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Ken Lay, Jeffrey Skilling Found Guilty In Enron Trial; Bush, Blair Stand Together; Joseph Biden Interview; Mexican President Vicente Fox To Meet Governor Arnold Schwarzenegger This Evening; Life Goes On In Kabul; Abbas Gives Hamas Ultimatum; President Bush Ordered Documents Seized From Congressman William Jefferson's Office Sealed For 45 Days
Aired May 25, 2006 - 16:59 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: To our viewers, you're in THE SITUATION ROOM, where new pictures and information are arriving all the time.
Standing by, CNN reporters across the United States and around the world to bring you today's top stories.
Happening now, it's 4:00 p.m. in Houston. They presided over the meteoric rise of one of the nation's biggest companies. Now they have been convicted in one of the biggest business scandals in U.S. history.
Here in Washington, it's 5:00 p.m. as well. President Bush and British Prime Minister Tony Blair have stood together in Iraq and fallen together in the polls. Now they'll huddle together at the White House then hold a joint news conference. We'll bring it to you live this evening here in THE SITUATION ROOM.
And President Bush intervenes directly in the constitutional showdown over a corruption probe, sealing documents seized from a congressman's offense. But the FBI isn't finished. It now wants to interview members of Congress in a leak investigation.
I'm Wolf Blitzer. You're in THE SITUATION ROOM.
It was the biggest corporate bankruptcy in U.S. history when it happened. Now, almost five years later, the jury says the men in charge of Enron were among those responsible for the company's multibillion-dollar collapse.
CNN's Ali Velshi is in Houston and has our report.
(BEGIN VIDEOTAPE)
ALI VELSHI, CNN CORRESPONDENT (voice-over): The verdicts for former CEO Jeffrey Skilling were read first. Guilty on 19 counts of conspiracy, fraud, false statements and insider trading. Not guilty on nine other counts. Skilling was stone-faced.
Then came the verdict for Enron founder Kenneth Lay. With relatives weeping in the background, Lay was convicted on all six counts of conspiracy and fraud. Both men could face decades in prison. But outside the courthouse, both men were still proclaiming their innocence.
KEN LAY, ENRON FOUNDER: Certainly we're surprised. I think probably more appropriate to say we're shocked. Certainly this was not the outcome we expected. I firmly believe I'm innocent of the charges against me, as I have said from day one. I still firmly believe that as of this day.
QUESTION: Jeff, do you think you can ever -- do you think you'll ever be able to admit to yourself that you may have committed crimes?
JEFFREY SKILLING, FMR. ENRON CEO: No.
QUESTION: Why not?
SKILLING: Because I didn't.
VELSHI: But on their sixth day of deliberations, the jury of eight women and four men found differently.
AMANDA PERRY, ALTERNATE JUROR: We admired them for the strength they had to build the company to what it was. And -- but you've got to look at the law. It's in front of you, and you've got to look at the facts that are in front of you.
VELSHI: The verdicts were a huge victory for prosecutors, who spent almost three years investigating Enron's collapse before bringing charges. They say they hope this case sends a message.
SEAN BERKOWITZ, DIRECTOR, ENRON TASK FORCE: To those who would think in the future of fraudulently misrepresenting your company to the public, know that people like this are ready. People like this are ready, and you will be held accountable for your actions.
(END VIDEOTAPE)
VELSHI: And that's -- that's what the message is to investors and to workers across the country, Wolf, the idea that the government has successfully prosecuted the biggest corporate scandal case in American history. That should give investors a little bit of comfort that the system isn't stacked against them -- Wolf.
BLITZER: I know they're planning appeals, Ali, but do they go to jail while the appeal process goes forward, or do they remain out on bail?
VELSHI: They remain out on bail, on bond until September 11th, which is the sentencing. Both men have had to surrender their passports. It's unclear weather they will remain out of jail while the appeal continues, if it hasn't gotten to that point by September 11th -- Wolf.
BLITZER: Lots of jail time they're facing. Both of them.
Ali is doing an excellent job for us, as usual, on the scene in Houston. Let's drill down a little bit more on that Enron verdict. The details are online. And our Internet reporter, Abbi Tatton, is standing by with more -- Abbi.
ABBI TATTON, CNN INTERNET REPORTER: Wolf, here is how the jury broke it down. Go to CNNMONEY.com. They have all of the details there on Ken Lay, guilty of six counts there. Two of them stemming from wire fraud. Those are stemming from online and video teleconferences from 2001 in which Ken Lay gave false statements.
Also, Skilling, the full details online. And also, the indictment is available at "The Houston Chronicle," which has exactly what the jury was considering here.
Skilling there guilty on 19 counts. Only guilty on one count here of insider trading. But have a look at that indictment. You'll see that just that one count brought in over $6 million -- Wolf.
BLITZER: Abbi, thank you very much.
Other important news we're following here in Washington, they are a bit of an odd couple in both style and politics, but they have stood together as close allies during a long war.
