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Gates & Pace Walk Back Shaky Claims Against Iran; NK Negotiator Details Nuclear Deal; Joe Biden Calls Bush Criticism of Congress 'Ridiculous'Al Qaeda in Iraq Leader Wounded in Battle, Reports Indicated

Aired February 15, 2007 - 19:00   ET

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

WOLF BLITZER, CNN ANCHOR: Happening now, explosives and explanations. Top Pentagon officials are grilled about Iran's role in arming Iraqi insurgents. Is this the last word on why the Bush administration had trouble getting its facts straight?
Also this hour, a slow-bleed strategy, that's what Republicans are accusing Democrats of plotting in the Iraq debate. I'll ask Senator and presidential candidate Joe Biden about the feud over funds for the troops.

Plus, the presidential campaign trail and the money trail, is Hillary Clinton in effect paying for a campaign endorsement? And does Rudy Giuliani's well-paid stint on the speaker's circuit cause a conflict?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

A major new development on the war in Iraq tonight, potentially, at least, and it involves a leader of al Qaeda in Iraq. That country's interior ministry telling CNN Abu Ayyub al-Masri has been wounded in a firefight and his top aide killed. Iraqi police not commenting on al-Masri's whereabouts right now. And the U.S. military saying it has no information.

All of that comes as top Pentagon officials are trying to clarify reports that top Iranian leaders are directly involved in arming Iraq's Shiite militias. Our senior Pentagon correspondent Jamie McIntyre is joining us now live with the latest -- Jamie.

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, Wolf, the U.S. defense secretary said tonight that he's sensitive to the skepticism about U.S. intelligence and that's why he wanted the presentation against Iran to be factual and substantiated by hard evidence.

(BEGIN VIDEOTAPE)

MCINTYRE (voice-over): Defense Secretary Robert Gates made it clear that what he was expecting from last week's Baghdad briefing was facts, not conjecture.

ROBERT GATES, DEFENSE SECRETARY: And to the degree I had any involvement, it was to say I want factual statements. I don't want adjectives. I don't want adverbs. I want the clarity of sentences and make it exactly clear what we know and what we don't know.

MCINTYRE: But an anonymous U.S. intelligence analyst crossed the line, offering his assessment that deadly Iranian-made bombs were being sent to Iraq under the orders of the highest levels of Iranian government. That forced everyone in the chain of command, from the president on down to the Joint Chiefs chairman to disavow the charge and tried to explain what went wrong.

GEN. PETER PACE, CHAIRMAN, JOINT CHIEFS OF STAFF: I wasn't there, so I don't know. But either those who are speaking didn't make a clear enough break between fact and assessment or those listening didn't hear the break between fact and assessment.

MCINTYRE: General Pace insisted the Pentagon had worked hard on the briefing to ensure the data that was going to be put out was accurate. But while professing the need for precision, Gates and Pace were at a loss to explain why such an important presentation was conducted by low-level officials under a cloak of anonymity.

(on camera): Why use anonymous officials and then not allow a taped transcript to be made so that everyone knows exactly what was said?

GATES: I don't know what the circumstances were. Why it was anonymous. Why it wasn't allowed to be taped. I don't know.

(END VIDEOTAPE)

MCINTYRE: Gates says he believes the evidence against Iran speaks for itself. And he hopes that the way it was presented won't harm the case that the U.S. was trying to make -- Wolf.

BLITZER: All right. Jamie, thanks for that. Jamie McIntyre at the Pentagon.

Meanwhile, weeks after Iraq's once iron-fisted dictator is dead, who is pulling the strings in Iraq right now? And joining us now in Baghdad, our correspondent Michael Ware.

Lots of focus on Iran right now. Some analysts here in Washington, Michael, believe Iran, over these past four years since the overthrow of Saddam Hussein's regime in Iraq, Iran has emerged as a big strategic winner in the region. What's the perspective from where you are?

MICHAEL WARE, CNN CORRESPONDENT: Oh, that's correct, without a shadow of a doubt, Wolf. I mean, we've been saying this for years now, that among the big winners of the American invasion of Iraq and the overthrow of Saddam is not just al Qaeda, which is stronger, bolder and much more gnarly than it was before the invasion, but Tehran is a massive winner.

Where once its influence stopped at Saddam's border, now they are not only in most of southern Iraq and much of central Iraq, but they've also got enormous influence in the central government. Indeed, one could argue easily that they have far more sway here in Baghdad than does the American government.

So, yes, it's true to say Iran is a huge victor of the invasion of Iraq.

BLITZER: It sort of reinforces the notion of the law of unintended consequences. Because when the U.S. overthrew Saddam, the hope was that democracy would remerge and that Iran would get the message, the people there would rise up against their own regime, and the spillover from Iraq would prove to be beneficial for U.S. throughout the region. Hasn't exactly happened that way.

