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On the Story

New Questions About Iraq War, Prisoner-Abuse Scandal; Gay Weddings Galore in Massachusetts; Gas-Price Records Falling

Aired May 22, 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.

THOMAS ROBERTS, CNN ANCHOR: Good morning, everybody. I'm Thomas Roberts at CNN Center in Atlanta.
The U.S. military has launched eight new investigations of detainee deaths in Iraq and Afghanistan. That brings the total to 33 investigations of 37 deaths. Thirty-two of those detainees died while in custody in Iraq, five in Afghanistan.

Car-bomb explosions today in Iraq. Seven Iraqi, including the suicide bomber, died in a blast in Baghdad. The car exploded outside the home of a deputy interior minister who was one of the 10 people wounded. In a town south of Baghdad, a car bomb killed one U.S. soldier, wounding three others.

In the West Bank, four Palestinians and an Israeli soldier were wounded today by a suicide bomber. It happened at a military checkpoint east of the city of Nablus. The bomber was the only fatality.

And back here in the U.S. - look at this: Iowa is awash this morning after rainstorms and a tornado hit the northwestern part of the state. Fifteen people suffered bruises or broken bones. About 45 homes were damaged, and several thousand lost power.

Those are the stories at this hour. I'm Thomas Roberts. ON THE STORY starts right now.

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

I'm Barbara Starr, ON THE STORY of new fighting in Iraq, new questions at home about the war, and the prisoner-abuse scandal.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: I'm Kelli Arena, ON THE STORY of new terrorism warnings and U.S. concerns over Olympic security.

MARIA HINOJOSA, CNN URBAN AFFAIRS CORRESPONDENT: I'm Maria Hinojosa, ON THE STORY of Massachusetts legalizing gay marriage, while opponents, including the governor, keep up the fight.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: I'm Dana Bash, in Crawford, Texas, ON THE STORY of President Bush's plan to address concerns about Iraq, here at home.

KATHLEEN HAYS, CNNfn CORRESPONDENT: I'm Kathleen Hays, ON THE STORY of gas prices spinning up and up.

We'll also talk about the shocker in the Martha Stewart case, even talk of another trial.

E-mail us at onthestory@cnn.com.

Now to Barbara and the price of war.

(BEGIN VIDEO CLIP)

ARMY GEN. JOHN ABIZAID, HEAD OF U.S. CENTRAL COMMAND: I won't be pollyannish about where we are, Senator. This is a hard thing and it's going to take a long time. And it's going to take a lot of courage and a lot of perseverance and unfortunately, more blood. And it's going to take more treasure.

(END VIDEO CLIP)

STARR: General John Abizaid, on Wednesday, telling a Senate hearing and the rest of us to prepare for a long, expensive war in Iraq. The military this week facing new questions about prisoner abuse, an attack on the Syrian border and the killing of a prominent Iraqi leader.

BASH: And Barbara, it seemed as though you got some different stories as the week came to a close from the pentagon about the investigations, about the deaths of some of the prisoners.

Tell us about that, and tell us essentially about the way the mood was left at the Pentagon, at the end of the week because of all that.

STARR: Well, you know, those of us in the press corps always joke -- the Friday afternoon press briefings, you know, no good can come of it. Well, we had a 4:30 background press briefing in the Pentagon yesterday, Friday afternoon, where they revised the number of death investigations that they are conducting, as a result of detainee deaths in Iraq and Afghanistan -- 33 cases, 37 victims. Nine of them now still open, active investigations.

And the Pentagon still has a lot of trouble coming up with an exact number of how many people died in custody. Now, we should remember, people die of natural causes. Sometimes these people are not in the best of health to begin with. But there are some cases that are now causing a lot of second looks.

HAYS: Barbara, update us, though, on the latest in the fingerpointing. As I was getting ready for this show today - and I was reading all the stories, and the guy who comes in and suddenly takes over the prison. And, you know, this lieutenant colonel and that general and the - Karpinski, who was running the place. It reminds me of reading a Nelson Demille novel where there is all this intrigue. I don't know all the plot yet, but it is an amazing story.

Kind of where -- where do we stand now in terms of where the fingers are pointing? STARR: Well, you know, it changes every day.

When Secretary Rumsfeld came back from Baghdad last week, the Pentagon was on a real high. They thought they'd got past the worst of it. And now we have these new, additional pictures, we have the video, we have everyday more and more bad news, more investigations, as you say.

There seems to be two things equally disturbing going on. Clear, criminal abuse. That is moving through the military justice system. But -- again, still, the much deeper, perhaps more distressing issue, what on earth was going on throughout the rest of the system?

ARENA: Right. Right.

STARR: The commanders, the procedures, the policies. This didn't just happen. You know, there was some sort of climate going on. And it's so hard to explain because one of the reasons is the Pentagon itself is confused and can't explain it. You ask questions and they say, We honestly don't know, we're looking into it.

HINOJOSA: So what's happening -- I mean, these are your corps reporters. You're always hanging out with them. You guys are there all the time. People getting angry in the reporters -- in the press corps right now with the Pentagon? Just like, hey, give us the straight answer?

STARR: Absolutely. At this briefing yesterday, I would say it reached a new low of the -- I mean, cold, hard fact, not opinion.

The Pentagon press corps has a new low in accepting the credibility of what we are told. Not so much that there is a belief there's a conspiracy of lying...

ARENA: You can't handle the truth.

(CROSSTALK)

STARR: That would be the easy part. That would be the easy part.

HINOJOSA: If they just...

STARR: They don't know. And, you know, if you believe that -- I just have to mention one case because it was mentioned in the papers this morning. There was an Iraqi high-level general, head of the air defense I believe, that died in U.S. custody. The press release that they put out when this man died in custody said apparently of natural causes. Well, now we've all had a look at his death certificate. Smothering, asphyxiation, and chest compression.

HAYS: Natural causes. There you go.

STARR: How does this happen?

HAYS: Natural if you're being interrogated too harshly perhaps. ARENA: You know, Barbara, I'm going to change the subject because -- there's so much to talk to you about. But Ahmed Chalabi -- did we back the wrong horse all along? I mean, now we're raiding his apartment...

HINOJOSA: But they're not even saying that they did raid it. I mean, isn't that part of a - yet another one of these, like, we thought....

(CROSSTALK)

STARR: ...the U.S. was just there in support, outside the gate.

I mean, as you know, Kelli, Ahmed Chalabi has been one of the most controversial characters. The Bush administration has backed him for a considerable period of time. The intelligence community, the law enforcement community, has been very skeptical of him, always questioning the veracity of the intelligence that he offered. And now very fundamental questions that he may have been in collision with Iranian intelligence.

And, Dana that gets me to the question about the White House. Clearly, a man that was backed by the conservatives, if you will, in the White House. By Vice President Cheney...

ARENA: And Wolfowitz.

STARR: And Paul Wolfowitz, the deputy secretary.

Dana, at the White House, are they rethinking it? How are they going to play this one?

BASH: Well, Barbara, you know, talking to White House officials over the past several months, it was very clear there is no love lost now between White House officials, going all the way up to the very, very top, and Ahmed Chalabi because of a lot of different things. Because - not only about this, this is obviously the straw that may have broken the camel's back. But just even in terms of what he said before the war, saying that the weapons of mass destruction were there, saying that Americans would be greeted as liberator. There are a whole host of issues.

But even more recently, the fact that he has not been helpful, the White House thinks, to them in their efforts. He's been opposed to the Baathists becoming part of this. He's said some statements that they thought were outrageous.

But still, you know, there was that picture of him standing just a row or two behind the first lady at the president's state of the union. So they did feel that they had to sort of stick with him for a while. But clearly, Barbara, this is something that -- one more symbol if you will, for the administration to deal with, in how perhaps they didn't have the right information or the right backers before the war.

ARENA: OK. Well, we can continue that discussion when we have Dana's segment coming up. But from problems in Iraq, to fear of terror attacks, both at the U.S. and at the Olympics. I'm back ON THE STORY in a moment.

(BEGIN VIDEOTAPE)

ANNOUNCER: Kelli Arena is CNN's Justice correspondent. Earlier, she worked for CNN's financial news. The New York Festivals awarded her a 2002 Best Correspondent Award.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ROBERT MUELLER, FBI DIRECTOR: We continue to monitor it and see what progress is being made to assure that these Olympics are free from attack.

(END VIDEO CLIP)

ARENA: FBI Director Robert Mueller on Thursday, taking the diplomatic "we're monitoring it" line, when asked what he would tell U.S. athletes worries about their safety at the Summer Olympics.

Welcome back. We're ON THE STORY.

HAYS: But Kelli, a lot of families who have kids going over there are very, very worried that their kids are going to be sitting ducks, that it's not safe, that there will be a terror attack. And, you know, the Olympics look like they're going on. But I wonder if all the athletes are going to end up going.

ARENA: Well, privately, I can tell you that counterterrorism officials are very concerned. They're worried about delays in construction because they can't do advanced security.

Greece has spent $1.2 billion on preparing for the Olympics. Just from security alone -- but just its proximity -- you know, where it is in the world, the port situation. There's so much that makes that country vulnerable right now. And the anti-American extremism that counterterrorism officials are painfully aware of is what has them really concerned.

And the thinking is if one athlete, one -- and the betting is on the NBA players -- drops out, then boom, boom, (UNINTELLIGIBLE) domino effect.

HINOJOSA: I mean, but doesn't that say something more? It's more than just, Well, I'm not going to go to the Olympics. It's essentially saying "I feel like, as an athlete, it's not worth it to go to the Olympics," which is incredible for an athlete to say. And then just kind of like, "And I don't really trust that anyone is going to be able to take care of us," which is - you know, I mean, I think back as a child to Munich. And the terrorist - you know, and that was the image I have of, like, the Olympics being this disaster. Is that kind of where they're - they're afraid it could...

ARENA: They're - I mean, when you're talking about 24-hour armed guards for the American, British and Israeli athletes, you're talking a very real concern. I mean, they are -- they're going to be accompanied -- and there's also talk of possibly providing armed guards for any country that has troops in Iraq right now, that has assisted the U.S. in Iraq, to protect them.

