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The Situation Room

Interview With Admiral Thad Allen; New Korean War?

Aired May 24, 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: It's called top kill, and it may be all that stands between the gushing well at the bottom of the Gulf of Mexico and an unparalleled ecological disaster.

Early Wednesday morning, BP plans to pump a heavy liquid into the site of the leak to try to stop the oil flow, so the well can be sealed with cement. If it doesn't work, the oil may flow for months. Frustrated federal officials are threatening to push BP out of the way, but the oil giant says no one could do a better job. I will speak with the government's point man on all of this, the Coast Guard commandant, Admiral Thad Allen. That's coming up.

Meantime, more grim images along Louisiana's polluted coast. That's where another battle is being played out.

Our Brian Todd is tracking that part of the story for us.

It's not pretty at all, Brian.

BRIAN TODD, CNN CORRESPONDENT: Not at all, Wolf. That other front in this battle is the effort to fight off the oil as it moves toward shore. Large manmade sand barriers are now being put in place. But Louisiana's governor says he needs more of them, he needs bigger sand booms, and he's got a lot of red tape standing in his way.

(BEGIN VIDEOTAPE)

TODD (voice-over): He's got almost 70 miles of soiled coastland, and oil creeping deeper into the marshes. He's got a plan to stop it, but Louisiana's governor says he's stuck in a bureaucratic nightmare.

GOV. BOBBY JINDAL (R), LOUISIANA: For over two weeks, we have been asking the U.S. Army Corps of Engineers to issue an emergency permit. We have answered every set of questions the same day they have asked those questions.

TODD: And, still, Bobby Jindal says he's gotten no permit to dredge up large amounts of sand to build massive booms.

(on camera): Governor Jindal and other state officials say that for smaller sand booms, they have already gotten federal permits. So, they have built sand barriers to fill in smaller gaps in places like Pelican Island and Elmer's Island there. Now they say they want to fill in much larger gaps in places like Barataria Bay, Timbalier Bay, and Terrebonne Bay here, and an ambitious plan to fill in a much larger gap between the Chandeleur Islands here and Breton Sound right there.

For the smaller areas, they say, those sand booms are absorbing oil.

(voice-over): But, so far, no permits have been issued for those larger operations. Contacted by CNN, the Army Corps of Engineers sent a statement saying it requested more information from the state last Friday, and, "We are currently evaluating that information, and will proceed as quickly as possible."

Other federal officials say experts have to weigh the long-term impact the sand booms would have on threatened species. State officials tell us, once they get the permits, they could have those massive sand barriers in place within a few days. But the wait is excruciating.

JINDAL: Every day we do not fight this oil on a barrier island, every day we are not dredging sand means one more day this oil has a chance to come into our ecosystem.

TODD: For oyster harvesters Floyd Lasange (ph) and Chris Hernandez (ph), that day has already passed. As they toured their oyster beds around Grand Isle, Louisiana, their worst fears were realized.

UNIDENTIFIED MALE: We came here yesterday morning, and check and see they have no oil at all. And then we came back this morning and this is what you see now.

UNIDENTIFIED MALE: It's like peanut butter or fudge, and it's just globs and globs of it. And it's oil. And it's probably got the dispersants in it. It's coming in between tides and just floating in. This area, everything is dead. Nothing can survive in this.

(END VIDEOTAPE)

TODD: Lasange (ph) and Hernandez (ph) say just about two feet below the surface in those areas are their oyster beds, and they're covered in oil. Those two gentlemen have been out of work since the oil started leaking last month. That's what a lot of people in this area are up against, Wolf.

BLITZER: Where would they get all this sand, Brian, from? Because I have heard people express some fear that if you move the sand, you displace it from the shore, that's going to cause other kinds of problems.

TODD: That's been a big concern. And I ran that by a state official in charge of coastal protection today. He told me that they're going to get that sand off of shelves, underwater shelves that are far off the coast of those barrier islands. He says that that will not leave any of Louisiana's coastland vulnerable to hurricanes or anything like that.

That's their plan at the moment. They're sticking with it. They're confident that they can get the sand from there and not leave anything vulnerable.

BLITZER: Brian, thanks very much.

As they gear up for a crucial effort to plug the Gulf oil leak, the frustration level is also way up, as the environmental damage grows.

(BEGIN VIDEOTAPE)

BLITZER: And joining us now from the White House, the commandant of the U.S. Coast Guard, Admiral Thad Allen.

Admiral, thanks very much for coming in. Here's the blunt question. Is top kill this week going to work?

ADMIRAL THAD ALLEN, U.S. COAST GUARD COMMANDANT: We certainly hope it will. Nothing is a sure thing. And we have found that out throughout this response. There are times where we have had technical problems to overcome. But we're certainly hopeful. Nobody is more hopeful than I am.