This hour, President Bush and British Prime Minister Tony Blair getting ready to meet at the White House to discuss how to move forward in Iraq.
Let's bring in chief national correspondent, John King -- John.
JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Wolf, troop levels in Iraq, the nuclear confrontation with Iran on the agenda for this summit tonight at the White House. This is Prime Minister Blair's eighth trip to the United States since the September 11th attacks. One subplot, will it be his last visit as the British leader?
(BEGIN VIDEOTAPE)
KING (voice-over): The president is right of center. The prime minister leans a bit left. But shoulder to shoulder is their trademark. The Iraq war their shared legacy and shared burden as this special relationship nears its end.
NILE GARDINER, HERITAGE FOUNDATION: This may well be the last summit meeting in Washington between President Bush and Prime Minister Blair. There is even some doubt whether Blair can last through until the end of this year.
KING: Back at the beginning, many wondered whether these two very different men would get along at all. An awkward joke passed for a bond when they first met at Camp David.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Well, we both use Colgate toothpaste.
(LAUGHTER) KING: But a similar world view outweighed philosophical differences, especially after 9/11. And the prime minister stood by the decision to wage war in Iraq, even though it was unpopular at home and in much of the world.
PHIL GORDON, BROOKINGS INSTITUTION: He still believes. I mean, Blair, for all of the talk of spin in politics, is a conviction politician.
KING: No weapons of mass destruction brought credibility questions.
UNIDENTIFIED MALE: Can he now reassure the house that we and the people of this country were not duped and that British soldiers were not sent to their deaths on a false premise?
KING: Iraq's political toll is unmistakable.
In April 2003, when Saddam Hussein's regime fell, Mr. Bush's approval rating stood at 70 percent. It's just 36 percent now. And 49 percent of Britons were satisfied with their prime minister back then. An anemic 28 percent satisfied now.
GORDON: They are both feeble politically. They are both largely seen to be lame ducks.
KING: One debate now is whether Iraq's toll includes less influence, less credibility, as the world deals with Iran's nuclear program.
GARDINER: I think they do remain extremely powerful figures. And while they're not loved, certainly they are respected as very strong international leaders.
GORDON: The truth is, they're probably right about Iran in its search for nuclear weapons. But that doesn't mean that the world believes them.
(END VIDEOTAPE)
KING: The president and prime minister try to talk once a week by secure video link. And Wolf, as they swap strategy notes tonight, one thing in the back of Mr. Bush's mind has to be, how long will it be Mr. Blair on the other end of that call?
BLITZER: And John's going to be with us tonight for our special coverage of the joint news conference during the 7:00 p.m. Eastern hour here in THE SITUATION ROOM.
United they stand, united they fall. They've been close allies on Iraq, and as we have just heard, they paid a price with their publics. The declines are dramatic.
Look now at how far President Bush and Prime Minister Blair have fallen in the past five years. Could a strong public appearance this evening help stem the slide for both leaders? Joining us now from Capitol Hill is Senator Joe Biden of Delaware, the ranking Democrat on the Foreign Relations Committee.
Senator, thanks very much for joining us.
SEN. JOSEPH BIDEN (D), DELAWARE: Thank you.
BLITZER: It will be a show of solidarity between the prime minister and the president tonight. Are you concerned -- as concerned today as you were a month ago before the formation of this new government in Iraq?
BIDEN: I am -- I am as concerned. In fact, I'm more concerned.
If you noticed, Wolf, when I was on your program just a couple of weeks ago, and then when the national security advisor of Iraq was on the program a couple of weeks ago -- or a week ago -- we both stated -- I never talked with him -- that sectarian violence is growing. It's not diminishing.
We have no plan to deal with the sectarian violence. The police, as you know, Wolf, are -- are just totally out of control. They are not trusted by anyone. They're made up of death squads.
Of the 200,000 people we trained, 100,000 are probably parts of the militia. And we have no real plan for how to deal with that.
BLITZER: What about the plan that the Iraqi government, consisting now of Shia, Kurd and Sunni, that they will take charge and deal not only with the insurgency, but the sectarian strife, which some are already saying verges on a civil war?
BIDEN: Well, let's recall what the new president said. He said, in 18 months we think we'll be able to be in control as a government. And within a year, we think we would be in control of 16 of the 18 provinces.
That's code for saying over 35 percent of the population they will not be able to control within a year. That's the sectarian violence. That's where everyone is being killed. That's where there's no plan.
They still do not have a non-sectarian control of the military, of the police, and of the intelligence organizations. They don't have a plan.
BLITZER: What about -- you've called for a target date for a withdrawal. You haven't gone as far as Congressman John Murtha, who wants an immediate, or nearly immediate pullout. You want a target date. Tell our viewers what you would like to see as far as the 130,000 or so U.S. troops in Iraq right now. When -- when do you want them out?
