Return to Transcripts main page

On the Story

What Happens to Martha Stewart Now?; Will Iraq's Constitution Get Back on Track?; How is Campaign 2004 Shaping Up?

Aired March 06, 2004 - 10:00   ET

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

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


KELLI ARENA, CNN ANCHOR: Mexico's President Vicente Fox is meeting with President Bush at the ranch near Crawford, Texas. Before leaving Mexico City, Fox said his priority in the meeting would be an agreement on migration. Fox believes U.S. requirements for Mexicans entering the U.S. legally are too strict.
Also in Texas today, Senator John Kerry campaigning ahead of Tuesday's Democratic primary. Kerry is pounding the Bush administration on the jobs issue, citing yesterday's disappointing report on job creation. He has a town-hall meeting this morning in Houston and a rally this afternoon in San Antonio.

A car bomb exploded this morning in the Iraqi town of Kaldia (ph), anti-coalition hotbed in the Sunni Triangle. No casualty reports yet yet. To the south, seven British soldiers were wounded last night when their patrol came under fire near Amarrah (ph).

The only casualties were Palestinians today in a clash with Israeli troops in the Erez region between Gaza and Israel. Israeli troops killed one attacker. Another attacker blew up his jeep near a Palestinian police post, killing three Palestinian security officer.

Now back to ON THE STORY.

DEBORAH FEYERICK, CNN CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week.

I'm Deborah Feyerick in New York ON THE STORY of guilty four- times over for Martha Stewart. What happens next for her and her company?

KELLY WALLACE, CNN NATIONAL CORRESPONDENT: I'm Kelly Wallace, on the political story of Edwards out and Kerry riding high into this early start of the general-election campaign.

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: I'm Jane Arraf in Baghdad, ON THE STORY of how Iraqis are molding their own political future, even as the violence that everyone feared explodes in Shia Muslim's holy places.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: I'm Dana Bash in Crawford, Texas, ON THE STORY of President Bush moving forward on his campaign, from the stump to brand-new TV ads, provoking criticism over images of 9/11. KATHLEEN HAYS, CNNfn CORRESPONDENT: Ad I'm Kathleen Hays in Washington, ON THE STORY of what many consider the issue No. 1 in this election year, jobs.

We'll see how the gay marriage issue continues to divide Americans.

And Maria Hinojosa joins us later to talk about that amazing Philadelphia story. A woman to be reunited with the daughter she thought died in a housefire six years ago.

E-mail us at ONTHESTORY@cnn.com.

Now, straight to Deborah Feyerick and Martha.

(BEGIN VIDEO CLIP)

DAVID KELLY, U.S. ATTORNEY: When we first indicted this case, we said that it was about lies. It was all about lies. And as you saw in the evidence, that's what it was.

(END VIDEO CLIP)

FEYERICK: That was the U.S. attorney for the southern district of New York, David Kelly, after the jury found Martha Stewart guilty of all four charges against her: making false statements, conspiracy and obstructing justice. She'll be sentenced in mid-June. She faces up to 20 years in prison. Now, because of sentencing guidelines, she will likely get much less. She is going to move quickly to appeal and rescue her reputation and her business.

WALLACE: Deb, take us inside that courtroom. When the verdict was read, what was the reaction of the spectators and the reaction of Martha Stewart?

FEYERICK: There was absolute silence. After lunch, word came down that something was happening, and everybody began saying, It's a verdict, it's a verdict. Then, the judge's assistant came out and said, No, it's just a note.

But it did turn out to be the verdict. The U.S. Attorney came down, extra marshals were ushered into the court. There was a real sense of expectation, because this trial took six long weeks. And all of a sudden, here it was. And even her lawyer thought that the jury would take the weekend to deliberate and come back with a verdict on Tuesday. It didn't happen. 3:00 - and I want to know for the record - or put it on the record - that that's the exact time that I said the verdict did come down. I should have bet on it. But 3:00 on Friday afternoon, they came out with their verdict.

BASH: Deb, tell us about the chances of Martha Stewart actually serving jail time. It's hard for all of us to imagine her sitting in jail, but it's very likely, almost probable, that she will serve at least a year, you think?

FEYERICK: Yes. That's probably, because of the sentencing guidelines, they're going to - there's what's called a downward departure. So she will probably serve anywhere between 12 months to about 24 months.

Again, the judge will take into consideration a lot of factors. She doesn't have a criminal record. She's done a lot for society. Again, she will weigh the strength of the charges, the implications -- all of that is going to be taken into account when she does decide what to do with Martha.

HAYS: Deborah, did Martha Stewart blow it? Did her lawyers blow it? Did she make a mistake to take this thing to court? Should she have accepted so many kind of fine, some kind of plea bargain early on?

FEYERICK: It's interesting. It really depends on who you ask.

I spoke with somebody at the SEC, because she's still facing civil litigation. The person from the SEC said if she had just come forward, said, Yes, I got this information - you know, I made a mistake. I wasn't thinking, traded on the information, then she would have had to pay a fine on essentially what was a $50,000 profit that she made on selling this stock.

But I spoke to one juror, and he said that she really miscalculated. It wasn't that she didn't take the stand. Nobody really seemed to have a problem with that. What this particular juror did have a problem with was that her legal team put on one witness and one witness only. He said that really conveyed the impression to all 12 that she was saying, I have nothing to worry about, You know, I'm going to beat this. And that was the problem that this particular juror seemed to have.

WALLACE: Deb, you've been talk to people. What was the strategy there? Then why did the defense only pull up - put up one witness and only take a few minutes really to present a defense? Because it wanted to show that the government didn't have a big case?

FEYERICK: Well, no, it wasn't that so much. And Robert Morvillo is one of the best defense attorneys in New York City. His closing argument, spectacular. Everybody on the edge of their seats on that.

But their thinking was, six long weeks of testimony. Everybody who could have been called was called, though they probably could have gotten somebody in to talk about Martha Stewart's character, whether they knew of any indication that this was the way she did business, whether she fudged things once in a while. You know, things like that, because that's what Peter Bacanovic's lawyer did.

But their belief was that the burden of proof, as it always is, is on the government and they simply did not feel that there was sufficient evidence not to create reasonable doubt. And if you think that the jury gave her benefit of the doubt, then they probably could have found reasonable doubt. But they didn't. They really did feel that the testimony of Doug Faneuil, that the documents that supported what had happened were simply too strong, in their opinion. BASH: Deb, tell us about Martha herself, in the courtroom. Obviously, you've watched her over the past few weeks. But particularly on yesterday, as they were reading the verdict, what her reaction was.

FEYERICK: You know, it's very interesting. She simply did not break character.

She is a very serious woman. She doesn't smile very often. In fact, the one time that she really opened up was when her old pal from 30 years ago, the actor Brian Dennehy, walked into that courtroom. And it was the first time that you really caught a glimpse of who, perhaps, the private Martha Stewart really is. She was smiling. She was bubbly. Very personable. And she didn't react that way to any of the other celebrities who would come to the court to support her.

But yesterday, as she stood, she was very straight-faced. She did not, you know, cry. She did not weep. Her shoulders did not sag. She just stood and heard the verdict that was read. And this must have been one of the hardest things she has ever had to face, to hear a judge say, Guilty, guilty, guilty, guilty. Clearly, there was no room for any sort of confusion, the way the judge read those charges against her.

HAYS: So Deborah, give us a sense now of what happens in the days and week ahead for Martha Stewart. What about sentencing? What about an appeal. Will -- she can go home to Connecticut and hang out until the next step? Will she have to be in custody?

FEYERICK: No. What she does have to do is on Monday, there is a probation -- she will basically have to go to the probation officer, or at least send a representative, in order to kind of find out what the terms of her probation are, prior to sentencing. Sentencing comes June 17. And obviously, that's when she's going to find out what the judge is thinking and how long she long she's going to serve.

She will likely begin putting her affairs in order, coming up with a strategy, because this is very critical to her company right now. How do you make it so that this billion-dollar empire that she's built simply doesn't fall apart? She's got very strong executives who are working for her. She is in a position where there are enough supporters of Martha Stewart that they could, in fact, rally to make sure that this company doesn't go down.

But, again, a lot is lost. The question is, How do you restructure, how do you save everything she's built? And, you know, Kathleen, even though she didn't show much emotion in court, you really have to give her credit. This a woman who came from nothing, built something that is extraordinary. Whether you like her, whether you don't like her, she is one heck of a business woman. And now she's really at a point where she could lose it all.

WALLACE: Deb, very quickly, what about the PR strategy? Because it was rather incredible, moments after the verdicts were read, there was a statement on her Web site. FEYERICK: Well, that's what good PR does. They know that -- you know, Martha Stewart does not live in a vacuum, that when this was going to come down, either way, guilty or not guilty, there had to be some sort of reaction. You go on record, you go on record quickly.

And, again, by saying that, you know, we will appeal, we will carry this through, and her lawyer, very clear, saying, We have issues. We have had issues with this case all along, we have issues with the charges, and we are going to appeal. They think they have a shot in the second circuit, which is the appeals court.

WALLACE: Well, Deb, from that incredible drama in the courtroom, to a political drama playing out in the Democratic Party. I am back ON THE STORY of two Johns, John Kerry and John Edwards, right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: I believe that in 2004, one united Democratic Party, we can and we will win this election.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. JOHN EDWARDS (D-NC), FMR. PRESIDENTIAL CANDIDATE: The truth of the matter is that John Kerry has what it takes right here to be president of the United States.

(END VIDEO CLIP)

WALLACE: The Democratic presidential race came to an end this week. John Kerry claiming victory after winning nine more states on Tuesday and John Edwards calling it quits. For Kerry, now, though, two major challenges, money and momentum -- how to keep the money coming in and the momentum going.

