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Tug of War over Summer Games; They Gave AAA Grades to Bad Loans; War Funds Steered to Pet Projects; American Father's Jailhouse Interview

Aired October 01, 2009 - 17:00   ET


BLITZER: All right, Jack, stand by.

We want to get to a CNN special event. It's time to reveal one of CNN's top heroes of 2009.

Here's CNN's Anderson Cooper.


Every hour today, we're revealing one of our top 10 CNN Heroes for 2009. From Boone, North Carolina, meet Dock Henley. Through his Wine To Water program, this bartender provides clean, sustainable water to thousands worldwide.

I'll be back in an hour with our next top 10 CNN Hero. And join me for a 360 special at 1100 p.m. tonight to meet all our heroes and begin voting for the CNN Hero of the Year. They'll win $100,000.

BLITZER: And congratulations to all of the heroes -- honorees.

To our viewers, you're in THE SITUATION ROOM.

Happening now, breaking news -- at least 1,100 people are dead after two large earthquakes hit Indonesia in as many days. That word from the United Nations, which says thousands may be trapped in the rubble. We're going to take you to the scene of the devastation.

A former prosecutor says he lied about influencing a judge in the Roman Polanski child sex case. In an exclusive interview, that key figure, David Wells, he joins me to talk about his bombshell revelation.

And he went around the world to try to get his abducted children back from his ex-wife. Now, in a CNN exclusive, an American father jailed in Japan has a message for his kids and for his country.

I'm Wolf Blitzer.


It's a bombshell rocking the high profile case of the director, Roman Polanski, now sitting in a Swiss jail and fighting extradition to the United States. A former prosecutor is now saying he lied about influencing the judge in Polanski's child sex case and that admission could kill Polanski's claims of trial misconduct. That former prosecutor, David Wells, will join us right here in just a few minutes in a CNN exclusive.

But first, more on this stunning twist from CNN entertainment correspondent, Kareen Wynter.

She's joining us with the latest -- Kareen.


Well, the filmmaker who interviewed David Wells for a controversial documentary says she's just astonished that Wells has now changed his story. She says she interviewed him four years ago, Wolf, and that he's never, ever raised any issues about his remarks -- leaving many to wonder why this seasoned attorney now says it was all a lie.


WYNTER: (voice-over): It's yet another bizarre twist in one of Hollywood's most notorious sex cases.


DAVID WELLS, ASSISTANT DISTRICT ATTORNEY: Where he had sexual intercourse with this...


WYNTER: A retired Los Angeles prosecutor now at the center of the more than three decade old Roman Polanski case -- one he had ties to only in the beginning.

TOM O'NEIL, "IN TOUCH" WEEKLY: It's shocking that someone of his rank and his importance in this case would do such a thing.

WYNTER: That former prosecutor, David Wells who, again, was not involved directly in the Polanski case later on, was seen here in the 2008 HBO documentary, "Roman Polanski: Wanted and Desired." Wells initially told the filmmaker he coached then presiding Judge Lawrence Rittenband on the case. That would have violated ethical standards. But the claims opened the doors for Polanski's attorneys, who pushed to have the case dismissed, alleging judicial misconduct -- that his fate was already sealed before he could be sentenced.


WELLS: And what I told him was, I said, you know, judge, you've made so many mistakes, I think, in this case.


WYNTER: Now, that very same David Wells who took credit for those back door judicial dealings says it was all a lie. Like this story in the film, where Wells claims that he counseled Rittenband on Polanski's sentence. (BEGIN VIDEO CLIP FROM "ROMAN POLANSKI: WANTED AND DESIRED," COURTESY HBO)

WELLS: He says, well, what am I going to do or what should I do?

And I said what you should do is send him up for a 90 day observation.


WYNTER: Wells worked in the California courthouse where, in 1977, the famed director pleaded guilty to unlawful sexual intercourse with a minor. Polanski fled the country the following year to avoid sentence. The fugitive director was arrested Saturday in Switzerland. But Wells, a former prosecutor, who's now changed his tune, has also joined Polanski in the spotlight.

And some wonder, was he lying then?

Is he lying now?

And what could his motivations be here?

O'NEIL: Wells thought he could get away with what he believed was a little lie at the time because the judge is no longer alive. And as this steamrolled and the stakes increased, Wells had a moment of conscience and said, oops, I lied.


WYNTER: We reached out to Polanski's U.S. attorneys and they had no comment.

Wolf, the L.A. County District Attorney's office told us anything they have to say will be through legal proceedings or in court -- Wolf.

BLITZER: Kareen Wynter, thank you very much.

And joining us now, the retired deputy district attorney, David Wells, who's now at the center of this controversy.

Mr. Wells, thanks very much for coming in.

WELLS: You're welcome.

BLITZER: Why would you make up this story to HBO?

