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CNN Wolf Blitzer Reports

Should the U.S. Fear Cyber Terror?; Nation Debates Pledge of Allegiance; Netanya Goes on After Repeated Suicide Bombings

Aired June 27, 2002 - 17:00   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.
WOLF BLITZER, CNN ANCHOR: Now on WOLF BLITZER REPORTS, cyber terror fears. Can al Qaeda hackers take remote control of nuclear plants, dams and emergency services?

One nation under God: a divided Supreme Court chips away at a wall between church and state as the nation debates another court's ruling on the Pledge of Allegiance.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We need common sense judges who understand that our rights were derived from God.

(END VIDEO CLIP)

BLITZER: It triggered Israel's massive offensive on the West Bank. Three months after the Passover Massacre, the seaside town of Netanya finds ways to go on.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We just pray that peace will come some day.

(END VIDEO CLIP)

BLITZER: And how to clean up Martha's mess. We'll ask a crisis management expert.

It's Thursday June 27, 2002. Hello, I'm Wolf Blitzer in Jerusalem.

Later this hour I'll take you to a city here in Israel that's on a constant state of terror alert.

Miles O'Brien is standing by in Atlanta. He has some other stories he's working on as well -- Miles.

MILES O'BRIEN, CNN CORRESPONDENT: Thanks Wolf.

This one is just in: Pledge of Allegiance ban put on hold. A judge from that same federal appeals court that declared the pledge unconstitutional yesterday has now blocked that ruling from being enforced. This prevents a ruling from taking effect until the 9th Circuit Court of Appeals decides whether it wants to change course. We'll have more on this in just a moment.

Big news from the Supreme Court that affects schools across the country, as well.

Plus: police narrow their investigation in the Elizabeth Smart case.

We'll have all that coming up, but first let's send it back to Wolf and the day's top story -- Wolf.

BLITZER: Thank you very much Miles. We begin with potential fears that al Qaeda may be able to use the Internet to engage in cyber warfare.

Let's get to our justice correspondent Kelli Arena. She's in Washington and she has details.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Hi Wolf. Government officials do confirm al Qaeda has more knowledge about, and interest in, a possible cyber attack than previously thought. Now CNN has learned that towards the end of last year, investigators discovered a house in Pakistan that was run by al Qaeda devoted solely to training for cyber warfare and hacking.

One intelligence official called it a cyber academy. Now, additionally in response to a report in today's "Washington Post" officials confirm that they found evidence al Qaeda members were gathering information about systems that control U.S. infrastructure -- things like dams and power grids.

Officials caution that, A, they have no specific evidence that attack is underway and, B, they're not convinced al Qaeda members have achieved the level of expertise that's necessary to carry out such an attack and, C, they are more worried about the likelihood of physical acts of terrorism over cyber acts of terrorism.

Now U.S. officials have warned about cyber attacks on the nation's infrastructure for years. What may be even more alarming according to some experts is how much still has to be done to deal with the vulnerabilities -- Wolf.

BLITZER: Kelli Arena in Washington. Thank you very much. So while experts believe that the U.S. infrastructure does have some vulnerabilities, they don't necessarily believe that the al Qaeda is capable of engaging in much damage right now. We're going to have more on this in just a moment, but first let's take a look at how you can weigh in on this very important story.

Go to my Web page. Our question of the day is this. Do you think cyber terror attacks could be as devastating as a bomb? Vote your opinion at CNN.com/wolf. While you're there let me know what you're thinking. Send me your comments. I'll read some of them on the air each day at the end of this program. That's also where you can read my daily column, CNN.com/wolf.

How much destruction, devastation could there be? How vulnerable is the U.S. infrastructure? For that let's go to CNN's Renay San Miguel. He's at the CNN center in Atlanta -- Renay.