Welcome back. We are ON THE STORY.

ARRAF: Kelly, I hate to be Iraqcentric, -- but it seemed that even though the number of soldiers dying here is pretty consistent, Iraq seemed to recede as a campaign issue as that campaign progresses.

Was that the case?

WALLACE: It was the case, Jane, because, really. Howard Dean, the former Vermont governor, was the one who was speaking out most vocally about his opposition to the war, and then he had to bow out of the race. So it left between two Johns, John Edwards and John Kerry. Both voted to give President Bush the authority to go to war with Iraq. So their positions very similar. It was not an issue in which they could draw contrast. The contrast really became about trade and jobs and their backgrounds and their styles. And that's what the voters seem to decide on. FEYERICK: You know, Kelly, because -- a lot of momentum, obviously, Edwards picked up. You felt the energy in the two campaigns. Many people think it simply makes sense for John Edwards to now be the vice presidential nominee. What did you get from his people?

WALLACE: Well, it's so interesting, Deb. You know, they really hated that question throughout the campaign because they said, Look, he is running for the nomination to be president, not for the vice presidency. Once he decided that he could no longer make a credible run for this and he was going to bow out, then the question started coming in, and his advisers would say on background that, If he is asked, he would certainly say yes. But they also say that this is now John Kerry's time, and that is kind of further down in the process.

John Edwards would no doubt certainly like to be called on to be vice president. But you have John Kerry naming a head of his vice presidential search committee, looking at a number of people. John Edwards is one. Some people raising questions, though, because the question is, Could John Edwards win his own state of North Carolina in a general election? And is there some sense from John Kerry you pick up? Does he believe John Edwards has the experience, the national security experience, to be vice president, and to be president if something happens? Not clear if believes he does have that experience.

BASH: Kelly, on John Kerry, you know, President Bush's aides have made it very clear that they don't think that he got bloodied up enough at all during the primary season because Howard Dean fell so fast and he rose so fast and that his favorables are, from their perspective, way too high at this point, and they're going to do what they can to bloody him up.

You know, John Kerry always says bring it on. That's his favorite refrain. But are they ready for what they're going to get from the Bush team, in terms of trying to bring him down many, many notches?

WALLACE: Well, Dana, of course they say they're ready. But they're also dealing with - and you know it so well - President Bush, with more than $100 million dollars to spend over the next several months. And John Kerry does not have much right now, a few million dollars at the most. So he's going to try and raise some $80 million between now and the summer.

But one thing is interesting, Dana. You did see this strategy throughout the campaign. Anytime republicans would try and attack or question John Kerry on any issue, he and his aides came firing back. And they continue to say that they think they learned lessons from the 1998 Michael Dukakis campaign. Aides believe that Dukakis allowed Republicans to define him, that he didn't fight back hard enough to prevent that from happening.

So they say they've learned lesson. They're going to try as hard as they can. But they also know the power of money, the power of advertising, and that President Bush has an enormous advantage right now.

HAYS: Kelly, you know, for hard-core Democrats, who were really looking for the ABB candidate, anybody but Bush, anybody who can beat Bush, right? John Kerry...

WALLACE: Right.

HAYS: ... is their man. But if you're an independent voter, someone in the middle, you are looking for a clear definition on issues. Does Kerry have that card to pull out? How is he going to play with independents? Because they're key to winning this race for him.

WALLACE: They are key. I mean, and we know that the Republicans and the Democrats both believe they might have 45 percent solidly on each of their sides, so that this general election could be decided by the 10 percent in the middle.

It's interesting. If you watched John Kerry the day after Super Tuesday when he became the virtual democratic nominee, he was really trying to appeal to some Republicans, even independents, saying something like, you know, there's nothing very conservative or Republican about having very high deficits, about having people like John Ashcroft in the Justice Department.

So he is try to make his way to that middle-of-the-road voter. It's something he was hit on during the primary campaign, John Edwards saying he was doing well with independents, that he was the better candidate to win those independents and defeat President Bush. Right now, though, John Kerry hoping that Democrats and those independents who are having some questions with the Bush administration will go his way.

ARRAF: Well, from the U.S. campaign to small steps towards elections here in Iraq, I'm back ON THE STORY after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

L. PAUL BREMER, U.S. CIVILIAN ADMINISTRATOR IN IRAQ: Civilized people the world over join you in outraged grief.

(END VIDEO CLIP)

ARRAF: That was the chief civilian administrator in Iraq, L. Paul Bremer, talking about attacks in Baghdad and Karbala that killed more than 180 people. The aim, he said, was clear -- to promote religious violence and stop the U.S. from handing power back to Iraq on June 30.

HAYS: Jane, who are the Iraqis angry at now? Are the - are they angry at suspected al Qaeda terrorists? Are they angry at the U.S. for not protecting them? Are they angry at each other?

ARRAF: I guess the short answer is they're angry at pretty well everybody. But I guess last on that list, and this is probably a good thing, is each other. Now the worst possible scenario would be if we had these horrendous attacks, absolutely horrifying, in the Shia holy places, and they had been blaming other Iraqi, Sunnis, for instance. Instead, they're blaming the United States, they're blaming Israel, of course, and they are blaming foreigners, al Qaeda, whoever it might be. But they haven't so far started blaming other Iraqis.

FEYERICK: With religion such a powerful force in the region, what is the general mood amongst the people about the Governing Council, about what they can achieve, whether they can bring the country together, whether, in fact, it is a governing body that the people themselves can believe in?

ARRAF: It isn't quite yet.

Now, we have to remember, that it's U.S.-appointed. And for what it is, it is remarkable. I mean, we've got 25 people who are doing the same kind of things that you all have been covering to some extent. I mean, hammering out deals in back rooms, disagreeing with each other without killing each other, which is really new for this country.

But there isn't really the process that filtered down to the public. For instance, had this constitution that was supposed to be signed. It wasn't. Nobody in the streets knows what this constitution is. Journalists couldn't even get a copy. There are still a lot of things that have not been explained to people. And until they are, there isn't going to be a lot of support for these people.

WALLACE: Jane, question about security. Didn't the American forces kind of pull back a little bit and allow Iraqis to have security on Tuesday, a holy day, in honor of, you know, the holy day in Baghdad and Karbala? And are they going to make changes in light of what happened on that day?

ARRAF: Well, they were on high alert, as were the Iraqi security forces. And it was really an impossible situation.

You have to imagine this incredible ceremony. Now, this was a commemoration they have not been able to do publicly for more than 30 years under Saddam. And this is sort of the definitive illustration of Shia power. Waves and waves of people whipping themselves with steel chains, cutting themselves with knives. And in that situation, you can't really set up a search. I mean, it really was not a town-hall meeting kind of situation. They knew there might be violence. They tried to minimize it. But they couldn't do everything that they could have to prevent suicide bombers without actually stopping the ceremonies and that's what Saddam did.

BASH: Jane, I want to ask you about the delay the writing of this constitution. You did a fabulous piece yesterday where you showed that there was actually a band, an orchestra playing. This was such a big and momentous ceremony. And then everything just got stalled.

Tell us exactly what this was like to be there, and covering that event.

ARRAF: Well, first of all, the location is a bit surreal because it's held in the convention center, which was built for the nonaligned summit. And I have spent hours and hours and perhaps days with other member of our team under Saddam in that very hall, staking out people like Tariq Aziz and covering Arab unity conferences that ended in fistfights.

So this was the location of this momentum ceremony. And it was supposed to start at 4:00 -- 4:15, people started thinking, Oh, this is just Iraq time -- 4:30, they started wondering a little bit. And then, as it started getting later and later, and they kept bringing out the children and the band to amuse people, it became really very clear that this was not going to happen anytime soon.

But everyone tried to put a good face on it. The Governing Council members themselves were nowhere to be seen. But the U.S. officials kept going around, reminding everyone that this was a great illustration of democracy and this was the way it should be and this was a necessary step. And maybe it is.

HAYS: Well, of course, Jane, the Bush administration would like to see this signed because they want to make it clear that things are on track in Iraq and we can bring troops home sooner rather than later. But we -- many experts have said it's really tough to forge a country where there are basically three such separate groups, the Kurds, the Sunni Muslims in the center, and then the Shiites who are the majority in the south.

To what extent is the constitution having trouble, because it's having trouble really hammering out this constitution in a way that all three groups feel that they're equally protected from each other?

ARRAF: I think what this delay in signing the constitution illustrated, that no matter how carefully you draft something - and, according to U.S. officials, this was a beautiful document, a document that would be the envy of any country anywhere, in terms of setting up civil liberties and democratic institutions. But at the end of the day, after this horrendous bombing in the Shia holy places, a couple of days later, the grand Ayatollah Ali al-Sistani, did the equivalent of picking up the phone - he doesn't pick up the phone - but, essentially he made it clear from his location in Najaf -- he's quite reclusive -- that he was not happy with this.

And Shia members of the Governing Council paid attention. Shias form 60 percent of the population here. And the Ayatollah al-Sistani is this huge, unseen force that looms over almost everything. And what it illustrated, I think, is that you can say you're going to have democracy, but at the end of the day there are other forces at work that are perhaps equally important.

BASH: Well, Jane, thanks to you. And also, we want to say thank you to Deborah Feyerick for joining us. We understand you gave to back on the stories you're covering today.

We're going to go back to presidential politics after a short break and a check at what's making headlines at this hour. Stay with us.

(COMMERCIAL BREAK)

ERICA HILL, CNN ANCHOR: I'm Eric Hill in Atlanta.

In the headlines at this hour, Attorney General Ashcroft remains in intensive care in Washington with a severe case of gallstones. Ashcroft was admitted Thursday night. Right now, he's being treated with antibiotics and painkillers while doctors determine whether surgery is necessary. Deputy Attorney General James Comey is acting as attorney general while Ashcroft is hospitalized.

