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The Situation Room

President Obama Postpones Foreign Trip; Interview With Mexican Ambassador to United States

Aired March 18, 2010 - 18:00   ET

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

WOLF BLITZER, CNN ANCHOR: And, to our viewers, you're in THE SITUATION ROOM.

Happening now: With his hosts already rolling out the red carpet and the White House press corps already in the air, President Obama decides to push back his foreign trip, as Democrats make a final push for health care reform.

After U.S. citizens are caught up in the latest violence near the border, is it safe for Americans, and others, to visit Mexico right now? I will ask Mexico's ambassador to the United States.

And food stamps have turned into debit cards, but now some of those cards are being used to commit fraud against U.S. taxpayers. We will take you inside an undercover investigation.

I'm Wolf Blitzer. We want to welcome our viewers in the United States and around the world. You're in THE SITUATION ROOM.

As Democrats work for a vote this Sunday on health care reform, President Obama's keeping a close eye on their efforts. He's made now a last-minute postponement of his trip to Asia, putting it off until June.

It was so last minute that a plane with CNN journalists had already left, now already halfway around the world.

Our White House correspondent, Suzanne Malveaux, is joining us on the phone from Singapore.

Suzanne, what did you learn about this trip, the postponement, obviously a very significant development? The president was supposed to be going to Indonesia and Australia.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, I have to say, I must admit, I thought it was an early April Fool's joke when we landed here in Singapore.

We had just got off the plane here. We were in the airport. This is really after a 24-hour journey that started Wednesday afternoon from Washington and then through Newark and then on from Newark to Singapore, an 18-hour flight, and our BlackBerrys were just buzzing. We were finally able to get them to convert over to the Singapore network here. And we all found out. Just -- we were just shocked that the trip had been actually postponed here. And this is -- as you mentioned, we're halfway around the around the world here. We have got about a two-hour delay here, and then we will be moving on.

We are going to go on to Jakarta. It's a two-hour flight from here. We're 12 hours ahead of where you are, Wolf, so it's actually 6:00 in the morning here on Friday. So, if you can imagine leaving Wednesday and arriving on Friday, that's where we are in our journey.

And we're going to go ahead. We're going to move forward to Jakarta, where we're meeting with my producer (AUDIO GAP) and photographer Mike Green (ph), because we have got stories that are already set up, ready to go. We have interviews set up with some teachers, with the school that he went to in Jakarta when he was just a -- just a boy, some of his places where he used to live. And all of those things, we want to get a sense of.

And, clearly, there's a lot of excitement that's out there in Jakarta. They -- this is a homecoming trip for them. This is their native son, if you will, welcoming him back, so obviously there's going to be a lot of disappointment. But we're hoping to get a flavor of what it's like to be there and what it was like for him to grow up there.

BLITZER: He spent some of -- a couple formidable years growing up in Jakarta, in Indonesia. We're talking about President Barack Obama.

So, this is the home of the largest Muslim community in the world. It's one of the largest democracies in the world. And they have no choice right now but to wait until June to actually see the president arrive.

MALVEAUX: It's clearly a disappointment, Wolf. And, you know, I had a chance when I was doing the documentary on Obama during the campaign to talk to the -- then the candidate, not the president, about his time in Indonesia, as well as his sister, Maya, because the two of them spent four years, formidable years -- formative years here.

And he talked about the fact that it really opened his eyes to a whole 'nother way of life. Obviously, it was a much more dangerous time, during the time when he was in Jakarta, but it was also a time of poverty, and he was able to really reach out and to learn a lot.

And he talked about that during the campaign, and how it really gave him what he felt was an international sense of who he was. And his mother was there. For 10 years, she worked with women helping them develop and -- in their own lives.

And it's a place that's changed, though. As you know, Wolf, it has been the target of several bombings, but it is also a model for democracy and for a country that is secular and sticks up for women's rights and is able to be a real good example for modern Islam as well. BLITZER: Suzanne, have a safe trip, you and the entire team over there. We will look forward to your reports next week here in THE SITUATION ROOM.

Suzanne Malveaux on the way to Jakarta, Indonesia, right now. She's in Singapore, the president, though, not on his way to Indonesia. He's going to be spending the next few months here, especially the next few days, getting ready to see if health care reform can be enacted.

So, what's the White House strategy right now in this do-or-die push for health care reform?

Let's bring in our senior political correspondent, Candy Crowley, the host of CNN's "STATE OF THE UNION."

I guess, when all is said and done, the president really had no choice. If he wants this passed, he's got to be here to honcho it.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, it's not as much about getting this passed, because the Democrats on the Hill, on the House side, are feeling very, very good about their ability to get this passed. Now that the numbers have come in, some of those moderate Democrats who have been worried about the size of the bill, the cost of the bill, are beginning to come over to the yes side.