WARE: No, not at all. And in fact, I think it's entrenched the power of the regime in Tehran. Arguably, they've never been safer than they are right now in terms of American activity. I mean, the U.S. military is so strained right now, in terms of both men and machine that it's simply too much of an ask to be considering any kind of a strategic strike against Iran.

And indeed, Wolf, should America be readying to go to war against Iran or launch any major offensive, you'll know it because they'll have to introduce a draft.

BLITZER: This notion of an accidental war emerging between the U.S. and Iran, is that a realistic scenario?

WARE: Well, we're certainly not seeing that right now here on the ground. Tensions are acute. But we're not at sort of guns drawn. I mean, remember, this is, from the Iranian point of view, still a proxy war, much like the CIA fought against the Soviets in Afghanistan in the 1980s.

Iran, like the CIA then, is using middlemen. It's not getting its hands dirty. I mean, it still maintains, as an American intelligence analyst put it, plausible deniability. Indeed, said this analyst, they invented it.

BLITZER: Michael Ware reporting for us from Baghdad. Michael, thanks.

WARE: Thanks, Wolf.

BLITZER: The gloves are off and the emotions are running very high in the House debate over a troop buildup in Iraq. Republicans are accusing a leading Democrat of plotting to choke off funding for the troops. And they're sharing war stories to press their points. Let's go to our congressional correspondent Andrea Koppel -- Andrea.

ANDREA KOPPEL, CNN CONGRESSIONAL CORRESPONDENT: Wolf, just as Democrats did earlier this week, Republicans today gave war veterans center stage.

(BEGIN VIDEOTAPE)

KOPPEL (voice-over): Texas Republican Sam Johnson led the debate. Johnson endured almost seven years of torture as a POW in Vietnam and returned home 34 years ago this week. REP. SAM JOHNSON (R), TEXAS: There were many times I would pray to God that I would pass out and slip into unconsciousness, just to escape the pain.

KOPPEL: Johnson was one of a group of Republican vets who shared personal experiences to remind colleagues what happens when congressional support for a war falters.

JOHNSON: The same holds true today. The enemy wants our men and women in uniform to think that their Congress doesn't care about them. That they're going to cut the funding and abandon them and their mission.

KOPPEL: Ohio Republican Paul Gillmor, an Air Force veteran, said the Democrats' non-binding resolution puts Congress at a dangerous crossroads.

REP. PAUL GILLMOR (R), OHIO: It begins this Congress down a path which ends with cutting off funding for our troops and abandoning our foreign policy.

KOPPEL: Democrats deny they plan to cut funding for combat troops.

REP. STENY HOYER (D-MD), MAJORITY LEADER: Obviously, if we send troops to Iraq, they're going to be serving in Iraq. We're going to protect them.

KOPPEL: But in a Web cast interview with an anti-war advocacy group, Democrat John Murtha, who oversees defense spending repeated a promise to tie future funding for Iraq to troop readiness.

REP. JOHN MURTHA (D), PENNSYLVANIA: That stops the surge for all intents and purposes.

KOPPEL: The Republican Campaign Committee jumped on Murtha's comments, circulating a statement calling it the Democrats' "slow bleed: strategy to choke off funding for troops in harm's way.

(END VIDEOTAPE)

KOPPEL: Look for Republicans to continue to hammer way at this theme during the remaining hours of debate. A vote is expected some time tomorrow, and both sides expect it will pass -- Wolf.

BLITZER: Andrea, thank you for that. Andrea Koppel reporting from the Hill. Let's go up to New York and Jack Cafferty for "The Cafferty File."

Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: Hi, Wolf. Well, it's no secret the United States pre-war Iraq planning left a few things to be desired. Now comes more proof of that from a private research group called the National Security Archive which obtained its material under the Freedom of Information Act. In 2002 U.S. officials thought that four years after Saddam Hussein was gone, the situation in Iraq would be quite different than it is today. They expected, among other things, a representative Iraqi government to be in place. The Iraqi army to be working to keep things calm. And as few as 5,000 U.S. troops remaining in-country. A pretty far cry from President Bush sending an additional 21,500 troops to join the 132,000 U.S> troops already in Iraq.

The executive director of the National Security Archive calls the assumptions in these reports, quote, "delusions," unquote. So here's the question: Why was the pre-war planning for Iraq so far off the mark? E-mail your thoughts to caffertyfile@cnn.com, or go to cnn.com/caffertyfile -- Wolf.

BLITZER: They were pretty off the mark, Jack. Thanks very much for that. Coming up here in THE SITUATION ROOM, a top State Department official on the defensive. I'll confront Chris Hill with some tough criticism coming in from his own former colleagues about a new nuclear deal with North Korea.