In Grand Forks, North Dakota, Alfonzo Rodriguez was bound over for trial after pleading not guilty to kidnapping in the disappearance of college student Dru Sjodin. Sjodin was last seen leaving her job at a mall last November. No trial date set.

And updating a story we told you about earlier -- Russian media report that 12 Russian polar explorers have now been rescued from an ice flow in the Arctic. The scientific team had been at the North Pole station for nearly a year. Most of the research station, though, fell into the Arctic Ocean when the ice shelf suddenly broke off. Two Russian helicopter flew through total darkness to reach the stranded team and their dogs.

In Haiti, U.S. Marines have moved into some rebel-held areas to help improve security. Pro-Aristide supporters - demonstrators, rather, in Port-au-Prince have denounced the presence of the Marines and other international troops as a - quote - "occupation." While the capital is said to be calm, reports are emerging of vigilante justice against pro-Aristide militants in some parts of the country.

Musician David Crosby has been arrested on drug and weapons charges in New York. Police say marijuana, a handgun and two knives were found in luggage that Crosby left behind at a hotel. Crosby was in New York for a performance near Times Square.

Those are the top stories at this hour. Now, let's head back to ON THE STORY.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: He spent two decades in Congress. He's built up quite a record. In fact, Senator Kerry's been in Washington long enough to take both sides on just about every issue.

(END VIDEO CLIP)

BASH: President Bush in Los Angeles on Wednesday, taking his first full-fledged jabs at his new Democratic rival in that speech and in some brand-new ads, a signal of how his campaign strategy is shaping up.

Welcome back. We're ON THE STORY. We also want to welcome Maria Hinojosa, who is joining us from Westport, Connecticut.

MARIA HINOJOSA, CNN URBAN AFFAIRS CORRESPONDENT: Hey, Dana, just wondering, this was a pretty rough week for President Bush. Yes, he has geared up, and now has launched his campaign. But front page of "The Daily News" had him -- big criticism about President Bush using September 11 as part of his campaign ads. Also, the jobs report.

But tell us, what's the atmosphere like and the mood like in the White House now?

BASH: Well, it's interesting, Maria. Those were definitely some interesting stories that the president had to deal with.

But in terms of the big picture, this has really been a different kind of week in traveling and following around the president, in California first for a couple of days and now here in Texas. He completely has pivoted into campaign mode.

After Senator Kerry essentially locked up the nomination, he called him on Tuesday. And the very next day, 24 hours later, he really took off the gloves, went after him, used his name for the first time, hit him on everything from being a waffler, to the major issues in the campaign, Iraq, terrorism, taxes, the economy.

And meanwhile, while he's doing that, his campaign is eager to get into the fray. They want to get in there. Every time Senator Kerry says something, they want to make sure that their voice is heard on those issues.

And then, of course, as you mentioned, the brand-new ads -- $10 million in new ads put out just this week.

WALLACE: Dana, speaking of the ads and the criticism, of course, of using images of September 11 -- did these - did the White House or the Bush/Cheney aides you've been talking to -- did they expect so much push-back, so much push-back that has really dominated the headlines over the past few days, Democrats seizing on this? Was it more than they expected?

BASH: That's a good question, Kelly. Because talking to them at the end of the week, they say, Oh, yes, they did expect it. They anticipated that there would be some questions about it.

But earlier in the week -- and, really still, now -- they are absolutely not backing down on this. They say this is part of the fabric of the nation, that 9/11 completely changed things. It's a shared American experience. And most importantly for the president in his re-election campaign, they say you just simply can't talk about his three-plus years in office without talking about September 11, because it changed so much, not only in terms of how he's led, but also in term of the policies that have gone through congress, and that have really changed. They all have to do with 9/11.

They say that they - you know, they understand that people might not necessarily think it is appropriate. But they were also very quick to make sure we talked to families of victims of September 1 who said they didn't have a problem with it. They also got Rudy Giuliani out there pretty fast as well. So they tried to play defense but didn't back down, didn't back down. Definitely stayed on offense.

HAYS: So what about the strategy in these ads? I almost can't -- tell me in dollars -- seems a lot to spend on four ads. They obviously didn't outsource any..

BASH: They got a lot of money.

HAYS: ...cheap labor there, right?

But what are we going to see, Dana? What's the story they're going to tell this year to, you know, have the final chapter be the one they want, which is President Bush re-elected in 2004?

BASH: Well, that's interesting you use that term because that's the way the campaign is describing this, these eight months that we have ahead of us -- long eight months -- as a book. And that these first ads are essentially the first chapter. And that first chapter, they want to redefine and reintroduce the president to the American people on their terms, not on - on the terms of Senator Kerry and the Democrats that they've been hearing from for so long.

And that's essentially what you saw in these ads. Very positive. The tagline that you have heard and you will hear many, many times is steady leadership in times of change, saying he's somebody who is decisive. He can make decisions. He can lead. Beginning to set up a contrast between him and how they're trying to paint John Kerry, who, as I said is -- they said they think is a zig-zagger.

You know, it's interesting. We're told that the president, while he has not been out there over the past couple of weeks -- until this week, essentially -- has been reviewing Senator Kerry's record. He has been reviewing the transcripts of interviews he's done, reviewing the debate, the Democratic debates. And we're told that he understands that Senator Kerry is going to be a tough opponent, watching the races that he has been in for the Senate over the past couple of decades. He's -- he knows it's going to be a tough one.

HINOJOSA: Hey, Dana, just wondering -- President Vicente Fox from Mexico is visiting this week, actually, right now at the ranch there with President Bush. If you go back to just before the -- when Bush won the other election and he became into president, there was a lot of relationship and talk between President Fox and President Bush about a possible legalization treaty that would basically legalize undocumented immigrants in the United States. Clearly, after September 11, a lot of change there.

And the Bush plan now of a semi-amnesty -- actually, when you look at Latinos in reaction to that -- he doesn't sew up the Latino vote when he comes out with this plan. So what's the talk on what might happen between these two presidents and how far will President Bush go, in fact, to trying to give full legalization to these undocumented immigrants or to try to get the Latino vote?

BASH: Well, first, let's start on the relationship between Presidents Fox and Bush. You're right, they were very close. It was this, you know -- this much-celebrated relationship at the beginning of President Bush's time in office. And then things really went sour because of the war in Iraq, not supporting him on that, and a whole host of other issues, particularly after September 11 and the fight against terrorism.

But this meeting here -- as we speak, they are currently at the ranch, not too far from here -- is just sort of the latest in trying to get the relationship back on track, and, certainly is noteworthy that it is coming at a time when the president and his aides make it very clear that they are eager to court the Hispanic and the Latino vote. It's absolutely key in some of the key states.

But beyond that, in terms of the policy issues you were talking about, Maria, the -- what he proposed, what President Bush proposed in January before going to Mexico, is to give temporary legal status to some illegal immigrants. That's really not going to go anywhere, according to Republican sources I'm talking to on the Hill. Conservatives absolutely do not like the plan. It's an election year, and, you know, they understand the president had to do it and Vicente Fox even, is a very practical politician. He understands that it's probably not going to go anywhere.

But the two men definitely are trying to mend fences, if you will. And an interesting story, the president, when he greeted Fox at the airport or at the heliport, I should say, yesterday, he drove up in his Texas-style pickup truck and he told reporters that what they had for dinner last night was fish and that President Bush said he caught the fish that they were going to have for dinner last night. So they were trying to make it a down-home meal.

HAYS: Aww. What a nice guy. And actually, you know, looking at the pictures we just of them greeting each other, it certainly looked like a warm greeting between the two presidential couples.

But we're going to go from presidential politics, to the one issue that may cause the most heartburn in Bush/Cheney campaign headquarters. That's jobs. Where are they and why aren't there more of them?

I'm back ON THE STORY after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: Empty talk about jobs and economic isolation won't get anyone hired. The way to create jobs is our pro-growth, pro- entrepreneur agenda.

(END VIDEO CLIP)

HAYS: That's Mr. Bush, pumping up his economic program in Los Angeles this week. That question of how to create jobs and how many are being created right now is at the center of campaign 2004.

Welcome back. We're ON THE STORY.

BASH: Kathleen, I tell you that the president's aides were so disappointed. Usually, they put a good face on these job numbers and say things are getting better. They did that, but it was impossible for them to hide how disappointed they were with these new numbers and impossible for them to explain it.

BASH: Well, you know, Dana, it was a jaw-dropping number for everybody. When that number came out at 8:30, people on Wall Street were saying, What happened? We have 21,000 new jobs created, looking at least 125,000 maybe 150,000. Some of the back numbers revised lower.

It's a strange thing. It's true, we've had these slow-moving job recoveries in the past. But we've had strong GDP numbers. We've got businesses spending again. We've got consumers spending. Home construction is good. There just isn't job creation yet.

HINOJOSA: I'm just wondering, Kathleen. You know, the Bush presidency had been saying where it's going to be great, there had been so much expectation. Is there any sense that they can - that they will go down that expectation route, any sense that, in fact there, could be more jobs created? Or this is what it's going to look like for the next, let's say, three to four months?

HAYS: Well, actually, you know, the administration continues to insist -- I interviewed Glen Hubbard, the former CEA chairman yesterday. And we also had Greg Mankew on the air. The current CEA - you know, the White House chief economist, saying just be patient. If -- employers cannot continue to run their businesses as fast as they are without adding more workers.

The problem is, number one, we're very productive. We've gotten efficient. We've got lots of computers. The other thing is, there's a lot of job insecurity. Who do you know, if their boss says, You know, you're going to have to work a little extra; you're going to have to get that done in less time -- is going to say, Hell no, I'm going to go find another job? It just isn't that kind of job market.