The president -- and this comes from a conversation that I had with a White House official recently, who said, you know, when the president gets this bill, your all's storyline will change. It won't be, oh, the president focused on the wrong thing for a year. It won't be, oh, he can't get this, despite all his popularity.

It will be, the president never gave up, even when people told him to make this into little-bitty pieces. He kept pushing for what he wants.

This is about, I think -- the president staying here is about being around when that vote comes in, about being a part of the victory route, even if, as you and I know, it's only partway there, but it's much closer than it's ever been. And so this is about taking a victory lap.

BLITZER: Because the changes -- let's say the House passes the Senate bill on Sunday. They have to pass a separate, you know, legislation, including all the fixes, as they call it, the reconciliation. Well, that will, then, go to the Senate and it's not going to immediately be passed by the Senate. That could take a while.

CROWLEY: It isn't. And it could be changed. And, in fact, you have had Democrats on the Senate side saying we may -- some of these things, because of the parliamentary rules, may come out. And you know what happens then? It has to go back to the House.

So, there's lots of things now between now and the time he sits in the Rose Garden and signs this. Still, a House bill getting passed, even if it's the Senate bill, and the fix-it package, that being passed is a major win for the president who, as you know, has been getting beat up pretty -- politically for a while about how come he can't get it done. So, this will be a good moment for him.

BLITZER: And it will be a good moment for "STATE OF THE UNION" Sunday morning, 9:00 a.m. Eastern. You're going to have a lot to talk about, setting the stage for a vote Sunday afternoon.

(CROSSTALK)

CROWLEY: Yes, we are. And, so, we will have some congressmen, some of the yes-or-no people, and some leaders on that side, to kind of give us a sense of what's going on, and then some senators to tell us what's next.

BLITZER: We will be watching...

CROWLEY: OK.

BLITZER: ... 9:00 a.m. Sunday morning, "STATE OF THE UNION WITH CANDY CROWLEY."

Debilitating aftereffects of 9/11 that left thousand of people sick, and now they may soon be getting millions of dollars.

And what happens when the man behind those attacks is finally captured? We're talking about bin Laden -- U.S. plans for the capture of bin Laden and the political complications. We have new information.

And food assistance fraud, how your tax dollars are being scammed. This is a CNN exclusive.

(COMMERCIAL BREAK)

BLITZER: More than eight years after 9/11, the terror attacks, a settlement may now be near with the thousands of people who say they have been sick ever since.

Let's go to CNN's Mary Snow. She has details of a proposed agreement.

Mary, what's going on?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, tomorrow, a federal judge here in New York is going to hold a hearing on the proposed settlement for a lawsuit that has been years in the works. The judge last week put off a decision. Tomorrow, he's expected to hear directly from some of the people who became sick after working on the World Trade Center site.

(BEGIN VIDEOTAPE)

SNOW (voice-over): On September 11, former New York City police officer Frank Maisano was among the first-responders rushing to the scene. He stayed at ground zero for a week and then worked at the Fresh Kills landfill, where debris was taken.

FRANK MAISANO, 9/11 LAWSUIT PLAINTIFF: I felt the dust, had an intermittent cough, but that all came to a head when I chased a suspect later on.

SNOW: In January of 2004, he collapsed. Maisano had to leave the police department and now may face a lung transplant. He blames the toxic air he inhaled at ground zero and faults the city for a lack of protective gear.

MAISANO: We didn't have no protective gear. We just went down there to work to retrieve body parts. That's what we did.

SNOW: Maisano is among 10,000 plaintiffs who sued and is happy lawyers reached a settlement with the city. We asked New York City's chief attorney, Michael Cardozo, about the workers who say the city didn't do enough to provide protective gear.

MICHAEL CARDOZO, CORPORATION COUNSEL, CITY OF NEW YORK: The city's response and the contractors' response is, we did a heroic effort in responding, in supplying respirators and that kind of issue. And each plaintiff, depending where that plaintiff worked, would have to prove the contrary.

SNOW: The settlement ranges between $575 million and $657 million, depending on how many of the plaintiffs accept it -- 95 percent must agree to it, or there's no deal. And they have 90 days to decide.

Plaintiffs would receive between a few thousand dollars and more than a million depending on the severity of their illness. And Maisano, a father of three, is expected to be at the high end of the range.

MAISANO: Hopefully, with this money, I'm able to put aside for my kids' future, secure my family's future. That's most important to me right now.

SNOW: Former New York City police officer Glen Klein has reservations.

(on camera): What do you think of this settlement?