BIDEN: I want a plan that when they come out they'll have a stable government. The only way to do that is to give the Shia, the Sunni and the Kurds some breathing room. Guarantee the Sunnis a part of the oil revenues. Get the major five countries in the world to call a conference, a regional conference, which I know the British are for -- I hope they're putting pressure on the president -- a regional conference involving all the regional powers to say you cannot interfere internally.
And at that time, move to give each of the regions local autonomy over everything from the divorce laws and over their laws relating to how they send their kids to school, like we do here, which is part of the reason for this ripping sectarian violence. And bring those militias back into those communities and not have them preying on one another as a first step.
BLITZER: Here is what the president's press secretary, Tony Snow, told our Lou Dobbs last night. Listen to this, Senator.
(BEGIN VIDEO CLIP)
TONY SNOW, WHITE HOUSE PRESS SECRETARY: The president would like to be able to move U.S. forces into support roles, but you're going to do that as conditions on the ground dictate. You're not simply going to say, "You know what? We're going to do it in march," or "We're going to do it in April." You have to find out the shifting realities on the ground.
(END VIDEO CLIP)
BLITZER: Is there anything in there you disagree with?
BIDEN: No, not at all. That's why my plan says, give the military until the year 2008 to be able to determine how they're going to deal with that situation.
Put another way, Wolf, if we do not stem this increase in sectarian violence, i.e. a civil war, all of the king's horses and all of the king's men, 300,000 Americans, will not be able to hold that country together. That's why you need a plan.
Democrats, some of them have a plan how to get out but not what they're going to leave behind. And this administration has a plan how to not let it get any worse, but no plan how to secure it.
I have a plan. My plan might not be the perfect plan. But as I said to you before, what is -- what other alternatives are being offered out there?
What are the plans to change the situation on the ground? This new government being formed by itself will not be able to stop the sectarian violence.
BLITZER: One other plan that's out there is Congressman John Murtha's plan. He's going to be joining us during our 7:00 p.m. Eastern hour. He says re-deploy, get out almost immediately, let the Iraqis take over.
BIDEN: Well, see, that's not a plan of what you're leaving behind. I'm not prepared to leave behind chaos, a civil war. If you leave behind -- if we leave and the aftermath is a civil war, that will result in a regional war. And our interests will be impacted on for a decade. For a decade.
And so my plan is, come up with specifics that each of the parties should and could be doing now. Amend the constitution in a way that will get them all to buy into the situation. Insist on their pulling back their militias into their own regions. Give them an incentive to stay together and not be engaged in sectarian violence. And call a world meeting led by the five major powers to put pressure on all the neighbors to stay out of the game.
That's a plan that gives you a shot of leaving behind when you leave a relatively stable government. Not a democracy, but a stable government where there's a central government, control of the borders, control of the revenue, and not allowing the country to spin apart out of kilter.
BLITZER: Here is what Senator John McCain told Larry King last night. Listen to this, Senator.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R), ARIZONA: If we lose, then it will deteriorate into sectarian violence. The Iranians will play, the Syrians will play. The whole area will retrogress into chaotic conditions.
Also, I think very importantly, we should remember that these people are not just interested in Iraq. They're interested in attacking us.
(END VIDEO CLIP)
BLITZER: Do you agree with the senator?
BIDEN: Absolutely right. That's why John should buy into my plan. I've got a plan to keep it from going to the civil war.
What is the president's plan? The president's plan is to say this new government, this new consensus government, will produce a solution that ends the sectarian violence.
When I asked General Casey, "Of the 200,000 men and women you have trained, General, when will they be prepared to take on the militias?" He said, "They will not be able to take on the militias."
When I came back and appeared on your program three years ago, Wolf, I said that we have no plan to train the police. Their sectarian thugs. Do you doubt that now? Does anybody doubt that?
When I came back the last time, I was on your program and told you that I'm hearing on the ground from our trainers, generals training these guys, that they're only training militiamen to get better at what they do to go back to join their militias and not sharing (ph) a united army. So is anybody disagreeing with those propositions? And if they're not, then what are we going to do about? What are we going to do about it?
You've got to give the three sectors, Shia, Sunni, and Kurds, breathing room, so their main purpose is not to try to kill one another, but to repair their own regions with a prospect of coming together stronger later, like we did in the Dayton Accords in the Balkans, like we did in 1776 in the United States. It took us 13 years to get our Philadelphia moment.
BLITZER: Senator Biden is the ranking Democrat on the Senate Foreign Relations Committee.
Always good to have you on our program, Senator.
BIDEN: Always good to be with you.
BLITZER: I know you'll be watching this news conference on CNN later tonight from here in THE SITUATION ROOM.
And this note to our viewers. The Bush-Blair news conference special coverage begins here in THE SITUATION ROOM, 7:00 p.m. Eastern. The two leaders them meet with reporters at 7:30 p.m. Eastern. We'll have extensive coverage.
Time now for Jack Cafferty once again and "The Cafferty File" -- Jack.
JACK CAFFERTY, CNN ANCHOR: Thank you, Wolf.