RENAY SAN MIGUEL, CNN CORRESPONDENT: Well Wolf, if a 15-year old kid in Canada who went by the nickname of "Mafia Boy" could use the Internet to shut down eBay and Yahoo! as he did a couple of years ago, then why wouldn't terrorists be able to use the Internet and use some of the same tools available to that -- to that teenager to shut down some of the critical systems in our country like power grids and telecommunication systems.

That's the consensus of some of the people I've been talking with today who work for both the private sector in computer security industry and also one gentleman who works for the government agency TASK (ph) to respond to emergency computer attacks. Now this report about al Qaeda possibly looking into the Internet to cause damage, comes on the heels of two reports that were issued just within in the past week -- one from the National Academy of Sciences and one from the Business Software Alliance.

Both very critical of just how well protected our critical infrastructures are in this country. They say more needs to be done to protect our power grids and water supplies and things of that nature. All of them are hooked to the Internet and that leaves them open to attacks like they're being discussed by al Qaeda -- Wolf.

BLITZER: Renay, has anyone ever successfully hacked into a power plant or a similar facility?

SAN MIGUEL: Sure, in California of last year several folks got -- were able to hack their way into the system of the Cal ISO, the Independent Systems Operator. That's the agency that is responsible for the maintaining the flow of electricity across all high voltage lines in California.

They didn't do any damage. They were more interested in just kind of playing games, playing hide and seek, if you will. But that was, if they were able to be a little bit more malicious, they would have caused some damage according to Steve Trilling (ph) who is with the Semantic Security Corporation.

Also a gentleman in Australia last year hacked into the sewer supply there and sent thousands of liters of raw sewage into public ponds and creeks. He was put in jail for that, but once again he was able to get -- use the Internet to hack into some of these critical facilities.

BLITZER: Are the tools to gauge in this cyber sabotage readily available on the Internet Renay?

SAN MIGUEL: According to Tom Longstaff, who is the director of Research and Development for the Computer Emergency Response Team, that's the government agency involved in computer security, sure, most of the software techniques are freely available and -- but they would have to be modified or tailored depending on the target.

What Mr. Longstaff told me was that it'd be more likely they would try to get inside information coupled with downloading software tools. They would need to have a little bit more information about just exactly what kind of facilities are there, which power turbines to turn off or reverse or that kind of thing. That would be a little bit more -- that would be better information for them to have to be able to cause damage.

BLITZER: Briefly Renay, the possibility, their homegrown American hackers could team up with al Qaeda. How remote are you hearing is that?

SAN MIGUEL: Not very remote. Everybody's got a price is the old saying. But it wouldn't have to be an American hacker, somebody in this country who has a grudge against his own -- his or her own country. There are plenty of folks out there with the expertise to hack that al Qaeda could go out and pay money to. Folks who have a grudge against America would be more than willing to engage in cyber attacks for al Qaeda.

BLITZER: Renay San Miguel, thank you very much. And there's another fear that's looming out there as well. Russian nuclear scientists and the potential danger that they could pose.

For that let's go to our national security correspondent David Ensor.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: You'll want to push it just a little bit and then pull the trigger.

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): The new General Accounting Office report says U.S. programs to help control smuggling of nuclear and radioactive materials out of the former Soviet Union and central Europe are poorly coordinated and haphazardly run, leaving this country more vulnerable to attack by terrorists using a radiological or nuclear materials weapon such as a dirty bomb.

SEN. PAT ROBERTS (R), KANSAS: It's rather damning. We have six agencies involved. We spent about $90 million in 30 countries in Europe. And I'm not sure that each of the agencies knew what the other one was doing in terms of any kind of cooperation. And I'm not sure that methogies (ph) were really up to date, or really did any good either.

ENSOR: The new GAO report says the equipment used by U.S. Customs and others to monitor against nuclear smuggling into this country is also not adequate.

ROBERTS: Right now we're basically relying on pagers and that's not the best equipment that we can use.