GLEN KLEIN, 9/11 LAWSUIT PLAINTIFF: It's not for me. I'm not happy with it.

SNOW: Why?

KLEIN: It may be for other people.

Well, I will put it to you like this. Once you take the settlement, you're done. That's all you have. If you get sick down the road with a more serious illness and you settle for, let's say, $40,000, $50,000, what's that going to do for you four or five years from now? It's going to be gone. SNOW (voice-over): Klein takes medications for a series of ailments from gastrointestinal problems to post-traumatic stress disorder, after working for months at ground zero. He wants to see long-term health care benefits included and says a policy to provide up to $100,000 if you develop certain kinds of cancer isn't enough.

KLEIN: One hundred thousand dollars when you have cancer is nothing.

(END VIDEOTAPE)

SNOW: Now, the city also says that workers won't lose any health benefits they currently have if they sign on to this settlement, but one factor that is being considered, the fees for the attorneys are part of this settlement, and the judge in the case has stressed that he wants to make sure that those fees are fair and reasonable -- Wolf.

BLITZER: Thanks, Mary -- Mary Snow reporting.

Will U.S. authorities ever have to decide whether to read Osama bin Laden his rights? The attorney general of the United States, Eric Holder, was grilled about that on Capitol Hill this week, and he gave a startling answer.

(BEGIN VIDEO CLIP)

ERIC HOLDER, U.S. ATTORNEY GENERAL: You're talking about a hypothetical that will never occur. The reality is that we will be reading Miranda rights to the corpse of Osama bin Laden. He will never appear in an American courtroom.

REP. JOHN CULBERSON (R), TEXAS: But it is...

(CROSSTALK)

HOLDER: That's a reality. That's a reality.

(END VIDEO CLIP)

BLITZER: Later, though, the U.S. military commander in Afghanistan, General Stanley McChrystal, said American troops will still try to capture bin Laden alive and bring him to justice.

Let's bring in our national security contributor Fran Townsend. Fran Townsend worked for the Bush administration as the homeland security adviser. She also worked in the Justice Department during the Clinton administration.

Do you have a sense of what the U.S. policy is right now about capturing bin Laden alive or dead?

FRANCES TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: You know, Wolf, it would be impossible to have any sense about what the plan is.

You know, the attorney general was before this hearing. He was asked a question. He sort of had this snarky, snotty, sarcastic reply. And that's all fine. It's a little bit beneath the office of the attorney general to have that kind of a response, and I think that's part of what was shocking about it.

BLITZER: To say that he's going to be dead one way...

TOWNSEND: And we're going to read it to a corpse.

BLITZER: He left sort of -- left it vague whether the U.S. would kill him, someone else would kill him, or he would kill himself.

TOWNSEND: Right.

And what it left is -- the Congress, by the way, didn't ask the obvious follow-up question, which is, OK, we got that the intelligence suggests you are not going to get him alive, he's going to die during a capture routine. What is your plan, Mr. Attorney General, if you do capture him? By what criteria will you decide, and who will be involved in that decision?

BLITZER: Well, is there a pledge? Did you in the Bush administration, did you have a plan what to do with bin Laden if you captured him alive?

TOWNSEND: It was perfectly clear -- it was not our preference -- we thought that, based on the intelligence, he would be dead, but the plan was for him to go to a military commission. And I think it's the right question, Wolf.

BLITZER: When you say military, a military trial, instead of a civilian trial?

TOWNSEND: That's right.

BLITZER: But to take him first to a military base and start questioning him, I assume?

TOWNSEND: That's right. And you would have exploited the intelligence and then ultimately put him into the military commission, the military trial process.

I think it is fair game for Congress and the American people to ask, what is your plan, and by what criteria will you make these decisions, not only, by the way, Wolf, for bin Laden, but what about Zawahiri? What about the leadership of al Qaeda? Which ones and by what criteria will you make those decisions?

It's hard to have a real honest debate with Congress on Capitol Hill if you won't tell us what the criteria is. This is an administration that said they are going to be transparent. It's a fair question. And I think the attorney general needs more than sort of the snide reply. He needs to give them an honest, fulsome answer about what this administration's policy is going to be.

BLITZER: Well, General McChrystal was very honest. He basically said, you know what, we have a plan. If we capture bin Laden, we will take him and do whatever is necessary. But he says, we left-wing bring justice to him one way or another.

TOWNSEND: That's right.

It was interesting today. We saw in the newspapers, Leon Panetta, the director of the CIA, gave an interview and he said that bin Laden would be taken to a military base, maybe. But that won't really be Leon Panetta's decision. After all, that is the decision of the attorney general, and so I think Congress is right to ask the question. I think now the attorney general needs to give a real honest, fulsome answer.