WELLS: The -- when I was a D.A. in Malibu, the last couple of years in the office, this film crew said that they were from France and making this documentary and they were going to try to sell it over there. I was of the impression that it never would be shown in the United States. And I made these imprudent comments just to liven it up a little.

In retrospect, it was a bad thing to do and I never knew this thing was going to be shown in the United States until somebody called and told me it was on TV.

So, you know, looking back at it now, it was a bad thing to do. But like I said, it's not -- I wouldn't be the first person that's buttered things up for the -- for a documentary. And viewing that documentary, there's a lot of misstatements in there anyway. And -- and they don't all come from the prosecutorial side.

BLITZER: All right. So you basically confirm you did lie -- you say you lied to the HBO documentary -- documentary filmmakers, right?

WELLS: That's correct. Yes.

BLITZER: OK. All right. Let me read to you the statement that Marina Zenovich, the director of "Roman Polanski: Wanted and Desired," the HBO film, what she just put out: "For the record," she says, "on the day I filmed Mr. Wells at the Malibu Courthouse, February 11, 2005, he gave me a one hour interview. He signed a release, like all my other interviewees, giving me permission to use his interview in the documentary worldwide. At no time did I tell him that the film would not air in the United States. Mr. Wells was always friendly and open with me. At no point in the four years since our interview has he ever raised any issues about its content. In fact, in a July 2008 story in "The New York Times," Mr. Wells corroborated the account of events that he gave in the film. I am astonished that he has now changed his story. It is a sad day for documentary filmmakers when something like this happens."

All right, she's definitely contradicting you on several points, including the notion that she never told you this would -- wouldn't air in the United States.

WELLS: You know, it was a long time -- it was a couple of years ago. And my recollection was, she -- she never mentioned her being -- doing this for a French company. But it was my impression it was not going to be shown here.

BLITZER: Based on what?

WELLS: And she -- I had the impression -- I'm sorry.

BLITZER: Based on what?


WELLS: It was not...

BLITZER: How did you get that impression?

WELLS: ...going to be shown -- well, because she hadn't even sold the thing yet. And when she told me that it was for French TV, I think I quipped something to the effect of, well, you're going to need an interpreter, because I don't speak French. And I might have misinterpreted what she said. That's possible, giving her the benefit of the doubt. But I never thought it would be shown here.

BLITZER: But quickly, why is it OK to lie on French TV as opposed to lying on U.S. TV?

WELLS: Well, you know -- you know, I could call it, you know, building a bigger story, putting my -- my part in the case bigger than it actually was. But when you peel away all the feathers and things, it's a lie and I should not have done it. I wish I didn't. When I heard that they were making an issue out of this -- and I knew Polanski had no standing because he was a fugitive. So once that -- once his hearing was denied, I called the D.A.'s office and told them, look, I've got to tell you. I lied about this. I embarrassed the office. I'm sorry I did it, but I'm going to own up to it.

BLITZER: Why did you tell "The New York Times" that you stood by the story you told HBO back in July of 2008?

You told "The New York Times" that you were corroborating it.

WELLS: Well, you know something, I was still trying to back out of this thing, because I figured Polanski was never going to come back. I wanted to put it to bed and I didn't want to hold myself out as a liar. And, as a matter of fact, once he was arrested in Switzerland, I figured, look, I'm going to let this thing out, I'm going to tell the story the way it is and if I take a beating over it, I deserve it. And I do.

BLITZER: Here's exactly some of the...

WELLS: I mean...

BLITZER: ...some...

WELLS: ...I don't like admitting to this.

BLITZER: No, I -- obviously.

Here's an extended clip of what you said in that HBO documentary.

I want to play a little bit of it.

Listen to this.


WELLS: My feeling was he could go on to state prison. Rittenband had asked me about it and I said, judge, I said, you know, you're going to give this guy probation. He said no, no, I want to send him to jail. I said, you'll never do it, because the first thing that's going to happen when you sentence him, he's going to appeal it.

I'm going to give him a year in the county jail. That would be the sentence it appealed immediately. Well, I'm going to give him weekends in the county jail. Immediate appeal. No matter what the sentence was, if it included a day in jail, Dalton, incorrectly so, would have appealed it. And it's going to go all the way up to the State Supreme Court. He has the money. And he'll take it to the U.S. Supreme Court if he thinks he can. He said, well what am I going to do?


BLITZER: That entire conversation that you recount there, was that -- was that whole thing a lie?

WELLS: Yes, it was. That whole thing was complete fabrication. I never discussed this case with Rittenband under any circumstances at any time. The issue of the 1203 -- 03 -- I had discussed that with him many times in the past, with other attorneys, because it was Rittenband's common sentence to say let's send

them up for a diagnostic study and we'll follow the recommendation. And I have a hunch that's what was done on this case. I wasn't there when the plea was taken. I don't know what the contents of the plea are. I could only guess.