ENSOR: U.S. assistance to former Soviet nations includes radiation monitors, stationary, mobile vans and handheld equipment, as well as training, supplied under various programs by the Departments of State, Defense, Energy, Customs, the FBI and the Coast Guard. The State Department is supposed to coordinate it all. RICHARD BOUCHER, STATE DEPARTMENT SPOKESMAN: I recognize that there's always room for improvement and we've begun to coordinate development to the prioritize list of border crossings and ports of entry overseas that should be equipped for the radiation detection equipment.

ENSOR: On Capitol Hill the Senate approved more money for other programs designed to improve security at nuclear facilities in Russia and elsewhere.

(END VIDEOTAPE)

ENSOR: The new GAO report underscores an important weakness in U.S. national security: that the U.S. has done too little to stop nuclear or radiological smuggling at the source and too little, as well, to protect its own borders from the menace -- Wolf.

BLITZER: David, what can you tell us about the arrest of an alleged al Qaeda figure in Indonesia?

ENSOR: Well CNN learned earlier today, Wolf, that Omar al-Faruq was arrested in Indonesia on June 5. He's also sometimes known as Mahmoud bin Ahmad Assegaf. He is a Kuwaiti national. He's regarded as a kind of a medium-level leader in al Qaeda and important collector of money, a fund-raiser, a financier for al Qaeda in that part of the world -- Wolf.

BLITZER: David Ensor, thank you very much. Let's get some other news now.

Miles O'Brien is standing by once again in Atlanta -- Miles.

O'BRIEN: Thank you very much Wolf.

The Air Force is confirming an American warplane crashed today in France near the German border, killing the pilot. The A-10 Thunderbolt, more commonly known as the Warthog, went down in a small forest, but did not burn on impact.

Sources say the pilot was alone, was taking part in a training session. He was from the 52nd Fighter Wing based in Germany.

The Forest Service worker accused of starting the worst wildfire in Colorado's history could get out of jail today. Sources say Terry Barton's husband used the couple's house to post her $600,000 bail. The hearing is taking place on that as we speak. We'll bring you the results as they become available to us.

Meanwhile in Arizona, CNN's David Mattingly has our first look at two communities where fire destroyed hundreds of homes.

(BEGIN VIDEOTAPE)

DAVID MATTINGLY, CNN CORRESPONDENT: Black and dirt and charred foundations, the remains of the single worst night of property damage in the Arizona fires. The communities of Heber and Overgaard, 217 residences lost. Many of them mobile homes, acres of them consumed Saturday in a matter of hours.

UNIDENTIFIED MALE: Sheer heat, British thermal units of heat. Two -- 2,000, 2500 degrees of temperature slamming against the back of this area here.

MATTINGLY: This was the first time since the fires that Forest officials have allowed news cameras into the forest. Protective clothing was required and a tight convoy as we drove into still active fire areas.

This is the second checkpoint we've passed just in the last couple of miles and these are actually very good sources of information because the conditions are really dicey this time of the afternoon and we may have to turn around and leave the forest at any time.

Along the way blackened forest, patches of trees and roads dyed red from flame retarded slurry dropped from the air. And firefighters using a break in the weather to take the offensive.

This is what firefighters call a burnout. They're starting here on the highway and they're burning out all the material away from the road, taking more of the fuel away from the fire that might be coming through here later. The heat as we drove by was intense, but nothing compared to what the people of Overgaard encountered as they fled their homes.

UNIDENTIFIED MALE: You look around and see all this darkness and you know how do you feel? And you don't even live here -- it's pretty bad, isn't it?

MATTINGLY: And as tentative as it was for us to come into this area, it will be just as uncertain for the people who call this forest home.

As in so many of the affected areas, the conditions for and the threat of a new fire still exist. Forestry officials say there's an active fire burning just a couple of miles away from here, and while it might look safe here right now, as easily as the fire came through, it could easily come right back.