BLITZER: I suspect the next time he's testifying on Capitol Hill, he will do that.

Fran, thanks for coming in.

Horrific new details of a terrorist plot -- the plan was to seize captives in Denmark, decapitate them, and throw the heads out the window. We have details right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: New trouble for a Republican senator following revelations of an affair with the wife of a top staffer -- why federal prosecutors are now looking into possible wrongdoing.

And is it safe for Americans to go to Mexico? Mexico's ambassador to the United States is here in THE SITUATION ROOM.

Plus, food stamps being used to commit fraud against U.S. taxpayers.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Do you have any Trojans in there?

UNIDENTIFIED MALE: Who?

UNIDENTIFIED MALE: Trojans?

UNIDENTIFIED MALE: Yes.

UNIDENTIFIED MALE: Yes. Do you have a three-pack or...

UNIDENTIFIED MALE: No, just singles.

UNIDENTIFIED MALE: Yes, just give me two of those.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: The violence raging in northern Mexico hit closer to home last weekend, when a pregnant U.S. Consulate worker and her husband were shot dead in Juarez, across the border from El Paso. There were more than 2,600 killings in Juarez alone last year.

(BEGIN VIDEOTAPE)

BLITZER: And joining us now, the Mexican ambassador to the United States, Arturo Sarukhan.

Mr. Ambassador, welcome back to THE SITUATION ROOM.

ARTURO SARUKHAN, MEXICAN AMBASSADOR TO THE UNITED STATES: Thank you, Wolf.

BLITZER: As you know, a lot of Americans are nervous right now about letting their kids, their college students, go to Mexico, Cancun, or other places on spring break. Given the violence that's going on, how worried should they be?

SARUKHAN: Well, I think that, whenever people travel abroad, you have to exercise caution, precaution as necessary.

But what is going on in Mexico and being concerned about the violence in Ciudad Juarez, and sending your kids to Cancun is like saying that you're concerned because there was a hijack or mugging in New Orleans and you're going on holidays to New York City.

There are pockets of violence in certain parts of Mexico, but those patterns are not replicated in places like Cancun or the...

(CROSSTALK)

BLITZER: But there are areas of Cancun, maybe not necessarily where the young Americans stay, but not that far away, where there could be some trouble.

SARUKHAN: We have not seen any incidents of drug-related violence in places like Cancun or Cabo San Lucas, which are obviously two of the hottest destinations in Mexico.

BLITZER: What happened in Juarez? You're talking about Juarez. Some American diplomats, were they targeted because they were Americans, shot down and killed?

SARUKHAN: We're still in the middle of the investigation. The initial findings seem to suggest that these three individuals that were associated with the consulate in Ciudad Juarez were not necessarily targeted because they were working for the consulate.

Now, what is behind the murder of these individuals is still unclear, but I hope that, in the next 24 or 48 hours, we will have more information on that.

BLITZER: And it seems like the drug cartel in Mexico is taking all sorts of drastic action right now, the kidnappings, the murders, the violence. It seems to be getting worse on a daily basis.

SARUKHAN: I know that it sounds counterintuitive, and it will sound counterintuitive to your viewers, but there is a direct correlation between increased violence and the fact that these groups are feeling squeezed and quartered.

They are lashing out because they are losing. They are lashing out because they are trying to control the last remaining routes of drugs into the U.S. And we have seen a bit of that taking place over the past three years.

BLITZER: We have also seen the president of Mexico, President Calderon, he's taking steps, using the military, Mexican marines and others, to go into some of these communities and basically take charge of local police responsibilities, because the place are corrupt.

SARUKHAN: We have had obviously a very important challenge in Mexico, which is the corruption festered for so many years, that only the armed forces could be used as a stopgap measure by the president to initially take them down and push them back. And that's what the president has done, to create those breathing spaces where then you can move in and rebuild communities and ensure that the rule of law is prevailing.

BLITZER: How prevalent is this corruption among local law enforcement in Mexico?

SARUKHAN: I don't want to quantify, but it's a big challenge.

BLITZER: A huge challenge.

SARUKHAN: I think it's a very big challenge.

BLITZER: And President Cauldron and his government, are they on top of it?

SARUKHAN: I think -- I think that what you're seeing in Mexico is, for the first time, a Mexican president committed to taking it back, to taking -- taking it on and pushing it back.

BLITZER: What, if anything, can the United States do to help in a situation like this?

SARUKHAN: Well, I think -- I think this administration and the previous administration have been committed to finding new ways to cooperate with Mexico. The key challenge for us right now, Wolf, is to ensure that guns and money -- bulk cash which feed into the drug syndicates -- don't cross from the U.S. into Mexico.