Also, are presidential endorsements for sale? News questions about a new backer for Senator Hillary Clinton. Also, big bucks and big perks, Rudy Giuliani's gig as a high-paid speaker is now under the microscope because he's a White House hopeful. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: A landmark deal struck with North Korea to end its nuclear program, but critics increasingly concerned the country will repeat the past and fail to live up to its end of the bargain. Joining us now, the assistant secretary of state, Chris Hill, the chief American negotiator. He's just back from those talks.

Mr. Secretary, thanks very much for coming in.

CHRISTOPHER HILL, ASSISTANT SECRETARY OF STATE: Sure.

BLITZER: It didn't take very long for the former United States ambassador to the United Nations to say this is a really bad deal for the United States. Listen to what John Bolton told us here in THE SITUATION ROOM.

(BEGIN VIDEO CLIP)

JOHN BOLTON, FORMER U.S AMBASSADOR TO UNITED NATIONS: It sends exactly the wrong signal to would-be proliferators around the world. If you hold out long enough and wear down the State Department negotiators, eventually you get rewarded, in this case with massive shipments of heavy fuel oil for doing only partially what needs to be done to complete the dismantling of their nuclear program.

(END VIDEO CLIP)

BLITZER: Mr. Secretary, do you want to respond to the former ambassador? HILL: Well, look, he's a private citizen. He's certainly entitled to his views. And I think the president spoke very clearly about this yesterday. What I would say is that it's true, this is only the first step. It's not the whole thing. I mean, what we have is a 60-day agreement where they'll shut down and seal this reactor, the reactor that has been continuing to produce plutonium up to this very day.

And then they -- we will begin discussing with them a list and try to get -- run to ground all of their other programs and go on from there. So it's going to be a step-by-step process.

BLITZER: But as of now -- they get to keep, at least for now, the what, six or eight nuclear bombs that they already have and all of the enriched uranium, plutonium that they've already developed?

HILL: Well, you know, they don't get to keep anything in the sense of they've already agreed to a September '05 agreement in which they say they will get rid of all of their nuclear programs. So what we're going to try to do is do this in phases. And the first phase is going to be to shut down the reactor so that the problem of plutonium, which is on the order of some 50 kilos, that is 110 or so pounds, that that problem doesn't get any bigger. And then we will move from there. So we're really doing this step-by-step.

BLITZER: They had a similar deal, as you remember, back in the Clinton administration in '94, in which they promised to not go forward in exchange for a lot of economic assistance, energy assistance. But they were cheating on that deal. What makes you think they're not going to cheat this time?

HILL: Well, you know, there's always the risk of cheating. And that's you try to keep these on, you know pretty short traunches. I mean, if they cheat in this 60-day process, I mean, we will know that pretty soon. So there's always the threat of that.

But I will say there's one big difference between this deal and the previous deal, which is this is a multi-lateral deal. China acts as a guarantor. They are one of the six parties, and they are part of the deal. And that's very different from the past when it was a bilateral arrangement between North Korea and the United States.

BLITZER: What guarantee do you have that the North Koreans are actually going to destroy their existing nuclear weapons arsenal?

HILL: Well, in this first 60 days, we have got to sit down with them and go through the list of what they're finally going to declare to the international community. And on that list, we need to make sure that we've run to ground our concerns that they are -- that they have a highly-enriched uranium program.

So we're going to sit down with them and go through what we have on that and see if we can figure that out. And after we have done this list, in this next traunche, they are required to put together a declaration, and it has to be all of their programs, not some of their programs. So when we finally see that declaration, we can decide whether we think it's all, rather than some.

BLITZER: And the point that former Ambassador Bolton made that this sends a horrible signal to countries like Iran that the U.S. is willing to go ahead and provide enormous amounts of economic assistance, even if you don't fully destroy your nuclear arsenal. What about that point?

HILL: Well, North Korea is a country that has very little electricity and very little, frankly, heating fuel. Many North Koreans are in the dark and they're cold. So really what we're doing is providing what is essentially some humanitarian assistance in return for them taking steps to get rid of these terrible nuclear programs.

I think if this succeeds, if we're able to do this on a step-by- step basis -- and again, I can't emphasize enough the importance of getting China with us, that was not the case when the earlier program went through. So having China, having Russia with us, having Japan, South Korea, this is quite a powerful coalition. And if we can pull this off, frankly, I think it would be a good sign for other countries.

BLITZER: The U.S. ambassador -- the chief negotiator, Chris Hill, joining us from the State Department. Mr. Secretary, thanks very much.

HILL: Thank you.

BLITZER: Still to come here in THE SITUATION ROOM, a key endorsement and a lucrative contract. We're following Senator Hillary Rodham Clinton's money trail in the race for the White House.

And roads and highways across much of the East iced and dangerous. We have some shocking video of a semi actually crashing into multiple cars. Stay with us. You are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's check with in Carol Costello for a closer look at some other important stories makes news right now -- Carol.