While active fires persist and unburned sections of forest remain, homeowners are kept away and wondering when this most dangerous of fire seasons will allow them to get back on with their lives.

David Mattingly, CNN, Over Guard, Arizona.

(END VIDEOTAPE)

O'BRIEN: All right, we're headed for a break, but there are some big changes today that affect students and parents everywhere you're want to -- going to want to hear about in just a few minutes. A huge boost for school vouchers plus a new requirement on the SAT that turns up the heat on college hopefuls plus new leads in the case of Elizabeth Smart. Police say they're getting closer to a suspect, and a great story of determination, the refusal to give up will take Steve Fossett more than halfway around the world now.

But first, lots of bad businesses this week. What about the good? "Money" Magazine asks: What are the most underrated trends today?

(BEGIN VIDEO CLIP)

JAMES P. GORMAN, EXEC. V.P. & PRES., U.S. PRIVATE CLIENT GROUP MALE: I think one of the most underrated aspects of financial services is advice. Everybody is talking about being an adviser, giving advice, the importance of advice. It's very difficult to give advice, to have the confidence, the capabilities, the technology to support you in delivering that advice for that client's financial needs.

ROBERT L. REYNOLDS, VICE CHAIRMAN & COO, FIDELITY INVESTMENTS: The 529 plan that was passed in the tax bill last year that allows people to contribute money for another individual's college education. Money accumulates tax-free and then comes out tax-free and that is a tremendous way to save for college.

JOHN CLISTON BOGLE, FOUNDER & FMR. CHMN, THE VANGUARD GROUP, INC.: Bonds, mutual funds, that's been a very small part of this industry for a long time, but bond funds will come into their own. They're the most intelligent way by far for individual investors to own bonds whether they're 401(k) or directly. It's a great way to own government bonds, corporate bonds, municipal bonds, whatever your preference is or tax status is.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: Welcome back. I'm Wolf Blitzer in Jerusalem. Coming up shortly, I'll have a special report on victims of terror, but first let's go back to Miles O'Brien. He's going to tell us about a major decision from the Supreme Court today -- Miles.

O'BRIEN: Thank you very much Wolf. The Supreme Court completed its term today with two major rulings on education involving school vouchers and student drug testing. For a debrief on the briefs, we turn to national correspondent Bob Franken in Washington.

Hello Bob.

BOB FRANKEN, CNN NATIONAL CORRESPONDENT: Hello Miles and of course the school vouchers decision is so closely related in that it's a separation of church and state issue related to the Pledge of Allegiance issue that's been so widely discussed. The Supreme Court Justices by a five to four margin, have ruled that the Cleveland School Vouchers Program is in fact constitutional in spite of the fact that people can use taxpayer money under the program to send their children to parochial schools as most of them do, which require religious training.

Nevertheless, the justices said that that was neutral. Chief Justice Rehnquist wrote the opinion. The constitutionality of a neutral educational aid program simply does not turn on whether or why in a particular time most private schools are religious or most recipients choose to use the money to go to religious schools.

Now, there were some very stinging dissents. John Paul Stevens, as often as the case, wrote one of them. He said this is profoundly misguided. He went on to liken this to situations in the Mideast, the Vulcans in Northern Island and said whenever we remove a brick from the wall that was designated, designed to separate religion and government we increase the risk of religious strike.

That was the minority opinion. The school voucher programs are now the law of the land. They will be allowed because of a five to four decision -- Miles.

O'BRIEN: Bob, continuing our public school week theme in the federal court system, let's move onto the issue of drug testing in schools and the court broadened that capability and that power to do that. Not all students objected to it just yet, but a larger body of students.

FRANKEN: That's right. In the past, the justices had ruled that student athletes could be subjected to random drug tests for the obvious reason, that they were putting themselves in harm's way if they had any sort of drug ingest and that type of thing. But now the justices are also saying that any student who participates in extracurricular activities can be subjected to a drug test per a policy in the Oklahoma school district, which became the center of this.