So it's a very real concern. I mean, there are Olympians who are not bringing their families. The security experts have advised the athletes not to wave American flags or to -- or to be too demonstrative when they win -- if they win -- because they feel that that could be considered confrontational.

There is a great deal of concern. But I know that the Olympic Committee, the Greek government, very committed to pulling this thing off. They keep trying -- you know, offering assurances. And they are doing - they are making an unbelievable effort here. But there is always - you know, there's always a vulnerability. No matter how much you do, there's always a vulnerability. And so -- unfortunately, the timing is really what has everybody concerned.

BASH: Kelli, one of the more bizarre stories, from my perspective, that you had to cover this week was this lawyer in Oregon who was allegedly being...

ARENA: Brandon Mayfield, yes.

BASH: Yes, tell us about this and his relationship to the Madrid bombing or maybe not a relationship to the Madrid bombing.

ARENA: Right, well that is the big question, isn't I?

Short story, because it's, like, so complicated. But there was a print that was found on a bag of detonators near the Madrid bombings that were similar to the detonators used to blow up the trains back in March. The prints were run, FBI hit -- makes a hit, OK? It's -- they say, this guy, Brandon Mayfield. Of course, they don't say this publicly. This is all according to sources.

So they put him under surveillance. But then what happens is, some of the press picks up on this and they start asking questions. So the FBI, again, according to sources, gets nervous, says our cover is blown. They take him into custody as a material witness. So he's not charged with anything. They just say, You may have information about this crime that we're interested in knowing.

And he makes an appearance before a grand jury and they have him for two weeks. And lo and behold, in that time Spanish authorities say, Wait a minute, we made another hit with this print. There's this Algerian who is at large and we think the print belongs to him.

But I have to tell you that every single person that I've spoken to here in the united states says, No, the print is Mayfield's. It's Mayfield's print. He has been released - he was released this week. And the thinking is -- because everything's under seal. But the thinking is, is that the judge probably said, Look, you don't have anything more on this guy except that - you know, that you think his print matches. You don't know how the print got on the bag. You can't hold him forever. Continue your investigation.

He remains a material witness. He remains a material witness. There is some speculation that his release was with conditions, some travel conditions. His brother suggested that he couldn't visit certain family members.

So it is -- it is really a "he said/she said" situation at this point.

STARR: And Kelli, going back to the issue of terrorism, there are some terrorism warnings at home.

ARENA: Right, well, suicide bombers. We saw another FBI warning this week that went out to state and local law enforcement officials, telling them, beware -- know that this is a very real possibility. And, you know, so look out for people who may be wearing heavy clothes, you know, bulky clothes, in the especially warm weather. They even said, you know, look out for wires, you know, that might be...

HINOJOSA: And we're all supposed to be kind of, like, watching for this (UNINTELLIGIBLE)

ARENA: We're all supposed to be on guard. I mean, the suicide bombing thing, I have to tell you, has been a big concern for a long time, and every single expert that you talk to ...

HAYS: And this summer, there's so much happening, the transfer of power, June 30, the Greek Olympics, the Republican convention...

(CROSSTALK)

ARENA: Right, the conventions; you've got the World War II memorial.

But it's not really the big events that they're worried about. They're worried about somebody walking into a shopping mall.

HAYS: And what about Zarqawi, the man who beheaded Nick Berg, now rivaling Osama bin Laden. Are we have many of these guys around the world to rival bin Laden and lead these things?

ARENA: Well, he's a special - he's a special case. And the experts who watch the movement say that he is really emerging as a very influential leader in the Islamic (UNINTELLIGIBLE) -- not for al Qaeda -- he has connections to al Qaeda -- but for the sort of extremism movement overall.

I mean, he now - he's gone out there and he's shown followers, Look, I've got American blood on my hands. I am not afraid to do the dirty work, OK? I am here -- look at it. I am out here, and I am fighting the battle, front line, you know, with you. And so they say that that really -- that, as a propaganda tool, as a recruiting tool, as a call to -- and, again that also ties in...

(CROSSTALK0

ARENA: Well, that's what they're saying. He's rivaling Osama bin Laden in terms of grabbing the hearts and minds of the extremist population.

That's another thing that they say is worrying to something happening on U.S. soil because somebody who is an extremist -- somebody who is all by himself, not affiliated, sees something like that and says, I have to go out and do my bit for the cause.

BASH: And Kelli, you know, Zarqawi is just one of the problems that the Bush administration is facing in Iraq. And the president is, of course, going to talk about that in a very public way on Monday. How will he address those concerns? We're back on that story in just a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There is only one path to peace and safety -- America will use every resource we have to fight and defeat these enemies of freedom.

(END VIDEO CLIP)

BASH: President Bush this week, talking about the enemies of freedom, a theme that he will likely touch on when he gives an address on Monday night, the first in a series of speeches, an attempt to reassure the country about Iraq.

ARENA: Dana, what can he possibly say with any definitiveness on Monday? I mean, what is the strategy?

BASH: Well, what he's going to say is, at this point, the strategy, Kelli, is to get him out there.

I talked to one Republican pollster last night who breathed a sigh of relief and said, It's about time. I mean, this is a guy who is getting a sense of what people are feeling out there, and he said people are feeling awful, that the mood is just down because of the pictures coming out of the prison-abuse story, because of the mounting casualties, because there's just an uncertainty about what's going to happen in the future, and that it's really putting a downer on things that should be looking up for the president, like the economy, and that people need to hear from him, that they need to hear sort of a reassuring voice.

As far as the specifics...

(CROSSTALK)

BASH: As far as the specifics, we don't know. We don't know. We don't know exactly what the specifics will be. At this point, they're trying to work out the specifics. For example, what exactly the sovereignty will look like, who will be the interim president for Iraq, who will be the two vice presidents. Those are the things that they're working on at the U.N. and the U.S. And what the White House is trying to do is get the president out there. As soon as they have that information, he's going to explain it.

But the overriding reason to do the speech in primetime on Monday night is for Americans to hear him, not only say that things are going to be OK, but also say that things may not be OK, almost to set the expectation level that people should expect the violence to continue. And sort of...

(CROSSTALK)

BASH: Go ahead.

HINOJOSA: That's what I was going to ask you, because it's kind of like, what can the president say at this point, in such a disastrous news cycle, that can be at all reassuring, really?

BASH: Well, when you talk to White House officials in private, they essentially say, Maria, that they understand they can't change the news. They're not going to be able to change the fact that there is violence, that you have -- you had a horrible event this week, like the president of the Iraqi Governing Council getting, essentially, assassinated. So what they do think that they need to do, particularly as they keep calling it a critical time between now and June 30, is at least try to affect the message, to try to affect the news cycle, by having the president - by using the bully pulpit.

And you talk to a lot of Republicans, and they say that the White House just simply has not done that well enough, as you see the president's poll numbers drop.

(CROSSTALK)

HAYS: ...because the poll numbers are dropping. We're getting closer and closer to November, when people are going to cast their vote. There's a very sizable body of conservative Republicans who have been criticizing the president for going to war in Iraq, for being, in effect, captured, really by the neoconservative thinkers. They're criticizing him for spending too much money.

There seems to me there's a lot of grumbling, that the president has taken the Republican Party down a track which may lose them the White House come November. What are you getting from the people around the president, but more out in the - out in the fields?

BASH: Well, you saw the president go up and try -- himself and try to reassure Republicans on Capitol Hill this week, right before Republicans went out -- went home for Memorial Day recess, right before they were going to go out and essentially -- they're supposed to, at least five months before an election, almost be ambassadors for the president, to talk up his policies, to talk up the situation around the country. And they were not in a good mood, in a good position to do that. And so the president went up to Capitol Hill, had a pep rally of sorts. Tried to reassure them.

But you're right, Kathleen. It is - it is something that is almost causing -- definitely a different atmosphere among Republicans.

And Barbara, I wanted to ask you -- you have seen, just watching the hearings on Capitol Hill, listening to Republican, the way they have been questioning the generals, the way they have been questioning the civilian leadership about the policies.

I wonder what you are hearing from the Pentagon and even the civilian leadership at the Pentagon, about the way even Republicans seem to be much tougher on the administration about the Iraq policy.

STARR: It seems at the moment -- they're pretty tough on the Senate side, and Deputy Secretary Paul Wolfowitz this week has given some testimony where, for the first time, he, who is one of the more ardent supporter of the war, is expressing some skepticism, some uncertainty about what's going on.

But politically, Dana, you have to wonder where the Democrats are, because will they be able to take advantage of this? And, of course, I thought one of the more interesting stories this week was John Kerry deciding perhaps to delay accepting the nomination so he could raise more money.

BASH: That's right, and of course it didn't take very long for the Bush campaign to come out and criticize him, saying that it is typical John Kerry.

But this is a real issue for the Democrats, because it's really all about money. I mean, let's face it. The Bush campaign has raised so much money. You know, close to $200 million. And they essentially had a five-week window where they were going to be able to spend that and John Kerry, in getting the nomination, the laws are that he would have to start -- just essentially take $75 million from the government and that would be his pot of money. Well, they want to delay that because the disadvantage that they know that they have against Republicans and against the Bush campaign.

ARENA: Dana, quickly, can you talk about the Barbara and the girls coming into a -- save the day for dad?

BASH: Well, they certainly are thinking about coming in to save the day.

I talked to people at the campaign, people in the first lady's office this week about just -- OK, we're hearing they're going to go out and campaign. What does that mean? Well, the answer is, they say they still don't know. They could be over in Arlington, Virginia, licking envelopes. They could be cutting spots. They could be out on the stump. You know, they're -- basically, what they have done is they've gone to their parents, apparently, and said, OK, we're ready to help. Because, you know, we certainly haven't seen a lot of them at all on the campaign trail. So say they're ready to do it now. Be interesting to see what exactly that means.

HAYS: Well, I guess they won't hold it against their dad that he didn't make it to graduation at Yale. But I guess there are extenuating circumstances.

