests that she hopes means will never happen again to women. How big of a problem has this been across the board in the financial industry?

BETTY SPENCE, PRESIDENT, NATL. ASSOC. OF FEMALE EXECUTIVES: It has been a very serious problem. I'm very glad we're addressing it here tonight because it has been a problem that not a lot of people have been talking about, it's been sort of behind the scenes. There was a study done in 2001 by Catalyst which -- in which one-third of the women on Wall Street who took part in the study said they had been sexually harassed.

ZAHN: That's staggering.

SPENCE: One third of them. More than half said they were believed they were being paid less for equal work.

ZAHN: And certainly we're not just talking about the financial industry. We've heard these reports and cries for help from other businesses where women work as well. My question to you, when these companies see that $100 million has been paid out in settlements that has to put the fear of God in the human resources department. Doesn't it? What do you think the impact ultimately is?

SPENCE: Well, Merrill Lynch, I'm sure, has already taken steps as the attorney just pointed out. Any company that is facing the stick of a lawsuit or a settled suit such as this one is going to start making changes, and Merrill Lynch probably now is one of the best places on Wall Street to work, because the suit began five, six years ago, so the changes have been made.

ZAHN: And you've got to hope that this has a kind of a ripple effect on these other companies?

SPENCE: It does have a ripple effect. Companies that are smart know that if they are taking care of these kinds of problems early, if they are doing the compensation surveys to make sure that the women and men are being paid equally and are looking to make sure that the women are getting the good clients, so that they're going to be able to compete equally with the men, these are the companies that are succeeding.

ZAHN: Betty Spence, we've got to leave it there. Thanks for spending some time with us tonight.

SPENCE: Thank you.

(END VIDEOTAPE)

ZAHN: We'll take a short break here. Kobe Bryant's defense against rape charges just got tougher. We're going to look at why a judge's decision could force a major change of strategy.

And the Kerry campaign releases some of the candidate's military records. But will that be enough to satisfy his critics?

(COMMERCIAL BREAK)

ZAHN: The defense of the Kobe Bryant case was handed a major setback today by the judge. In ruling on a pre-trial motion, the judge said Bryant's defense team will not have access to his accuser's medical and psychological records. With me now, CNN senior legal analyst Jeffrey Toobin, who has been following this very closely. How big of a setback is this?

JEFFREY TOOBIN, CNN SR. LEGAL ANALYST: It is a setback. There is a lot more litigation, there is a lot more to go here.

But the issue right here is her medical records. She was in the hospital in February and May of 2003. And remember, the incident itself took place in June, so it's right before.

She was treated by mental health professionals in some way. The defense argued is that because she discussed her treatment with a variety of people, she waived her privilege, that these records should now longer be secret because she talked about her treatment. The judge today said no, just because you talk about your treatment with your mother, for example, doesn't mean that you waived your privilege. I think it's sort of a common sense decision. So the defense doesn't...

ZAHN: So you (UNINTELLIGIBLE) with the judge, then? TOOBIN: Absolutely. I think the judge made the only decision he could. So the records themselves will not be turned over to the defense.

ZAHN: But that does not mean that the defense team doesn't talk about her sexual history.

TOOBIN: Absolutely. There are a lot more issues, mostly involving the rape shield law, which the defense is claiming does not prevent them from going into whether this woman had sex with other people in the period immediately around when this incident with Kobe Bryant took place. That decision has nothing to do with what was decided today. And that's going to be a much better issues, I think, for the defense.

ZAHN: But take us where the defense team would be taking a jury with that. The suggestion that this was a woman who was promiscuous?

TOOBIN: Well, not really.

ZAHN: Someone that put herself in a situation to have this happen to her?

TOOBIN: I don't think that's -- that they would be allowed to do that. Because that really is what the rape shield law is about. Some sort of woman is a type of woman who has, you know, loose sex. That is what rape shield laws have really prevented. But...

ZAHN: I know, but this defense team has been very aggressive...

TOOBIN: They have...

ZAHN: ... at moving around the edges of the rape shield law.

TOOBIN: That's right, but if there are injuries, for example, to her and her private parts, and the defense can show that she was having sex with other people in the period immediately around the time when she had this incident with Kobe Bryant, then they probably would be able to get into the other sexual encounters, because they could...

ZAHN: But that's still leading you to the same place, is it not?

TOOBIN: Well, I mean, that's what the prosecution is arguing. But I think -- you know, in fairness to Kobe Bryant, I mean, if there is a potential other source of these injuries, how can the defense not be allowed to point that out to the jury? It is a tough call. I mean, there are really opposing principles at work here. And the judge has got to balance them. But if Kobe Bryant's freedom is at stake and he can point to specific encounters that may have produced specific injuries, I think he's got to be able to prove that.

ZAHN: So you think that would be fair?

TOOBIN: I think that would be fair. But this is an example, of these medical reports, which is decided today, I think that was too far field. There is no good claim. I think that just because you talk about your medical history with your mother, you waived all privacy -- that was silly.

ZAHN: So take us through the next couple of steps.

TOOBIN: Well, now we're going to see a lot more litigation about the rape shield law. What is admissible, what isn't. It's very methodical. This judge is doing this in an organized way. But it is -- you know, this trial is not going to happen before summer.

ZAHN: Let's move back to Michael Jackson land. CNN reported...

TOOBIN: We're waiting -- we're waiting with baited breath, yes.

ZAHN: Well, you never know what is going to happen around that -- the circus surrounding it, the coverage of this. CNN told just about the time we got on the air that a grand jury decision is expected sometime this week.

TOOBIN: Right. The grand jury has been meeting in Santa Barbara for some time. By all indications their deliberations appear to be wrapping up. It looks like not today, possibly tomorrow. And whether he's the only defendant that they're looking into or other defendants, we don't know. But certainly...