BLITZER: Well, what are the chances, realistically, based on all of the information you have received?

ALLEN: BP officials tell us that, given some of the uncertainties that are involved, that we cannot know because of the condition of the well. They're giving it about 60 to 70 percent, Wolf.

BLITZER: Sixty to 70 percent, that's pretty good. But here's the other question. Could this top kill, where you throw all this mud down there, could it actually exacerbate the problem and make the spillage even worse if it doesn't work?

ALLEN: Well, you're asking a great problem, Wolf. And it really involves I think something the public has been concerned about and maybe I could address here, and that's the federal involvement in this whole planning effort.

For the last 10 to 14 days, we have been involved in a series of intense discussions with the BP engineers involving some of the great intellectual minds in the administration, Including Secretary Chu and represents of the National Lab. And some of the things they're questioning are the assumptions by British Petroleum on the ability of the casings in the well bore to withstand the pressures of the mud that will be inserted and the margins of errors and how they're making those assumptions.

And we have been talking about those for over 10 days, and basically putting them through a metaphorical knothole. So, everybody is right on top of this, Wolf.

BLITZER: So, basically, even if there is a chance it won't work, and even a chance it could make matters worse, you think the chances are greater that it will work? ALLEN: We think so, Wolf. One of the things they're going to do, they're going to be monitoring the pressure of the mud going down in the well. And there is a certain threshold pressure they won't go beyond, and, if they're not successful, they will terminate it. And they will do that, rather than risk the integrity of the well.

BLITZER: The governor of Louisiana, Bobby Jindal -- and I know you have been in contact with him -- he said this on Sunday. He wants action. I want to play this little clip and get your reaction.

(BEGIN VIDEO CLIP)

JINDAL: We have got two options. We can either fight this battle, we can fight this oil on the barrier islands, 15 to 20 miles off of our coast. Or we can face it in thousands of miles of fragmented wetlands.

Every day we're not given approval on this emergency permit to create more of these sand booms is another day where that choice is made for us, as more and more miles of our shore are hit by oil.

(END VIDEO CLIP)

BLITZER: He wants the sand dunes, these so-called barrier islands, he wants them built right now. Why not?

ALLEN: Well, Wolf, first of all, let me agree with the governor on his first proposition. We want to deal with this as far offshore as possible. The last place to deal with this is in the marshes and along the beaches of Louisiana.

The issue with the barrier islands or the berm are being reviewed right now by the Corps of Engineers, and we are working with them in parallel, because we don't want to add any more time to this decision process than is necessary.

But some of the construction times go into six, nine months, potentially a year. And we have to look at the issue of the efficacy of doing this right now and as part of the spill response. Nobody disagrees with Governor Jindal about the effects of this oil, and nobody cares more about barrier islands in Louisiana in Washington than I do.

The question is, is that the right response as part of the overall plans that we have right now? And we're looking at it right now, and there will be a decision made.

BLITZER: You have repeatedly said that you're confident that BP is trying to do its best, and you think they're trying to do the right thing. We hear a different tone from the interior secretary, Ken Salazar. I'm going to play this little clip of what he says, and I want you to explain if the two of you are on the same page as far as BP is concerned. Listen to this.

(BEGIN VIDEO CLIP) KEN SALAZAR, U.S. INTERIOR SECRETARY: I want to make it very clear. Under the law, BP is the responsible party. BP is charged with capping their leaking oil well and paying for the response and for the recovery, without limitation. They will be held accountable. We will keep our boot on their neck until the job gets done.

(END VIDEO CLIP)

BLITZER: Are the two of you on the same page?

ALLEN: We are, Wolf.

Secretary Salazar is a great leader. He's a great friend and mentor of mine. And I think that a metaphorical term is all means of pressure applied to BP to make sure we have a successful outcome. We're on the sage same page.

BLITZER: Do you have confident -- confidence in BP?

ALLEN: We have looked at every step, at every line of operations they're carrying out right now. I have consulted with CEOs of other petroleum companies. We have brought scientists in from around the country. The range of options they are pursuing in the sequence is consistent with industry practices and will be supported by other executives.

And we have asked very tough questions on pressure thresholds and so forth. This is our best shot, and we should take it.

BLITZER: And, finally, you have the legal authority if the right emergency declarations are made to basically take charge of this entire operation and remove BP or actually force BP to do what you want them to do. How close are you to that kind of a decision?

ALLEN: Not close, Wolf.

BP owns the means of production and the means of solution at the seafloor on this. And while you could say that there is a legal argument made that we could do that, it would not be my recommendation we do that at this time.