And so we seem to have gotten on this very slow, grinding machine that isn't just moving fast enough. Now, it's true, we look at the number, the net change of 21,000 jobs. Millions of jobs are being created every week, millions of jobs are being destroyed. But we just need the economy to eke out about 200,000 more jobs a month to give the economy the juice it needs to give people confidence again. And again, it's just - it's an economy, it's a changing kind of world that we haven't dealt with before. And we're seeing this very slow job growth.

But yes, it could happen. And the White House says it will.

WALLACE: And Kathleen, no surprise, lots of smiles on the part of the Democratic nominee -- virtual nominee -- John Kerry with that jobs report coming out, because he's been really using this issue to try and hammer away at the Bush White House.

But I want to ask you something -- the "O" word, outsourcing. It is now part of all of our vocabularies. And I'm just curious -- is this something that has just been building over time? Has it really gotten more play during the political season? Now that most Americans know exactly what outsourcing mean and you have Congress trying to fight to prevent it.

HAYS: Well, you know, three or four years ago, companies were outsourcing. This has been going on for a while. I mean, the first outsourcing was companies like Nike setting up their manufacturing plants all over Asia, chasing the cheapest labor. But when the economy was stronger and we were creating 200,000, 300,000 jobs a month, nobody cared about outsourcing a few thousand jobs here and there because it was just -- it was something that we could afford to do.

What's also happening, though -- china and technology. Think about it. The new technologies, the cheap communication - I mean, it's so much easier for companies to start setting up part of their ventures overseas.

This week, I interviewed a company out on Long Island, a small manufacturer. Had 90 employee, cut it back to 20 as they outsourced their production facilities to China. Now they're profitable again. So they're happy they saved those two dozen jobs. They're doing so well with it they have now started their own outsourcing consulting kind of thing. They're a one-stop shopping conduit. If you wanted to set up a small manufacturing firm and send the production over to China, they're going to help you do it at a price.

But it just goes to show you, this is - this, to me, is like a river running downhill. The forces are there. This is what companies are doing. The government's trying to get involved to kind of stop it to a certain extent. But while the governments and politicians are arguing, the businesspeople, this is what they're doing.

BASH: Kathleen, as an expert economist, I have to ask you a question about what we're hearing from Bush aides, which is that yes, jobs are not as good as they should be, but they are pushing housing starts; they're pushing the stock market gains; they're pushing consumer confidence being as good as it should be. And that those signals are just, if not more important, than the job signals, in terms of how people feel. What do you make of that?

HAYS: That's - you know, that's - that's true. And that's why this is such a puzzle, because in terms of production, in terms of economic activity, in terms of orders, in terms of sales, there's a lot happening in this economy. It's running at about a 4 percent annual rate. Alan Greenspan said it a couple weeks ago -- in the past, with these kinds of numbers, you'd see the jobs.

But think about it. Jobs really are, for many people, the No. 1 issue. And if we start losing confidence, if we pull back on spending, this is something that could hurt the economy. And people are worried about the future. They're worried what outsourcing means. They're worried about what technology means to their future job. They're worried -- should I send my kid to college? Is it even going to be worth it?

So Bush is right, the aides are right. But the problem is, jobs, I think, for most families, is still the issue for themselves, for their kids, for their future.

HINOJOSA: Well, from jobs and the economy, to a story about family, heartbreak and reunion. When we come back, I'm ON THE STORY of the family that was reunited with the little girl lost for six years and now found again in Philadelphia, when we come back.

ANNOUCER: Maria Hinojosa is CNN urban affairs correspondent. She won a Robert F. Kennedy Award and was twice named by Hispanic Business Magazine as one of the most influential Latinos in the country. She's written two books.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: (SPEAKING IN SPANISH)

(END VIDEO CLIP)

HINOJOSA: And that is Luz - Luz Ay de Cuevas (ph), saying that she never believed that her little baby girl was, in fact, dead. An extraordinary story in Philadelphia. She basically said that she had gone up to this house of hers that was on fire, looked into the crib, didn't see the baby, all -- the fire department, the police department told her, your baby is dead. Six years later, she goes to a party and recognizes her 6-year-old daughter because of a dimple in the face.

Welcome back. We're ON THE STORY of the Philadelphia reunion.

HAYS: Well, Maria, the thing that is so poignant to me -- I mean, it's all poignant. But this little girl. She was raised by another mother for six year. What - what -- that has got to just really twist her head in a lot of strange ways. A birth father now involved in this.

What can you tell us about where the family stands now, where this child stands now?

HINOJOSA: Well, it's really -- it's very confusing. The mother and father that gave birth to little Delimar -- is what the name they gave her -- she has now been called Aaliyah for the past six years. They have now separated. So there's some kind of infighting going on between them.

What we had first heard was that when Delimar was first told - and, in fact, taken away by the DIFAS (ph) officials, she went into hysterics. And this is the woman, Carolyn Correa, who allegedly took her -- is the only mother she's ever known. So the first reports we were getting is that she was just traumatized and in hysterics.

Now, when they were finally able to see each other again on Thursday night, so less than a week had passed, and already we're hearing reports that the child has kind of come to understand the basics of what had happened here. I have a 6-year-old, so I'm continually looking at her, saying, could she, in fact, manage this? But apparently she did call her birth mother "mommy," did give her a hug. So at least on the part of the birth mother, Luz Ay De Cuevas, a tremendous sense of hope.

But this is going to be a long reunion process. They're not living together. They did get together and see each other on Thursday. But it's going to be a long process with a lot of counseling.

BASH: Maria, just take us back a little bit. Explain what exactly happened in this tremendously, as you put it, poignant story, of this 6-year-old girl. Essentially, the mother thinking she was dead and then finding her all these years later.

HINOJOSA: Well, you know, one of the interesting things that happens here is why is it the Philadelphia Police Department and fire department was so quick to dismiss Luz Ay De Cuevas, who said that when she went up to the burning bedroom and looked inside the crib for a 10-day-old baby and didn't see her, and didn't see her on the bed -- Why were they so willing to say, You know what? You're wrong. The baby is dead, and declare the baby is dead, even though they never found any remains?

For six years, she believed that her baby was still alive, had an inkling that this other woman who she had just met, might have taken her baby. The woman who she had just met, when they met, she said, Oh, you have a baby. I just had a baby. And then Luz Ay De Cuevas said, So, where is your baby? She said, Well, my baby's father was black so my family took the baby away from me. Some point there, she allegedly takes little Delimar, takes her as her own. So a lot of questions now remain if she was pregnant, where was - where is that baby, and who might have helped her to take part in this conspiracy of taking little Delimar for six long years?

WALLACE: Maria, what an incredible story.

But let me switch gears a little bit to where you are. Westport, Connecticut, the hometown of Martha Stewart. You've been talking, we understand, to friends, neighbors. What's the reaction there to this momentous verdict yesterday?

HINOJOSA: You know, Kelly, it kind of goes like in the papers, all right? Like, here in The New York Times, relatively subdued headline, not too large here.

But then you go to The Daily News and it's - woops, No, I'm sorry. I wanted to go to the Post first. Woops. Gave it away. Post, big, red letters of "GUILTY." And then, of course, The Daily News kind of taking it all out, putting her behind bars and, of course, the famous Martha Stewart curtains.

But here in her hometown of Westport, Connecticut, goes the way it is nationally. There are some people who just say, What a tragedy. She was such an important woman, one of the biggest women to take such a huge financial leap and into her company. Someone said from a feminist's perspective, I'm really sad that she's fallen from grace.

But then also people are saying, But you know what? She lied. She misstepped. She shouldn't have done these things. Why did she make these mistake of not saying the truth, and not coming kind of -- straight up and saying this is what happened?

So you're really getting it from both angles here at Oscar's Deli in Westport, Connecticut, where you're finding people who say, We love her. We're sad. And others who say, You know what? She's not such a nice person. Good riddance. She lied to federal officials. Don't do it. And we're learning the lesson.

HAYS: Well, you know, Maria, I think that - it's -- one thing that's interesting about Martha Stewart is exemplifies something, you know, on this whole question of jobs -- somebody who started her own smaller business and then her big company. And, of course, the Republicans say, That's what's happening right now in our economy.

When you are up there, though, have you run into anybody who recalled her, you know, the teenage Martha Stewart, a real go-getter, or, you know, somebody exhibiting these kinds of really dynamic, aggressive qualities, that they may have gotten her into troubling, but they also got her ahead in a big way.

HINOJOSA: Absolutely. That was one of the first people we spoke to, said, I saw her when she opened her first catering business, and I've seen her grown and she's worked hard and what a woman. I mean, she has just given all of this time and effort to her company. And sad, but, you know, what? Again, but people say, But why did she lie? She lied.

HAYS: Yes, she did. Boy, it's a good lesson, isn't it? Sometimes the lie is worse than the deed. Well, thanks, Maria.

We're coming back ON THE STORY after this.

ANNOUNCER: Senator Hillary Clinton was in the news this week. What's her story? The answer after the break.

(COMMERCIAL BREAK)

ANNOUNCER: Senator Hillary Clinton. What's her story? The former first lady has been called many things, but this week, something new - tough guy. For the first time, Men's Journal put a woman on their tough guy list. Clinton ranks 25 among athletes and other Washington figures, such as Arizona Senator John McCain and Defense Secretary Donald Rumsfeld. The magazine's senior editor says looking at what she's been through and she represents, would you mess with her? And he says Clinton on the list is not a jab, but a compliment.

HAYS: Thanks so much to my colleagues and thank you for watching ON THE STORY. We'll be back next week.