Judge Clarence Thomas wrote the majority opinion, saying the need to prevent and deter the substantial harm of childhood drug use provides the necessary immediacy for the school testing policies. He said that's because there is a national drug epidemic.

Now, this was also a five-to-four decision. Justice Sandra Day O'Connor wrote one of the dissents, and she said the particular testing program upheld today is not reasonable. It is capricious, even perverse -- strong language, but the justices, by that five-to- four margin have expanded the drug testing potential in the schools -- Miles.

O'BRIEN: But Bob, just quickly, the reason they didn't expand it to the full student body is there is a presumption of less privacy among people engaged in extracurricular activities. Is that correct?

FRANKEN: Well as a matter of fact, the justices said you don't need a presumption of use. They just decided that since the policy they were addressing had to do with extracurricular activities. They would say that it is OK. Now you could probably extrapolate from this that if somebody presented a drug policy that involved all the students, by the same reasoning, the justices would probably go along.

O'BRIEN: Oh interesting. OK, Bob Franken at the Supreme Court for us. We appreciate that. In its next term, the Supreme Court may have to deal with another controversial school related case, this one involving, you guessed it, the Pledge of Allegiance.

As we reported earlier in this program, one of the judges who ruled that the pledge is in fact unconstitutional has just issued a stay of that ruling delaying enforcement of the ruling pending further appeals. And now there's also late word the Justice Department will ask the full 9th Circuit Court of Appeals to review the case. Despite yesterday's ruling that the pledge and its reference to God undermine religious freedom in this country, the pledge was recited at public schools all across the country today.

President Bush supports the pledge. He says it's time for the courts to understand that the rights of Americans are derived from God.

(BEGIN VIDEO CLIP)

BUSH: America is a nation that is -- a nation that values our relationship with an Almighty. A declaration of God and the Pledge of Allegiance doesn't violate rights. As a matter of fact, it's a confirmation of the fact that we received our rights from God as proclaimed in our Declaration of Independence.

(END VIDEO CLIP)

O'BRIEN: The full 9th Circuit Court of Appeals could overturn the ruling of the three-judge panel. If the ruling is -- and if it is upholding the ruling, the case would then go to the Supreme Court.

An exam given to more than a million high school students each year is about to change. The non-profit board that oversees the Scholastic Assessment Test, the SAT, today approved some major revisions.

CNN's Maria Hinojosa has the score.

(BEGIN VIDEOTAPE)

MARIA HINOJOSA, CNN CORRESPONDENT (voice-over): The biggest change for the SATs will be that the number two pencil used mostly to fill in dots, will now be used by students to write an essay, the first time college admissions officers will have access to work written by students without help from anyone.

BILL FITZSIMMONS, HARVARD UNIVERSITY: It's real. It's nothing that can be manipulated. It's something that a student will do entirely on his or her own.

HINOJOSA: Other changes -- verbal analogies will be dropped and so will be quantitative comparisons in math. More critical reading will be added, along with more difficult math including Algebra II.

Outside the College Board, student protesters from NoMoreTests.com pushed to get rid of the SATs altogether. JOSHUA FISHER, NOMORETESTS.COM: I thought the test was boring and it caused a lot of unnecessary stress. I actually did well because my parents were able to afford a test prep for me.

HINOJOSA: And critics said the changes did not go far enough.

BOB SCHAEFER, FAIR TEST: The causes of this reform, the number of colleges were dropping the test because of the SAT's inaccuracy, its biases and its susceptibility of the coaching. The College Board hasn't addressed any of those in the changes. In fact, they're going to make some of those even worse.

HINOJOSA: The SAT changes were spurred on in part by a threat from the University of California system over a year ago to drop the SATs because they didn't capture how and what students learn in class. And to the charge of bias, the College Board says that the test in and of themselves aren't the problem.