In the end, the jury in the Enron trial decided to put the blame on the two guys who ran the company. Ken Lay and Jeff Skilling both were found guilty on a laundry list of charges relating to conspiracy and fraud. And both could well spend the rest of their lives in prison.
The case was a huge win for the government after a four and a half year investigation. The White House and lawmakers have already reacted to the verdict, saying they send a strong message on corporate corruption. The guilty verdicts also come after prosecutors have won convictions against executives in other high-profile cases from WorldCom, to Adelphia, to Martha Stewart.
So here's the question: What message does the Enron verdict send?
Your thoughts, e-mail us at CaffertyFile@CNN.com or go to CNN.com/CaffertyFile -- Wolf.
BLITZER: Jack, thank you very much.
Up ahead, an ultimatum from the Palestinian president to the Hamas-led Palestinian government. We'll have details of what he said and why it could put Hamas in a very uncomfortable position.
Also, there are new developments in the showdown between Congress and the White House. President Bush ordering some unusual action with records seized from a United States congressman's office.
Plus, Mexico's president about to meet with the California governor, Arnold Schwarzenegger. We're going to show you why there could be tension during the talks over immigration.
Stay with us.
(COMMERCIAL BREAK)
BLITZER: Take a look at this. We're getting some live pictures coming in from Andrews Air Force Base right now. The prime minister of Britain, Tony Blair, has just arrived at Andrews Air Force Base, outside of Washington, D.C., in suburban Maryland.
He's now in that limousine. He'll be driving -- driving, not helicoptering -- over to the White House for talks immediately with the president. Those talks scheduled to start in about 40 minutes.
They will be followed at 7:30 p.m. Eastern by a joint news conference. The president and the prime minister, a news conference that we will be bringing you live right here in THE SITUATION ROOM.
He's sitting in the back seat, if you're interested, with the British ambassador here in Washington.
Also happening now, the Senate is on the verge of passing its controversial immigration reform bill. Also happening now, Mexican President Vicente Fox is heading to Sacramento, where in just a few hours he'll address California's legislature and meet with governor, Arnold Schwarzenegger, with immigration very high on the agenda.
CNN's Chris Lawrence is joining us now live from Sacramento with a little bit of a preview.
What do we expect, Chris?
CHRIS LAWRENCE, CNN CORRESPONDENT: Well, Wolf, because of the issue of immigration, when President Fox arrives here in about 90 minutes, he's going to face a little bit of controversy. There are protesters already lined up outside. One state senator is going to pass out buttons that say "No mas."
So Governor Schwarzenegger has a definite political stake in how his meeting with the president is perceived.
(BEGIN VIDEOTAPE)
LAWRENCE (voice-over): California and Mexico share a border and nearly $40 billion a year in trade. But their two leaders don't share an opinion on illegal immigration.
VICENTE FOX, MEXICAN PRESIDENT: Enforcement-only measures will not solve the challenges posed by the migration phenomenon.
LAWRENCE: President Vicente Fox has lobbied the United States to legalize millions of Mexican immigrants. Governor Arnold Schwarzenegger initially endorsed the minutemen, a citizens border patrol dedicated to stopping illegal immigrants.
GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I will also talk to President Fox about the issue of building tunnels, for example, to make it a crime to build tunnels under our borders.
LAWRENCE: When it comes to illegal immigration, Schwarzenegger's position has changed. On May 12th, he said California's National Guard should not patrol the border, when it's a job best left to the federal government.
SCHWARZENEGGER: It's their responsibility, not the state's responsibility. So to provide security...
LAWRENCE: Schwarzenegger still plans to tell President Fox he opposes using the military for law enforcement duties.
SCHWARZENEGGER: However, I am prepared to commit the California National Guard troops in support of Border Patrol operations.
LAWRENCE: A Republican political strategist says the governor has to stay flexible on immigration issues. Because he's running for re-election in a Democratic state, Schwarzenegger needs to hold on to his conservative base and get 35 percent of the Latino vote.
UNIDENTIFIED MALE: He does not have the luxury of some hard-core Republican members of Congress to shout on the issue and to be obstinate of the issue, because, again, they're not running for the governor of California. Arnold is.
(END VIDEOTAPE)
LAWRENCE: Yes, Hoffenblum (ph) says that this meeting is more symbolic than substantial. But how accommodating or how tough the governor comes across could affect how people vote come November -- Wolf.
BLITZER: Chris Lawrence, good report. Thank you.
And as we mentioned, the Senate is now on the verge of passing its immigration reform bill. But it will have to be reconciled with the House version, and there are some critical differences.
While both bills provide for increased border security, the Senate bill also includes a guest worker program. The House bill does not. And the Senate bill provides a path towards citizenship for people who are currently here illegally, while the House bill would make illegal immigration a felony.
Zain Verjee is off once again today. Fredricka Whitfield is joining us from the CNN Center with a closer look at some other important stories making news -- Fred.
FREDRICKA WHITFIELD, CNN ANCHOR: Hello again, Wolf.