Well, you know, a lot of...

BASH: And they might not make it to their graduations either.

HAYS: It is tough being the president's kids.

Well, you know, you can't separate politics from pocketbook issue. We're back on the economic story and what President Bush told me and financial journalists this week.

But first, a check on what's making headlines at this hour.

ROBERTS: Good morning. I'm Thomas Roberts at CNN Center in Atlanta.

Eight more investigations have been opened into the deaths of people being held by the U.S. military in Iraq and Afghanistan. There are now 33 investigations into 37 detainee deaths. Several of the cases are listed as homicides, a few as justified homicides, indicating the prisoners were trying to escape.

The White House is releasing positive job figure from the Labor Department. A short time ago, President Bush used his weekly radio address to trumpet the latest job gains.

(BEGIN AUDIO CLIP)

BUSH: When we let the American people keep more of what they earn and save, they put that money to good use. They demand more goods and services, which creates demand for new workers. Now that our economy is expanding and adding more jobs, we need to make sure Americans keep their tax relief.

(END AUDIO CLIP)

ROBERTS: Unemployment is now 5.6 percent. That's down 0.7 from last June.

A U.N. envoy says North Korea doesn't plan to stop developing nuclear weapons unless they get a non-aggression guarantee from the U.S. But during a summit this morning with Japan's president, North Korean leader Kim Jong-Il agreed to continue a moratorium on missile tests.

Well, the rain in Spain didn't dampen the celebratory mood for the country's first royal wedding in 98 years. Crown Prince Felipe was married this morning to a former TV host. Security, as you can imagine, was tight for the ceremony with 20,000 police in the city and NATO F-18s patrolling the skies overhead.

Those are the top stories for you at this hour. I'm Thomas Roberts. ON THE STORY will be back in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: We're pleased with the economic progress here in America. After all, the growth rates are high. New jobs are being created.

(END VIDEO CLIP)

HAYS: President Bush talking up economic growth and new jobs. That was after a Cabinet meeting. But the economy and his record was on his mind when he sat down with me and a handful of other financial reporters this week.

Welcome back. We're ON THE STORY.

HINOJOSA: OK. So Kathleen, and suddenly you get this call, Hi, the president wants to see you tomorrow. And you're like, Huh? Like, I mean, you didn't quite think it was real because the motivation is, Why is he calling you guys in?

HAYS: Well first of all, it's surprising. This doesn't happen all the time. And, in fact, one of my columns on the Web - see, I wrote about "My Thursday in the White House with George," you know?

But clearly -- it's pretty obvious that the economy is doing better. The war in Iraq is not going so great. And, in fact, the president was very interesting. You know, you go into the Roosevelt Room. There's a long, rectangular table. All the journalists - seven of us on one side, the president comes in, everybody stands up, everybody sits down. He's on the other side with all of his advisers.

He starts by just laying out -- Look, I know these images of war are disconcerting to the American people. I know it's hard to be optimistic and confident.

Having said that, the economy's turned around. Having said that, you know, make my tax cuts permanent, pass my energy bill, everything will be fine. I mean, really - in fact, someone asked me, how did he seem? Did he seem kind of worried? And I said, No, actually, he seems as confident and sure of himself as ever.

HINOJOSA: But that may be a problem too, right? I mean, appearing just a little too confident.

STARR: OK. He hasn't filled up his gas tank lately. What did he have to say about gas prices?

HAYS: Well, it's interesting. I would say about half the questions were on energy prices.

ARENA: I'm sure.

HAYS: And his point is, Look, you can't consume your way to less energy dependence. You have to produce your way to more energy dependence. Again, trying to pump all up his things for the energy bill, which include drilling in the Arctic refuge, which a lot of people say would be a drop in the bucket.

But I think some of the more interesting questions about opening up the Strategic Petroleum Reserve, which the democrats have made an issue. And I think he made a very clear case for -- the last time in the world you want to tap your emergency reserves is, as Kelli you point out, how vulnerable we are to terror attacks. I asked him specifically, What would constitute an emergency? When would you? Because he said emergency over and over and over. And he pretty much confirmed, in the event of a terrorist attack or a refinery gets blown up in the Middle East. Something happens that is really, really dire. Otherwise no way those reserves get open.

So no matter how high that gas price goes, that's not what he's talking about.

ARENA: And the market.

(CROSSTALK)

BASH: And the other argument that the president makes, that his aides make, is that that doesn't work. And that even when they do open it up, either if they divert some of the oil going into the Strategic Petroleum Oil Reserve or they take it out, that historically it either has a short-term gain or it simply doesn't work at all.

Do you think that there's actually something to be said for that?

HAYS: Actually, most oil traders I've talk to tend to agree with that. And they would also probably agree with the president that it is a question of growing global demand.

I think where the debate starts, though, is how you solve that. And even though the president says that he's for energy conservation, that he'd like to see more clean burning coal, nuclear technology et cetera.

ARENA: You're not going to see that in China. I mean, you know, they're...

HAYS: Well, and the Chinese themselves are starting their own Strategic Petroleum Reserve.

Demand is growing year after year. And as the economy gets stronger, as India develops, there's going to be more and more demand for it.

ARENA: So is there a new acceptable price range now for a barrel of crude than there was before?

HAYS: One of the trader down at the New York Mercantile Exchange that I interviewed this week who was very bullish on oil back in 2002 -- so got bullish, thinking the price would rise before the big move up started, now says we've probably seen the peak. Oil got up to $42 a barrel this week. It closed lower this week after the Saudis said they want to pump some more, and they're going to urge OPEC to do that.

But he told me he thinks $30 to $40 is our new range. But that's a lot higher than $20 to $30 a barrel.

STARR: A $30 to $40 a barrel range -- what is the impact across the economy?

HAYS: Well, let's start with the airline. The airlines' losses could be as high as $5 billion this year ...

ARENA: And already hurt. Already hurt by...

HAYS: Exactly. Well, they were going to be $2.5 billion. But they've been kind of climbing out of the hole. We've stayed near $40 a barrel. One penny-cent increase in the cost of fuel per gallon is $180 million in cost across the industry. This is very, very bad. They were hurting at $25 a barrel. This is very, very bad.

But - there's -- it ripples in many way. It isn't just what you spend at the pump and the less money you might have to then stop at McDonald's and get the kids Happy Meals or whatever. It's the cost of shipping and trucking, and that gets kind of passed into prices. So that's the worry.

HINOJOSA: So let me ask you this. When -- how does the president say - and, in fact, because I was talking to a lot of unemployed folks just by chance this week, and they're saying the economy's doing great? We don't get it. So where is the economy doing so fabulously when we're going to be looking at these skyrocketing gas prices?

HAYS: There's no doubt that there's a pool, a large pool of long-term unemployed and things have not picked up enough for them.

But we've seen recently that things are picking up. So the hope is -- and a lot of people share this view on Wall Street, a lot of people who are, you know, making investments based on what they think the economy is going to do. It's not politics, it's all about money. They also think that we're going to see more jobs growth. And little by little that will lift up.

But, you know, terror hanging on the stock market, worries about Iraq hanging on the stock market, the high energy prices -- there are some clouds that could maybe pull things down, pull the economy down just when it does look like it's starting to fire a lot more.

The president is saying, My plan is working. Really, I agree, though. His best story, really, right now is the economy. Because we've said it through the program, today you can't change the news, you can't change the photos, and that's the big thing for him.

HINOJOSA: Well, one place that the economy is actually picking up is in the state of Massachusetts, where there are going to be lots more legal gay marriages in the United States. I'm on that story when we come back.

(COMMERCIAL BREAK)

ARENA: We just got a briefing from the coalition forces in Iraq. Brigadier General Mark Kimmitt making a statement that the attack along the Syrian border by the U.S. was not an against on a wedding part, trying to put that issue to rest once and for all.

Let's hear what he had to say.

(BEGIN VIDEO CLUP)

BRIG. GEN. MARK KIMMIT, U.S. ARMY: And there was no evidence of wedding. There was - there were no decorations, no musical instruments found, no large quantities of food or leftover servings one would expect from a wedding celebration. No gifts, all the men were - almost -- the men were almost all military-aged. No family elders that one would expect to see at a event of that type.

(END VIDEO CLIP)

ARENA: And it is our good fortune to have our Pentagon correspondent right here for a quick reaction.

Barbara, does this - does this do it?

STARR: Probably not. The Iraqis are going to believe what they believe; the coalition's going to believe what it's going to believe. And this is another case, no question, they hit the target they aimed at, but no one is ever really going to be able to say who was in that area that was bombed.

ARENA: All right. Thanks, Barbara.

Now we're going back to our other topic, Maria Hinojosa on gay marriage.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: By the power vested in me by the Commonwealth of Massachusetts --

(CHEERS AND APPLAUSE)

(END VIDEO CLIP)

STARR: Maria, you were in Cambridge when all of this began to unfold. What was the atmosphere?

HINOJOSA: You know what? I have to say, there were so many people that were so happy...

HAYS: Party, party, party.

HINOJOSA: It was just a huge -- we arrived in Cambridge in the afternoon on Sunday. Cambridge being, you know, funky Harvard location. 12:01, city hall opened, started giving out the first licenses. They were out there until 3:00 in the morning applauding every single couple that walked out with their marriage license.

You -- I saw such a diversity of people. Older women getting married who have been together for 25 years. A black man and an elderly white man who were thinking about issues of security, how do we protect our property when -- issues of inheritance and death? And you had a lot of funky, younger couples. Overwhelmingly, lot of families, women with kids getting married.

So a very different picture, kind of, of gay America, as it is today.

HAYS: What about the people around them? Because, you know, we know there are some people who are against gay marriage. Were there any protesters? Was there anybody trying to rain on that parade?

HINOJOSA: On Sunday, when we got to Cambridge, there was a small group, probably about a dozen strong, real fringe people -- I mean, holding up signs like, you know, " All Gays Should Die," very, very kind of ugly stuff. Not a lot of attention placed there.