PROF. PATRICK HAYASHI, UCLA: The difference between fairness in a test and fairness in an education system, there is an unequal education system in America and one that we at the College Board are dedicated to doing all we can to change that unfairness.

(END VIDEOTAPE)

HINOJOSA: And Miles, for all those students looking forward to this new SAT test, well they'll have to wait. The first one will be administered in March of 2005 -- Miles.

O'BRIEN: Well Maria, analogies are to students as fingernails are to blackboards, undoubtedly. But an essay test, that's not easy. And surely that's going to be a lot harder to score, and more subjective.

HINOJOSA: Well that's true, but they are going to have several experts, professional readers going over the tests. And they say that what they're going to be looking for is grammatics, punctuation, and having a clear flow-through of thought in the essay, not about the essay topic.

O'BRIEN: All right, you don't get to bring your spellchecker into that test, do you?

HINOJOSA: That's right.

O'BRIEN: All right Maria Hinojosa, thanks very much, appreciate it. Some new questions about a potential suspect in the disappearance of Elizabeth Smart. The answers may in fact be in his car.

And could Martha Stewart's PR disaster have been averted? We'll ask a crisis management expert just ahead.

But first, the news quiz.

Here's a sample question from the October 1996 SAT, one of those analogy questions. Song is to repertoire as score is to melody, instrument is to artist, solo is to chorus, benediction is to church, suit is to wardrobe. The answer coming up.

(COMMERCIAL BREAK)

BLITZER: Welcome back. I'm Wolf Blitzer in Jerusalem.

Israel, as you probably know, has many ground zeros. I'll take you to one of them. I was there earlier today. We'll get a special, up-close look.

But first, once again, Miles O'Brien in Atlanta.

O'BRIEN: Thank you very much Wolf Blitzer.

There are some potentially new significance (sic) today in the search for missing Utah teenager Elizabeth Smart. Investigators are now focusing on a car belonging to a handyman who once worked for the Smart family.

CNN's Ed Lavandera is live in Salt Lake City with more on that -- Ed.

ED LAVANDERA, CNN CORRESPONDENT: Hi Miles.

Well, the second day of the federal grand jury here in Salt Lake City continue to questioning (sic) people today. We understand that Richard Ricci's neighbor, who lives in the trailer park community just on the southern edges of Salt Lake City, was before the grand jury answering questions.

What police are trying to do is firm up everybody's story as to what might have been around June 5, when Elizabeth Smart was abducted. They're hoping to get everyone's story on the record so if anyone starts changing that story, they'll be able to come back to them and hold this testimony against them.

Now, the car you're talking about is, sources are telling CNN that one of the cars that police have been looking into -- trying to create this timeline as to what Richard Ricci was doing -- was the Jeep Cherokee car that was given to Ricci by the Smart family for payment -- for work that he had done on the house.

Now the police are trying to put together a timeline as to what he was doing between May 31 and June 8 of this year. And the reason they're doing that, sources tell CNN, is because for a period of time that Jeep Cherokee was taken to an auto shop for repair work. But when the car was returned it came back with 1,000 more miles than it originally had when it was brought in, on the odometer.

So tests are now being done, we understand, to try to figure out where that car might have gone and how all of those miles were put onto that car. That's something that continues to happen.

But despite all of this, Ricci's family maintains that he was at home the night of the abduction of Elizabeth Smart, and that he is not the man police are looking for.

(BEGIN VIDEO CLIP)

DAVID MORSE, RICCI'S FATHER-IN-LAW: What I've seen, and the way he's lived, and we've lived, I don't think he had anything to do with it.

UNIDENTIFIED FEMALE: Yes, he couldn't have.

MORSE: And I know they have to find Elizabeth, but they sure ruined a couple lives here, I'll tell you that from what's happened.

UNIDENTIFIED FEMALE: They sure messed us up.