BLITZER: While he was awaiting sentencing, did you show this judge a photograph of Roman Polanski with some young women?

WELLS: No. A reporter for the "Santa Monica Outlook" named Dick Brennamen (ph) handed me a newspaper that had this picture on Mr. Polanski at the Oktoberfest. And he asked if I would give it to the judge. I said, well, yes, I'll get it to him. And I gave it to one of the court personnel, who handed it to the judge. And I don't remember whether that was the bailiff or the clerk. I just don't remember at this time. It was a long time ago.

BLITZER: A lot of people are...

WELLS: Did I comment about it to him?


BLITZER: A lot of people are asking this question -- are you lying now or were you lying to the HBO documentary filmmaker?

Because so much is at stake right now. His whole appeal, as you know, was based on -- on what you told HBO.

WELLS: If he had come back, the D.A.'s office, I imagine, would have put me on the witness stand, or Mr. Dalton would have put me on there, and I would have told the story I'm presently telling, that I had not discussed the case with Rittenband That would have been a surprise to them. I didn't want to surprise either one of them. So I told the D.A., after the judge denied his motion to set aside the plea, that I had lied and I was available for a statement if the D.A.'s office cared to take one from me.

BLITZER: The California bar.

WELLS: ...and then...

BLITZER: The California bar...

WELLS: ...when he was arrested. BLITZER: ...Mr. Wells, is probably going to investigate your behavior, given the fact that you're an attorney.

Are you ready to say under oath what you're saying to all of us right now?

WELLS: Absolutely. Absolutely.

BLITZER: Are you ready to take a polygraph test?

WELLS: And I'm even willing to take a polygraph over it. Oh, yes, yes. I'll take -- from a reputable polygraph operator, yes.

BLITZER: Because we'd be more than happy to get a reputable polygraph operator to come in and -- and film you taking this polygraph on this sensitive subject.

WELLS: I would be happy to do that and I have no problem with it.

The only issue is what is the position of the district attorney's office on this?

As you know, polygraphs are inadmissible in court. They may not want me to do it. If they say don't do it, I won't do it. But I'm willing to do it. I don't have any problem with that.

BLITZER: Because this wouldn't be for court, this would just be for the court of public opinion -- for the world to see you take a polygraph and -- and to clarify once and for all whether you lied then or you're lying now.

WELLS: If this case went to trial, everybody that hears that polygraph result or hears what I said are going to know about it. It's going to be as difficult to get a jury in this case as there was in O.J. Simpson. And I'm not going to do anything more to -- to hamper the district attorney's case. I'm just not going to do it. I mean it's not easy for me to get up there and admit to the world that I lied. I mean this is mortifying, but it's the truth.

BLITZER: And to get back to that lie, you did it because you thought, what, it was going to make you look more important, make you look better?

Is that why you did it?


BLITZER: And -- and did you get paid from the HBO documentary filmmaker?

Were you paid for this?

WELLS: Of course not. I wouldn't take any money for something like that.

BLITZER: So it was simply your...

WELLS: That would have -- I was a DA. It was improper for me.

BLITZER: It was simply your ego at the time and you wanted to pretend that you were a lot more important in this case than you actually were?

WELLS: You're saying it better than I am, but what you're saying is true.

BLITZER: That's the truth and the whole truth?

WELLS: That's the truth, the whole truth and nothing but the truth.

BLITZER: Did you understand...

WELLS: And if the L.A. County D.A.'s office...

BLITZER: Did you understand, at the time, that this could be interpreted as prosecutorial misconduct and -- and this whole case could be thrown out based on the way you were describing the events to the HBO filmmakers?

WELLS: No. It never crossed my mind because I never think -- thought that this thing would surface in the United States. That was my state of mind.

Now, did -- did I misunderstand what the lady, producer, director said?

That's possible. But I -- I never would have made that statement if it was shown here. I didn't think -- you know, in fact, in the beginning, I asked her, why would you want to make a movie about Polanski?

This is 30, 35 years old. It -- it's not news. Oh, yes, people want to hear it. And I was all right.

BLITZER: Because the argument some are making now is that you're coming out with this second story, claiming you lied back in 2005, but coming out with this second story because now he might be coming back and this whole case could be thrown out based on what you told HBO.

Is that why you have now changed your story?

WELLS: That's not why I changed, but -- but you're correct. Based on the original statement, it could throw the case out. And I'm not going to let that happen. I'm not going to hide behind a lie. I just won't do it. It's unethical. This case is an active case again. It's not something that's past history. And, you know, the credibility is based on the fact that I'm destroying my character in public. And everybody in the world knows about this. This is not easy for me.

BLITZER: Obviously, it's -- it's a very painful situation. But is it correct to say, Mr. Wells, that you're telling this story now because you want to make sure that if, in fact, he does come to the United States, he goes to jail?