BLITZER: Is it still crossing in?

SARUKHAN: It is. It is.

BLITZER: Is the that the biggest problem right now, the demand here for drugs, the demand for, if you will, the revenue from the mon -- from the guns?

SARUKHAN: Well, there's always -- there's always a connection between a consumer nation like the United States living next to a country that has become the platform for a significant amount of drugs coming into -- into the United States, in the same way that the availability of guns or of laundering operations on this side of the border are seeping into the drug operations in Mexico. You need two to tango. You need two to win. And at the end of the day, we will succeed or we will fail together.

BLITZER: We've seen -- and correct me if I'm wrong -- a recent reduction in illegal immigration -- in illegal border crossings from Mexico into the United States.

A, is that true?

And if it is, why?

SARUKHAN: There has been an important drop, especially in 2009. Most of it is directly linked to the global recession, the lack of jobs and the unwillingness to cross over if you can't find a job in the U.S. market.

BLITZER: So it's mostly there's no jobs here?

SARUKHAN: It's jobs.

BLITZER: People aren't coming over...

SARUKHAN: It's a jobs-driven problem.

BLITZER: All right. Getting back to the safety of tourism in Mexico right now. The bottom line is, is the level of American tourism to Mexico going down based on -- it was a year ago when we -- you were here in THE SITUATION ROOM. We were all worried about swine flu in Mexico. And that was causing a dramatic reduction.

What about the violence right now?

SARUKHAN: So far, the numbers that we have seen, both as a result of Mexico's and United States' ability to hake on H1N1 successfully, is that we have seen a very important rebound in tourism numbers in Mexico, occupation rates both in Cancun and Cabo San Lucas, for example, are at the level that they used to be in these same periods in previous years. So far, we have not seen a direct impact of this on occupancy rates in hotels in Mexico.

BLITZER: Ambassador, good luck to you.

SARUKHAN: Thank you, Wolf.

BLITZER: New fallout from a senator's affair -- details of a grand jury probe into Nevada Republican John Ensign.

Plus, a California man held without charges in Iran's most notorious prison for two years. You probably haven't heard anything about his case -- until now.

(COMMERCIAL BREAK)

BLITZER: There's new trouble right now for Republican Senator John Ensign of Nevada, following revelations of an affair with the wife of one of his top staffers.

CNN's Brian Todd is working the story for us -- Brian, what is going on now?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, we have learned that the way Senator Ensign dealt with the fallout from this affair, specifically how the senator dealt with the husband of his former mistress, is the subject of some heavy scrutiny by federal investigators.

(BEGIN VIDEOTAPE)

TODD: (voice-over): CNN has learned federal prosecutors are looking into possible wrongdoing by an influential Republican senator. The probe reportedly focuses on allegations that John Ensign of Nevada used his office to gain work for former staffer Doug Hampton, whose wife had an affair with Ensign. The National Republican Senatorial Committee, which Ensign once led, confirms to us it's received a subpoena in the case.

CNN Las Vegas affiliate, KLAS TV, which first reported this story, says federal grand jury subpoenas have been issued to at least six Las Vegas businesses who've had dealings with Ensign and that after the affair was made public, Ensign tried to get some companies to hire Hampton and that two of them did. We called, e-mailed and went to Ensign's office. We were told the senator was not available. His press secretary issued a statement: "Senator Ensign is confident he has complied with all ethics rules and laws and will cooperate with any official inquiries."

Ensign's attorney did not return our calls and e-mails.

SEN. JOHN ENSIGN (R), NEVADA: It's absolutely the worst thing that I've ever done in my life.

TODD: Last year, the senator admitted the affair with Hampton's wife, Cindy, who was also one of his aides. He later told CNN's Dana Bash what he did for Doug Hampton.

ENSIGN: I recommended him for jobs, just like I've recommended a lot of people. But we absolutely did nothing except for comply exactly with what the ethics laws and the ethics rules of the Senate state.

TODD: If the probe looks at whether Ensign promised favors to those companies in exchange for hiring Hampton, former federal prosecutor Kendall Coffey says this.

(BEGIN VIDEO CLIP FROM "FACE TO FACE," COURTESY LAS VEGAS ONE)

KENDAL COFFEY, FORMER FEDERAL PROSECUTOR: What crosses the line from sleazy exchanges of favors to something criminal is a fairly specific use of the office and a fairly specific quid pro quo. There has to be a message that says, in effect, you've got to hire this person, you've to give your business to this person in order to get my support for your specific project. (END VIDEO TAPE)

TODD: The probe could also be looking at whether Doug Hampton got lobbying jobs within one year after he stopped working for Ensign. If he did, that would violate federal law. A source with one of those businesses tells CNN the grand jury is scheduled to meet March 31st in Washington -- Wolf, this is moving fairly fast.