But the next day, in Boston, you saw much more mainstream people coming out and really being upset about this. Talking just what's going on with our country that marriage between a man and woman is now being called something else for gay men and women? A lot of people just saying, You know what? If they want to get the rights, give them the rights, but why change the institution of marriage? One woman coming out in her wedding dress saying, She's just a churchgoer and felt that this was something that she needed to do.

But then kind of taking it one step further, she was like, you know, what's next? Bestiality? So, you know, like people marrying their pets? It was kind of weird.

But I think that there is a feeling, like, you know, is Massachusetts the first one? And all the states are going to come toppling next? And what does that mean for the country?

BASH: And Maria, until other states do, obviously, people are going to want to go - and already, as you were talking about, going to Massachusetts. What's the governor, Mitt Romney, trying to do to stop that at this point?

HINOJOSA: He's trying everything he possibly can. He's pulling out this old law from 1913 that basically was enacted so that you didn't have to recognize interracial marriages. He's trying to re- enact that now. And a lot of the local lawmakers are saying, No way, no how. This was a discriminatory law back then and we're not going to use it now.

Here's the interesting thing: you've got clerks in these small little city halls all across the state, that are basically saying, You know what, governor? You can tell us what you want, but if someone comes in and they want to get married, and even if they're out of state, we're going to go ahead and give them the license.

ARENA: So what does it mean for someone who's out of state? Let's say you live in New York and you go to Massachusetts to get married. Is that marriage recognized?

HINOJOSA: New York is one of the few states that said it will recognize that. But there is...

ARENA: OK, it was a bad choice. So what about Kentucky?

(CROSSTALK)

HINOJOSA: Well, they won't, essentially. They won't. There's no reason why they would have to.

And you also have to remember - look, there are 38 states on -- in this country that have passed amendments that say No way, no how, will there be gay marriage in this state.

So this is - I mean, Massachusetts, for gay folks across the country, huge civil rights victory. But this is not the ambiance around the country. And, you now, a lot of people really just saying, No way, no how. It's not going to happen in our state.

HAYS: But it is happening more and more. It seems like it's a wave you're not going to stop at this point.

HINOJOSA: And interestingly, just really quickly, the younger people continue to poll that they're accepting of this more and more. So what's going to happen in ten years? Hard to tell.

HAYS: We shall see.

Well, we can tell you what's going to happen next -- from marriage to Martha, big developments in the Martha Stewart case yesterday. I'm back on that story after this.

(COMMERCIAL BREAK)

HAYS: Welcome back to ON THE STORY.

And a surprise development in the Martha Stewart case. One of the prosecution's witnesses, charged with perjury for statements he made during testimony.

This is amazing. You know, all the stories now where they're going to be sentenced, Peter Bacanovic, Martha Stewart's assistant, and suddenly, Larry Stewart, who is a Secret Service analyst, laboratory director, he runs this kind of investigation of the handwriting analysis that was so important in this case, is charged with perjury.

We don't know yet why. Some questions as to why the lab he worked for wouldn't have said earlier there was something going on. But basically - remember, Peter Bacanovic said he wrote "60" on a pad at work. And that was really important, because that was - if the stock hit 60, the agreement was, they claimed, that he was supposed to sell Martha's stock. So it wasn't that she got inside information.

So whether or not that was actually written after the fact to kind of make a little trail and hide something was a key issue. And that's why it was analyzed. This guy, Larry Stewart said, Oh yes, I did this. I was on top of it.

But now, apparently -- they're not saying that the evidence wasn't good. They're not saying there was anything wrong with the trial. They're just saying that Larry Stewart lied about his involvement in the trial. And, of course, Martha Stewart's attorney is saying, We want a mistrial.

HINOJOSA: What is his motivation to lie? I mean, what does he get out of this?

HAYS: I have no idea, and since we don't know -- if you want me to speculate personally, as a human being, I would say, Well, maybe it was a big, big trial and this is his department and maybe he just wanted to have a bigger footprint.

Maybe he was kind of involved. After all, he's the director of this particular part of the whole operation.

ARENA: So he basically exaggerated...

HAYS: That's what it sounds like. But we don't know yet...

(CROSSTALK)

ARENA: ...said I was more important than I was, and for that he's, you know...

STARR: This is the second thing nit (ph) in this trial. You had the juror...

ARENA: Go ahead, Dana.

(HIGH-PITCH TONE)

ARENA: Woah, we lost Dana.

HAYS: Well, there we go.

But that's it. Because the first thing that happened was there was another - remember, there was a jury who came out, and everyone was taken aback because this man was talking about - very -- wanted to talk to the press, victory for the little guy. And then it turned out that he had lied about his past, that he had been prosecuted for wrongdoings, maybe not convicted -- and that that didn't come out.

And the idea is that apparently, the prosecution could be at fault for not having vetted this ahead of time. In other words, they should have found out that this Larry Stewart wouldn't have been or couldn't have been as involved as he said it was. And that's the kind of thing the judge has to consider for a mistrial.

Dana, you're back.

BASH: I'm back. That was actually going to be my question is how - how likely is it that this will be considered material, if you will, to the trial and it could end up in a mistrial? Or is that still very unclear?

HAYS: Well, it is unclear, but that's, obviously, the big question for Martha Stewart and Peter Baconovic.

And for the U.S. attorney. U.S. attorney says no, we don't need a mistrial. Because, number one, this piece of evidence has specifically to do with the charges against Peter Bacanovic that he made false documents and the jury threw out that charge because they didn't think they had enough evidence.

So he's saying....

ARENA: But it doesn't matter because the legal -- some legal experts are saying, look, you know, you - you know, this -- when there's too many little things that go wrong, you know, then it is up to - it is a judge's responsibility to take a step back and say, Well, wait a minute. You know, was the government sloppy here? You know, should they have been more on the ball, and was this a wash job and thrown together...

HINOJOSA: And so ultimately what she gets is perhaps a chance to -- if they start from ground zero and start the trial all over with a mistrial, she could plea, right?

HAYS: Well, according to our Justice correspondent Kelli Arena...

(CROSSTALK)

ARENA: If it's a mistrial, you go back to drawing board.

HAYS: And another thing...

ARENA: But, I mean, I think though, that to say there will be a mistrial, though, is really...

HAYS: We don't know at this point.

ARENA: We don't know.

HAYS: It's up to the judge's discretion.

But another point. People say, Oh well, the cost. And an attorney I was talking to this morning said, Hey, look, if the prosecution made a mistake, then that's the state and if the state screwed up, basically, then they should bear the cost.

But speaking of another dramatic story -- but a human cost that even goes far beyond maybe people having to spend a year of their life in jail. The story you covered this week, Kelli, about human trafficking, so shocking so -- just something -- a case that's been right under our noses being busted wide open.

ARENA: Right.

Well, Justice Department did their first annual report on human trafficking to Congress. 800,000 people, they estimate, are trafficked each year -- 800,000...

HINOJOSA: Around the world?

ARENA: Around the world. And in the United States, about 17,000, 18,000 people ...

HINOJOSA: And really those are the only numbers that they...

ARENA: That they know about, right. I mean, because there's so much they don't know about.

And we talked to one victim of human trafficking who is still afraid to use her name and -- you know, now that they're allow TVs (UNINTELLIGIBLE) visas so that they can stay in the country legally and work.

But this is a mom who came over to the United States, thinking she was going to get a job sewing, that she could make some money. You know, go back home. She only wanted to come for six months. She thought everything was on the up and up.

She gets here. She is forced to live in this factory. She was not allowed to bathe. She was allowed one meal a day for 10 minutes that she had to eat...

HINOJOSA: And this is right here in Washington, outside of Washington, D.C.?

ARENA: No, this was in California.

HINOJOSA: Oh, so in California.

ARENA: Yes, this was in California.

HINOJOSA: But she wasn't a sex worker, which is a lot of...

ARENA: No, no.

(CROSSTALK)

ARENA: Most - most of the women -- and some very young, you know, 14, 15-year-old girls are brought over as sex slaves. And so that is the predominant...

HAYS: Who are the - who are the consumers? Who are the buyers of these services? Who are these women being, in essence, sold to?

ARENA: The woman that we spoke to - actually, it was a legitimate business. It wasn't an (UNINTELLIGIBLE) -- there were workers there who were legal workers. And this woman was told, You're not allowed to talk to anybody. You're not allow to make any phone calls. You're not - I mean, you're not allowed to step outside. (UNINTELLIGIBLE)

And so the thinking is someone called in an anonymous tip to immigration and said, We think we've got, you know, someone who is a slave - I mean, virtual slave. 18 hours a day working -- not allowed to turn on the light -- not allow to turn on the light. Had to just use the sewing machine light for a little while at night when she was sewing. And just so fearful because the woman who was in control of her said do not go outside, because the police will get you and they'll throw you in jail because you know how -- you know, in the United States --

HINOJOSA: And also if she speaks -- sometimes there's the possibility that because there's some connection to her family back home, there's fear they would retaliate against her family.

ARENA: And that's why she's still afraid. She's still afraid.

She says, I have babies back home. I have a family. You know, these people know where they are. They could be harmed. So very upsetting.

HAYS: Amazing story. And of course, there's going to be more ON THE STORY. We're coming back right after this.

(BEGIN VIDEOTAPE)

ANNOUNCER: A grade-schooler took her school to court. What's her story? More when we come back.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: A sixth-grader made headlines this week. What's her story? Nashala Hearn won the right to wear a headscarf to her Oklahoma school in a settlement announced Wednesday. She claimed religious discrimination when she was suspended twice for wearing her scarf. The justice department agreed the school violated the 12- year-old Muslim's rights.

UNIDENTIFIED MALE: Nashala perhaps put it best when she observed, that it's simply unfair for other students to wear crosses, but that she can't wear (UNINTELLIGIBLE)

ANNOUNCER: The Muskegee, Oklahoma school district will change its dress code, and will also pay the Hearn family.

(END VIDEOTAPE)

HAYS: Thanks to my colleagues, thanks for watching ON THE STORY. Hope you enjoyed it as much as we did. Come back next week.