BLITZER: Admiral Thad Allen.

Good luck, Admiral. We're counting on you.

ALLEN: Thank you, Wolf.

(END VIDEOTAPE)

BLITZER: We have much more ahead on the oil disaster. A former special agent in charge of the Environmental Protection Agency's criminal investigation says BP has a history of putting profit before security, and accuses the government of covering up these problems for years. Stand by for that.

Also, the rising risk of a new Korean war. We will talk about that with our national security contributor, Fran Townsend. And love blossoms in adversity, but mothers of those American hikers held in Iran reveal a romance born in captivity.

(BEGIN VIDEO CLIP)

NORA SHOURD, MOTHER OF DETAINED AMERICAN: Shane made a little ring for Sarah out of I guess his shirt. He unraveled string and thread and wove it and made a little ring for her.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: The mothers of three men hikers jailed in Iran saw their children for the first time in 10 months. They don't know when they will see them again. Those moms returned to the United States with some good news as well.

And they shared it with CNN's Mary Snow, who is joining us live.

All right, Mary, tell us what they told you.

MARY SNOW, CNN CORRESPONDENT: Well, that good news, Wolf is that two of the American hikers are engaged and look forward to marrying when their ordeal is over. Now, the mothers of the hikers hoped that ordeal would be over by now. But, three days ago, they had to leave Tehran without their kids. They took us inside their visit and look at what comes next.

(BEGIN VIDEOTAPE)

SNOW (voice-over): As the world watched their emotional reunion in Tehran, the mothers of three Americans who have been detained since July say their kids were unaware of who was waiting for them.

NORA SHOURD, MOTHER OF DETAINED AMERICAN: You know, it was so difficult to see them. It was like very, very exciting and happy, but also really sad, because you knew it was going to be over. You know, it's like try to be with it while you're with it, but you know it's going to end.

The last time we saw them, they were actually in an elevator and the doors closed like that. And that was the last time we saw them.

LAURA FATTAL, MOTHER OF DETAINED AMERICAN: Looking at our kids being taken from us, we're traveling halfway around the world. We're not going to be able to see them for a while. And having them being taken away to a prison in Tehran was a devastating moment.

CINDY HICKEY, MOTHER OF DETAINED AMERICAN: It was haunting. I mean, I see it over and over again, the doors closing, and not knowing when we're going to see them again. And it was extremely difficult. It was the opposite of the feeling when we first met them.

FATTAL: This is the problem. They're so isolated. SNOW: Adding to the emotional visit, some unexpected news coming from the three hikers. Shane Bauer and Sarah Shourd told their mothers they got engaged in January at Iran's Evin Prison.

Josh Fattal will be the best man.

SHOURD: They have been in love for a long time. Shane made a little ring for Sarah out of I guess his shirt. He unraveled string and thread and wove it and made a little ring for her. And, of course, they asked us both if it was OK.

FATTAL: So we said, absolutely.

SHOURD: It's certainly OK with us, you know?

SNOW: Sarah and Shane were living together in Damascus when their friend Josh visited, and they went hiking in Iraq. Their families say they accidentally crossed an unmarked border into Iran. Iran accuses them of spying, but formal charges have not been filed.

(on camera): And, in terms of their case, what do they know about it?

HICKEY: Nothing. I mean, they don't know anything about their case. They don't know anymore than we do. We know nothing about their case.

SNOW: And have they had any access to the lawyer that you hired?

HICKEY: Absolutely none.

(CROSSTALK)

SHOURD: No access to the lawyer.

SNOW (voice-over): With their future in limbo, Iran's intelligence minister suggested the Americans might be released in a prisoner swap. I asked the mothers about that.

SHOURD: We kind of say, well, OK, but what can we do about it? We can't do anything about it. We just have to continue to stay focused on or goal and our campaign to get our kids out. And this is what we think about. This is all, you know, peripheral stuff to us.

(END VIDEOTAPE)

SNOW: Now, as to what happens next, the mothers are vowing to redouble their efforts, saying that they wanted their kids to know that now they have to try to work even harder so win their release -- Wolf.

BLITZER: Well, we hope they're released soon. Good luck to those moms and the kids in jail as well.

The U.S. and South Korea plan a major show of force after international investigators concluded a North Korean submarine sank a South Korean warship back in March. The Pentagon says the U.S. and South Korean militaries are conducting anti-submarine exercisers and practicing intercepting ships at sea.

All this comes as the secretary of state, Hillary Clinton, is visiting China, calling on North Korea to stop what she calls its threatening behavior.

Joining us now, our national security contributor, Fran Townsend, who is working this story for us.