BLITZER: Ensign's family also made payments to the family of the former mistress, is that right?

TODD: That's right. Ensign's attorney has said that the senator's parents paid Doug and Cindy Hampton and their children -- they gave them gifts totaling $96,000 in 2008.

Now, in a statement, the attorney said that Ensign's parents made those gifts -- gave those gifts, quote, "out of concern for the well- being of longtime family friends during a difficult time."

But, yes, Ensign's parents did give payments to the -- to the Hampton family.

BLITZER: So this investigation will go on.

TODD: That's right.

BLITZER: Brian, thank you.

An American man's nightmare in Iran -- held without charges for two years.

Why has his case barely been reported?

And hidden camera video of outrageous food stamp fraud. This is a CNN exclusive.

(COMMERCIAL BREAK)

BLITZER: An elderly California resident has been locked up for two long years in Iran's most infamous jail. He still hasn't been charged and even the State Department doesn't know much about his situation.

Our foreign affairs correspondent, Jill Dougherty, has been digging into this case.

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Wolf, over the past year, there have been several cases of Americans held in Iranian jails. But there's one case we've heard almost nothing about -- until now.

(BEGIN VIDEOTAPE)

DOUGHERTY: (voice-over): Seventy-one-year-old Reza Taghavi, a retired Iranian-American businessman from Southern California, has been held in Tehran's notorious Evin Prison for two years. Now his American lawyer reveals secret talks.

PIERRE PROSPER, LAWYER FOR REZA TAGHAVI: We are negotiating terms. And I -- my -- my job really is to talk to the government to see what -- what will it take.

What do they want?

DOUGHERTY: In April, 2008, Reza Taghavi took one his frequent trips to Tehran to see family and friends. According to his lawyer, an acquaintance asked Taghavi to carry $200 to an Iranian who needed some money. Taghavi agreed.

Iranian authorities arrested him on suspicion of anti-regime activity.

PROSPER: It's not clear what the accusations actually are at this time because the investigation, believe it or not, after two years, is still -- still ongoing.

DOUGHERTY: Two years later, Prosper says his client has not been charged with any crime. Cases of other Americans being held, like three hikers who allegedly strayed over the Iranian border, have been highly publicized. But Taghavi's family kept silent, not even telling the State Department he'd been arrested.

LEILA TAGHAVI, DAUGHTER: Blind faith and not knowing that it would take this long and just unsure about how things worked.

DOUGHERTY: The Iranian to whom Taghavi gave the $200 was arrested and convicted of involvement with a terrorist group that blew up a mosque in Shiraz. But Taghavi's lawyer claims the businessman had no known contact with any terrorist group.

The State Department admits it has few details.

MARK TONER, STATE DEPARTMENT SPOKESMAN: We understand that he's in poor health. And we've not yet received consular access to him through the Swiss protecting power. But we repeatedly call -- have called for and continue to call for his immediate release by Iranian authorities.

DOUGHERTY: In a twist, Iranian authorities even invited Taghavi's lawyer to Tehran to discuss the case.

PROSPER: He has not been charged, prosecuted or convicted. So there must be some questions out there. We're trying to answer the questions in -- in a way that obviously will lead to a favorable outcome.

DOUGHERTY: Leila Taghavi told us she doesn't think her father can tolerate being in prison much longer.

TAGHAVI: My biggest hope is that this message reaches and the right people and somebody can do something.

(END VIDEO TAPE) DOUGHERTY: Leila Taghavi told us she spoke with her father by phone Wednesday morning and he told her to have faith, that he believes people will do the right thing -- Wolf.

BLITZER: Let's hope.

Jill Dougherty, thanks for that report.

Beer, cigarettes, even lottery tickets -- a new investigation uncovers how your money is helping some people pay for these items. You're going to find out why.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Beer, cigarettes, even lottery tickets -- a new investigation in Florida reveals that millions of dollars of your money is helping some people pay for those items. And it's because of a scam involving the modern-day version of food stamps, debit cards.

John Zarrella is joining us from Miami right now -- John, tell us what this is all about.

JOHN ZARRELLA, CNN CORRESPONDENT: You know, Wolf, we had exclusive access as state law enforcement officers here in Florida conducted a crackdown -- a crackdown on fraud in the state by people using a debit card just like this one.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The female is getting out and walking toward the front door.

ZARRELLA (voice-over): An undercover agent walks into a small convenience store in Tampa. Wearing a recording device, she approaches the cashier with a debit card.