Just ahead, "PEOPLE IN THE NEWS" on Mike Myers and American Idol.

Coming up right now, a check of the news 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

Aired May 22, 2004 - 10:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THOMAS ROBERTS, CNN ANCHOR: Good morning, everybody. I'm Thomas Roberts at CNN Center in Atlanta.
The U.S. military has launched eight new investigations of detainee deaths in Iraq and Afghanistan. That brings the total to 33 investigations of 37 deaths. Thirty-two of those detainees died while in custody in Iraq, five in Afghanistan.

Car-bomb explosions today in Iraq. Seven Iraqi, including the suicide bomber, died in a blast in Baghdad. The car exploded outside the home of a deputy interior minister who was one of the 10 people wounded. In a town south of Baghdad, a car bomb killed one U.S. soldier, wounding three others.

In the West Bank, four Palestinians and an Israeli soldier were wounded today by a suicide bomber. It happened at a military checkpoint east of the city of Nablus. The bomber was the only fatality.

And back here in the U.S. - look at this: Iowa is awash this morning after rainstorms and a tornado hit the northwestern part of the state. Fifteen people suffered bruises or broken bones. About 45 homes were damaged, and several thousand lost power.

Those are the stories at this hour. I'm Thomas Roberts. ON THE STORY starts right now.

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

I'm Barbara Starr, ON THE STORY of new fighting in Iraq, new questions at home about the war, and the prisoner-abuse scandal.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: I'm Kelli Arena, ON THE STORY of new terrorism warnings and U.S. concerns over Olympic security.

MARIA HINOJOSA, CNN URBAN AFFAIRS CORRESPONDENT: I'm Maria Hinojosa, ON THE STORY of Massachusetts legalizing gay marriage, while opponents, including the governor, keep up the fight.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: I'm Dana Bash, in Crawford, Texas, ON THE STORY of President Bush's plan to address concerns about Iraq, here at home.

KATHLEEN HAYS, CNNfn CORRESPONDENT: I'm Kathleen Hays, ON THE STORY of gas prices spinning up and up.

We'll also talk about the shocker in the Martha Stewart case, even talk of another trial.

E-mail us at onthestory@cnn.com.

Now to Barbara and the price of war.

(BEGIN VIDEO CLIP)

ARMY GEN. JOHN ABIZAID, HEAD OF U.S. CENTRAL COMMAND: I won't be pollyannish about where we are, Senator. This is a hard thing and it's going to take a long time. And it's going to take a lot of courage and a lot of perseverance and unfortunately, more blood. And it's going to take more treasure.

(END VIDEO CLIP)

STARR: General John Abizaid, on Wednesday, telling a Senate hearing and the rest of us to prepare for a long, expensive war in Iraq. The military this week facing new questions about prisoner abuse, an attack on the Syrian border and the killing of a prominent Iraqi leader.

BASH: And Barbara, it seemed as though you got some different stories as the week came to a close from the pentagon about the investigations, about the deaths of some of the prisoners.

Tell us about that, and tell us essentially about the way the mood was left at the Pentagon, at the end of the week because of all that.

STARR: Well, you know, those of us in the press corps always joke -- the Friday afternoon press briefings, you know, no good can come of it. Well, we had a 4:30 background press briefing in the Pentagon yesterday, Friday afternoon, where they revised the number of death investigations that they are conducting, as a result of detainee deaths in Iraq and Afghanistan -- 33 cases, 37 victims. Nine of them now still open, active investigations.

And the Pentagon still has a lot of trouble coming up with an exact number of how many people died in custody. Now, we should remember, people die of natural causes. Sometimes these people are not in the best of health to begin with. But there are some cases that are now causing a lot of second looks.

HAYS: Barbara, update us, though, on the latest in the fingerpointing. As I was getting ready for this show today - and I was reading all the stories, and the guy who comes in and suddenly takes over the prison. And, you know, this lieutenant colonel and that general and the - Karpinski, who was running the place. It reminds me of reading a Nelson Demille novel where there is all this intrigue. I don't know all the plot yet, but it is an amazing story.

Kind of where -- where do we stand now in terms of where the fingers are pointing? STARR: Well, you know, it changes every day.

When Secretary Rumsfeld came back from Baghdad last week, the Pentagon was on a real high. They thought they'd got past the worst of it. And now we have these new, additional pictures, we have the video, we have everyday more and more bad news, more investigations, as you say.

There seems to be two things equally disturbing going on. Clear, criminal abuse. That is moving through the military justice system. But -- again, still, the much deeper, perhaps more distressing issue, what on earth was going on throughout the rest of the system?

ARENA: Right. Right.

STARR: The commanders, the procedures, the policies. This didn't just happen. You know, there was some sort of climate going on. And it's so hard to explain because one of the reasons is the Pentagon itself is confused and can't explain it. You ask questions and they say, We honestly don't know, we're looking into it.

HINOJOSA: So what's happening -- I mean, these are your corps reporters. You're always hanging out with them. You guys are there all the time. People getting angry in the reporters -- in the press corps right now with the Pentagon? Just like, hey, give us the straight answer?

STARR: Absolutely. At this briefing yesterday, I would say it reached a new low of the -- I mean, cold, hard fact, not opinion.

The Pentagon press corps has a new low in accepting the credibility of what we are told. Not so much that there is a belief there's a conspiracy of lying...

ARENA: You can't handle the truth.

(CROSSTALK)

STARR: That would be the easy part. That would be the easy part.

HINOJOSA: If they just...

STARR: They don't know. And, you know, if you believe that -- I just have to mention one case because it was mentioned in the papers this morning. There was an Iraqi high-level general, head of the air defense I believe, that died in U.S. custody. The press release that they put out when this man died in custody said apparently of natural causes. Well, now we've all had a look at his death certificate. Smothering, asphyxiation, and chest compression.

HAYS: Natural causes. There you go.

STARR: How does this happen?

HAYS: Natural if you're being interrogated too harshly perhaps. ARENA: You know, Barbara, I'm going to change the subject because -- there's so much to talk to you about. But Ahmed Chalabi -- did we back the wrong horse all along? I mean, now we're raiding his apartment...

HINOJOSA: But they're not even saying that they did raid it. I mean, isn't that part of a - yet another one of these, like, we thought....

(CROSSTALK)

STARR: ...the U.S. was just there in support, outside the gate.

I mean, as you know, Kelli, Ahmed Chalabi has been one of the most controversial characters. The Bush administration has backed him for a considerable period of time. The intelligence community, the law enforcement community, has been very skeptical of him, always questioning the veracity of the intelligence that he offered. And now very fundamental questions that he may have been in collision with Iranian intelligence.

And, Dana that gets me to the question about the White House. Clearly, a man that was backed by the conservatives, if you will, in the White House. By Vice President Cheney...

ARENA: And Wolfowitz.

STARR: And Paul Wolfowitz, the deputy secretary.

Dana, at the White House, are they rethinking it? How are they going to play this one?

BASH: Well, Barbara, you know, talking to White House officials over the past several months, it was very clear there is no love lost now between White House officials, going all the way up to the very, very top, and Ahmed Chalabi because of a lot of different things. Because - not only about this, this is obviously the straw that may have broken the camel's back. But just even in terms of what he said before the war, saying that the weapons of mass destruction were there, saying that Americans would be greeted as liberator. There are a whole host of issues.

But even more recently, the fact that he has not been helpful, the White House thinks, to them in their efforts. He's been opposed to the Baathists becoming part of this. He's said some statements that they thought were outrageous.

But still, you know, there was that picture of him standing just a row or two behind the first lady at the president's state of the union. So they did feel that they had to sort of stick with him for a while. But clearly, Barbara, this is something that -- one more symbol if you will, for the administration to deal with, in how perhaps they didn't have the right information or the right backers before the war.

ARENA: OK. Well, we can continue that discussion when we have Dana's segment coming up. But from problems in Iraq, to fear of terror attacks, both at the U.S. and at the Olympics. I'm back ON THE STORY in a moment.

(BEGIN VIDEOTAPE)

ANNOUNCER: Kelli Arena is CNN's Justice correspondent. Earlier, she worked for CNN's financial news. The New York Festivals awarded her a 2002 Best Correspondent Award.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ROBERT MUELLER, FBI DIRECTOR: We continue to monitor it and see what progress is being made to assure that these Olympics are free from attack.

(END VIDEO CLIP)

ARENA: FBI Director Robert Mueller on Thursday, taking the diplomatic "we're monitoring it" line, when asked what he would tell U.S. athletes worries about their safety at the Summer Olympics.

Welcome back. We're ON THE STORY.

HAYS: But Kelli, a lot of families who have kids going over there are very, very worried that their kids are going to be sitting ducks, that it's not safe, that there will be a terror attack. And, you know, the Olympics look like they're going on. But I wonder if all the athletes are going to end up going.

ARENA: Well, privately, I can tell you that counterterrorism officials are very concerned. They're worried about delays in construction because they can't do advanced security.

Greece has spent $1.2 billion on preparing for the Olympics. Just from security alone -- but just its proximity -- you know, where it is in the world, the port situation. There's so much that makes that country vulnerable right now. And the anti-American extremism that counterterrorism officials are painfully aware of is what has them really concerned.

And the thinking is if one athlete, one -- and the betting is on the NBA players -- drops out, then boom, boom, (UNINTELLIGIBLE) domino effect.

HINOJOSA: I mean, but doesn't that say something more? It's more than just, Well, I'm not going to go to the Olympics. It's essentially saying "I feel like, as an athlete, it's not worth it to go to the Olympics," which is incredible for an athlete to say. And then just kind of like, "And I don't really trust that anyone is going to be able to take care of us," which is - you know, I mean, I think back as a child to Munich. And the terrorist - you know, and that was the image I have of, like, the Olympics being this disaster. Is that kind of where they're - they're afraid it could...

ARENA: They're - I mean, when you're talking about 24-hour armed guards for the American, British and Israeli athletes, you're talking a very real concern. I mean, they are -- they're going to be accompanied -- and there's also talk of possibly providing armed guards for any country that has troops in Iraq right now, that has assisted the U.S. in Iraq, to protect them.