Still ahead, "PEOPLE IN THE NEWS," focusing this week on who else? Martha Stewart. Coming up right now, a check on what's making headlines at this hour.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com




Constitution Get Back on Track?; How is Campaign 2004 Shaping Up?>


Aired March 6, 2004 - 10:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KELLI ARENA, CNN ANCHOR: Mexico's President Vicente Fox is meeting with President Bush at the ranch near Crawford, Texas. Before leaving Mexico City, Fox said his priority in the meeting would be an agreement on migration. Fox believes U.S. requirements for Mexicans entering the U.S. legally are too strict.
Also in Texas today, Senator John Kerry campaigning ahead of Tuesday's Democratic primary. Kerry is pounding the Bush administration on the jobs issue, citing yesterday's disappointing report on job creation. He has a town-hall meeting this morning in Houston and a rally this afternoon in San Antonio.

A car bomb exploded this morning in the Iraqi town of Kaldia (ph), anti-coalition hotbed in the Sunni Triangle. No casualty reports yet yet. To the south, seven British soldiers were wounded last night when their patrol came under fire near Amarrah (ph).

The only casualties were Palestinians today in a clash with Israeli troops in the Erez region between Gaza and Israel. Israeli troops killed one attacker. Another attacker blew up his jeep near a Palestinian police post, killing three Palestinian security officer.

Now back to ON THE STORY.

DEBORAH FEYERICK, CNN CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week.

I'm Deborah Feyerick in New York ON THE STORY of guilty four- times over for Martha Stewart. What happens next for her and her company?

KELLY WALLACE, CNN NATIONAL CORRESPONDENT: I'm Kelly Wallace, on the political story of Edwards out and Kerry riding high into this early start of the general-election campaign.

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: I'm Jane Arraf in Baghdad, ON THE STORY of how Iraqis are molding their own political future, even as the violence that everyone feared explodes in Shia Muslim's holy places.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: I'm Dana Bash in Crawford, Texas, ON THE STORY of President Bush moving forward on his campaign, from the stump to brand-new TV ads, provoking criticism over images of 9/11. KATHLEEN HAYS, CNNfn CORRESPONDENT: Ad I'm Kathleen Hays in Washington, ON THE STORY of what many consider the issue No. 1 in this election year, jobs.

We'll see how the gay marriage issue continues to divide Americans.

And Maria Hinojosa joins us later to talk about that amazing Philadelphia story. A woman to be reunited with the daughter she thought died in a housefire six years ago.

E-mail us at ONTHESTORY@cnn.com.

Now, straight to Deborah Feyerick and Martha.

(BEGIN VIDEO CLIP)

DAVID KELLY, U.S. ATTORNEY: When we first indicted this case, we said that it was about lies. It was all about lies. And as you saw in the evidence, that's what it was.

(END VIDEO CLIP)

FEYERICK: That was the U.S. attorney for the southern district of New York, David Kelly, after the jury found Martha Stewart guilty of all four charges against her: making false statements, conspiracy and obstructing justice. She'll be sentenced in mid-June. She faces up to 20 years in prison. Now, because of sentencing guidelines, she will likely get much less. She is going to move quickly to appeal and rescue her reputation and her business.

WALLACE: Deb, take us inside that courtroom. When the verdict was read, what was the reaction of the spectators and the reaction of Martha Stewart?

FEYERICK: There was absolute silence. After lunch, word came down that something was happening, and everybody began saying, It's a verdict, it's a verdict. Then, the judge's assistant came out and said, No, it's just a note.

But it did turn out to be the verdict. The U.S. Attorney came down, extra marshals were ushered into the court. There was a real sense of expectation, because this trial took six long weeks. And all of a sudden, here it was. And even her lawyer thought that the jury would take the weekend to deliberate and come back with a verdict on Tuesday. It didn't happen. 3:00 - and I want to know for the record - or put it on the record - that that's the exact time that I said the verdict did come down. I should have bet on it. But 3:00 on Friday afternoon, they came out with their verdict.

BASH: Deb, tell us about the chances of Martha Stewart actually serving jail time. It's hard for all of us to imagine her sitting in jail, but it's very likely, almost probable, that she will serve at least a year, you think?

FEYERICK: Yes. That's probably, because of the sentencing guidelines, they're going to - there's what's called a downward departure. So she will probably serve anywhere between 12 months to about 24 months.

Again, the judge will take into consideration a lot of factors. She doesn't have a criminal record. She's done a lot for society. Again, she will weigh the strength of the charges, the implications -- all of that is going to be taken into account when she does decide what to do with Martha.

HAYS: Deborah, did Martha Stewart blow it? Did her lawyers blow it? Did she make a mistake to take this thing to court? Should she have accepted so many kind of fine, some kind of plea bargain early on?

FEYERICK: It's interesting. It really depends on who you ask.

I spoke with somebody at the SEC, because she's still facing civil litigation. The person from the SEC said if she had just come forward, said, Yes, I got this information - you know, I made a mistake. I wasn't thinking, traded on the information, then she would have had to pay a fine on essentially what was a $50,000 profit that she made on selling this stock.

But I spoke to one juror, and he said that she really miscalculated. It wasn't that she didn't take the stand. Nobody really seemed to have a problem with that. What this particular juror did have a problem with was that her legal team put on one witness and one witness only. He said that really conveyed the impression to all 12 that she was saying, I have nothing to worry about, You know, I'm going to beat this. And that was the problem that this particular juror seemed to have.

WALLACE: Deb, you've been talk to people. What was the strategy there? Then why did the defense only pull up - put up one witness and only take a few minutes really to present a defense? Because it wanted to show that the government didn't have a big case?

FEYERICK: Well, no, it wasn't that so much. And Robert Morvillo is one of the best defense attorneys in New York City. His closing argument, spectacular. Everybody on the edge of their seats on that.

But their thinking was, six long weeks of testimony. Everybody who could have been called was called, though they probably could have gotten somebody in to talk about Martha Stewart's character, whether they knew of any indication that this was the way she did business, whether she fudged things once in a while. You know, things like that, because that's what Peter Bacanovic's lawyer did.

But their belief was that the burden of proof, as it always is, is on the government and they simply did not feel that there was sufficient evidence not to create reasonable doubt. And if you think that the jury gave her benefit of the doubt, then they probably could have found reasonable doubt. But they didn't. They really did feel that the testimony of Doug Faneuil, that the documents that supported what had happened were simply too strong, in their opinion. BASH: Deb, tell us about Martha herself, in the courtroom. Obviously, you've watched her over the past few weeks. But particularly on yesterday, as they were reading the verdict, what her reaction was.

FEYERICK: You know, it's very interesting. She simply did not break character.

She is a very serious woman. She doesn't smile very often. In fact, the one time that she really opened up was when her old pal from 30 years ago, the actor Brian Dennehy, walked into that courtroom. And it was the first time that you really caught a glimpse of who, perhaps, the private Martha Stewart really is. She was smiling. She was bubbly. Very personable. And she didn't react that way to any of the other celebrities who would come to the court to support her.

But yesterday, as she stood, she was very straight-faced. She did not, you know, cry. She did not weep. Her shoulders did not sag. She just stood and heard the verdict that was read. And this must have been one of the hardest things she has ever had to face, to hear a judge say, Guilty, guilty, guilty, guilty. Clearly, there was no room for any sort of confusion, the way the judge read those charges against her.

HAYS: So Deborah, give us a sense now of what happens in the days and week ahead for Martha Stewart. What about sentencing? What about an appeal. Will -- she can go home to Connecticut and hang out until the next step? Will she have to be in custody?

FEYERICK: No. What she does have to do is on Monday, there is a probation -- she will basically have to go to the probation officer, or at least send a representative, in order to kind of find out what the terms of her probation are, prior to sentencing. Sentencing comes June 17. And obviously, that's when she's going to find out what the judge is thinking and how long she long she's going to serve.

She will likely begin putting her affairs in order, coming up with a strategy, because this is very critical to her company right now. How do you make it so that this billion-dollar empire that she's built simply doesn't fall apart? She's got very strong executives who are working for her. She is in a position where there are enough supporters of Martha Stewart that they could, in fact, rally to make sure that this company doesn't go down.

But, again, a lot is lost. The question is, How do you restructure, how do you save everything she's built? And, you know, Kathleen, even though she didn't show much emotion in court, you really have to give her credit. This a woman who came from nothing, built something that is extraordinary. Whether you like her, whether you don't like her, she is one heck of a business woman. And now she's really at a point where she could lose it all.

WALLACE: Deb, very quickly, what about the PR strategy? Because it was rather incredible, moments after the verdicts were read, there was a statement on her Web site. FEYERICK: Well, that's what good PR does. They know that -- you know, Martha Stewart does not live in a vacuum, that when this was going to come down, either way, guilty or not guilty, there had to be some sort of reaction. You go on record, you go on record quickly.

And, again, by saying that, you know, we will appeal, we will carry this through, and her lawyer, very clear, saying, We have issues. We have had issues with this case all along, we have issues with the charges, and we are going to appeal. They think they have a shot in the second circuit, which is the appeals court.

WALLACE: Well, Deb, from that incredible drama in the courtroom, to a political drama playing out in the Democratic Party. I am back ON THE STORY of two Johns, John Kerry and John Edwards, right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: I believe that in 2004, one united Democratic Party, we can and we will win this election.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. JOHN EDWARDS (D-NC), FMR. PRESIDENTIAL CANDIDATE: The truth of the matter is that John Kerry has what it takes right here to be president of the United States.

(END VIDEO CLIP)

WALLACE: The Democratic presidential race came to an end this week. John Kerry claiming victory after winning nine more states on Tuesday and John Edwards calling it quits. For Kerry, now, though, two major challenges, money and momentum -- how to keep the money coming in and the momentum going.

Welcome back. We are ON THE STORY.