UNIDENTIFIED FEMALE: Can I get a 100 back off of this?

ZARRELLA: She picks up about $12 worth of chips, soda and cigarettes, then presses the clerk.

UNIDENTIFIED FEMALE: What do you want?

UNIDENTIFIED FEMALE: I really want 100 back.

ZARRELLA: The clerk runs the debit card, allegedly keeps $100 for the store and gives the agent $100 plus the goods.

UNIDENTIFIED MALE: OK, U.C.'s (ph) out, a small bag in her hand.

ZARRELLA: What the store clerk just did, Florida Department of Law Enforcement officials say, is illegal. And they say, you should be outraged.

BOB URA, FDLE SPECIAL AGENT: It's directly stealing from the taxpayers of the United States.

ZARRELLA: The debit card the undercover agent used is called an electronic benefit transfer card, or EBT, which can only be used to purchase food. It's more commonly known by its old name, food stamps.

URA: See what they do is they charge the U.S. government $212.02, EBT food benefit food balance, all that. And they give us $100 in cash -- cigarettes and chips for $212.

ZARRELLA: Bottom line -- there's no requirement to itemize the receipt, so the convenience store allegedly got a $100 kickback of your taxpayer money. The recipient, the undercover agent, got cash back -- also illegal.

(on camera): Authorities targeted 30 stores in the State of Florida. At 16, they were allowed to use the EBT cards. At multiple stores, the cash from those EBT cards were used to purchase lottery tickets. And at one store, agents used the EBT card to buy the prescription drug, Oxycodone.

UNIDENTIFIED MALE: A point of sale device.

ZARRELLA: If you think that's outrageous, listen to this transaction at a drive-thru store called Big Daddy's.

UNIDENTIFIED MALE: It looks like Wayne's the clerk, but it looks like he may have shaven his beard.

ZARRELLA: It was one of the stores targeted because in just the month of December, it did $34,000 in EBT transactions. Compare that to $1,000 at comparable stores. Here, the agents didn't get money back, but they illegally got nonfood items, beer, cigarettes and this...

UNIDENTIFIED MALE: Do you have any Trojans in there?

UNIDENTIFIED MALE: Who?

UNIDENTIFIED MALE: Trojans?

UNIDENTIFIED MALE: Yes. Yes. Well, I've got these. We've got these.

UNIDENTIFIED MALE: Yes. Yes.

Do you have a three pack or...

UNIDENTIFIED MALE: I've got singles.

UNIDENTIFIED MALE: Yes, just give me two of those.

ZARRELLA: Wednesday, following a three month investigation, state agents hit the 16 targeted stores across Florida. At Big Daddy's, three people were taken into custody -- the owner and two employees. None of them would comment for CNN at the scene. Authorities believe during the past year, the 16 stores alone defrauded taxpayers of $3.5 million.

KEN TUCKER, FDLE ASSISTANT COMMISSIONER: If you multiply it nationwide, it's -- you know, I can't give you an accurate number, but it has to be in the billions of dollars.

ZARRELLA: The USDA, which administers the program, says nationwide, 38 million people benefit from the supplemental nutrition program. It estimates 1 percent of the $50 billion in EBT funds were lost to fraud in 2009.

Authorities in Florida say the next phase of their operation will target people using the cards illegally rather than for what they were intended -- food to put on the table.

(END VIDEO TAPE)

ZARRELLA: Now, in an unfortunate development today, the man you saw in that piece at the end there -- that -- that Big Daddy who owns that store, he was bailed out last night of jail -- from jail. And at his store, they found him dead this morning, Wolf.

They are not sure, police in Tampa, whether it was a natural death or whether the man known as Big Daddy committed suicide.

And, Wolf, again, just this card, just swiping it and that's all it took for these people to -- to scam you and me and every taxpayer in the country.

BLITZER: Yes. And that's just in one small area.

ZARRELLA: Yes.

BLITZER: But it's presumably going on all over the country and, as we saw, maybe $1 billion is wasted -- is lost like that?

ZARRELLA: Absolutely. And that's in Florida, they say, that's probably a conservative number -- Wolf.

BLITZER: All right. I guess that's why they've got to do these investigations.

John Zarrella, stay on top of this for us.

Thank you very much.

And as John just said, that most recent count of more than 38 million people who receive federal food assistance is a 22 percent increase from 2008. On average, each month, an individual receives around $134 in benefits. Households receive nearly $300 a month. And that money can only be used -- at least it's supposed to only be used to buy food you eat at home, like bread and cereal, fruit vegetables, meat, dairy products. You can't use the money to buy any other kind of hot food or something you'd eat in a store. You also can't use the money to buy anything that isn't food, like alcohol or tobacco, paper products, pet food or household supplies, or, as we just saw, condoms.