You want to see Roman Polanski in jail?

WELLS: It doesn't matter what I want with respect to Roman Polanski. I'm not part of the prosecution anymore. And that's irrelevant, what I want. I want to see that justice is done. And for me not to say anything or wait until the last minute until I'm called as a witness to say something, again, goes to the credibility of the statement I'm making now. I voluntarily went to Marsha Clark on her blog and I said, look, I'm going to lay this out for you and tell you the truth. It hurts.

And she said, do you want to use the word lie?

I said, it's going to get down to that eventually, so you might as well put it in now. And that's -- that's my motivation.

BLITZER: Have you spoken with...

WELLS: I loved that office I worked for. I...

BLITZER: Have you spoken with anyone in the district attorney's office since -- since Roman Polanski was picked up and arrested in Switzerland?

WELLS: Absolutely not.

BLITZER: Do you want to?

WELLS: That's up to them. They know how to get a hold of me. And I told them way back, after they denied his first request to set the thing aside, when I called the D.A. who's on the case, David -- and I can't remember his last name. I said, well, why don't you get a statement from me in case something happens to me or something, so it's -- at least it's cleared up.

BLITZER: If this were...

WELLS: But they can't just put that statement in. It's hearsay.

BLITZER: If this were someone else, another retired district attorney, another former prosecutor who behaved as you -- as you have behaved in this -- in this case of the interview and now this, is that grounds for being disbarred, do you think?

WELLS: I don't think so. I don't think so. I -- I have always been honest and truthful in my profession. In my dealings in court, in my dealings with defense attorneys, dealings with prosecutors, judges, you contact any of those people and they'll tell you that they have a high regard for me -- or at least did before this.

BLITZER: All right. So just wrap this up for us, Mr. Wells. Tell our viewers in the United States and around the world -- because people all over the world are fascinated by this case and they're watching -- why all of us should believe you now as opposed to then.

WELLS: You know, I can't -- I can't make somebody believe me. The only thing I can say is why would I make this thing up and change my statement and subject myself to international embarrassment unless the statement was true?

BLITZER: All right. Mr. Wells, thanks very much for coming in and offering us your side of the story.

I suspect the story is by no means going away.

WELLS: I would think not.

BLITZER: Thank you.

WELLS: You're welcome.

BLITZER: Another exclusive guest coming up in THE SITUATION ROOM in the next hour, by the way, Governor Arnold Schwarzenegger.

I'll ask him for his take on the Roman Polanski case.

Let's go to Jack Cafferty right now for The Cafferty File -- Jack.

CAFFERTY: This country ought to be embarrassed. Our government has turned the debate over health care reform into a series of misrepresentations, name-calling and a bunch of ugly comments that are more fit for a schoolyard than a national forum.

First came the Republicans, led by Sarah Palin, who went on and on about death panels.

She was followed by Congressman Jim Wilson, who called the president a liar during his speech to a joint session of Congress -- a public outburst toward the president that I don't recall ever seeing the likes of.

But it's by no means just the Republicans. On the floor of the House of Representatives, freshman Democratic congressman, Alan Grayson, from Florida, claimed the Republican health care plan calls for sick people to, "die quickly." Grayson then went on to issue a non-apology, saying he apologizes to, "the dead and their families that we haven't voted sooner to end this Holocaust in America."


He's comparing the plight of uninsured Americans to the Holocaust?

Grayson is a real class act. Right here in THE SITUATION ROOM yesterday, he called Republicans "foot dragging, knuckle dragging Neanderthals."

What's happened to us?

We used to be able to have an intelligent debate, compromise, reach a consensus and move on.

And when the government engages in this kind of childish behavior for months on end, it's no surprise when ordinary Americans begin yelling nasty slogans and lies at each other in the streets or in town hall meetings. Sad.

Here's the question -- when it comes to health care reform, whatever happened to intelligent debate in this country?

Go to and you know the rest.

BLITZER: We certainly do, Jack.

A good question.

Thanks very much.

The death toll soars in the wake of a massive earthquake -- dramatic rescues as survivors are pulled from the rubble.

Also, President Obama pulling out all the stops to try to bring the Olympic Games to his hometown -- but does Chicago really want to play host?

And his last flight on this route ended with the so-called miracle on the Hudson. Now, Captain "Sully" Sullenberger hops into the pilot seat again -- flying the same route for the first time.


BLITZER: Breaking news out of Indonesia right now. The United Nations reports at least 1,100 people dead following two large earthquakes in as many days. There are fears that thousands may be still trapped in damaged buildings.

CNN's Dan Rivers is on the scene of this horrific devastation.

DAN RIVERS, CNN CORRESPONDENT: We're outside one of the main hospitals here in the City of Padang -- a city that is devastated and that is in almost complete darkness. This is one of the few locations where they do have electricity running on generators.