ARRAF: Kelly, I hate to be Iraqcentric, -- but it seemed that even though the number of soldiers dying here is pretty consistent, Iraq seemed to recede as a campaign issue as that campaign progresses.

Was that the case?

WALLACE: It was the case, Jane, because, really. Howard Dean, the former Vermont governor, was the one who was speaking out most vocally about his opposition to the war, and then he had to bow out of the race. So it left between two Johns, John Edwards and John Kerry. Both voted to give President Bush the authority to go to war with Iraq. So their positions very similar. It was not an issue in which they could draw contrast. The contrast really became about trade and jobs and their backgrounds and their styles. And that's what the voters seem to decide on. FEYERICK: You know, Kelly, because -- a lot of momentum, obviously, Edwards picked up. You felt the energy in the two campaigns. Many people think it simply makes sense for John Edwards to now be the vice presidential nominee. What did you get from his people?

WALLACE: Well, it's so interesting, Deb. You know, they really hated that question throughout the campaign because they said, Look, he is running for the nomination to be president, not for the vice presidency. Once he decided that he could no longer make a credible run for this and he was going to bow out, then the question started coming in, and his advisers would say on background that, If he is asked, he would certainly say yes. But they also say that this is now John Kerry's time, and that is kind of further down in the process.

John Edwards would no doubt certainly like to be called on to be vice president. But you have John Kerry naming a head of his vice presidential search committee, looking at a number of people. John Edwards is one. Some people raising questions, though, because the question is, Could John Edwards win his own state of North Carolina in a general election? And is there some sense from John Kerry you pick up? Does he believe John Edwards has the experience, the national security experience, to be vice president, and to be president if something happens? Not clear if believes he does have that experience.

BASH: Kelly, on John Kerry, you know, President Bush's aides have made it very clear that they don't think that he got bloodied up enough at all during the primary season because Howard Dean fell so fast and he rose so fast and that his favorables are, from their perspective, way too high at this point, and they're going to do what they can to bloody him up.

You know, John Kerry always says bring it on. That's his favorite refrain. But are they ready for what they're going to get from the Bush team, in terms of trying to bring him down many, many notches?

WALLACE: Well, Dana, of course they say they're ready. But they're also dealing with - and you know it so well - President Bush, with more than $100 million dollars to spend over the next several months. And John Kerry does not have much right now, a few million dollars at the most. So he's going to try and raise some $80 million between now and the summer.

But one thing is interesting, Dana. You did see this strategy throughout the campaign. Anytime republicans would try and attack or question John Kerry on any issue, he and his aides came firing back. And they continue to say that they think they learned lessons from the 1998 Michael Dukakis campaign. Aides believe that Dukakis allowed Republicans to define him, that he didn't fight back hard enough to prevent that from happening.

So they say they've learned lesson. They're going to try as hard as they can. But they also know the power of money, the power of advertising, and that President Bush has an enormous advantage right now.

HAYS: Kelly, you know, for hard-core Democrats, who were really looking for the ABB candidate, anybody but Bush, anybody who can beat Bush, right? John Kerry...

WALLACE: Right.

HAYS: ... is their man. But if you're an independent voter, someone in the middle, you are looking for a clear definition on issues. Does Kerry have that card to pull out? How is he going to play with independents? Because they're key to winning this race for him.

WALLACE: They are key. I mean, and we know that the Republicans and the Democrats both believe they might have 45 percent solidly on each of their sides, so that this general election could be decided by the 10 percent in the middle.

It's interesting. If you watched John Kerry the day after Super Tuesday when he became the virtual democratic nominee, he was really trying to appeal to some Republicans, even independents, saying something like, you know, there's nothing very conservative or Republican about having very high deficits, about having people like John Ashcroft in the Justice Department.

So he is try to make his way to that middle-of-the-road voter. It's something he was hit on during the primary campaign, John Edwards saying he was doing well with independents, that he was the better candidate to win those independents and defeat President Bush. Right now, though, John Kerry hoping that Democrats and those independents who are having some questions with the Bush administration will go his way.

ARRAF: Well, from the U.S. campaign to small steps towards elections here in Iraq, I'm back ON THE STORY after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

L. PAUL BREMER, U.S. CIVILIAN ADMINISTRATOR IN IRAQ: Civilized people the world over join you in outraged grief.

(END VIDEO CLIP)

ARRAF: That was the chief civilian administrator in Iraq, L. Paul Bremer, talking about attacks in Baghdad and Karbala that killed more than 180 people. The aim, he said, was clear -- to promote religious violence and stop the U.S. from handing power back to Iraq on June 30.

HAYS: Jane, who are the Iraqis angry at now? Are the - are they angry at suspected al Qaeda terrorists? Are they angry at the U.S. for not protecting them? Are they angry at each other?

ARRAF: I guess the short answer is they're angry at pretty well everybody. But I guess last on that list, and this is probably a good thing, is each other. Now the worst possible scenario would be if we had these horrendous attacks, absolutely horrifying, in the Shia holy places, and they had been blaming other Iraqi, Sunnis, for instance. Instead, they're blaming the United States, they're blaming Israel, of course, and they are blaming foreigners, al Qaeda, whoever it might be. But they haven't so far started blaming other Iraqis.

FEYERICK: With religion such a powerful force in the region, what is the general mood amongst the people about the Governing Council, about what they can achieve, whether they can bring the country together, whether, in fact, it is a governing body that the people themselves can believe in?

ARRAF: It isn't quite yet.

Now, we have to remember, that it's U.S.-appointed. And for what it is, it is remarkable. I mean, we've got 25 people who are doing the same kind of things that you all have been covering to some extent. I mean, hammering out deals in back rooms, disagreeing with each other without killing each other, which is really new for this country.

But there isn't really the process that filtered down to the public. For instance, had this constitution that was supposed to be signed. It wasn't. Nobody in the streets knows what this constitution is. Journalists couldn't even get a copy. There are still a lot of things that have not been explained to people. And until they are, there isn't going to be a lot of support for these people.

WALLACE: Jane, question about security. Didn't the American forces kind of pull back a little bit and allow Iraqis to have security on Tuesday, a holy day, in honor of, you know, the holy day in Baghdad and Karbala? And are they going to make changes in light of what happened on that day?

ARRAF: Well, they were on high alert, as were the Iraqi security forces. And it was really an impossible situation.

You have to imagine this incredible ceremony. Now, this was a commemoration they have not been able to do publicly for more than 30 years under Saddam. And this is sort of the definitive illustration of Shia power. Waves and waves of people whipping themselves with steel chains, cutting themselves with knives. And in that situation, you can't really set up a search. I mean, it really was not a town-hall meeting kind of situation. They knew there might be violence. They tried to minimize it. But they couldn't do everything that they could have to prevent suicide bombers without actually stopping the ceremonies and that's what Saddam did.

BASH: Jane, I want to ask you about the delay the writing of this constitution. You did a fabulous piece yesterday where you showed that there was actually a band, an orchestra playing. This was such a big and momentous ceremony. And then everything just got stalled.

Tell us exactly what this was like to be there, and covering that event.

ARRAF: Well, first of all, the location is a bit surreal because it's held in the convention center, which was built for the nonaligned summit. And I have spent hours and hours and perhaps days with other member of our team under Saddam in that very hall, staking out people like Tariq Aziz and covering Arab unity conferences that ended in fistfights.

So this was the location of this momentum ceremony. And it was supposed to start at 4:00 -- 4:15, people started thinking, Oh, this is just Iraq time -- 4:30, they started wondering a little bit. And then, as it started getting later and later, and they kept bringing out the children and the band to amuse people, it became really very clear that this was not going to happen anytime soon.

But everyone tried to put a good face on it. The Governing Council members themselves were nowhere to be seen. But the U.S. officials kept going around, reminding everyone that this was a great illustration of democracy and this was the way it should be and this was a necessary step. And maybe it is.

HAYS: Well, of course, Jane, the Bush administration would like to see this signed because they want to make it clear that things are on track in Iraq and we can bring troops home sooner rather than later. But we -- many experts have said it's really tough to forge a country where there are basically three such separate groups, the Kurds, the Sunni Muslims in the center, and then the Shiites who are the majority in the south.

To what extent is the constitution having trouble, because it's having trouble really hammering out this constitution in a way that all three groups feel that they're equally protected from each other?

ARRAF: I think what this delay in signing the constitution illustrated, that no matter how carefully you draft something - and, according to U.S. officials, this was a beautiful document, a document that would be the envy of any country anywhere, in terms of setting up civil liberties and democratic institutions. But at the end of the day, after this horrendous bombing in the Shia holy places, a couple of days later, the grand Ayatollah Ali al-Sistani, did the equivalent of picking up the phone - he doesn't pick up the phone - but, essentially he made it clear from his location in Najaf -- he's quite reclusive -- that he was not happy with this.

And Shia members of the Governing Council paid attention. Shias form 60 percent of the population here. And the Ayatollah al-Sistani is this huge, unseen force that looms over almost everything. And what it illustrated, I think, is that you can say you're going to have democracy, but at the end of the day there are other forces at work that are perhaps equally important.

BASH: Well, Jane, thanks to you. And also, we want to say thank you to Deborah Feyerick for joining us. We understand you gave to back on the stories you're covering today.

We're going to go back to presidential politics after a short break and a check at what's making headlines at this hour. Stay with us.

(COMMERCIAL BREAK)

ERICA HILL, CNN ANCHOR: I'm Eric Hill in Atlanta.

In the headlines at this hour, Attorney General Ashcroft remains in intensive care in Washington with a severe case of gallstones. Ashcroft was admitted Thursday night. Right now, he's being treated with antibiotics and painkillers while doctors determine whether surgery is necessary. Deputy Attorney General James Comey is acting as attorney general while Ashcroft is hospitalized.