So it's a very real concern. I mean, there are Olympians who are not bringing their families. The security experts have advised the athletes not to wave American flags or to -- or to be too demonstrative when they win -- if they win -- because they feel that that could be considered confrontational.

There is a great deal of concern. But I know that the Olympic Committee, the Greek government, very committed to pulling this thing off. They keep trying -- you know, offering assurances. And they are doing - they are making an unbelievable effort here. But there is always - you know, there's always a vulnerability. No matter how much you do, there's always a vulnerability. And so -- unfortunately, the timing is really what has everybody concerned.

BASH: Kelli, one of the more bizarre stories, from my perspective, that you had to cover this week was this lawyer in Oregon who was allegedly being...

ARENA: Brandon Mayfield, yes.

BASH: Yes, tell us about this and his relationship to the Madrid bombing or maybe not a relationship to the Madrid bombing.

ARENA: Right, well that is the big question, isn't I?

Short story, because it's, like, so complicated. But there was a print that was found on a bag of detonators near the Madrid bombings that were similar to the detonators used to blow up the trains back in March. The prints were run, FBI hit -- makes a hit, OK? It's -- they say, this guy, Brandon Mayfield. Of course, they don't say this publicly. This is all according to sources.

So they put him under surveillance. But then what happens is, some of the press picks up on this and they start asking questions. So the FBI, again, according to sources, gets nervous, says our cover is blown. They take him into custody as a material witness. So he's not charged with anything. They just say, You may have information about this crime that we're interested in knowing.

And he makes an appearance before a grand jury and they have him for two weeks. And lo and behold, in that time Spanish authorities say, Wait a minute, we made another hit with this print. There's this Algerian who is at large and we think the print belongs to him.

But I have to tell you that every single person that I've spoken to here in the united states says, No, the print is Mayfield's. It's Mayfield's print. He has been released - he was released this week. And the thinking is -- because everything's under seal. But the thinking is, is that the judge probably said, Look, you don't have anything more on this guy except that - you know, that you think his print matches. You don't know how the print got on the bag. You can't hold him forever. Continue your investigation.

He remains a material witness. He remains a material witness. There is some speculation that his release was with conditions, some travel conditions. His brother suggested that he couldn't visit certain family members.

So it is -- it is really a "he said/she said" situation at this point.

STARR: And Kelli, going back to the issue of terrorism, there are some terrorism warnings at home.

ARENA: Right, well, suicide bombers. We saw another FBI warning this week that went out to state and local law enforcement officials, telling them, beware -- know that this is a very real possibility. And, you know, so look out for people who may be wearing heavy clothes, you know, bulky clothes, in the especially warm weather. They even said, you know, look out for wires, you know, that might be...

HINOJOSA: And we're all supposed to be kind of, like, watching for this (UNINTELLIGIBLE)

ARENA: We're all supposed to be on guard. I mean, the suicide bombing thing, I have to tell you, has been a big concern for a long time, and every single expert that you talk to ...

HAYS: And this summer, there's so much happening, the transfer of power, June 30, the Greek Olympics, the Republican convention...

(CROSSTALK)

ARENA: Right, the conventions; you've got the World War II memorial.

But it's not really the big events that they're worried about. They're worried about somebody walking into a shopping mall.

HAYS: And what about Zarqawi, the man who beheaded Nick Berg, now rivaling Osama bin Laden. Are we have many of these guys around the world to rival bin Laden and lead these things?

ARENA: Well, he's a special - he's a special case. And the experts who watch the movement say that he is really emerging as a very influential leader in the Islamic (UNINTELLIGIBLE) -- not for al Qaeda -- he has connections to al Qaeda -- but for the sort of extremism movement overall.

I mean, he now - he's gone out there and he's shown followers, Look, I've got American blood on my hands. I am not afraid to do the dirty work, OK? I am here -- look at it. I am out here, and I am fighting the battle, front line, you know, with you. And so they say that that really -- that, as a propaganda tool, as a recruiting tool, as a call to -- and, again that also ties in...

(CROSSTALK0

ARENA: Well, that's what they're saying. He's rivaling Osama bin Laden in terms of grabbing the hearts and minds of the extremist population.

That's another thing that they say is worrying to something happening on U.S. soil because somebody who is an extremist -- somebody who is all by himself, not affiliated, sees something like that and says, I have to go out and do my bit for the cause.

BASH: And Kelli, you know, Zarqawi is just one of the problems that the Bush administration is facing in Iraq. And the president is, of course, going to talk about that in a very public way on Monday. How will he address those concerns? We're back on that story in just a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There is only one path to peace and safety -- America will use every resource we have to fight and defeat these enemies of freedom.

(END VIDEO CLIP)

BASH: President Bush this week, talking about the enemies of freedom, a theme that he will likely touch on when he gives an address on Monday night, the first in a series of speeches, an attempt to reassure the country about Iraq.

ARENA: Dana, what can he possibly say with any definitiveness on Monday? I mean, what is the strategy?

BASH: Well, what he's going to say is, at this point, the strategy, Kelli, is to get him out there.

I talked to one Republican pollster last night who breathed a sigh of relief and said, It's about time. I mean, this is a guy who is getting a sense of what people are feeling out there, and he said people are feeling awful, that the mood is just down because of the pictures coming out of the prison-abuse story, because of the mounting casualties, because there's just an uncertainty about what's going to happen in the future, and that it's really putting a downer on things that should be looking up for the president, like the economy, and that people need to hear from him, that they need to hear sort of a reassuring voice.

As far as the specifics...

(CROSSTALK)

BASH: As far as the specifics, we don't know. We don't know. We don't know exactly what the specifics will be. At this point, they're trying to work out the specifics. For example, what exactly the sovereignty will look like, who will be the interim president for Iraq, who will be the two vice presidents. Those are the things that they're working on at the U.N. and the U.S. And what the White House is trying to do is get the president out there. As soon as they have that information, he's going to explain it.

But the overriding reason to do the speech in primetime on Monday night is for Americans to hear him, not only say that things are going to be OK, but also say that things may not be OK, almost to set the expectation level that people should expect the violence to continue. And sort of...

(CROSSTALK)

BASH: Go ahead.

HINOJOSA: That's what I was going to ask you, because it's kind of like, what can the president say at this point, in such a disastrous news cycle, that can be at all reassuring, really?

BASH: Well, when you talk to White House officials in private, they essentially say, Maria, that they understand they can't change the news. They're not going to be able to change the fact that there is violence, that you have -- you had a horrible event this week, like the president of the Iraqi Governing Council getting, essentially, assassinated. So what they do think that they need to do, particularly as they keep calling it a critical time between now and June 30, is at least try to affect the message, to try to affect the news cycle, by having the president - by using the bully pulpit.

And you talk to a lot of Republicans, and they say that the White House just simply has not done that well enough, as you see the president's poll numbers drop.

(CROSSTALK)

HAYS: ...because the poll numbers are dropping. We're getting closer and closer to November, when people are going to cast their vote. There's a very sizable body of conservative Republicans who have been criticizing the president for going to war in Iraq, for being, in effect, captured, really by the neoconservative thinkers. They're criticizing him for spending too much money.

There seems to me there's a lot of grumbling, that the president has taken the Republican Party down a track which may lose them the White House come November. What are you getting from the people around the president, but more out in the - out in the fields?

BASH: Well, you saw the president go up and try -- himself and try to reassure Republicans on Capitol Hill this week, right before Republicans went out -- went home for Memorial Day recess, right before they were going to go out and essentially -- they're supposed to, at least five months before an election, almost be ambassadors for the president, to talk up his policies, to talk up the situation around the country. And they were not in a good mood, in a good position to do that. And so the president went up to Capitol Hill, had a pep rally of sorts. Tried to reassure them.

But you're right, Kathleen. It is - it is something that is almost causing -- definitely a different atmosphere among Republicans.

And Barbara, I wanted to ask you -- you have seen, just watching the hearings on Capitol Hill, listening to Republican, the way they have been questioning the generals, the way they have been questioning the civilian leadership about the policies.

I wonder what you are hearing from the Pentagon and even the civilian leadership at the Pentagon, about the way even Republicans seem to be much tougher on the administration about the Iraq policy.

STARR: It seems at the moment -- they're pretty tough on the Senate side, and Deputy Secretary Paul Wolfowitz this week has given some testimony where, for the first time, he, who is one of the more ardent supporter of the war, is expressing some skepticism, some uncertainty about what's going on.

But politically, Dana, you have to wonder where the Democrats are, because will they be able to take advantage of this? And, of course, I thought one of the more interesting stories this week was John Kerry deciding perhaps to delay accepting the nomination so he could raise more money.

BASH: That's right, and of course it didn't take very long for the Bush campaign to come out and criticize him, saying that it is typical John Kerry.

But this is a real issue for the Democrats, because it's really all about money. I mean, let's face it. The Bush campaign has raised so much money. You know, close to $200 million. And they essentially had a five-week window where they were going to be able to spend that and John Kerry, in getting the nomination, the laws are that he would have to start -- just essentially take $75 million from the government and that would be his pot of money. Well, they want to delay that because the disadvantage that they know that they have against Republicans and against the Bush campaign.

ARENA: Dana, quickly, can you talk about the Barbara and the girls coming into a -- save the day for dad?

BASH: Well, they certainly are thinking about coming in to save the day.

I talked to people at the campaign, people in the first lady's office this week about just -- OK, we're hearing they're going to go out and campaign. What does that mean? Well, the answer is, they say they still don't know. They could be over in Arlington, Virginia, licking envelopes. They could be cutting spots. They could be out on the stump. You know, they're -- basically, what they have done is they've gone to their parents, apparently, and said, OK, we're ready to help. Because, you know, we certainly haven't seen a lot of them at all on the campaign trail. So say they're ready to do it now. Be interesting to see what exactly that means.

HAYS: Well, I guess they won't hold it against their dad that he didn't make it to graduation at Yale. But I guess there are extenuating circumstances.

Well, you know, a lot of...

BASH: And they might not make it to their graduations either.