The theft of data on 26.5 million veterans may cost up to half- billion dollars to fix. That's the estimate of Veterans Affairs Secretary Jim Nicholson. He also tells Congress he's, in his words, mad as hell about it and accepts full responsibility. One congressman bluntly told Nicholson that he should resign.
Set aside no more. Right now in Romania, hundreds of residents who just yesterday had been placed under quarantine are free to move about. Fears of bird flu prompted the quarantine on residents of three districts in Bucharest. Recently, three birds raised domestically tested positive for bird flu, but none of the residents who have been quarantined has shown any symptoms of bird flu -- Wolf.
BLITZER: Thanks, Fred, very much.
Coming up, President Bush steps into a constitutional confrontation with the Congress. Will his unusual action be enough to avert a showdown?
Also, growing concern over a Taliban comeback in Afghanistan. Our Pentagon correspondent, Barbara Starr, is now on the ground in Afghanistan. She's embedded with U.S. forces. Her report, that's coming up.
Stay with us.
(COMMERCIAL BREAK)
BLITZER: Welcome back.
The top U.S. Marine Corps general headed off to Iraq today to tell troops personally they must abide by the rules of war. The mission comes as two criminal probes look into allegations that two groups of Marines killed innocent civilians in Iraq. One case is so serious, the members of Congress today got an advanced briefing on the findings.
Let's get our story from our senior Pentagon correspondent, Jamie McIntyre -- Jamie.
JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT: Wolf, Congressman John Murtha, a former Marine who says he's getting inside information from U.S. commanders, says as many at 24 civilians may have been killed, in his words, in cold blood.
(BEGIN VIDEOTAPE)
MCINTYRE (voice-over): The allegation is that last November, these civilians in Haditha videotaped by an Iraqi human rights group were slaughtered in a house-to-house rampage by U.S. Marines, who then allegedly tried to cover up the deaths with a story that the men, women and children will killed by a roadside bomb and during a firefight that followed with insurgents.
And now, in a second case, several Marines have been shipped back to Camp Pendleton, California, after local Iraqis accused them of killing a single Iraqi civilian last month. A statement issued by the U.S. military says, "A preliminary investigation found sufficient information to recommend a criminal investigation." The charges of atrocities are so potentially explosive, a one- star Marine general was dispatched to personally brief Congress.
SEN. JOHN WARNER (R), ARMED SERVICES CHAIRMAN: Based on I guess now well over 30 years of experience with the military, I would -- I would rank this as quite serious, both incidents.
MCINTYRE: And the Marines' top general, Commandant Michael Hagee, has gone to Iraq on a hastily-arranged tour to underscore to his Marines they need to abide by the law of war. According to his staff, Hagee will say, "The most difficult part of courage is not the raw physical courage. It is rather the moral courage to do the right thing in the face of danger or pressure from other Marines."
(END VIDEOTAPE)
MCINTYRE: Already, three Marine officers have been relieved of command for lack of competence. And sources tell CNN that investigators have concluded that the initial Marine account was not accurate and that murder charges are a possibility -- Wolf.
BLITZER: Jamie McIntyre -- thanks.
In Afghanistan, a military spokesman says five Canadian troops were wounded today by a roadside bomb. And a refugee agency says 3,000 villagers have fled their homes near an area where U.S. led troops have been clashing with Taliban fighters. Is this the start of a Taliban comeback? CNN Pentagon Correspondent Barbara Starr is in Afghanistan right now -- Barbara.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, well combat operations are heating up in other parts of the country. Here in Kabul, daily life goes on.
(BEGIN VIDEOTAPE)
STARR: At Kabul's food market 15 pounds of potatoes cost $2.00. Food is plentiful, people gather along the river bed. This is where you can make a telephone call. Kabul's children work day and night earning small amounts of money to help their families. Many women still wear the burqa in this city of four million people.
It seems like most of Kabul is out here in the marketplace today. But in other parts of Afghanistan, especially in the south, violence is again on the rise, the Taliban had been conducting a number of organized attacks. U.S. military officials say parts of Afghanistan are getting to be as dangerous as Iraq.
There are several worrying signs. U.S. military intelligence says in recent months Taliban fighters at times have been able to cross freely into southern Afghanistan. Roadside bombings and suicide attacks are on the rise. The Taliban have closely watched the insurgent success in Iraq. There's even been evidence the Taliban is conducting rudimentary training inside Afghanistan.
Kandahar where the Taliban first rose to power is now the center of much of the recent violence. Afghan President Hamid Karzai and the top U.S. commander General Karl Eikenberry has been there to try to appeal for calm. But U.S. intelligence officials say there are parts of the region where the Taliban are in control. U.S. and coalition forces are just beginning a series of combat operations against the Taliban that are now expected to continue through much of the summer.
The Taliban really never went away say U.S. intelligence officials. They've just been waiting it out until now, four and a half years after they were chased out of power. The war here U.S. officials say is definitely not over.