In Grand Forks, North Dakota, Alfonzo Rodriguez was bound over for trial after pleading not guilty to kidnapping in the disappearance of college student Dru Sjodin. Sjodin was last seen leaving her job at a mall last November. No trial date set.

And updating a story we told you about earlier -- Russian media report that 12 Russian polar explorers have now been rescued from an ice flow in the Arctic. The scientific team had been at the North Pole station for nearly a year. Most of the research station, though, fell into the Arctic Ocean when the ice shelf suddenly broke off. Two Russian helicopter flew through total darkness to reach the stranded team and their dogs.

In Haiti, U.S. Marines have moved into some rebel-held areas to help improve security. Pro-Aristide supporters - demonstrators, rather, in Port-au-Prince have denounced the presence of the Marines and other international troops as a - quote - "occupation." While the capital is said to be calm, reports are emerging of vigilante justice against pro-Aristide militants in some parts of the country.

Musician David Crosby has been arrested on drug and weapons charges in New York. Police say marijuana, a handgun and two knives were found in luggage that Crosby left behind at a hotel. Crosby was in New York for a performance near Times Square.

Those are the top stories at this hour. Now, let's head back to ON THE STORY.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: He spent two decades in Congress. He's built up quite a record. In fact, Senator Kerry's been in Washington long enough to take both sides on just about every issue.

(END VIDEO CLIP)

BASH: President Bush in Los Angeles on Wednesday, taking his first full-fledged jabs at his new Democratic rival in that speech and in some brand-new ads, a signal of how his campaign strategy is shaping up.

Welcome back. We're ON THE STORY. We also want to welcome Maria Hinojosa, who is joining us from Westport, Connecticut.

MARIA HINOJOSA, CNN URBAN AFFAIRS CORRESPONDENT: Hey, Dana, just wondering, this was a pretty rough week for President Bush. Yes, he has geared up, and now has launched his campaign. But front page of "The Daily News" had him -- big criticism about President Bush using September 11 as part of his campaign ads. Also, the jobs report.

But tell us, what's the atmosphere like and the mood like in the White House now?

BASH: Well, it's interesting, Maria. Those were definitely some interesting stories that the president had to deal with.

But in terms of the big picture, this has really been a different kind of week in traveling and following around the president, in California first for a couple of days and now here in Texas. He completely has pivoted into campaign mode.

After Senator Kerry essentially locked up the nomination, he called him on Tuesday. And the very next day, 24 hours later, he really took off the gloves, went after him, used his name for the first time, hit him on everything from being a waffler, to the major issues in the campaign, Iraq, terrorism, taxes, the economy.

And meanwhile, while he's doing that, his campaign is eager to get into the fray. They want to get in there. Every time Senator Kerry says something, they want to make sure that their voice is heard on those issues.

And then, of course, as you mentioned, the brand-new ads -- $10 million in new ads put out just this week.

WALLACE: Dana, speaking of the ads and the criticism, of course, of using images of September 11 -- did these - did the White House or the Bush/Cheney aides you've been talking to -- did they expect so much push-back, so much push-back that has really dominated the headlines over the past few days, Democrats seizing on this? Was it more than they expected?

BASH: That's a good question, Kelly. Because talking to them at the end of the week, they say, Oh, yes, they did expect it. They anticipated that there would be some questions about it.

But earlier in the week -- and, really still, now -- they are absolutely not backing down on this. They say this is part of the fabric of the nation, that 9/11 completely changed things. It's a shared American experience. And most importantly for the president in his re-election campaign, they say you just simply can't talk about his three-plus years in office without talking about September 11, because it changed so much, not only in terms of how he's led, but also in term of the policies that have gone through congress, and that have really changed. They all have to do with 9/11.

They say that they - you know, they understand that people might not necessarily think it is appropriate. But they were also very quick to make sure we talked to families of victims of September 1 who said they didn't have a problem with it. They also got Rudy Giuliani out there pretty fast as well. So they tried to play defense but didn't back down, didn't back down. Definitely stayed on offense.

HAYS: So what about the strategy in these ads? I almost can't -- tell me in dollars -- seems a lot to spend on four ads. They obviously didn't outsource any..

BASH: They got a lot of money.

HAYS: ...cheap labor there, right?

But what are we going to see, Dana? What's the story they're going to tell this year to, you know, have the final chapter be the one they want, which is President Bush re-elected in 2004?

BASH: Well, that's interesting you use that term because that's the way the campaign is describing this, these eight months that we have ahead of us -- long eight months -- as a book. And that these first ads are essentially the first chapter. And that first chapter, they want to redefine and reintroduce the president to the American people on their terms, not on - on the terms of Senator Kerry and the Democrats that they've been hearing from for so long.

And that's essentially what you saw in these ads. Very positive. The tagline that you have heard and you will hear many, many times is steady leadership in times of change, saying he's somebody who is decisive. He can make decisions. He can lead. Beginning to set up a contrast between him and how they're trying to paint John Kerry, who, as I said is -- they said they think is a zig-zagger.

You know, it's interesting. We're told that the president, while he has not been out there over the past couple of weeks -- until this week, essentially -- has been reviewing Senator Kerry's record. He has been reviewing the transcripts of interviews he's done, reviewing the debate, the Democratic debates. And we're told that he understands that Senator Kerry is going to be a tough opponent, watching the races that he has been in for the Senate over the past couple of decades. He's -- he knows it's going to be a tough one.

HINOJOSA: Hey, Dana, just wondering -- President Vicente Fox from Mexico is visiting this week, actually, right now at the ranch there with President Bush. If you go back to just before the -- when Bush won the other election and he became into president, there was a lot of relationship and talk between President Fox and President Bush about a possible legalization treaty that would basically legalize undocumented immigrants in the United States. Clearly, after September 11, a lot of change there.

And the Bush plan now of a semi-amnesty -- actually, when you look at Latinos in reaction to that -- he doesn't sew up the Latino vote when he comes out with this plan. So what's the talk on what might happen between these two presidents and how far will President Bush go, in fact, to trying to give full legalization to these undocumented immigrants or to try to get the Latino vote?

BASH: Well, first, let's start on the relationship between Presidents Fox and Bush. You're right, they were very close. It was this, you know -- this much-celebrated relationship at the beginning of President Bush's time in office. And then things really went sour because of the war in Iraq, not supporting him on that, and a whole host of other issues, particularly after September 11 and the fight against terrorism.

But this meeting here -- as we speak, they are currently at the ranch, not too far from here -- is just sort of the latest in trying to get the relationship back on track, and, certainly is noteworthy that it is coming at a time when the president and his aides make it very clear that they are eager to court the Hispanic and the Latino vote. It's absolutely key in some of the key states.

But beyond that, in terms of the policy issues you were talking about, Maria, the -- what he proposed, what President Bush proposed in January before going to Mexico, is to give temporary legal status to some illegal immigrants. That's really not going to go anywhere, according to Republican sources I'm talking to on the Hill. Conservatives absolutely do not like the plan. It's an election year, and, you know, they understand the president had to do it and Vicente Fox even, is a very practical politician. He understands that it's probably not going to go anywhere.

But the two men definitely are trying to mend fences, if you will. And an interesting story, the president, when he greeted Fox at the airport or at the heliport, I should say, yesterday, he drove up in his Texas-style pickup truck and he told reporters that what they had for dinner last night was fish and that President Bush said he caught the fish that they were going to have for dinner last night. So they were trying to make it a down-home meal.

HAYS: Aww. What a nice guy. And actually, you know, looking at the pictures we just of them greeting each other, it certainly looked like a warm greeting between the two presidential couples.

But we're going to go from presidential politics, to the one issue that may cause the most heartburn in Bush/Cheney campaign headquarters. That's jobs. Where are they and why aren't there more of them?

I'm back ON THE STORY after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: Empty talk about jobs and economic isolation won't get anyone hired. The way to create jobs is our pro-growth, pro- entrepreneur agenda.

(END VIDEO CLIP)

HAYS: That's Mr. Bush, pumping up his economic program in Los Angeles this week. That question of how to create jobs and how many are being created right now is at the center of campaign 2004.

Welcome back. We're ON THE STORY.

BASH: Kathleen, I tell you that the president's aides were so disappointed. Usually, they put a good face on these job numbers and say things are getting better. They did that, but it was impossible for them to hide how disappointed they were with these new numbers and impossible for them to explain it.

BASH: Well, you know, Dana, it was a jaw-dropping number for everybody. When that number came out at 8:30, people on Wall Street were saying, What happened? We have 21,000 new jobs created, looking at least 125,000 maybe 150,000. Some of the back numbers revised lower.

It's a strange thing. It's true, we've had these slow-moving job recoveries in the past. But we've had strong GDP numbers. We've got businesses spending again. We've got consumers spending. Home construction is good. There just isn't job creation yet.

HINOJOSA: I'm just wondering, Kathleen. You know, the Bush presidency had been saying where it's going to be great, there had been so much expectation. Is there any sense that they can - that they will go down that expectation route, any sense that, in fact there, could be more jobs created? Or this is what it's going to look like for the next, let's say, three to four months?

HAYS: Well, actually, you know, the administration continues to insist -- I interviewed Glen Hubbard, the former CEA chairman yesterday. And we also had Greg Mankew on the air. The current CEA - you know, the White House chief economist, saying just be patient. If -- employers cannot continue to run their businesses as fast as they are without adding more workers.

The problem is, number one, we're very productive. We've gotten efficient. We've got lots of computers. The other thing is, there's a lot of job insecurity. Who do you know, if their boss says, You know, you're going to have to work a little extra; you're going to have to get that done in less time -- is going to say, Hell no, I'm going to go find another job? It just isn't that kind of job market.