CAROL COSTELLO, CNN ANCHOR: Hi, Wolf. Hello to all of you. An Egyptian accused of masterminding the Madrid train bombing says he had no involvement in the deadly attack. He took the stand today on day one of his trial. He and 29 other suspects are on trial. He spoke to his lawyer but refused to answer questions from prosecutors. The bombings in 2004 killed 191 people and wounded 1,800. The attacks targeted morning rush hour commuter trains in Madrid.

Syria's president is coming to the aid of the estimated 1 million Iraqi refugees living within his country's borders. An Iraqi government news release says President Bashar al-Assad agreed today to help improve the conditions of those refugees. During a meeting with Iraq's parliamentarian speaker in Damascus today, he also discussed the importance of Syria's role in supporting Iraq's political process. Surprising news about the teenager who shot and killed five people at a mall at Salt Lake City this week before police killed him. He was from Bosnia. His relatives said his early life was marked by war and upheaval. They say during the war in Bosnia, he survived a massacre of 8,000 Muslins in Srebrenica. And they say his grandfather was killed in that massacre.

And updating a story we first brought you yesterday. You will remember this one, JetBlue Airways is dealing with more cancellations and irate customers. So far today 150 of JetBlue's 565 nationwide flights have been canceled because of icy conditions. Yesterday, during the winter storm, hundreds of passengers spent up to eight hours stranded on planes at New York's JFK airport. Hundreds of passengers at JFK are hoping to board flights that should have left yesterday, but there is a huge backlog. And they're not having a good time of it today -- Wolf.

BLITZER: What a mess. That mess continuing. Carol, thank you.

By the way, icy roads leading to this dramatic accident on the 71-75 Interstate near Cincinnati. Check it out. A police dash camera recorded the scene as a FedEx semi, skids out of control, slams into a car which then hits the cruiser. Amazingly in all of this, no one was seriously hurt.

Ice and snow are lingering across much of the East this afternoon as well, even as the storm tends to move on. Buffalo, New York, buried under 16 inches of new snow. And the schools there closed for the second day in a row

. To the Northeast, up to three feet of snow fell on parts of Vermont. Schools, businesses, government offices all shut down yesterday. And treacherous driving conditions left roads virtually deserted.

And the National Guard to the rescue on Interstate 78 in eastern Pennsylvania. Seven inches of snow, topped by three inches of ice left the road all but impassible, creating a 50-mile backup and leaving hundreds cars, trucks and the people inside stranded overnight.

And just ahead, opposing the war and funding the troops. Can Democratic presidential candidate Joe Biden have his cake and eat it too when it comes to the war in Iraq? I'll ask him, my interview with the Senate Foreign Relations Committee chairman is coming up.

Also, a surprising assessment of Fidel Castro's health. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM, where new pictures and information are arriving all the time.

Happening now, the top al Qaeda leader in Iraq is hurt and his top aide has been killed. That according to the spokesman for the Iraqi interior ministry. The official says it happened after Iraqi police engaged in a firefight with insurgents between Falluja and Samarra.

The showdown continues this weekend. Senators will spar over an Iraq resolution on Saturday. That's according to the majority leader, Harry Reid. It would be a procedural vote over whether or not to debate the non-binding measure that's now in the House.

Talking terrorists, but not about the world's most wanted terrorist. Regarding Afghanistan, President Bush warns the Taliban are likely to put on a deadly spring offensive. And he says U.S. and NATO forces will stay on the offense. But Mr. Bush did not mention anything about Osama bin Laden or where he might be.

An upbeat assessment, Fidel Castro's son says his father is well and expected to get better. The son says he believes the 80-year-old Cuban leader will see a total recovery.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

The war of words over Iraq is as intense as it ever has been, and it certainly made that very, very clear this week here in Washington. An historic House debate, a presidential news conference, new Senate maneuvers all adding ammunition right now.

And joining us is a leading Democratic critic of the president's Iraq policy, Senator Joe Biden of Delaware. He's the chairman of the Foreign Relations Committee and a Democratic candidate for president.

Senator Biden, thanks very much for coming in.

SEN. JOE BIDEN (D-DE), PRESIDENTIAL CANDIDATE: Happy to be with you.

BLITZER: The president in effect says you and your fellow Democrats who oppose his new strategy are being hypocritical because you all voted to confirm General David Petraeus as the new U.S. military commander in Iraq, but now you're tying his hands.

Listen to what the president said today.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This may become the first time in the history of the United States Congress that it has voted to send a new commander into battle and then voted to oppose his plan that is necessary to succeed in that battle.

(END VIDEO CLIP)

BLITZER: All right, Senator, how do you square that?

BIDEN: I think that's ridiculous. It's a little bit like saying that because I opposed the war in Iraq that I should be against the military. I mean, this is the president of the United States' plan. It's not Petraeus' plan. It's the president of the United State's plan. I know General Petraeus. He's a fine guy. And he's perfectly capable of leading our forces. The policy he's asked to lead on is a mistake.