Fran, as you take a look at this situation, a lot of folks think the sinking of that warship is, in fact, an act of war.

FRANCES TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: That's right, Wolf, and with good reason. I mean, imagine if it was a U.S. Navy ship. We would view it that way.

I think what you're seeing now is people trying to put the pieces together. Can you lead the chain of command back to Kim Jong Il? But this is -- it's an outrageously provocative act. You can see that the United States takes it very seriously. The president issued a statement, Secretary Clinton's trip to the region, especially to China. The goal there is to tell China, if you're not going to stand with us and help us with North Korea, don't hurt us.

You know, the ceremonial receiving of Kim Jong Il and what that relationship is really matters in terms of our own leverage in pushing back on North Korea.

BLITZER: South Koreans, they have a delicate situation, obviously, because this could be a horrendous situation, a million North Korean troops along the DMZ, not very far away from South Korea, literally miles. There are hundreds of thousands of South Korean troops up in the northern part of South Korea, 30,000 American troops right there as well. So, they have to coordinate with the U.S. very carefully.

TOWNSEND: That's right. Nobody really wants a conflagration there along the DMZ. And, in fact, Wolf, the problem is, you also have regional allies who don't want to see anything happen. But the -- the South Koreans can't just let this go.

They have lost 46 sailors. The Chinese don't want to see a mass migration event triggered by a conflagration along the DMZ. And so this is a very delicate situation.

I think, really, Secretary Clinton's engagement here is very, very telling. I mean, remember, when -- when there was that bombing of the Syrian nuclear reactor that was clearly a proliferation event on behalf of the North Korea who helped the Syrians...

(CROSSTALK)

BLITZER: When the Israelis bombed that Syrian reactor.

TOWNSEND: That's right, Wolf. And so we were very careful about -- we condemned it, but there were not real serious actions taken against the North Koreans. Again, that indicates to us, and should, that people don't want to see hostilities started there.

BLITZER: Well, it's about as tense a situation as you can think of, because the stakes -- I have been along the DMZ.

TOWNSEND: That's right.

BLITZER: Under -- as I said, under the best of circumstances, it's always tense. Certainly in this environment, it's even more. There is a hair-trigger situation unfolding there.

TOWNSEND: Absolutely.

BLITZER: Fran, thanks very much.

A whistle-blower calls for a criminal investigation of BP and accuses the government of covering up for the company for years. Our Special Investigations Unit is on the story.

And a century after his death, Mark Twain's autobiography is about to be published. Why now? You're going to find out.

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: Should BP face criminal charges for the massive oil spill? That's what a former EPA investigator believes. He says he has thousands of internal documents to prove why.

And a Tea Party favorite and now allegations of an affair. But this time, the candidate is a woman, and it's a case of he said/she said.

And the duchess of York caught in a major scandal, trading favors for cash. How did she become so broke? Richard Quest is here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's get back to our stop story.

As the oil company BP gets ready for a critical operation to try to plug the Gulf oil leak, a former special agent in charge of the Environmental Protection Agency's criminal investigation division is urging the government to launch a full criminal investigation into BP. He tells CNN the oil giant has a history of putting profit before security, and accuses the government of covering up these problems for years.

Let's go live to CNN's Abbie Boudreau. She's part of our Special Investigations Unit.

What's going on here, Abbie? ABBIE BOUDREAU, CNN SPECIAL INVESTIGATIONS UNIT: Well, Wolf, I talked to Scott West. A few years back, he investigated BP's management and how top officials at the company handled an oil spill in Alaska. His investigation lasted for 17 months.

He says he collected thousands of internal documents and had interviews with BP employees. But before he finished his investigation, the Justice Department put an end to it. The government fined BP $20 million, but Scott West says that's nothing for BP. Now, we interviewed him just a couple of hours ago, and here's part of that interview.

(BEGIN VIDEO CLIP)

SCOTT WEST, FORMER EPA SPECIAL AGENT: They have a corporate criminal culture. And that's what we were -- were dealing with in our investigations.

BOUDREAU: And you say a criminal, a corporate criminal culture. What do you mean by that?

WEST: Well, that, over and over again, we were finding evidence of decisions that were being made by management at various levels that resulted in criminal acts, criminal occurrences. So, that's how we were able to come up with the label of a criminal corporate culture.

BOUDREAU: What did happen? Did it receive penalties resulting from your investigation?

WEST: Well, they did. They -- the company came to the table. They pled guilty to a misdemeanor. Through restitution and criminal fines, it amounted to $20 million for the violation in Alaska.

And I was told to be happy with that, that that was a big corporate fine. But the fact still remained that the decision-makers were not held accountable. And corporations do not make decisions. Individuals within them do. And those are ones that should be held criminally accountable for these sorts of disasters.