But the hospital itself has been badly damaged. You can see outside on the front here those yellow body bags containing 12 different corpses -- just some of the dead that have been recovered. The death toll is climbing all the while, as the rescue operation continues here. But it's being hampered by a lack of light, a lack of power, a lack of food and water, as well, huge long cues for fuel -- many people trying to get fuel for their generators and the cues, we're being told, are two hours long at the moment.

Through the city, the little that I have seen so far, there are quite large areas that are still intact. But there are some big concrete buildings that have come down, clearly with real devastating results. This city is used to earthquakes. It's been hit before. This is, by far, the most devastating earthquake here in this city. And now everyone is wondering quite what the extent of this is.

We're still waiting to hear from the coastal areas and some of the -- the more outlying areas as to the death toll there. But it's a pretty grim picture here at the hospital.

And one update, as well, we wanted to give you about one man, my camera man, Mark Phillips (ph), that managed to talk to who was buried in the rubble. We understand that man from Singapore has now been rescued and he is in this hospital. We understand he is alive. We don't have any update on his condition -- one good piece of news amid all this mystery.

Dan Rivers, CNN, Padang, Indonesia.

BLITZER: President Obama taking unprecedented steps to try to bring the Olympic Games to his hometown, but there's a major divide in Chicago right now over whether to host the Games. We're there. We're talking to both sides.


BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, Arnold Schwarzenegger -- he's here in THE SITUATION ROOM talking global warming, health care reform, legalizing marijuana, the Roman Polanski case and more. My interview with the California governor -- it's an exclusive. We're only minutes away from that.

Also, the last time he flew this route, it ended with the miracle on the Hudson. Now, Captain "Sully" Sullenberger is back in the pilot seat. He's flying New York to Charlotte for the first time.

And you're about to meet another of our top 10 CNN Heroes of 2009.

CNN's Anderson Cooper is standing by to introduce us.

I'm Wolf Blitzer.


A power struggle is underway right now over who will host the 2016 Summer Olympic Games. Sources tell CNN Chicago may be a frontrunner, as the International Olympic Committee meets in Copenhagen, Denmark. The first lady, Michelle Obama, and the talk show host, Oprah Winfrey, they are already there. They're lobbying for their hometown. President Obama plans a personal appeal tomorrow.

Back in Chicago, boosters and critics are already looking ahead.

Let's go to CNN's Mary Snow.

She's in Chicago with more. Quite a debate underway there -- Mary. MARY SNOW, CNN CORRESPONDENT: There really is, Wolf. And there's so much anxiousness here, as the countdown clock enters its final hours. But there's a real divide. There are some people in this city who are dead set against having the Olympics here. And others, of course, are planning for a multi-billion dollar investment.


MARY SNOW, CNN CORRESPONDENT: More than 700 feet above the ground, what some see as downtown Chicago, Beth White of Chicago's Olympic bid committee has another view.

(On camera): What do you see out there?

BETTY WHITE, CHICAGO 2016: Yes, I see a fantastic Olympic Games.

SNOW (voice-over): Her vision? Using this football stadium and convention center to host more than a dozen games. And using Chicago's lake front for kayaking and canoeing. White says a key selling point is that 90 percent of the athletes will be staying within 15 minutes of the venues.

WHITE: You can see venues that are already built. We have so many existing structures that are here, it makes our budget feasible.

SNOW: Part of the plan is to build a temporary stadium in this park where we met up with University of Chicago economics professor Allen Sanderson. He thinks the real cost will be three times Chicago's estimate of over $4 billion.

ALLEN SANDERSON, UNIVERSITY OF CHICAGO ECONOMIST: And we use Athens, Beijing, Sydney and London coming up. I suspect the number will be $15 to $20 billion. We'll do fine if it's $5 billion. We will not do fine if it's $15 billion to $20 billion.

SNOW (on camera): If it's $15 billion to $20 billion, who pays?

SANDERSON: Well, ultimately the taxpayer.

SNOW (voice-over): And with Chicago's economy already in distress, there is skepticism. Bob Quellos is cofounder of No Game Chicago.

(On camera): That sign says "Imagine." You see that. You think what?

BOB QUELLOS, NO GAME CHICAGO: I think imagine better schools, better transit, better clinics for neighborhoods and better housing in the city. I think those are things that we should start with, not the Olympics.

SNOW (voice-over): Quellos' group protested this week and sent representatives to Copenhagen to try to persuade the International Olympic Committee not to pick Chicago. And despite the city's hard sell for its Olympic bid, residents of Chicago are divided. UNIDENTIFIED FEMALE: I've seen how Chicago politics works. I know how Chicago politics work, and I don't trust the politicians of Chicago.

UNIDENTIFIED MALE: The economic development leading up to that over the next seven years, it will be a great way to showcase everything that we have to offer here in the city.

UNIDENTIFIED FEMALE: Personally, I'm a little undecided.