BLITZER: But the president says General Petraeus put this plan together.

BIDEN: Well, let me say -- but whose plan it is? It's the president's plan, Wolf. Since when does a general set the plans? And I know General Petraeus well. He was arguing for a lot of stuff earlier the president didn't listen to. So, you know, I think it's a silly argument. This is the president's plan. The president's escalating this war. And he should be doing the opposite. He's refusing to talk to the international community about it. He's refusing to bring in the international community to make it the world's problem. He is going about this entirely the wrong way. And we're going to try to stop him.

BLITZER: Now, the issue for funding for the troops is a key issue and it could come up as early as next month. The president, while he's obviously concerned about any symbolic or nonbinding resolution opposing his new strategy, he's really going after you and other Democrats and some Republicans about the possibility of using money, the power of the purse.

Listen to what he said today.

(BEGIN VIDEO CLIP)

BUSH: Our men and women in uniform are counting on their elected leaders to provide them with the support they need to accomplish their mission.

(END VIDEO CLIP)

BUSH: All right. What do you say to the president, who's worried that you're going to tie their hands and endanger their very lives by cutting off funds?

BIDEN: We're not going to doing that. But he's endangering their lives. He's sending 17,500 people into the middle of Baghdad, 6.2 million people, and a lot of them without the right armor, without the right vest.

We ought to get real here. This is a president who sent our troops to war unprepared. He didn't send enough of them to war. Now he's sending them in the middle of a civil war. And as of yesterday the "Washington Post" reporting that we're sending not up-armored Humvees in there. We're sending in these troops, particularly Guardsmen without the actual body armor.

It's about time we start putting the focus. This is the president's badly-run war. He's putting people in harm's way, not prepared.

BLITZER: So are you ready to take the next step, as some of your Democratic colleagues are, and use that issue of emergency funding, the power of the purse, to try to stop this war?

BIDEN: No, that's not how you're going to stop this war. The way to stop this war is what I'm going to try to do next, along with many others. I just came from a meeting with my colleagues. And that is we're going to try to change the authorization for the use of force, redefine what the president is allowed to use force for in Iran-- in Iraq, excuse me -- and make sure he can't go into Iran on a false war.

And so what we're going to try to do is say, "Mr. President, the purpose of your forces in Iraq now is to train the Iraqis, protect the borders, not to be engaged in the middle of a civil war. Mr. President, start to listen to the Iraqi Study Group, start to listen to Biden-Gelb, start listening to all of those other plans out there that have one thing in common: do not escalate, Mr. President. There's a need for a political solution, Mr. President. Get about the business of helping Iraqis arrive at a political settlement. That's called a federal system. Begin to support it, Mr. President. Call in the world to support it. That's the way we'll end this civil war."

BLITZER: Yesterday, I interviewed here in the SITUATION ROOM former Senator Max Cleland of Georgia, who was, as you know, severely wounded in Vietnam. And he appealed to Republicans and Democrats to go ahead and use the power of the purse.

And He said this. I want to you listen to his emotional appeal to you and other members of Congress.

(BEGIN VIDEO CLIP)

FMR. SEN. MAX CLELAND, (D) GEORGIA: We will have a surge, all right, a surge in more planes bringing more casualties into Walter Reed and Bethesda in the dark of night, more arms and legs lost and more bodies coming home with a draped flag over their coffin. That is not the direction we should be going in.

(END VIDEO CLIP)

BLITZER: What do you say to Senator Cleland, who really wants you to stop the war by cutting off the funds?

BIDEN: I say he's absolutely right about stopping the war. The most direct and immediate way to be able to do that is change the authorization, give the president new limitations on what he can and cannot do because there's not a single, solitary person out there, including Max Cleland, who says that we're not going to have to leave behind somewhere around 20,000 forces over the horizon to be able to respond to what may be an al Qaeda movement into areas that can't be controlled by the government. And so this is complicated.

But what is not complicated is the president is escalating this war when we should be de-escalating this war. And the president loves this idea of trying to get it down to whether or not we're going to cut off funds for troops in the field. We have never done that, cut off funds for troops in the field. We cut off funds in the Bolton (ph) Amendment in 1975 after the vast majority of combat troops had already been removed. And we, in fact, had made this crystal clear that this was the end.

There's a lot between now and then, Wolf. As you well know, we must end this war by changing the president's authority to conduct it the way he's doing it.

BLITZER: Do you think Senator Clinton should do what you've done, and acknowledged that your vote in favor of the resolution leading up to the war was a mistake?

BIDEN: That is purely up to Senator Clinton. I have great respect for her. I remember when we both made our statements on the floor of the United States Senate when this war was being voted on. We both squarely said the president was expected to do things he didn't do. And he did the opposite things he said he was going to do. So I don't want to second guess Senator Clinton at all. I just know what I think. I believe, in fact, we made a tragic mistake, assuming that this president had the competence and competent people around him to abide by what he said he was going to do when we gave him the authority to rally the international community to put greater pressure on Saddam to abide by the U.N. resolutions.