HAYS: It is tough being the president's kids.

Well, you know, you can't separate politics from pocketbook issue. We're back on the economic story and what President Bush told me and financial journalists this week.

But first, a check on what's making headlines at this hour.

ROBERTS: Good morning. I'm Thomas Roberts at CNN Center in Atlanta.

Eight more investigations have been opened into the deaths of people being held by the U.S. military in Iraq and Afghanistan. There are now 33 investigations into 37 detainee deaths. Several of the cases are listed as homicides, a few as justified homicides, indicating the prisoners were trying to escape.

The White House is releasing positive job figure from the Labor Department. A short time ago, President Bush used his weekly radio address to trumpet the latest job gains.

(BEGIN AUDIO CLIP)

BUSH: When we let the American people keep more of what they earn and save, they put that money to good use. They demand more goods and services, which creates demand for new workers. Now that our economy is expanding and adding more jobs, we need to make sure Americans keep their tax relief.

(END AUDIO CLIP)

ROBERTS: Unemployment is now 5.6 percent. That's down 0.7 from last June.

A U.N. envoy says North Korea doesn't plan to stop developing nuclear weapons unless they get a non-aggression guarantee from the U.S. But during a summit this morning with Japan's president, North Korean leader Kim Jong-Il agreed to continue a moratorium on missile tests.

Well, the rain in Spain didn't dampen the celebratory mood for the country's first royal wedding in 98 years. Crown Prince Felipe was married this morning to a former TV host. Security, as you can imagine, was tight for the ceremony with 20,000 police in the city and NATO F-18s patrolling the skies overhead.

Those are the top stories for you at this hour. I'm Thomas Roberts. ON THE STORY will be back in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: We're pleased with the economic progress here in America. After all, the growth rates are high. New jobs are being created.

(END VIDEO CLIP)

HAYS: President Bush talking up economic growth and new jobs. That was after a Cabinet meeting. But the economy and his record was on his mind when he sat down with me and a handful of other financial reporters this week.

Welcome back. We're ON THE STORY.

HINOJOSA: OK. So Kathleen, and suddenly you get this call, Hi, the president wants to see you tomorrow. And you're like, Huh? Like, I mean, you didn't quite think it was real because the motivation is, Why is he calling you guys in?

HAYS: Well first of all, it's surprising. This doesn't happen all the time. And, in fact, one of my columns on the Web - see, I wrote about "My Thursday in the White House with George," you know?

But clearly -- it's pretty obvious that the economy is doing better. The war in Iraq is not going so great. And, in fact, the president was very interesting. You know, you go into the Roosevelt Room. There's a long, rectangular table. All the journalists - seven of us on one side, the president comes in, everybody stands up, everybody sits down. He's on the other side with all of his advisers.

He starts by just laying out -- Look, I know these images of war are disconcerting to the American people. I know it's hard to be optimistic and confident.

Having said that, the economy's turned around. Having said that, you know, make my tax cuts permanent, pass my energy bill, everything will be fine. I mean, really - in fact, someone asked me, how did he seem? Did he seem kind of worried? And I said, No, actually, he seems as confident and sure of himself as ever.

HINOJOSA: But that may be a problem too, right? I mean, appearing just a little too confident.

STARR: OK. He hasn't filled up his gas tank lately. What did he have to say about gas prices?

HAYS: Well, it's interesting. I would say about half the questions were on energy prices.

ARENA: I'm sure.

HAYS: And his point is, Look, you can't consume your way to less energy dependence. You have to produce your way to more energy dependence. Again, trying to pump all up his things for the energy bill, which include drilling in the Arctic refuge, which a lot of people say would be a drop in the bucket.

But I think some of the more interesting questions about opening up the Strategic Petroleum Reserve, which the democrats have made an issue. And I think he made a very clear case for -- the last time in the world you want to tap your emergency reserves is, as Kelli you point out, how vulnerable we are to terror attacks. I asked him specifically, What would constitute an emergency? When would you? Because he said emergency over and over and over. And he pretty much confirmed, in the event of a terrorist attack or a refinery gets blown up in the Middle East. Something happens that is really, really dire. Otherwise no way those reserves get open.

So no matter how high that gas price goes, that's not what he's talking about.

ARENA: And the market.

(CROSSTALK)

BASH: And the other argument that the president makes, that his aides make, is that that doesn't work. And that even when they do open it up, either if they divert some of the oil going into the Strategic Petroleum Oil Reserve or they take it out, that historically it either has a short-term gain or it simply doesn't work at all.

Do you think that there's actually something to be said for that?

HAYS: Actually, most oil traders I've talk to tend to agree with that. And they would also probably agree with the president that it is a question of growing global demand.

I think where the debate starts, though, is how you solve that. And even though the president says that he's for energy conservation, that he'd like to see more clean burning coal, nuclear technology et cetera.

ARENA: You're not going to see that in China. I mean, you know, they're...

HAYS: Well, and the Chinese themselves are starting their own Strategic Petroleum Reserve.

Demand is growing year after year. And as the economy gets stronger, as India develops, there's going to be more and more demand for it.

ARENA: So is there a new acceptable price range now for a barrel of crude than there was before?

HAYS: One of the trader down at the New York Mercantile Exchange that I interviewed this week who was very bullish on oil back in 2002 -- so got bullish, thinking the price would rise before the big move up started, now says we've probably seen the peak. Oil got up to $42 a barrel this week. It closed lower this week after the Saudis said they want to pump some more, and they're going to urge OPEC to do that.

But he told me he thinks $30 to $40 is our new range. But that's a lot higher than $20 to $30 a barrel.

STARR: A $30 to $40 a barrel range -- what is the impact across the economy?

HAYS: Well, let's start with the airline. The airlines' losses could be as high as $5 billion this year ...

ARENA: And already hurt. Already hurt by...

HAYS: Exactly. Well, they were going to be $2.5 billion. But they've been kind of climbing out of the hole. We've stayed near $40 a barrel. One penny-cent increase in the cost of fuel per gallon is $180 million in cost across the industry. This is very, very bad. They were hurting at $25 a barrel. This is very, very bad.

But - there's -- it ripples in many way. It isn't just what you spend at the pump and the less money you might have to then stop at McDonald's and get the kids Happy Meals or whatever. It's the cost of shipping and trucking, and that gets kind of passed into prices. So that's the worry.

HINOJOSA: So let me ask you this. When -- how does the president say - and, in fact, because I was talking to a lot of unemployed folks just by chance this week, and they're saying the economy's doing great? We don't get it. So where is the economy doing so fabulously when we're going to be looking at these skyrocketing gas prices?

HAYS: There's no doubt that there's a pool, a large pool of long-term unemployed and things have not picked up enough for them.

But we've seen recently that things are picking up. So the hope is -- and a lot of people share this view on Wall Street, a lot of people who are, you know, making investments based on what they think the economy is going to do. It's not politics, it's all about money. They also think that we're going to see more jobs growth. And little by little that will lift up.

But, you know, terror hanging on the stock market, worries about Iraq hanging on the stock market, the high energy prices -- there are some clouds that could maybe pull things down, pull the economy down just when it does look like it's starting to fire a lot more.

The president is saying, My plan is working. Really, I agree, though. His best story, really, right now is the economy. Because we've said it through the program, today you can't change the news, you can't change the photos, and that's the big thing for him.

HINOJOSA: Well, one place that the economy is actually picking up is in the state of Massachusetts, where there are going to be lots more legal gay marriages in the United States. I'm on that story when we come back.

(COMMERCIAL BREAK)

ARENA: We just got a briefing from the coalition forces in Iraq. Brigadier General Mark Kimmitt making a statement that the attack along the Syrian border by the U.S. was not an against on a wedding part, trying to put that issue to rest once and for all.

Let's hear what he had to say.

(BEGIN VIDEO CLUP)

BRIG. GEN. MARK KIMMIT, U.S. ARMY: And there was no evidence of wedding. There was - there were no decorations, no musical instruments found, no large quantities of food or leftover servings one would expect from a wedding celebration. No gifts, all the men were - almost -- the men were almost all military-aged. No family elders that one would expect to see at a event of that type.

(END VIDEO CLIP)

ARENA: And it is our good fortune to have our Pentagon correspondent right here for a quick reaction.

Barbara, does this - does this do it?

STARR: Probably not. The Iraqis are going to believe what they believe; the coalition's going to believe what it's going to believe. And this is another case, no question, they hit the target they aimed at, but no one is ever really going to be able to say who was in that area that was bombed.

ARENA: All right. Thanks, Barbara.

Now we're going back to our other topic, Maria Hinojosa on gay marriage.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: By the power vested in me by the Commonwealth of Massachusetts --

(CHEERS AND APPLAUSE)

(END VIDEO CLIP)

STARR: Maria, you were in Cambridge when all of this began to unfold. What was the atmosphere?

HINOJOSA: You know what? I have to say, there were so many people that were so happy...

HAYS: Party, party, party.

HINOJOSA: It was just a huge -- we arrived in Cambridge in the afternoon on Sunday. Cambridge being, you know, funky Harvard location. 12:01, city hall opened, started giving out the first licenses. They were out there until 3:00 in the morning applauding every single couple that walked out with their marriage license.

You -- I saw such a diversity of people. Older women getting married who have been together for 25 years. A black man and an elderly white man who were thinking about issues of security, how do we protect our property when -- issues of inheritance and death? And you had a lot of funky, younger couples. Overwhelmingly, lot of families, women with kids getting married.

So a very different picture, kind of, of gay America, as it is today.

HAYS: What about the people around them? Because, you know, we know there are some people who are against gay marriage. Were there any protesters? Was there anybody trying to rain on that parade?

HINOJOSA: On Sunday, when we got to Cambridge, there was a small group, probably about a dozen strong, real fringe people -- I mean, holding up signs like, you know, " All Gays Should Die," very, very kind of ugly stuff. Not a lot of attention placed there.