SNOW (on camera): Why?

UNIDENTIFIED FEMALE: I like the idea. But then the cost, everyone I know is concerned about the cost to the city itself.

SNOW: To taxpayers who say we're nervous because we're afraid that we're going to have to foot this bill?

WHITE: Don't be nervous. We're going to make you proud. And we're going to live within our means.


SNOW: And, Wolf, to give you an idea of just how extensive the process has already been, some economists estimate that it's cost Chicago $100 million just for the bidding process alone. Now Chicago 2016 team, of course, hoping for the best, planning a rally here in Chicago tomorrow as the announcement is made -- Wolf?

WOLF BLITZER, CNN ANCHOR: We'll get the results early afternoon tomorrow. Thanks very much, Mary, for that.

Money meant to help troops fight a war instead being spent on senators' pet projects back in their home states. Are the troops and the taxpayers losing out?

Plus, will the Governor Arnold Schwarzenegger pardon Roman Polanski if he's brought back to California and ends up facing punishment? I'll ask the former movie star -- that would be Arnold Schwarzenegger -- how he views the filmmaker's child sex scandal.

Stay with us, you're in THE SITUATION ROOM.


BLITZER: Before the financial markets collapsed like a house of cards last year, credit rating agencies gave their highest rates to some highly problematic securities made up of those unreliable subprime loans. Now these agencies are being targeted for major reform.

CNN's Brian Todd is looking into this.

Brian, what are you finding out?

BRIAN TODD, CNN CORRESPONDENT: Wolf, on Capitol Hill and on Wall Street, there is new scrutiny for those firms accused of allowing so many shaky mortgages to lead to a wider financial meltdown.


TODD (voice-over): Did Wall Street's umpires gloss over some critical weaknesses in the mortgage market right before the financial meltdown? The three top credit rating agencies are accused of giving overly optimistic ratings like the top designation AAA to shaky mortgage backed securities right up to the point many of them failed.

A whistle blower at Moody's told Congress his group gave some securities inflated ratings that it knew were wrong. And...

ERIC KOLCHINSKY, FORMER DIRECTOR, MOODY'S INVESTORS SERVICE: The groups always routinely bullied by business managers and their decisions are overridden in the name of general rating review.

TODD: Clients like investment banks would shop around to get the most favorable rating. But a representative of Moody's said there was no favoritism or fraud. They were just plain wrong in judging the market.

RICHARD CANTOR, CHIEF RISK OFFICER, MOODY'S CORP.: We were not alone in being mistaken about this. Most observers of the market, I would say nearly all observers of the market, were completely surprised by what happened.

TODD: Officials at the other top ratings firms, Standard and Poor's and Fitch, also deny wrongdoing and say they, too, simply misjudged how far the housing market would fall.

Credit rating agencies are supposed to rate how strong or weak so-called mortgage-backed securities are. Since many of those securities were created from unstable subprime mortgages they plunged in value when the housing market collapsed and the financial system nearly crumbled with them.

Mortgage backed securities are created when big investment banks buy a bunch of mortgages from local banks, pool them in portfolios and sell them to investors around the world.

What effect does the credit rating crisis for those securities have on average homeowners?

PROF. JOHN COFFEE, COLUMBIA LAW SCHOOL: Until we get the credibility of credit ratings restored, housing finance in the United States is at a total standstill. All of these asset-backed securitizations have been paralyzed. They're no longer being done. Unless they are done small banks really can't finance the demand for housing.


TODD: Now some members of a congressional committee looking into all of this also say that these credit ratings firms have conflicts of interest. That they're paid by the investment banks underwriting those mortgage securities to rate those securities, but that the underwriters also want to trade the securities so they have an interest in higher ratings.

But all three firms say they are transparent about what they do and they have built in firewalls to guard against conflict, Wolf.

BLITZER: Has there been any disciplinary action, Brian, taken against these analysts who gave these loans, these AAA ratings when they should have really given them D minus or F?

TODD: In a word, no. From congressional testimony, from our own calls to these firms, there's been no word of any disciplinary action, no terminations, to any analysts or others who gave these inflated ratings. One official from Fitch says that they give ratings by committee, not by individual. But again, these companies reiterate they just didn't know that the markets were going to fall. A simple misjudgment so why fire anyone.

BLITZER: Can anything be done basically about the system because so many investors out there, they go out and buy these AAA rated bonds when -- they rely on these companies.

TODD: That's right. Well, the one gentleman we interviewed from the piece, Mr. Coffee, from Columbia he's part of a task force looking into this for Congress. A bipartisan task force.

He says they're looking into doing a couple of things here. One, making it mandatory for these firms to do their own due diligence about these securities. Right now they just rely on the word from the investment banks who are underwriting it. Also create more of a risk of liability if they screw these things up. You know whether that ever comes to pass or in what form once it gets through Congress, we don't know yet. But they're trying to reform.