BLITZER: Senator Biden, thanks for coming in.

BIDEN: Thank you very much, Wolf.

BLITZER: And remember, CNN is a partner with WMUR television and the "New Hampshire Union Leader" for the very first presidential debates of the campaign season. They're set for this year April 4th and April 5th, the first debates in the lead-off presidential primary state of New Hampshire.

Coming up, Hillary Clinton lands a major catch in the crucial early primary state of South Carolina. And how did she grab the endorsement? We'll explore the fascinating story behind the story.

Plus, Rudy Giuliani's transition. As he makes the move from private citizen to presidential hopeful, some are questioning his lucrative speaking fees.

Stick around. You're in the SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Presidential hopeful Hillary Rodham Clinton insists she's in it to win, but how far will she go to win? That's what some are asking right now, amid a controversy causing them to question if her campaign is paying for support. CNN's Brian Todd is joining us with more on the story -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, the question stems from a deal Mrs. Clinton's campaign has just reached with a politician in South Carolina, who has the ability to deliver a crucial voting block.

(BEGIN VIDEOTAPE)

TODD (voice over): Hillary Clinton's political clout in the South reels in a big catch -- South Carolina state senator Darrell Jackson, a plugged-in, popular leader among African-American voters there. He endorses Senator Clinton for president, but about the same time that deal is reached, there's another. The Clinton campaign hires a P.R. firm owned by Jackson to work the primary season and beyond. Jackson says for at least $10,000 a month.

DARRELL JACKSON (D), SOUTH CAROLINA STATE SENATE: I personally believe she is the best candidate. It is not about the contract. It is not about the money.

TODD: Jackson tells CNN he was courted by other top Democrats, including Barack Obama and John Edwards. One of them offered his firm more money than Mrs. Clinton's campaign, he says, and the firm turned that down.

Jackson points out he does not draw a salary from his firm, and there's nothing illegal about a candidate hiring the firm of a politician who has endorsed them. But one analyst says this arrangement makes Jackson's endorsement less effective.

ROGER SIMON, POLITICO.COM: The endorsement doesn't work because people want to believe endorsements are sincere. And perhaps this is sincere, but once you take cash at around the same time you make your sincere statement, people say, wait a second.

TODD: A spokesman for Hillary Clinton's campaign says upfront, they went after Jackson. The spokesman says Jackson's support and his firm are highly sought after by many campaigns and says, quote, "It's insulting to him to think there's anything shady about this."

Jackson has another concern.

JACKSON: What is somewhat offensive is for anyone to imply that the only reason a prominent African-American will endorse Senator Clinton is because he is being paid off.

(END VIDEOTAPE)

TODD: Challenged by State Senator Jackson, we found at least one other similar case in the same state. Former South Carolina House Majority Leader Rick Quinn, who's white, is supporting John McCain for president. Quinn's father tells us his son's mail processing firm and his own P.R. firm have been hired by McCain in the past and will likely be again.

We should point out, however, Quinn has been out of the state legislature for about two years now -- Wolf.

BLITZER: All right, Brian, thank you for that.

$100,000, a private jet. Not bad for a single speech. And that's just what some likely Republican presidential candidate -- in this particular case, Rudy Giuliani -- commands right now. CNN's Mary Snow is watching the story from New York. She's joining us -- Mary.

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, with Rudy Giuliani hitting the campaign trail, his life as corporate citizen is coming under the microscope. At the same time, he's scaling back his appearances on the speaker circuit.

(BEGIN VIDEOTAPE)

SNOW (voice-over): He's best known as "America's mayor". And since leaving public office, Rudy Giuliani has capitalized on that, giving motivational speeches like this one in San Diego Wednesday.

RUDY GIULIANI (R), PRESIDENTIAL CANDIDATE: We had to cover up the buildings that we thought were going to be attacked.

SNOW: Giuliani can command $100,000 for an event. That's how much the Student Speaker's Bureau at Oklahoma State University paid him last March. Plus, another $47,000 for a private jet.

In a contract obtained by CNN, Giuliani's travel requirements were quite specific. The private aircraft must be a Gulfstream IV or bigger. He didn't end up using them, but also requested in the contract were five hotel rooms, including one for Giuliani. That was to be a large two-bedroom nonsmoking suite with a king-size bed on an upper floor with a balcony and view if applicable.

Political strategists say these type of contracts are not uncommon.

DAVID WINSTON, REPUBLICAN STRATEGIST: I don't think it's anything out of the ordinary. However, having said that, he's a presidential candidate. Everything he's done in the past is going to come under scrutiny.