(END VIDEO CLIP)

LAVANDERA: The Smart family continues with their search. They say that they have not given up hope. They continue to thank all of the people who have been doing so much legwork out in the hills and the mountains of Utah, trying to put together individual search teams as they continue the search for Elizabeth Smart.

And the Smart family realizes that as more time goes on, the odds are against them in trying to find Elizabeth Smart safe and sound. But they're holding out for a miracle at this point.

(BEGIN VIDEO CLIP)

DAVID SMART, ELIZABETH'S UNCLE: You know, when it comes to the odds and the statistics out there, we're fully aware of those. But we are, I think, as a nation, and the e-mails we've been getting, the hugs that we've been getting from people and the prayers that are going out for a miracle to happen -- miracles happen every day. And it's how we view those miracles.

And we believe that Elizabeth is out there.

(END VIDEO CLIP)

LAVANDERA: Now one final note about Richard Ricci. Some items that were -- we found out that the reason he was picked up for parole violations on June 14 and arrested was because some items that belonged to the Smart family turned up in Ricci's home. Apparently he has admitted to police that some of those -- he had taken some of those items last year when he was doing work at the house.

Miles, Back to you.

O'BRIEN: CNN's Ed Lavandera in Salt Lake City, thank you very much.

Well, For Martha Stewart it has been very much a bad thing. Faced with a swirling controversy over possible insider trading, what is the doyen of domesticity to do?

Well, for some answers, we turn to Frank Mankiewicz, the vice chairman of Hill & Knowlton, the country's largest PRESS: agency.

Mr. Mankiewicz, good to see you, sir.

FRANK MANKIEWICZ, VICE CHAIRMAN, HILL & KNOWLTON: Thank you.

O'BRIEN: All right, is Martha Stewart getting a bum rap in the media? And if so, why?

MANKIEWICZ: Well, she may be getting a slightly bum wrap. She may be getting a little more publicity than the case might deserve...

O'BRIEN: Wait a minute, it's a little more than a little, don't you think? Don't you think there's a bit of a full-scale feeding frenzy on?

MANKIEWICZ: No, this a woman who's been hungry for publicity and media attention. That's part of her stock and trade. She...

O'BRIEN: So it's a two-edged sword, in other words? She...

MANKIEWICZ: She never shunned it before, and she should not be surprised that it's surrounding her now.

O'BRIEN: All right. But you do get the sense -- and some have said this publicly, perhaps including Martha; and I don't know if she said it this past week -- that there is some sexism at root here because she is, after all, a woman. A man who reaches such lofty stature -- being a CEO of a New York Stock Exchange-listed company is not referred to in the same manner as Martha Stewart has been.

Would you agree with that premise?

MANKIEWICZ: Oh no, not at all. I don't -- that's the first I've ever heard of it. I mean, the man in the case has been arrested and goes all the way.

No, I think -- you know, insider trading is a very, very serious matter, regarded by the government as such. And this is a serious case.

Her story is far from being vindicated. I think she has a problem here, which is that she's letting her story out day by day. She should be telling it all at once.

O'BRIEN: All right, let us be a fly on the wall in a hypothetical session here where she comes to you for advice Mr. Mankiewicz. What would you tell her to do in order to handle this crisis which surrounds her?

MANKIEWICZ: Well, I would tell her what we tell all of our clients in crisis situations, which is you must tell the truth, you must tell it all, and you must tell it now. Tell it all in one news cycle. Get it all out there, tell the whole story.

She believes that she'll be vindicated. She believes she's done nothing wrong, then she should tell the entire story: What happened when and to whom and how, and what were the contents of the conversations. She can't do that if her lawyers advise her, for whatever reason -- perhaps self-incrimination -- that she can't do that, then she's in a much more serious situation.

O'BRIEN: Well, but this goes back to that age-old disconnect between what the lawyers will tell you and what the likes of you will tell somebody. Lawyers will tell you to stonewall. The PR people will tell you to spill it.