Why is this government and a whole different administration showing the same sort of protection to this foreign corporation? I -- I just don't get it. And I would like to have that question answered.

BOUDREAU: So you think there should be a criminal investigation?

WEST: Absolutely. There should have been one from day one, particularly because of the history of this company. Had I been the special agent in charge sitting in Dallas at EPA when -- the first moment I heard about that fire, I would have sent in a couple of investigators to start nosing around and find out what they could find.

BOUDREAU: So often in cases like this, we think of BP as this huge corporation. But you were trying to hold the leaders of this company criminally accountable for putting profits before safety. And Tony Hayward is now the company's CEO. Was he part of your investigation a few years back?

WEST: Well, I'm not in a position where I can name specific names that we were looking at, because nobody was charged with a crime and nobody was convicted. What I can say is that we were developing information that, had we been able to pursue it, would have allowed us to look at some very high and senior members of the corporation, both in the United States and in London.

BOUDREAU: Was Tony Hayward on that list?

WEST: That I can't say.

BOUDREAU: Knowing what you know about Tony Hayward, do you think you should have been promoted to CEO?

WEST: Well, again, you know, he's -- as far as the stockholders are concerned, he's doing good for the company. So that's their decision.

BOUDREAU: But knowing -- WEST: I...

BOUDREAU: -- but knowing what you know and what you learned from your investigation, do you think -- would you have put him in that position, as the leader of this company?

WEST: Well, you know, I certainly would not have. But they didn't ask me.

BOUDREAU: Why wouldn't you have promoted him?

WEST: Well, there's a -- there's a record there. There's a pattern. I would have looked for someone that may have had nothing to do with the old school -- the old ways of doing things. I'd have said, look, you know, we've had these crimes, we've had this criminal corporate culture. Tony, you're at the -- pretty much at the helm as the number two guy through all of this. And whether or not you had anything to do with it doesn't really matter. We need to change this culture. We need to change the appearances. Let's find somebody else. That's what I would have decided.

(END VIDEO TAPE)

BOUDREAU: Scott West is no longer working for the government. He now works for a non-profit environmental group and lives in Seattle -- Wolf.

BLITZER: Abbie, how does BP respond to all of these allegations?

BOUDREAU: Well, a spokesperson from BP says since Tony Hayward became CEO: "He's focused on safe and reliable operations as the company's number one priority. In the last 10 years or so, injury rates and the number of spills have reduced by approximately 75 percent." And he goes on to say that: "BP has an ombudsman program to receive, investigate and help resolve concerns and issues raised by employees and contractors. BP continues to implement its operating management, a cornerstone of achieving safe, reliable and responsible operations at every BP operation."

BP says it's determined to learn from this event and get better as a company -- Wolf.

BLITZER: Abbie, thanks very much.

Abbie Boudreau of our Special Investigations Unit.

A new scandal is shaking up politics in one state, as a blogger alleges an affair with a GOP candidate for governor. She's calling it a disgraceful smear.

And word of a possible compromise on gays in the military -- details of a possible deal between the Pentagon and the White House and Democrats in Congress.

(COMMERCIAL BREAK)

BLITZER: We're following word of a deal on the repeal of the "don't ask/don't tell" policy banning gays and lesbians from serving openly in the United States military. Democratic sources telling our senior Congressional correspondent, Dana Bash, that the Pentagon and the White House have reached an agreement in principle that would let Congress vote on repealing the ban while giving the Pentagon time to implement new policies.

Let's talk about it with CNN's John King.

He's the host of "JOHN

KING USA" that comes up right at the top of the hour.

Explain what -- what is going on here behind-the-scenes and in front of the scenes, because this is one of those really sensitive issues.

JOHN KING, HOST, "JOHN KING USA": It's a very sensitive issue. And remember, I talked to Defense Secretary Gates, Wolf, just a few days ago -- a little more than a week ago. And he said, look, there are smart ways to do this and stupid ways to do this. And he wanted more time. He wanted until the end of the year. He's surveying the troops. He wants to get their feedback before he said, then, he would repeal the policy.

Instead, though, a lot of pressure from liberals on the Hill, saying, no, we promised this and w need to do it now. And so they're trying to do this as part of the Defense appropriations process. They need to appropriate the money for the Pentagon. They want to add the repeal in there.

The question is, do they have the votes?

And so the one thing they're looking for tonight is for Secretary Gates to come out and say, I've looked at this proposed compromise language and it's good enough for me, because they believe that would send a signal to some conservative Democrats, perhaps a few moderate Republicans, who would then say, if the secretary is for it, I can be for it.