But the next day, in Boston, you saw much more mainstream people coming out and really being upset about this. Talking just what's going on with our country that marriage between a man and woman is now being called something else for gay men and women? A lot of people just saying, You know what? If they want to get the rights, give them the rights, but why change the institution of marriage? One woman coming out in her wedding dress saying, She's just a churchgoer and felt that this was something that she needed to do.

But then kind of taking it one step further, she was like, you know, what's next? Bestiality? So, you know, like people marrying their pets? It was kind of weird.

But I think that there is a feeling, like, you know, is Massachusetts the first one? And all the states are going to come toppling next? And what does that mean for the country?

BASH: And Maria, until other states do, obviously, people are going to want to go - and already, as you were talking about, going to Massachusetts. What's the governor, Mitt Romney, trying to do to stop that at this point?

HINOJOSA: He's trying everything he possibly can. He's pulling out this old law from 1913 that basically was enacted so that you didn't have to recognize interracial marriages. He's trying to re- enact that now. And a lot of the local lawmakers are saying, No way, no how. This was a discriminatory law back then and we're not going to use it now.

Here's the interesting thing: you've got clerks in these small little city halls all across the state, that are basically saying, You know what, governor? You can tell us what you want, but if someone comes in and they want to get married, and even if they're out of state, we're going to go ahead and give them the license.

ARENA: So what does it mean for someone who's out of state? Let's say you live in New York and you go to Massachusetts to get married. Is that marriage recognized?

HINOJOSA: New York is one of the few states that said it will recognize that. But there is...

ARENA: OK, it was a bad choice. So what about Kentucky?

(CROSSTALK)

HINOJOSA: Well, they won't, essentially. They won't. There's no reason why they would have to.

And you also have to remember - look, there are 38 states on -- in this country that have passed amendments that say No way, no how, will there be gay marriage in this state.

So this is - I mean, Massachusetts, for gay folks across the country, huge civil rights victory. But this is not the ambiance around the country. And, you now, a lot of people really just saying, No way, no how. It's not going to happen in our state.

HAYS: But it is happening more and more. It seems like it's a wave you're not going to stop at this point.

HINOJOSA: And interestingly, just really quickly, the younger people continue to poll that they're accepting of this more and more. So what's going to happen in ten years? Hard to tell.

HAYS: We shall see.

Well, we can tell you what's going to happen next -- from marriage to Martha, big developments in the Martha Stewart case yesterday. I'm back on that story after this.

(COMMERCIAL BREAK)

HAYS: Welcome back to ON THE STORY.

And a surprise development in the Martha Stewart case. One of the prosecution's witnesses, charged with perjury for statements he made during testimony.

This is amazing. You know, all the stories now where they're going to be sentenced, Peter Bacanovic, Martha Stewart's assistant, and suddenly, Larry Stewart, who is a Secret Service analyst, laboratory director, he runs this kind of investigation of the handwriting analysis that was so important in this case, is charged with perjury.

We don't know yet why. Some questions as to why the lab he worked for wouldn't have said earlier there was something going on. But basically - remember, Peter Bacanovic said he wrote "60" on a pad at work. And that was really important, because that was - if the stock hit 60, the agreement was, they claimed, that he was supposed to sell Martha's stock. So it wasn't that she got inside information.

So whether or not that was actually written after the fact to kind of make a little trail and hide something was a key issue. And that's why it was analyzed. This guy, Larry Stewart said, Oh yes, I did this. I was on top of it.

But now, apparently -- they're not saying that the evidence wasn't good. They're not saying there was anything wrong with the trial. They're just saying that Larry Stewart lied about his involvement in the trial. And, of course, Martha Stewart's attorney is saying, We want a mistrial.

HINOJOSA: What is his motivation to lie? I mean, what does he get out of this?

HAYS: I have no idea, and since we don't know -- if you want me to speculate personally, as a human being, I would say, Well, maybe it was a big, big trial and this is his department and maybe he just wanted to have a bigger footprint.

Maybe he was kind of involved. After all, he's the director of this particular part of the whole operation.

ARENA: So he basically exaggerated...

HAYS: That's what it sounds like. But we don't know yet...

(CROSSTALK)

ARENA: ...said I was more important than I was, and for that he's, you know...

STARR: This is the second thing nit (ph) in this trial. You had the juror...

ARENA: Go ahead, Dana.

(HIGH-PITCH TONE)

ARENA: Woah, we lost Dana.

HAYS: Well, there we go.

But that's it. Because the first thing that happened was there was another - remember, there was a jury who came out, and everyone was taken aback because this man was talking about - very -- wanted to talk to the press, victory for the little guy. And then it turned out that he had lied about his past, that he had been prosecuted for wrongdoings, maybe not convicted -- and that that didn't come out.

And the idea is that apparently, the prosecution could be at fault for not having vetted this ahead of time. In other words, they should have found out that this Larry Stewart wouldn't have been or couldn't have been as involved as he said it was. And that's the kind of thing the judge has to consider for a mistrial.

Dana, you're back.

BASH: I'm back. That was actually going to be my question is how - how likely is it that this will be considered material, if you will, to the trial and it could end up in a mistrial? Or is that still very unclear?

HAYS: Well, it is unclear, but that's, obviously, the big question for Martha Stewart and Peter Baconovic.

And for the U.S. attorney. U.S. attorney says no, we don't need a mistrial. Because, number one, this piece of evidence has specifically to do with the charges against Peter Bacanovic that he made false documents and the jury threw out that charge because they didn't think they had enough evidence.

So he's saying....

ARENA: But it doesn't matter because the legal -- some legal experts are saying, look, you know, you - you know, this -- when there's too many little things that go wrong, you know, then it is up to - it is a judge's responsibility to take a step back and say, Well, wait a minute. You know, was the government sloppy here? You know, should they have been more on the ball, and was this a wash job and thrown together...

HINOJOSA: And so ultimately what she gets is perhaps a chance to -- if they start from ground zero and start the trial all over with a mistrial, she could plea, right?

HAYS: Well, according to our Justice correspondent Kelli Arena...

(CROSSTALK)

ARENA: If it's a mistrial, you go back to drawing board.

HAYS: And another thing...

ARENA: But, I mean, I think though, that to say there will be a mistrial, though, is really...

HAYS: We don't know at this point.

ARENA: We don't know.

HAYS: It's up to the judge's discretion.

But another point. People say, Oh well, the cost. And an attorney I was talking to this morning said, Hey, look, if the prosecution made a mistake, then that's the state and if the state screwed up, basically, then they should bear the cost.

But speaking of another dramatic story -- but a human cost that even goes far beyond maybe people having to spend a year of their life in jail. The story you covered this week, Kelli, about human trafficking, so shocking so -- just something -- a case that's been right under our noses being busted wide open.

ARENA: Right.

Well, Justice Department did their first annual report on human trafficking to Congress. 800,000 people, they estimate, are trafficked each year -- 800,000...

HINOJOSA: Around the world?

ARENA: Around the world. And in the United States, about 17,000, 18,000 people ...

HINOJOSA: And really those are the only numbers that they...

ARENA: That they know about, right. I mean, because there's so much they don't know about.

And we talked to one victim of human trafficking who is still afraid to use her name and -- you know, now that they're allow TVs (UNINTELLIGIBLE) visas so that they can stay in the country legally and work.

But this is a mom who came over to the United States, thinking she was going to get a job sewing, that she could make some money. You know, go back home. She only wanted to come for six months. She thought everything was on the up and up.

She gets here. She is forced to live in this factory. She was not allowed to bathe. She was allowed one meal a day for 10 minutes that she had to eat...

HINOJOSA: And this is right here in Washington, outside of Washington, D.C.?

ARENA: No, this was in California.

HINOJOSA: Oh, so in California.

ARENA: Yes, this was in California.

HINOJOSA: But she wasn't a sex worker, which is a lot of...

ARENA: No, no.

(CROSSTALK)

ARENA: Most - most of the women -- and some very young, you know, 14, 15-year-old girls are brought over as sex slaves. And so that is the predominant...

HAYS: Who are the - who are the consumers? Who are the buyers of these services? Who are these women being, in essence, sold to?

ARENA: The woman that we spoke to - actually, it was a legitimate business. It wasn't an (UNINTELLIGIBLE) -- there were workers there who were legal workers. And this woman was told, You're not allowed to talk to anybody. You're not allow to make any phone calls. You're not - I mean, you're not allowed to step outside. (UNINTELLIGIBLE)

And so the thinking is someone called in an anonymous tip to immigration and said, We think we've got, you know, someone who is a slave - I mean, virtual slave. 18 hours a day working -- not allowed to turn on the light -- not allow to turn on the light. Had to just use the sewing machine light for a little while at night when she was sewing. And just so fearful because the woman who was in control of her said do not go outside, because the police will get you and they'll throw you in jail because you know how -- you know, in the United States --

HINOJOSA: And also if she speaks -- sometimes there's the possibility that because there's some connection to her family back home, there's fear they would retaliate against her family.

ARENA: And that's why she's still afraid. She's still afraid.

She says, I have babies back home. I have a family. You know, these people know where they are. They could be harmed. So very upsetting.

HAYS: Amazing story. And of course, there's going to be more ON THE STORY. We're coming back right after this.

(BEGIN VIDEOTAPE)

ANNOUNCER: A grade-schooler took her school to court. What's her story? More when we come back.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: A sixth-grader made headlines this week. What's her story? Nashala Hearn won the right to wear a headscarf to her Oklahoma school in a settlement announced Wednesday. She claimed religious discrimination when she was suspended twice for wearing her scarf. The justice department agreed the school violated the 12- year-old Muslim's rights.

UNIDENTIFIED MALE: Nashala perhaps put it best when she observed, that it's simply unfair for other students to wear crosses, but that she can't wear (UNINTELLIGIBLE)

ANNOUNCER: The Muskegee, Oklahoma school district will change its dress code, and will also pay the Hearn family.

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HAYS: Thanks to my colleagues, thanks for watching ON THE STORY. Hope you enjoyed it as much as we did. Come back next week.

Just ahead, "PEOPLE IN THE NEWS" on Mike Myers and American Idol.

Coming up right now, a check of the news at this hour.

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