SNOW: By comparison, former President Bill Clinton averages about $150,000 per speech. Former Secretary of State Colin Powell was paid $75,000 at a speaking event last year.

A Giuliani campaign spokeswoman confirms a "Washington Post" report that Giuliani is now holding off on taking any more fees while his camp consults with the Federal Election Commission. Under FEC rules, candidates who don't hold office can accept money for speeches as long as they're not campaign-related.

Years before Giuliani became a candidate, some of his speeches attracted attention, including one to the South Carolina Hospital Association in February 2005. After signing on, the event was changed to a fund-raiser for victims of the tsunami that hit Asia. Giuliani was reportedly paid $100,000 to speak and donated $20,000 of it to charity. A local Republican lawmaker protested.

TRACY EDGE (R), SOUTH CAROLINA STATE HOUSE: I really thought that just on that one night for a charitable event of that magnitude, he could have charged nothing. I think that would have been the noble thing to do.

SNOW: A Giuliani aide tells CNN following the controversy, Giuliani felt badly about the whole thing and wrote another check for $60,000 to the charity. (END VIDEOTAPE)

SNOW: Now, Giuliani's speaking fees are just a small part of his larger business, Giuliani Partners, sure to come under examination as he continues on the campaign trail. A Giuliani aide says, "People understand Rudy Giuliani has been in the private sector. They understand the difference between public and private" -- Wolf.

BLITZER: Does he still have some of these paid speaking engagements on his schedule?

SNOW: He does, Wolf. And these were engagements scheduled before he announced his exploratory committee. And this is what his campaign is now looking at with the FEC, about how to go forward.

BLITZER: Mary Snow reporting for us. Thank you, Mary.

So what about the rest of the field? Former Senator John Edwards, and former Governors Mitt Romney, Mike Huckabee and Tom Vilsack are among the other private citizens making a run for the White House. The rest are all public officials -- senators like Hillary Clinton, Barack Obama, John McCain, as well as the rest of the members of Congress running for president are prohibited from accepting speaking fees. And state officials, like New Mexico Governor Bill Richardson, also face strict limits on earning cash for their speeches.

Up ahead, Jack Cafferty wants to know why was the pre-war planning for Iraq so far off the mark? Jack is standing by with "The Cafferty File."

Plus, CNN's Jeanne Moos on a bizarre legal battle over Anna Nicole Smith's body. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's go back to New York. Jack Cafferty has got "The Cafferty File." Jack?

CAFFERTY: Wolf, a private research group has obtained documents that show that back in 2002, U.S. officials thought that by now we would have just 5,000 troops remaining in Iraq, and everything would be just swell there.

The question we asked is why was the pre-war planning so far off the mark?

David in Crescent City, California writes: "The intelligence was contradictory and the administration cherry-picked those items that supported what they wanted to believe. This is a weakness that you have to guard against: people fall in love with their pet theories and tend to discount everything else."

Tom writes: "Jack, it wasn't off the mark at all. Bush and Cheney rewrote the intelligence to fit their needs to go to war with Iraq. The same is going to happen with Iran. What is going to stop these guys?"

Chris in Los Angeles: "Dear Jack, Halliburton, KBR and others have made their billions and the oil industry has just made the largest profits in its history. I'd say the pre-war planning worked out just fine."

Lee writes from Milwaukee: "Planning for post-war Iraq was neglected, because regional chaos was precisely the goal of the neo- cons who ginned up the war in the first place. They sure planned well when it came to the permanent military bases we've built. Forget a stable Iraq. That's why we're really there."

Julia in Fremont, California: "Because, Jack, they went to war with the intelligence that they wanted to have, not the intelligence they actually had."

And Wistar in Georgia: "If pre-war planning had been accurate, we would not have gone to war. I guess anyone who did not predict what President Bush wanted to hear was fired, or certainly was ignored."

And Charles writes this: "Jack, can you say "C" students? Mission accomplished, y'all."

If you didn't see your e-mail here, you can go to CNN.com/caffertyfile, where we post more of these online each day -- Wolf.

BLITZER: Thanks, Jack.

Up ahead, a top Nascar driver apologizes for cheating.

Plus, no peace even after death. The body of Anna Nicole Smith is not yet at rest. The battle continues inside a Florida courtroom. Our Jeanne Moos will have more.

Stay with us.

(COMMERCIAL BREAK)

COSTELLO: I'm Carol Costello in New York. We'll get back to Wolf Blitzer and Jeanne Moos's report in just a moment. But first, other stories we're following at this hour.

There is word that Iraqi police may have wounded the leader of al Qaeda in Iraq and killed his top aide. A spokesman for the Iraqi Interior Ministry tells CNN it happened last night during a firefight on the road between Fallujah and Samarra. The U.S. military says it has no information about this report.