There are currently about 23,000 U.S. troops in Afghanistan and the plan for NATO to take over remains on track -- Wolf.
BLITZER: Barbara Starr, she's embedded with U.S. military forces in Afghanistan. Right now her reports will continue in the coming days here in THE SITUATION ROOM. And Iraq and Afghanistan are both certain to be hot topics when President Bush and the British Prime Minister Tony Blair hold a joint news conference this evening. CNN live coverage starts right here in THE SITUATION ROOM 7:00 p.m. eastern.
Coming up, the judicial branch approves a raid of the legislative branch, executed by the executive branch and constitutional questions abound. Now for the first time, President Bush is publicly weighing in on a criminal investigation. And get this... the Palestinian President Mahmoud Abbas gives his rivals in the Hamas led Palestinian government an ultimatum. Act now or else. We'll tell you what he's demanding. Stay with us here in THE SITUATION ROOM.
(COMMERCIAL BREAK)
BLITZER: There were more bloody clashes in Gaza today between Palestinian police and militia men from the ruling Hamas Party. Amid fears that the power struggle could lead to a Palestinian civil war, the Palestinian Authority President Mahmoud Abbas is giving Hamas an ultimatum which could put the militant Islamic group in a very uncomfortable position of having to recognize Israel. CNN's John Vause has the story from Jerusalem -- John.
JOHN VAUSE, CNN CORRESPONDENT: Wolf, the Palestinian Authority President Mahmoud Abbas says there's no time to waste. He's given this new Hamas government to agree to a national unity platform which includes a Palestinian state in the West Bank Gaza and east Jerusalem. If they don't agree he says, he'll go to the people.
(BEGIN VIDEOTAPE)
VAUSE: After a month of violence with at least 10 dead, warring Palestinian factions came to talk. The Hamas prime minister arrived in Gaza. Linked by video hook up to the Palestinian Authority President, Mahmoud Abbas in his West Bank headquarters in Ramallah saying, there was no time to waste. Abbas delivered an unexpected ultimatum. Giving Hamas 10 days to agree to a national platform which includes a Palestinian state in the West Bank, Gaza, and East Jerusalem, or he'll call for a referendum. MAHMOUD ABBAS, PRESIDENT, PALESTINIAN AUTHORITY: It is not enough to say we reject, we reject, we reject. This is easy. We should say we accept, we accept, we accept and we should say what we accept.
VAUSE: As gunman from the Hamas militia traded fire with the regular security services in Gaza, the Hamas prime minister said he was committed to unity and ending the bloodshed.
ABBAS: We support unifying the political vision among us all because this is the way to unify our demands.
VAUSE: And some Hamas officials say they'll support the referendum.
ABDEL AZIA DUAIK, PALESTINIAN PARLIAMENT SPEAKER: It is a fact that through democratic means we can solve our problems.
(END VIDEOTAPE)
VAUSE: It's being called the prisoner's referendum because it's based on a five page document drawn up by Palestinian militants from Hamas, Fatah and Islamic Jihad, all inmates in Israeli jails. And if the Palestinians support this referendum, it could be a way out for Hamas. Essentially de-facto recognition of Israel while not having to change its hard-line charter -- Wolf.
BLITZER: John Vause reporting for us from Jerusalem. Thank you, John. Lou Dobbs getting ready for his program that begins right at the top of the hour and he's standing by to tell us what he's working. Hi Lou.
LOU DOBBS, CNN ANCHOR: Hi Wolf thank you. Coming up at 6:00 here on CNN, more on tonight's summit meeting between President Bush and British Prime Minister Tony Blair. We'll also be reporting tonight on the Senate's vote this evening on a so-called comprehensive immigration reform bill that will give amnesty to millions of illegal aliens and sharply escalate the war on our middle class. We'll have complete coverage for you.
And among my guests tonight, Congressman Steve King who's likely to pay a key important role in the House Senate conference on immigration reform. And tonight, I'll be talking with two of the country's leading authorities on illegal immigration about the huge costs of the Senate's pro-amnesty bill.
And we'll be examining the constitutional show down over an FBI raid on a congressman's office in a bribery investigation. We hope you'll join us for that and a great deal more coming up at the top of the hour. Wolf, back to you.
BLITZER: Thank you very much Lou. Good work. Good interview yesterday with Tony Snow, the new White House press secretary. Still to come in our 7:00 p.m. eastern hour, our live coverage of the news conference between President Bush and British Prime Minister Tony Blair. The leaders will discuss the war in Iraq and what they see as progress there. We're going to have live coverage for you of that. And fresh developments concerning the FBI raid of Congressman William Jefferson's office. President Bush is now weighing in directly. Stay with us. You're in THE SITUATION ROOM.
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BLITZER: You're looking at a live picture of the United States Senate. The floor of the Senate, the vote now underway, well into the vote on immigration reform. Widely expected to pass rather easily. Then the hard work will begin. Trying to reconcile the Senate version with a very, very different version in the U.S. House of Representatives. We'll go back to the Senate once the final vote is announced. In the meantime let's go back to Fredricka Whitfield. She's joining us from Atlanta with a closer look at some other important stories making news. Fred?