BLITZER: These firms have their credibility at stake.

TODD: That's right.

BLITZER: And they obviously messed up this time. Let's see what happens. Thanks very much.

Money meant to help troops fight a war is instead being spent on senators' pet projects geared more toward helping their home states.

Let's bring in our senior congressional correspondent Dana Bash. She's digging deeper into this.

Dana, what are you learning?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: We're learning that even in a time of war, Wolf, even in a time of record deficits here on Capitol Hill, pork still reigns.


UNIDENTIFIED MALE: I'd like to present each of you with a...

BASH (voice-over): Utah National Guardsmen returning from risky deployments receive a gesture of appreciation. A video scrapbook about their battalion and tour of duty.


UNIDENTIFIED FEMALE: It's your story told your way.


BASH: It's produced by a business in Utah called StoryRock. Utah's senator, Robert Bennett, wants to help his home state company take this nationwide. So he's secured a $5 million earmark in the defense spending bill. And get this. It's coming from the fund that's supposed to pay for basic needs for troops at war. Like food, fuel, and ammunition.

We found Senator Bennett and asked him why he's taking money from wartime operations funding.

(On camera): Why is it important to make what is essentially scrapbooks for members of the National Guard?

SEN. ROBERT BENNETT (R), UTAH: It's been proven to be a very strong retention tool, recruitment tool. The military spends a lot of money to try to get people to re-enlist. We're frankly saving them some money.

BASH (voice-over): Bennett is unapologetic, and hardly the only senator using this budget to bring home the bacon. We counted 59 earmarks from both Republicans and Democrats totaling nearly $172 million. In the fund slated to pay for troops' essential needs.

SEN. JOHN MCCAIN (R), ARIZONA: This is the life blood of our military.

BASH: Anti-earmark crusaders like John McCain call it an outrage. And the Pentagon which didn't ask for the pet projects doesn't like it either.

GEOFF MORRELL, PENTAGON PRESS SECRETARY: Every dollar that we are forced to spend on things which we do not need requires us to take money from things which we do need. And the people who lose in that trade-off are our troops and the taxpayers.

BASH: The Pentagon did not request cold weather gloves for troops in Afghanistan. But Delaware's Tom Carper got $5 million for one company, W.L. Gore, GORE-TEX, which has 640 employees in his state.

SEN. TOM CARPER (D), DELAWARE: You know, special forces fighting in very difficult conditions in the winters in the mountains in Afghanistan, I want to make sure they have what they need to be safe.

BASH: Carper admits his earmark will help folks back home. But says it helps troops, too. That's what Olympia Snowe says. She's sending $20 million home to Maine to fix Humvees.

(On camera): Is this something that the Pentagon specifically asked for?

SEN. OLYMPIA SNOWE (R), MAINE: You know, I don't know. But, you know, we-- it's not only the Pentagon's decisions. It's -- there are several branches of government. Legislative branches. One of the three. And I think it's -- it's a mutual decision making process.

BASH (voice-over): In fact, all the senators we talked to with pork projects had one common defense.

BENNETT: Congress has the power of the purse.

BASH: It's their job.


BASH: Now there is more transparency in earmarks these days. Lawmakers are required to make them public and post them online. But, Wolf, watchdog groups argue that they are still a problem because they are still projects that are secured by powerful lawmakers and sent back home with no bidding and no competition. Wolf?

BLITZER: All right. Thank you.

He went around the world to try to get his abducted children back from his ex-wife. Now in a CNN exclusive, an American father jailed in Japan has a message for his kids and for his country.


BLITZER: His Japanese ex-wife abducted their children, fled to her homeland. He followed them all the way from Tennessee but was jailed when he tried to grab the kids back. Now an American dad sit in a Japanese jail, charged with kidnapping.

CNN's Kyung Lah was granted an exclusive interview.


KYUNG LAH, CNN CORRESPONDENT (voice-over): In a second floor interrogation room, we waited for Christopher Savoie on our side of the glass. Police gave us 15 minutes. A stopwatch running in the corner. We took our electronic devices, no cameras, no tape recorders. And then an emotional Christopher Savoie entered the room.

"I'm so scared," he said, carefully choosing his words and speaking in Japanese as required by police during a jail visit. "I don't know how long I'll be in here. I want Americans to know what's happening to me. I didn't do anything wrong. Children have the right to see both parents. It's very important for my children to know both parents."

Police have charged him with kidnapping his two children as they walked to their school here in Yanagawa, Japan. Savoie drove 8-year- old Isaac and 6-year-old Rebecca to the U.S. consulate but Japanese police arrested him just steps from the front gate. Under U.S. law, Savoie has sole custody. But in Japan, ex-wife Noriko who abducted the children from the U.S. is the recognized guardian.

"Japanese people think she's the victim here," Savoie told me. In the States, my ex-wife is the one who's in the wrong."