The plan -- the compromise plan is essentially this. Congress would vote this week to repeal "don't ask/don't tell." But the effective date would be only after that survey that Secretary Gates wants to take of all the troops and their families comes to him. And what I'm waiting to see the final language on is some language that gives the secretary a little bit of wiggle room if there significant resistance from the troops or if he decides for housing reasons or logistics reasons he needs a little bit more time for implementation.

That is the secretary's concern. Before he will say, I will accept this compromise, he wants to make sure that he has enough wiggle room to implement the plan.

BLITZER: So -- so even if Congress approved it now, it wouldn't go into effect until this review, which is going to go on until the end of the year -- until the review is complete?

KING: Right. It would not take effect this year even if Congress and the president signed this in a matter of several weeks. The point is that many of the members who have been pushing this for some time want to be able to go home and say we have listened to you, we have taken the key votes; yes, it's a sensitive issue; yes, it's difficult and it will take some time to implement. But essentially, that it is done -- that it will be done, as opposed to we're going to try to get it done.

BLITZER: Because you...

KING: That's the one point...

BLITZER: -- you need Congressional action, no matter what, to change the current law of "don't ask/don't tell."

KING: Right.

BLITZER: And a lot of -- a lot of activists think you have a better chance of getting it passed with this Congress than the new one after November.

KING: More Republicans likely after November, so they want to do it now. This last footnote, though. Our Congressional producer, Ted Barrett, just talked to Senator Carl Levin in the hall on Capitol Hill. He's the chairman of the Senate Armed Services Committee. He says even with -- even if Secretary Gates blesses this compromise, he's not certain he has the votes. So there's still some lobbying to do on the Hill.

BLITZER: In the committee.

Congratulations to John King.

He received an honorary degree from his alma mater, the University of Rhode Island, yesterday.

Good work. KING: Thank you. It was wonderful to go home. And you had the same honor in Upstate New York in Niagara.

BLITZER: We're getting those degrees left and right.

KING: That's it. Dr. Blitzer.

BLITZER: Yes.

Thanks very much.

Another sex scandal in South Carolina. The Republican frontrunner for the gubernatorial nomination is denying a conservative blogger's claim they had an affair.

And the Duchess of York, better known as Fergie, is caught on tape pedaling access to her former husband, Britain's Prince Andrew.

Stick around.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: South Carolina gubernatorial candidate Nikki Haley, has been the GOP frontrunner, picking up endorsements from Sarah Palin, former Massachusetts governor, Mitt Romney, and many others. But her campaign has suddenly been rocked by allegations of an extra-marital affair -- charges she's strongly denying.

Our Lisa Sylvester has been looking into all of this for us -- Lisa, tell our viewers what's going on.

SYLVESTER: Well, Wolf, Nikki Haley is a married mother of two and she is currently leading the pack of Republicans seeking to replace outgoing governor, Mark Sanford.

And that makes her, also, a key target of political rivals. She is out now forcefully denying rumors of having an extra-marital affair several years ago.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): She's a rising political star in South Carolina -- a Tea Party favorite who has surged in the polls in the four way Republican gubernatorial primary. But now, Nikki Haley has been accused of straying outside her marriage. An influential state blogger dropped a bombshell, saying that years ago, he had an inappropriate physical relationship with Haley. Will Folks, who says he is a Haley supporter, says he decided to come forward after rival campaigns began leaking the story to the media. Folks, who resigned from the state government in 2005, before admitting a domestic violence charge, says he isn't saying anymore.

But Haley was quick to deny the allegations. In a radio interview, she dismissed the allegation as a disgraceful smear and as political tactics, saying her marriage to her husband, Michael, is as strong as ever.

NIKKI HALEY (R), SOUTH CAROLINA GUBERNATORIAL CANDIDATE: Michael and I met my very first weekend at Clemson. We dated for seven years. We've been married for 13 years. He is my very best friend and probably my biggest cheerleader and supporter as I am in this race.

SYLVESTER: Folks provided no evidence of an affair, but it surfaced in a state that's already sensitive to the charges of indiscretion after the peccadilloes of South Carolina governor, Mark Sanford, who called an Argentine mistress his soul mate.

GOV. MARK SANFORD (R), SOUTH CAROLINA: And so the bottom line is this. I -- I've been unfaithful to my wife.

SYLVESTER: Governor Sanford is one of a string of politicians who have fallen from political grace -- Representative Mark Souder, Representative Eric Massa and form New York governor, Eliot Spitzer.

Temple University professor Frank Farley says politics, by its nature, draws a Type T personality -- T for thrill seeker. They're natural leaders, charismatic, but there is a down side.