WHITFIELD: Hi, again Wolf. In East Timor bullets flying back and forth, homes being set on fire, residents and visitors scrambling for safety. Today, international peace keepers arrive in the capital of East Timor to try to restore some order. Renegade troops and government forces have clashed since March after many in the military were fired after going on strike. At least 12 people are dead, dozens hurt. Some fear the violence could plunge East Timor into civil war.
And in Iraq, students trying to ace their final exams face an even more daunting task, staying alive. To help them today Iraq's government announced it plans to give students extra security as they take final exams next month. Iraq's education minister hopes to prevent any plots. A statement says Iraq will allow students to take their final exams at other testing sites if their own schools are being threatened -- Wolf.
BLITZER: Thank you very much Fred. Up ahead, friends in arms. In our 7:00 p.m. eastern hour, we'll have live coverage of the news conference between President Bush and the British Prime Minister Tony Blair at the White House.
Will they discuss when U.S. and British troops might be able to return home? And from high flying executives to convicted felons. It's obviously a very steep fall from grace. What else do guilty verdicts against Enron's founder and former CEO mean? Jack Cafferty going through your emails. Stay with us.
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BLITZER: OK we have a live picture of the (INAUDIBLE) at the White House. Photographers are scrambling right now. Momentarily, within the next few seconds, the British prime minister, there he is, Tony Blair, will be walking out, getting out of that limo and being received by his friend, the president of the United States.
They're going to go inside, meet for about an hour, an hour and a half. Have some serious discussions. Mostly, we're told, on the situation in Iraq. And then come before reporters, have a news conference at 7:30 p.m. eastern. They're smiling. Let's listen in to hear if they say anything as they go into the White House.
If they did say anything, they didn't say anything really all that important. The president and the prime minister, Tony Blair, George W. Bush, they'll be having a news conference later tonight and we'll carry it here in THE SITUATION ROOM.
Other news we're following. He was an architect of the war in Iraq, now he's a lightning rod for criticism of that war. That would be the Defense Secretary Donald Rumsfeld and how he's standing his ground. Tonight, he'll be joining CNN's Larry King for a special interview. And our Senior Pentagon Correspondent Jamie McIntyre is joining us now live from the Pentagon with a preview. I take it, Jamie, that Larry has already taped the interview with the defense secretary?
MCINTYRE: A fascinating exchange Larry King and Rumsfeld in his office. Of course Rumsfeld said don't expect any big announcements on troop withdrawals yet. And in typical Rumsfeld fashion, refused to speculate how soon troops will be able to come home.
(BEGIN VIDEO CLIP)
DONALD RUMSFELD, DEFENSE SECRETARY: Why should a war be popular? It's a vicious ugly horrible thing. But by golly, if we tossed in the towel every time we had a problem in this country, we wouldn't have a country. We wouldn't have won the revolutionary war.
(END VIDEO CLIP)
MCINTYRE: He said -- Rumsfeld said he refused to give a date of when he thought troops would start to come home in substantial numbers. He says once you give a date, you're stuck with it. More tonight on Larry King Wolf?
BLITZER: Never a shortage of words from Donald Rumsfeld. Thanks Jamie very much. And remember to our viewers, please stay with us for President Bush and Prime Minister Blair, their joint news conference. Our special coverage begins right here in THE SITUATION ROOM 7:00 p.m. eastern. The two leaders will meet with reporters at the White House at 7:30 p.m. eastern. We'll bring it all to you live right here in THE SITUATION ROOM.
And then, stay for Larry's special interview with Donald Rumsfeld that airs on "LARRY KING LIVE" tonight. The defense secretary and Larry King 9:00 p.m. eastern. An interview you'll want to see also here on CNN.
Meantime, there are new developments in the growing constitutional showdown over the FBI's raid of a congressman's office over the weekend. President Bush is now intervening in a very unusual move. Let's bring in our Justice Correspondent Kelli Arena with the latest -- Kelli.
KELLI ARENA, CNN JUSTICE CORRESPONDENT: Wolf, the president has ordered it. The FBI says that it will comply. And the Justice Department says that it will help maintain the integrity of this investigation but that doesn't mean that everyone's happy about it.
(BEGIN VIDEOTAPE)
ARENA: President Bush ordered documents seized from Congressman William Jefferson's office to be sealed for 45 days. It's the first time this president has publicly intervened in a criminal investigation. In a statement, he said the move will provide both parties more time to resolve the issues. Lawmakers were pleased.
REP. DENNIS HASTERT (R), HOUSE SPEAKER: It hasn't been settled, but I think it gives us some time to take a step back, take a breath, and work out the problems.
ARENA: Those problems stem from this weekend when FBI agents armed with a search warrant removed documents from Jefferson's Capitol Hill office. Lawmakers went ballistic, calling it a violation of the constitution's separation of powers.