It was the night a top adviser to President Bush became a rapper.

Jeanne Moos has a closer look at this most unusual transformation. We're finding out what happened behind-the-scenes.

Stay with us.

You're in THE SITUATION ROOM.

(BEGIN VIDEO CLIP)

KARL ROVE, FORMER BUSH ADVISER: This man will never stop. Look at him jumping up and down a...

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: Karl Rove calls the moment mortifying -- the night he was transformed from White House adviser into a Moost Unusual character.

Our Jeanne Moos takes a closer look at the rapper, M.C. Rove.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT: (voice-over): A major political figure like Karl Rove writes a 600 page memoir and guess which memory leaps out?

(BEGIN VIDEO CLIP)

ROVE: Get out his gun because he's shooting Quayle.

(END VIDEO CLIP)

MOOS: Roves spends three pages describing the events so mortifying, we put a viewer discretion warning on it three years ago.

Now finally, we hear his side of one of our favorite stories.

(BEGIN VIDEO CLIP)

ROVE: Tell me what is your name, M.C. Rove.

(END VIDEO CLIP)

MOOS (on camera): The book is called "Courage and Consequence." And it took courage to do what Karl Rove did.

(voice-over): A comedian roamed the White House Correspondents Dinner.

UNIDENTIFIED MALE: Let's see, who do we have?

MOOS: Rove writes in his memoir: "I panicked and broke eye contact, hoping that if I didn't see him, he wouldn't pick me."

UNIDENTIFIED MALE: You, sir.

Would you mind helping us. You are the rap star this evening.

MOOS: "No way," Rove mouthed. But it was way too late.

(BEGIN VIDEO CLIP)

ROVE: But he will rap it when you give him a chance. Look at him move, doing a rapping dance.

(END VIDEO CLIP)

MOOS: "So there I was," Rove writes, "flailing around and living up to the saying about Norwegians -- they don't dance, they twitch. That night, I twitched as hard as I could.

(BEGIN VIDEO CLIP)

ROVE: This man will never stop. Look at him jumping up and down and ready to hop.

(END VIDEO CLIP)

MOOS: Rove writes that: "Upon leaving the stage, as I passed the president, I could see he was enjoying my discomfort. 'You're fired,' he spat at me."

(BEGIN VIDEO CLIP)

ROVE: Doing the dance, the Karl Rove dance.

(END VIDEO CLIP)

MOOS: Note the cell phone.

(on camera): After the performance, Karl Rove called his son, who was away at college.

(voice-over): "Dad," that was awesome. His roommate screamed in the background: "Way to go, Mr. Rove," then broke into raucous laughter.

Rove notes that David Letterman aired a clip under the title...

(ON SCREEN)

Why the World Hates Us

(BEGIN VIDEO CLIP)

ROVE: He will do it, but without fail. Get out his gun, cause he's shooting Quayle.

(END VIDEO CLIP) MOOS: "And when I got an iPhone," Rove writes, "son Andrew programmed it so if I opened YouTube, a video of my performance would boot up."

Stephen Colbert's review of Rove's memoir was preceded by this.

(BEGIN VIDEO CLIP FROM "THE COLBERT REPORT," COURTESY COMEDY CENTRAL)

STEPHEN COLBERT, HOST: Sometimes I can't find him on TV, I'll just put a pair of wire-rimmed glasses...

(LAUGHTER)

(END VIDEO CLIP)

MOOS: On a loaf of ham. But Rove's no ham. He was dragged into this, but a good sport.

(BEGIN VIDEO CLIP)

ROVE: M.C. Rove.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP FROM "LATE NIGHT WITH DAVID LETTERMAN," COURTESY CBS/WORLDWIDE PANTS)

DAVID LETTERMAN, HOST: I have a very strong feeling that that's unconstitutional.

(END VIDEO CLIP)

MOOS: Jeanne Moos, CNN...

(BEGIN VIDEO CLIP)

ROVE: M.C. Rove.

(END VIDEO CLIP)

MOOS: New York.

(BEGIN VIDEO CLIP)

ROVE: M.C. Rove in the house.

(END VIDEO TAPE)

BLITZER: Happening now, President Obama delays his overseas trip once again, as House Democrats push toward weekend votes on health care reform. This hour, the House speaker is gushing over a new set of numbers, but her vote count still isn't where she says it needs to be.

Also, the man who changed everything in the United States Senate -- Republican Scott Brown of Massachusetts. He's here in THE SITUATION ROOM this hour.

How far is he willing to go to stop health care reform?