Sounds like a game of musical chairs in the Palestinian organizational structure. The Palestinian Prime Minister Ismail Haniya formally announced his resignation today. One of his aides tells CNN that the action was just a procedural move. It's supposed to trigger the reformation of a Hamas-backed unity government under the terms of a recent agreement. Haniya is expected to resume his position once the new power-sharing government is formed. A tense exchange on Capitol Hill today between Fed chair Ben Bernanke and the chairman of the House Financial Services Committee. Bernanke called inflation the greatest risk to the economy. But Congressman Barney Frank challenged that statement, saying slow growth is just part -- is just as big a risk.

Al Gore -- Al Gore is joining forces with big names in the entertainment industry in his latest effort to fight global warming. It's called the Campaign for a Climate in Crisis. And it's main attraction is a 24-hour concert called Live Earth. It will be held around the world on July 7th and will feature more than one hundred artists, including the Red Hot Chili Peppers, Snoop Dogg and Faith Hill.

And racing star Michael Waltrip is apologizing for his team's role in Nascar's biggest cheating scandal ever. Two of his team members were suspended after a fuel additive was discovered. Waltrip says he wants to find out exactly what happened. We'll keep you posted.

Now back to Wolf.

BLITZER: A week after her death, Anna Nicole Smith still is at the center of some stranger than fiction moments, much like those that made her a star of reality TV and the tabloids.

Here's CNN's Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): As in life...

UNIDENTIFIED MALE: Guys, I want your hands on her...

MOOS: So in death. People were trying to get their hands on her.

UNIDENTIFIED FEMALE: They are damning evidence, Your Honor.

UNIDENTIFIED MALE: Your Honor, I object...

UNIDENTIFIED FEMALE: Please let me finish.

MOOS: Who gets the body?

The mother wants Anna Nicole her buried in Texas. The boyfriend wants her in the Bahamas.

UNIDENTIFIED FEMALE: I have people that loved her. And the woman sitting across from me has not laid eyes on that young lady since 1995. And she sits here today to take her to Texas and put her in the ground alone.

MOOS: Alone, as opposed to the plot Anna Nicole was said to have bought for herself next to the son's grave in the Bahamas.

This could be any ugly family argument, but this one involved one of those first name only celebrities.

UNIDENTIFIED MALE: Anna right here, please.

MOOS: And it was on camera.

UNIDENTIFIED FEMALE: Let me finish...

UNIDENTIFIED MALE: It's strange.

UNIDENTIFIED MALE: Talk to me, talk to me...

MOOS: The folksy Florida judge at this hearing kept things under control.

UNIDENTIFIED MALE: Get your pens ready. I'm not doing orders.

MOOS: Anna Nicole's mother's pen was as flamboyant as her daughter had been.

UNIDENTIFIED MALE: Where is she now, physically?

JOSHUA PERPER, BROWARD COUNTY CHIEF MEDICAL EXAMINER: She's physically under refrigeration.

MOOS: Despite the sniping...

UNIDENTIFIED FEMALE: Under Florida law...

UNIDENTIFIED FEMALE: No! Not under...

UNIDENTIFIED MALE: They have refused to present a will.

UNIDENTIFIED FEMALE: That's not true, your honor.

UNIDENTIFIED MALE: No, you cut and pasted...

UNIDENTIFIED FEMALE: I said I had the whole thing...

MOOS: ... the bickering gave away to cooperation.

UNIDENTIFIED MALE: The lady needs to be involved.

MOOS: Off that a similar family fight over another flamboyant celebrity is going on simultaneously.

Almost two months after his death, James Brown's body is still at an undisclosed location, waiting for his alleged widow and children to agree on a burial place.

Since Anna Nicole seemed to like living in front of cameras, she probably wouldn't mind details of her death being televised.

UNIDENTIFIED MALE: And there's a dress, that Anna's dressmaker of 15 years is preparing.

MOOS: The judge didn't seem worrying about dressing, putting on his robe, taking it off in front of the cameras, and several times...

UNIDENTIFIED FEMALE: All of this is going to become...

MOOS: ... the judge's cell phone went off. He had to fumble in his robes.

UNIDENTIFIED MALE: It's my wife telling me what to do.

MOOS: Or maybe it was Anna Nicole calling truly long distance.

ANNA NICOLE SMITH, DECEASED: Hi.

MOOS: Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: Here's a look at some of the "Hot Shots" coming in from our friends over at the Associated Press, pictures likely to be in your hometown newspapers tomorrow.

In India, an artist blows a ball of fire during a religious procession.

In Iraq, Iraqi soldiers guard a border crossing with Iran.

In Germany, men wearing masks parade through a town during a tradition that is supposed to drive away winter.

And in the Czech Republic -- look at this -- a baboon stares at onlookers at a zoo.

Some of this hour's "Hot Shots", pictures often worth a thousand words.

Thanks very much for joining us. I'm Wolf Blitzer in Washington.

Up next, "PAULA ZAHN NOW"

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