REP. NANCY PELOSI (D), MINORITY LEADER: This was not about protecting an individual member of congress, but it was in keeping with the speech and debate clause in the constitution of the United States.
ARENA: Jefferson, who denies any wrong doing is under investigation for allegedly taking bribes. In an affidavit, FBI agents said they allegedly found $90,000 in marked bills hidden in his freezer. Justice officials insist every other avenue was exhausted before they sought a search warrant, but got no cooperation from Jefferson.
ALBERTO GONZALES, ATTORNEY GENERAL: At the end of the day, the decision was made that this was absolutely essential to move forward with that investigation.
ARENA: Government and law enforcement officials are angry about what the president did and suggested to CNN that when a possible felony is involved, separation of powers does not apply. One senior official quipped sarcastically, are they going to give Jefferson back the $90,000 too. Steve Pomerantz is a retired FBI agent.
STEVE POMERANTZ, RETIRED FBI AGENT: This is not the time for some sort of a polite accommodation. It just doesn't have a place in the course of a criminal investigation.
(END OF VIDEOTAPE)
ARENA: And this isn't the end of the friction between the FBI and congress. Some members are privately complaining because agents want to interview them in a leak investigation focusing on the NSA's domestic spying program. Government officials say that it only makes sense to interview some members as they knew about the program and they could have told the press -- Wolf.
BLITZER: People in the executive branch could have told the press, too. It's a major investigation, Kelli thank you very much. Meanwhile, the House Speaker Dennis Hastert is outraged and denying a disputed report linking him to a federal corruption probe. "ABC News" quoted unnamed law enforcement sources as saying Hastert is "in the mix of the Justice Department's investigation into the Jack Abramoff lobbying scandal."
The Justice Department has denied the story twice. But "ABC News" says it has double checked its sources and is standing by its report. Hastert has demanded a retraction and he's threatening to sue the network for liable and defamation.
Up next, will the guilty verdicts against Enron's top two former executives send a message to other would-be corporate criminals? Jack Cafferty has your email. Stay with us, you're in THE SITUATION ROOM.
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BLITZER: The Senate has just passed comprehensive immigration reform legislation. A majority of senators now officially voting in favor of the legislation cosponsored by Senators Kennedy and McCain among others. The legislation now goes to the House for a conference report.
A conference committee where it will be battled out because there are serious differences between what the Senate has passed and what the House has passed. Jack Cafferty, no great surprise there. The Senate is on board and now it's going to be a fight between the Senate and the House.
CAFFERTY: Yes. I suppose the conventional wisdom is the House will prevail. The Senate bill is a little more than an amnesty to all these illegal aliens in the country. Former Enron executives Ken Lay and Jeff Skilling convicted of multiple charges including conspiracy and fraud. They'll likely spend the rest of their lives in a federal prison. The question is, what message did the verdict send?
Sylvia in Tennessee writes, "The real message will come when they're sentenced. Hopefully, the judge will have owned Enron stock."
Tom is Naples, Florida: "Jack, you don't really think Skilling and Lay going to jail is going to change what goes in business in this country. It just means everybody has to be more careful not to get caught."
Anne in Pennsylvania: "I hope it sends a strong message to corporate America to stop screwing around with their employees' pensions, retirement funds and jobs. For all of the Enron employees that were robbed of their retirement, pensions and jobs by these guys, it's good news, and I'm sure they feel some vindication."
Dolores writes in Arkansas: "It should certainly make CEOs and other big shots in business think a little before they sign papers and then come back and say they didn't know what was going on."
Dave in Florida writes: "The Enron case says nothing to the would-be cheaters except you'd better put your money offshore before you start your thieving."
And G. writes: "The message is better double up on your political contributions" -- Wolf.
BLITZER: I don't know if you were watching CNN earlier. Kyra Phillips was interviewing some of the Enron employees who lost their entire life savings, their 401(k)s, their retirement plans, one guy $2 million that he had worked his whole life. Nothing in return. These were heartbreaking stories of real people who went down the drain as a result of this kind of corruption.
CAFFERTY: Yes. The other sin is that these two lowlifes -- and that's what they are -- are going to be allowed to remain free pending sentencing on September the 11th, and then I'm sure their lawyers will argue vigorously for them to remain free pending appeal. I assume they plan to appeal. It's too bad they weren't remanded into custody immediately like Dennis Kozlowski, that fat worm that ran Tyco was, and told to begin serving their sentence immediately.
And while they surrendered their passports, these guys had enough money -- I wouldn't put it beyond them -- to be able to figure out access to a private jet and blow the country and wind up some place where they can't be extradited. I hope that doesn't happen, but it's too bad they're out walking around tonight. They ought to be in a cell somewhere.
BLITZER: Jack, thanks very much.
We're going to be back here in an hour for our special coverage of the president's news conference with the prime minister. Our coverage begins 7:00 p.m. Eastern. Until then, thanks for watching. Let's go to Lou Dobbs. He's in New York -- Lou.
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