PROF. FRANK FARLEY, TEMPLE UNIVERSITY: The T negative, unfortunately, is where they take risks in destructive ways, either self-destructive ways or in ways that are destructive of other people. And it's like you sometimes -- it sometimes overflows in a sense.

You know, you may be this big T personality out there, a leader, changing the world, but you also have a little bit of that negative potential.

(END VIDEO TAPE)

SYLVESTER: And we should emphasize again that Nikki Haley adamantly denies cheating on her husband.

Sarah Palin spoke to her this morning. And according to Palin's Facebook page, Palin told Haley: "Hang in there." She says: "Any lies told about you will strengthen your resolve to clean up political and media corruption. You and your supporters will grow stronger through things like this," end quote.

And Haley, during her radio interview, said, if anything, these charges have made her even more motivated to win the state primary, which, Wolf, is in just two weeks -- Wolf.

BLITZER: We'll watch that primary in two weeks.

Thanks very much for that, Lisa.

A royal scandal caught on tape -- details of the undercover sting that has Sarah Ferguson apologizing.

And the Gulf disaster unfolding in real time -- CNN's Jeanne Moos takes a Moost Unusual look at the gusher cam.

(COMMERCIAL BREAK)

BLITZER: Undercover video has sparked a royal uproar in Britain. The tabloid newspaper, "News of the World," secretly recorded Sarah Ferguson, the Duchess of York, the ex-wife of Prince Andrew, making a deal to provide access to the prince in exchange for more than $700,000.

Watch this.

(BEGIN VIDEO CLIP)

SARAH FERGUSON, DUCHESS OF YORK: If we want to do a big deal with Andrew, then that's the big one.

UNIDENTIFIED MALE: I do. Of course, OK. No, of course. So you need 500,000 even.

FERGUSON: Yes, but that's in wire transfers.

UNIDENTIFIED MALE: That has to be a wire transfer, I mean, obviously.

FERGUSON: That's a wire transfer that's completely above board and that goes straight to wire transfer.

UNIDENTIFIED MALE: Who do we send that to?

FERGUSON: Then tat is then like then you open up all the channels, whatever you need, whatever you want. And then that's what -- and then you meet Andrew and that's fine. And that's -- that's -- that's when you really open up whatever you want.

(END AUDIO CLIP)

BLITZER: In a statement, Ferguson says: "I very deeply regret the situation and the embarrassment caused. It is true that my financial situation is under stress. However, that is no excuse for a serious lapse in judgment and I am very sorry that this has happened. I can confirm that the Duke of York was not aware or involved in any way of the discussions that occurred. I am sincerely sorry for my actions. The Duke has made a significant contribution to his business roll (ph) over the last 10 years and has always acted with complete integrity."

And joining us now from London, CNN's Richard Quest -- Richard, how is all of this playing in the U.K.?

RICHARD QUEST, HOST, "QUEST MEANS BUSINESS": It's playing with great seriousness at one level, because of the sheer severity of what the Duchess of York was involved in. Words like "corruption," "lack of integrity," "dishonesty," "grubby," "shabby" -- all those sort of words that, frankly, go to the very core of what she was involved with. And the mere fact that she apologized so quickly shows just how difficult this position is.

There's no getting away from it -- this is the royal family's nightmare, in the sense that their integrity is being called into question, that they are up for sale to the highest bidder and that you can, Wolf, buy access and favors from the royals.

BLITZER: How did she get into this financial predicament of her own?

QUEST: Well, that's the fascinating part. It's not the first time that the duchess has been like this. After her divorce, she ran up a seven figure overdraft, which eventually she paid off through her work with Weight Watchers and writing books about Budgie the Helicopter and then more recently, of course, through a publicity -- a public relations (INAUDIBLE) speaking.

But that went under. It collapsed. And it's believed that the duchess, once again, has very serious debts. She's been sued a couple of times. And we do know by her own admission today, Wolf, that she is under financial stress.

This was a huge amount of money she was being offered -- or she was seeking -- basically to get access to -- for someone to her ex- husband.

BLITZER: But I take it there was nothing illegal that she was doing.

Is she facing, potentially, any criminal charges?

QUEST: Not that I've heard.

I'm sure there will be people looking to see whether there was something truly criminal about this. But even if there was and even -- which is -- it is not questionable -- the real issue here is the Duke of York, Prince Andrew, his career is going around the world selling U.K., Inc. He is the person that you talk to if you're looking to invest here, if you want to do business with the U.K. He promotes British interests.

The mere scintilla of suggestion by anyone that you could buy access to him is really what's damaging. And she has thrown not just the baby out with the bath water, she's thrown the whole bloody bathroom out of the window at the same time.