In this rural town in southern Japan, those who've heard about the case side with the mother. Even knowing the U.S. courts awarded custody to the American father.

"They belong with their real mother," says this woman. That cultural divide is what Savoie's attorney says is difficult to fight, who says Japanese law clearly sees Savoie as the criminal.

"He technically may have committed a crime according to Japanese law," says his attorney. "But he shouldn't be indicted. He did it for the love of his children."

Savoie wanted us to get this message to his children.

"I love you, Isaac, Rebecca. Your daddy loves you forever. I'll be patient and strong until the day comes that I can see you both again. I am very sorry that I can't be with you."

(On camera): We have reached out to Savoie's ex-wife, Noriko, but so far she has not responded to our request for an interview. As far as the two children, they've been returned to her custody.

Kyung Lah, CNN, Yanagawa, Japan.


BLITZER: More than eight months after becoming a hero, the so- called "Miracle on the Hudson" pilot now flies that fateful route for the first time. Captain Sully Sullenberger speaking out about his return.

And I'll go one on one with the California governor Arnold Schwarzenegger. How serious is he about water conservation?


BLITZER: Is it rue, Governor, that you're regulating the amount of time your kids can be in the shower to help save water?

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: Well, to be honest with you, I think that if you don't start with the children, with our next generation, you don't have much.



BLITZER: The last time he pilot a plane from New York to Charlotte it ended in what became known as the "Miracle on the Hudson." Today U.S. Airways Captain Sully Sullenberger flew the same route again for the first time reunited with his first officer, Jeffrey Scott.


CAPT. CHESLEY "SULLY" SULLENBERGER, "MIRACLE ON THE HUDSON" PILOT: It's good to be back in New York. It's good to be back at work.


I should say it's good to be back at work at U.S. Airways. I have been working for quite a while. But New York and New Jersey have been very good to us. Not only on January 15th but since.

On Saturday morning, January 17th, after my first interview with the investigators, U.S. Airways officials asked me what I need from them. And I had only one request. And that was when I did return to work, I wanted to be reunited with my crew from flight 1549 on January 15th.


BLITZER: Among the passengers on today's flight, some were on the flight back in January.


CHRISTY SPEARS, "MIRACLE ON THE HUDSON" SURVIVOR: I've had the fortunate opportunity to meet with Sully a couple of times, he's a wonderful man, he's a wonderful pilot. I would trust him with my life and obviously it was good to do that today.


BLITZER: By the way Sullenberger's flight arrived safely in Charlotte ahead of schedule.

The start of nuclear talks with Iran today, what did the Obama administration get out of them? The president himself explains.

Plus my exclusive interview with California's governor Arnold Schwarzenegger.


BLITZER: Check back with Jack Cafferty for "The Cafferty File" -- Jack?

JACK CAFFERTY, CNN ANCHOR: The question this hour is: When it comes to health care reform, what ever happened to intelligent debate in this country?

Kelli in Cleveland: "For an intelligent debate, those involved have to actually use facts to make their arguments. These aren't debates. They're shouting matches. Factual intelligent debates don't get airtime."

Kathryn says: "When our elected leaders are bought and paid for by the special interests of the health care industry, they have no reason to debate compromise or come to a consensus. They already know what they want the outcome to be. And any distractions serves their purposes to keep legitimate debate and compromise from happening."

Marco writes from Gainesville, Florida: "Hey, hey, LBJ, how many kids did you kill today? I firmly believe, Jack, that you are pining for a past that never existed. Comments like the one I quoted above have been a staple in America politics since I suspect our inception."

Monica writes from Michigan: "Calm and rational debate ended when the country elected its first African-American Democratic president and the Republicans drew a line in the sand. From day one the Republicans said they wanted Obama to fail and followed the likes of Rush Limbaugh. The GOP doesn't want to debate the issues on their merits or based on what Americans really want. They're out to defy this president no matter what."

Joe says: "Intelligent debate requires intelligent people and Washington has been lacking those for a long time. With lawmakers voting on bills they don't read, ignoring the voices of their constituents, and putting their own political careers before doing the right thing, good luck."

Glenn in California writes: "The health insurance companies paid for to go away." And Jill in Texas said, "What happened to intelligent debate? It got sick and died."

If you didn't see your e-mail here, go to my blog, Check them -- Wolf?

BLITZER: Jack, thanks very much.

And now a special event. It's time to reveal one of CNN's top heroes of 2009. Here's Anderson Cooper.

ANDERSON COOPER, CNN ANCHOR: I'm Anderson Cooper. Every hour today we're revealing one of our top 10 CNN Heroes for 2009.

From the Philippines meet Efren Penaflorida. His program, to bring tutors to at-risk kids. He's giving children an alternative to gangs. I'll be back in an hour with our next top 10 CNN Hero.