And so we seem to have gotten on this very slow, grinding machine that isn't just moving fast enough. Now, it's true, we look at the number, the net change of 21,000 jobs. Millions of jobs are being created every week, millions of jobs are being destroyed. But we just need the economy to eke out about 200,000 more jobs a month to give the economy the juice it needs to give people confidence again. And again, it's just - it's an economy, it's a changing kind of world that we haven't dealt with before. And we're seeing this very slow job growth.

But yes, it could happen. And the White House says it will.

WALLACE: And Kathleen, no surprise, lots of smiles on the part of the Democratic nominee -- virtual nominee -- John Kerry with that jobs report coming out, because he's been really using this issue to try and hammer away at the Bush White House.

But I want to ask you something -- the "O" word, outsourcing. It is now part of all of our vocabularies. And I'm just curious -- is this something that has just been building over time? Has it really gotten more play during the political season? Now that most Americans know exactly what outsourcing mean and you have Congress trying to fight to prevent it.

HAYS: Well, you know, three or four years ago, companies were outsourcing. This has been going on for a while. I mean, the first outsourcing was companies like Nike setting up their manufacturing plants all over Asia, chasing the cheapest labor. But when the economy was stronger and we were creating 200,000, 300,000 jobs a month, nobody cared about outsourcing a few thousand jobs here and there because it was just -- it was something that we could afford to do.

What's also happening, though -- china and technology. Think about it. The new technologies, the cheap communication - I mean, it's so much easier for companies to start setting up part of their ventures overseas.

This week, I interviewed a company out on Long Island, a small manufacturer. Had 90 employee, cut it back to 20 as they outsourced their production facilities to China. Now they're profitable again. So they're happy they saved those two dozen jobs. They're doing so well with it they have now started their own outsourcing consulting kind of thing. They're a one-stop shopping conduit. If you wanted to set up a small manufacturing firm and send the production over to China, they're going to help you do it at a price.

But it just goes to show you, this is - this, to me, is like a river running downhill. The forces are there. This is what companies are doing. The government's trying to get involved to kind of stop it to a certain extent. But while the governments and politicians are arguing, the businesspeople, this is what they're doing.

BASH: Kathleen, as an expert economist, I have to ask you a question about what we're hearing from Bush aides, which is that yes, jobs are not as good as they should be, but they are pushing housing starts; they're pushing the stock market gains; they're pushing consumer confidence being as good as it should be. And that those signals are just, if not more important, than the job signals, in terms of how people feel. What do you make of that?

HAYS: That's - you know, that's - that's true. And that's why this is such a puzzle, because in terms of production, in terms of economic activity, in terms of orders, in terms of sales, there's a lot happening in this economy. It's running at about a 4 percent annual rate. Alan Greenspan said it a couple weeks ago -- in the past, with these kinds of numbers, you'd see the jobs.

But think about it. Jobs really are, for many people, the No. 1 issue. And if we start losing confidence, if we pull back on spending, this is something that could hurt the economy. And people are worried about the future. They're worried what outsourcing means. They're worried about what technology means to their future job. They're worried -- should I send my kid to college? Is it even going to be worth it?

So Bush is right, the aides are right. But the problem is, jobs, I think, for most families, is still the issue for themselves, for their kids, for their future.

HINOJOSA: Well, from jobs and the economy, to a story about family, heartbreak and reunion. When we come back, I'm ON THE STORY of the family that was reunited with the little girl lost for six years and now found again in Philadelphia, when we come back.

ANNOUCER: Maria Hinojosa is CNN urban affairs correspondent. She won a Robert F. Kennedy Award and was twice named by Hispanic Business Magazine as one of the most influential Latinos in the country. She's written two books.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: (SPEAKING IN SPANISH)

(END VIDEO CLIP)

HINOJOSA: And that is Luz - Luz Ay de Cuevas (ph), saying that she never believed that her little baby girl was, in fact, dead. An extraordinary story in Philadelphia. She basically said that she had gone up to this house of hers that was on fire, looked into the crib, didn't see the baby, all -- the fire department, the police department told her, your baby is dead. Six years later, she goes to a party and recognizes her 6-year-old daughter because of a dimple in the face.

Welcome back. We're ON THE STORY of the Philadelphia reunion.

HAYS: Well, Maria, the thing that is so poignant to me -- I mean, it's all poignant. But this little girl. She was raised by another mother for six year. What - what -- that has got to just really twist her head in a lot of strange ways. A birth father now involved in this.

What can you tell us about where the family stands now, where this child stands now?

HINOJOSA: Well, it's really -- it's very confusing. The mother and father that gave birth to little Delimar -- is what the name they gave her -- she has now been called Aaliyah for the past six years. They have now separated. So there's some kind of infighting going on between them.

What we had first heard was that when Delimar was first told - and, in fact, taken away by the DIFAS (ph) officials, she went into hysterics. And this is the woman, Carolyn Correa, who allegedly took her -- is the only mother she's ever known. So the first reports we were getting is that she was just traumatized and in hysterics.

Now, when they were finally able to see each other again on Thursday night, so less than a week had passed, and already we're hearing reports that the child has kind of come to understand the basics of what had happened here. I have a 6-year-old, so I'm continually looking at her, saying, could she, in fact, manage this? But apparently she did call her birth mother "mommy," did give her a hug. So at least on the part of the birth mother, Luz Ay De Cuevas, a tremendous sense of hope.

But this is going to be a long reunion process. They're not living together. They did get together and see each other on Thursday. But it's going to be a long process with a lot of counseling.

BASH: Maria, just take us back a little bit. Explain what exactly happened in this tremendously, as you put it, poignant story, of this 6-year-old girl. Essentially, the mother thinking she was dead and then finding her all these years later.

HINOJOSA: Well, you know, one of the interesting things that happens here is why is it the Philadelphia Police Department and fire department was so quick to dismiss Luz Ay De Cuevas, who said that when she went up to the burning bedroom and looked inside the crib for a 10-day-old baby and didn't see her, and didn't see her on the bed -- Why were they so willing to say, You know what? You're wrong. The baby is dead, and declare the baby is dead, even though they never found any remains?

For six years, she believed that her baby was still alive, had an inkling that this other woman who she had just met, might have taken her baby. The woman who she had just met, when they met, she said, Oh, you have a baby. I just had a baby. And then Luz Ay De Cuevas said, So, where is your baby? She said, Well, my baby's father was black so my family took the baby away from me. Some point there, she allegedly takes little Delimar, takes her as her own. So a lot of questions now remain if she was pregnant, where was - where is that baby, and who might have helped her to take part in this conspiracy of taking little Delimar for six long years?

WALLACE: Maria, what an incredible story.

But let me switch gears a little bit to where you are. Westport, Connecticut, the hometown of Martha Stewart. You've been talking, we understand, to friends, neighbors. What's the reaction there to this momentous verdict yesterday?

HINOJOSA: You know, Kelly, it kind of goes like in the papers, all right? Like, here in The New York Times, relatively subdued headline, not too large here.

But then you go to The Daily News and it's - woops, No, I'm sorry. I wanted to go to the Post first. Woops. Gave it away. Post, big, red letters of "GUILTY." And then, of course, The Daily News kind of taking it all out, putting her behind bars and, of course, the famous Martha Stewart curtains.

But here in her hometown of Westport, Connecticut, goes the way it is nationally. There are some people who just say, What a tragedy. She was such an important woman, one of the biggest women to take such a huge financial leap and into her company. Someone said from a feminist's perspective, I'm really sad that she's fallen from grace.

But then also people are saying, But you know what? She lied. She misstepped. She shouldn't have done these things. Why did she make these mistake of not saying the truth, and not coming kind of -- straight up and saying this is what happened?

So you're really getting it from both angles here at Oscar's Deli in Westport, Connecticut, where you're finding people who say, We love her. We're sad. And others who say, You know what? She's not such a nice person. Good riddance. She lied to federal officials. Don't do it. And we're learning the lesson.

HAYS: Well, you know, Maria, I think that - it's -- one thing that's interesting about Martha Stewart is exemplifies something, you know, on this whole question of jobs -- somebody who started her own smaller business and then her big company. And, of course, the Republicans say, That's what's happening right now in our economy.

When you are up there, though, have you run into anybody who recalled her, you know, the teenage Martha Stewart, a real go-getter, or, you know, somebody exhibiting these kinds of really dynamic, aggressive qualities, that they may have gotten her into troubling, but they also got her ahead in a big way.

HINOJOSA: Absolutely. That was one of the first people we spoke to, said, I saw her when she opened her first catering business, and I've seen her grown and she's worked hard and what a woman. I mean, she has just given all of this time and effort to her company. And sad, but, you know, what? Again, but people say, But why did she lie? She lied.

HAYS: Yes, she did. Boy, it's a good lesson, isn't it? Sometimes the lie is worse than the deed. Well, thanks, Maria.

We're coming back ON THE STORY after this.

ANNOUNCER: Senator Hillary Clinton was in the news this week. What's her story? The answer after the break.

(COMMERCIAL BREAK)

ANNOUNCER: Senator Hillary Clinton. What's her story? The former first lady has been called many things, but this week, something new - tough guy. For the first time, Men's Journal put a woman on their tough guy list. Clinton ranks 25 among athletes and other Washington figures, such as Arizona Senator John McCain and Defense Secretary Donald Rumsfeld. The magazine's senior editor says looking at what she's been through and she represents, would you mess with her? And he says Clinton on the list is not a jab, but a compliment.

HAYS: Thanks so much to my colleagues and thank you for watching ON THE STORY. We'll be back next week.

Still ahead, "PEOPLE IN THE NEWS," focusing this week on who else? Martha Stewart. Coming up right now, a check on what's making headlines at this hour.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com




Constitution Get Back on Track?; How is Campaign 2004 Shaping Up?>