BLITZER: So she's basically an outcast right now.

Any chance she can make a comeback?

QUEST: It is just about impossible that I could see, at the moment -- well, I suppose never say completely impossible. But it is just about impossible for her to make a comeback from this. The queen has spent nearly six decades protecting the name of the royal family. They only do things in service -- in duty for the country. And what -- and what Fergie has shown is that, basically, she was offering a price to pay.

And the only salvation in all of this is that she said that the -- that "The Duke is whiter than white." She used the phrase "The Duke is whiter than white." And at the moment, there is not a shred of allegation that he knew or he has taken money or he was in any way involved. That's small comfort tonight but what has been a very grubby incident for the royal family.

BLITZER: A grubby incident, indeed.

Richard, thanks very much.

President Obama's senior adviser, David Axelrod, is John King's guest right at the top of the hour on "JOHN KING USA." Stick around for that interview and a lot more. And it's the disaster some people just can't stop watching. Jeanne Moos takes a Moost Unusual look at what we're calling the gusher cam in the Gulf of Mexico.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some Hot Shots coming in from our friends at the Associated Press.

In Beijing -- look at this -- a young girl runs past the fountain outside a shopping mall.

At an auction house in London, a woman admires a life-sized sculpture of a female Indian elephant.

In Park City, Utah, snow falls on a tulip during a late spring snowstorm.

And in Fort Wayne, Indiana, 5-year-old Regina Brooks (ph) blows bubbles at the annual Bubble Festival.

Hot Shots -- pictures worth a thousand words.

People around the world are watching a disaster unfold in real time.

CNN's Jeanne Moos takes a Moost Unusual look.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT: (voice-over): Day or night, you can watch it gush -- a volcano of oil streaming live on a computer near you -- live on TV.

(BEGIN VIDEO CLIP, COURTESY MSNBC)

UNIDENTIFIED MALE: Marauding plumes of oil the size of Manhattan.

(END VIDEO CLIP)

MOOS: Being used to bite the hand that drilled it.

(BEGIN VIDEO CLIP, COURTESY MSNBC)

GOV. BOBBY JINDAL (R), LOUISIANA: BP is the responsible party. UNIDENTIFIED MALE: put the pressure on BP.

(END VIDEO CLIP)

MOOS: Live even in an empty Senate Environmental Committee hearing room. Congressional committees put the pressure on BP to make the gusher public. Shot by cameras on remote-controlled mini-subs, there's an occasional change of angle.

And when a lens gets spotted, you can't just wipe it like you would up top.

(BEGIN VIDEO CLIP FROM "AMERICAN MORNING")

KIRAN CHETRY, CNN ANCHOR: Rob Marciano for us on the...

(END VIDEO CLIP)

MOOS: Not when you're a mile underwater. Just about the only passers by are eel-like creatures. You almost want to warn them -- turn around. Swim for your life. Like a fire, the gusher is mesmerizing -- ghostly.

On the other hand, even to a former Navy diver like Jeff Snyder...

JEFF SNYDER, GEOPHYSICIST: It's actually kind of boring. Yes, there's the blackish brown cloud of stuff.

MOOS: Especially if you watch it for hours.

(on camera): All right.

Could you keep an eye on it, because I have to keep watching this thing?

(voice-over): It's the latest continuous feed in an age of Web cams pointed at oddities like Dili (ph) the half blind domesticated, potty-trained pet deer who can do stairs and has her own bedroom. She sometimes shares the bed with a pet poodle. From Dili to...

UNIDENTIFIED MALE: The naked mole rat camera is one of our most popular cameras.

(END VIDEO CLIP)

MOOS: You can drop in any time to watch the naked mole rat scratch. The National Zoo in Washington has dozens and dozens of cameras trained on more than 20 animals.

And if the octopus doesn't seem to be home, just ask the director to radio for a camera repositioning.

DENNIS KELLY, DIRECTOR, SMITHSONIAN NATIONAL ZOO: I'll try and get that arranged.

MOOS: The next thing you know...

KELLY: You're looking at almost the octopus' mouth at the moment. There he is.

MOOS (on camera): We're in the octopus.

(voice-over): Worse even than the octopus and the naked mole is this naked man camera. Watch him watching TV. Watch him sleeping. But even the naked man isn't as disturbing as the gusher that never sleeps.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: And remember, you can always follow what's going on behind-the-scenes here in THE SITUATION ROOM. I'm on Twitter. You can get my Tweets at Wolfblitzercnn -- all one word.

Thanks very much for watching.

I'm Wolf Blitzer in THE SITUATION ROOM.

And "JOHN KING USA" starts right now.