ZAHN: Take off your journalist hat for a moment. You're a former prosecutor.

TOOBIN: Yes.

ZAHN: Do you believe that an indictment will come down here?

TOOBIN: Grand jurors are the play things of prosecutors. If the prosecutor wants an indictment, he'll get an indictment. Every indication we've had from this office is that this -- this prosecutor wants an indictment. Chances are he'll get it.

ZAHN: But you're not so sure there is a very strong case here?

TOOBIN: That's a very different question. You know the old saying is that any prosecutor who wants to could get an indictment of a ham sandwich if he wanted. So it's not -- the grand jury is not really an independent check on the prosecutor. But a conviction is a very different story from an indictment. How is that for dodging your question?

ZAHN: I think that's very good. I'm trying to think if you fit in that category, more (UNINTELLIGIBLE) sandwich, more tuna salad.

TOOBIN: I don't know.

ZAHN: We'll let you go. Thanks, Jeffrey.

The president's campaign will unleash a storm of new campaign ads. His opponent is ready to return fire. We're going to give you some of the previews of ads that will hit the airwaves.

(COMMERCIAL BREAK) ZAHN: In the presidential ad wars both the Bush and Kerry campaigns have new commercials ready to go. Also the Kerry campaign is scrambling to diffuse questions about the senator's Vietnam war record. In Washington to talk politics are two the host of CNN's "CROSSFIRE," Paul Begala and Robert Novak.

(BEGIN VIDEOTAPE)

ZAHN: Good to see both of you.

PAUL BEGALA, "CROSSFIRE": Thank you, Paula.

ROBERT NOVAK, "CROSSFIRE": Thank you, Paula.

ZAHN: Let's start off tonight by looking at how the Bush campaign continues to pummel John Kerry for being a waffler. Here is a part of one of the campaign's latest ads.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: "The Wall Street Journal" said Kerry's tax plan would mean increasing the tax burden again, which would likely kill the recovery.

UNIDENTIFIED MALE: On Iraq, "The Washington Post" says Kerry's attempts to weave a thread connecting and justifying his positions are unconvincing.

(END VIDEO CLIP)

ZAHN: Some of the polls we look at would suggest the defining of John Kerry has some traction and it is hurting him.

How does this change the perception?

BEGALA: Well, he needs to do a little political jujitsu. The president says I change too often on issues, well I have changed as the facts have changed. My problem with Mr. Bush is he doesn't change enough. He sees 8 million Americans out of work and says stay the course, don't change our economic policy. I want to change it. He sees 42 million without health insurance, he says don't change anything, stay the course. I want to change it. He says 135,000 guys in Iraq, without enough armor, without enough allies, he says great stay the course. I want to change it.

So, embrace the change, John Kerry, and make yourself the candidate of change. I think it could work for him.

ZAHN: Will it work for him?

NOVAK: What interests me is I have heard not for months, for a year that this time the Democrats say we're not going to let the Republicans define our candidate. And I said, yes, I would like to see how that works out. Well, they have defined the candidate. They haven't ppummeled him. What they have done is they've taken newspaper editorials, and some from liberal newspapers and described him. I think it has been a very clever campaign.

DOBBS: Let's look at another ad now out by the Kerry campaign where John Kerry does directly attack the president on the issue of Iraq. Let's watch together.

(BEGIN VIDEO CLIP)

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: Let me tell you exactly what I would do to change the situation in Iraq. I would immediately reach out to the international community and sharing the burden, the risk, because they also have a stake in the outcome of what is happening in Iraq.

(END VIDEO CLIP)

ZAHN: Bob Novak, isn't that what the president is saying too?

NOVAK: It is exactly what he's saying. That's the whole problem with John Kerry. When you get beyond the (UNINTELLIGIBLE) of what a terrible guy Bush is, there is so little difference in the substance of how they would approach the problem and what he would do if he was in this president and of course did vote for the resolution. The problem of having the international community charge share the burden is you can go to Berlin and Paris all you want and you're not going to get any troops from Iraq. So it is a rather unconvincing ad in my opinion.

ZAHN: Want to weigh in on that, Paul?

BEGALA: I think -- nobody, except maybe President Bush's wonderful mother believes that he could actually get foreign troops to come in. He is fairly or not the most hated American president around the world in recent memory. John Kerry made the point on "Meet The Press" this weekend with Tim Russert that maybe we need a new face to make the case. I have done campaigns all around the world. And right now, if you want to succeed in a free country's election around the world you have to attack Bush.

ZAHN: Got a question for you, Bob Novak, John Kerry's campaign releasing his records from the Vietnam War, will this, you think, stop this story?

NOVAK: I think the story has got very few legs. I think it is a bogus issue. I think the Democrats brought it on themselves when they started all this silly stuff about whether many, many years ago George W. Bush went to his national guard drills in Alabama and went into the records. I think the American people couldn't care less about this kind of thing about what George W. Bush did in the national guard and whether the wound that John Kerry got was a legitimate wound, whether he -- went home too early, it is a phony issue. The press just loves this. News media loves it, but the American public doesn't like these issues, and they ought to lay off of it.

ZAHN: All gentlemen, We're going to leave it there tonight.

Paul Begala, Robert Novak, of CNN's "CROSSFIRE," thank you, both. (END VIDEOTAPE)

ZAHN: And we'll be right back.

(COMMERCIAL BREAK)

ZAHN: That wraps it up for all us here this evening. Thanks so much for being with us tonight.

Tomorrow night, the training is available, so why are so few of the nations pilots choosing to carry a gun. We'll talking with a pilot who lost both of his parents on 9/11.

Thanks again for joining us tonight. "LARRY KING LIVE" is next. Have a good night.

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