So -- and generally speaking, people follow the lawyer's advice, for obvious reasons.

MANKIEWICZ: Well, we also have another piece of advice for our clients, which is never take public relations advice from your lawyers, and never take legal advice from your PR counsel.

O'BRIEN: But the two can be sort of mutually exclusive, and at odds.

MANKIEWICZ: Oh, they can indeed. They can, indeed. The lawyer's goal is, after all, to have the client emerge innocent. The PR person's goal is to have the client seem to be innocent in addition to being innocent.

And those are often two conflicting roles.

O'BRIEN: Let me ask you this: Next time Martha Stewart speaks, would you recommend she have a very sharp kitchen implement in her hand?

MANKIEWICZ: I would recommend that she avoid any association with her stock and trade when she talks. This is a serious matter. She shouldn't be turning pancakes or designing window coverings; she should be paying serious attention to her problem, and only to her problem.

O'BRIEN: And not the salad.

OK, Frank Mankiewicz, thank you very much. Frank Mankiewicz is with Hill & Knowlton. We appreciate your insight on crisis management for Martha Stewart.

Now let's send it back to Wolf Blitzer in Jerusalem --

BLITZER: Thank you Miles.

Terror victims can be found virtually everyplace here in Israel, but one town has become a particularly deadly flashpoint. I was there earlier today. I'll take you there when we come back.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

In the West Bank, hundreds of thousands of Palestinians are now under curfew as Israel consolidates its reoccupation of parts of the West Bank in the aftermath of that pair of suicide bombings here in Jerusalem last week.

Israeli attack helicopters fired missiles at the Palestinian Authority compound in Hebron, where a number of terrorist suspects are said to be holed up. The Israeli military says troops will overrun the complex if those inside don't come out.

An earlier wave of Palestinian suicide bombings reached a crescendo at the end of march in the Israeli coastal city of Netanya. There was that Passover Seder massacre; 29 Israelis were killed. That sparked the all-out Israeli military offensive that's been continuing in the West Bank ever since.

Earlier today I was in Netanya to get a close look at a town the Israelis call The Diamond City.

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(voice-over): The other face of Netanya, away from the nightmare images of the dozen attacks the city has faced over the past year and a half. These are the Netanya beach boys who have spent their whole lives on the sand.

UNIDENTIFIED MALE: Come to the beach. Enjoy the sun. Keep going. Keep going to the work. Everything. You do everything that you can. But, a little caution.

BLITZER: These beaches should be full as the high tourist season approaches, but the tourists are staying away. Not the locals.

UNIDENTIFIED MALE: The terrorists want the life will stop. We are doing the opposite.

BLITZER: Meet Marc Kahlberg, head of the tourist police in Netanya. A dream job? Not when the beach front has become the prime target for Palestinian suicide bombers.

And as dusk falls over the city, he briefs volunteers -- civilians who help out the police. The whole country has again been placed on the highest alert. The security services warn a suicide bomber is on his way. Netanyahu could be the target.

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BLITZER: Life goes on. Thirteen-year-old Natalie is celebrating her bat mitzvah. Her mother, Eliza (ph), is determined terror threats will not stop the celebration. How will the current situation shape her daughter's future?

UNIDENTIFIED FEMALE (through translator): We really don't know at the moment. We are living for the moment. This is the moment, from now to now.

BLITZER: Outside the hotel, where the teenagers dance, the heightened alert brings a surprise checkpoint. Two Palestinian gunmen opened fire on this road four months ago. The police aren't taking any chances. ANTHONY FELIX, POLICE VOLUNTEER: Terror isn't when something happens and people are involved and killed in this most horrendous way that we've been suffering. The real terror is what goes on in people's lives the whole of the time, because that's what terror is all about.

BLITZER: And it's about the roadblocks in the heart of the city.

FELIX: The people in the cars here have shown you great deal of patience and, indeed, pleasure at the visible level of security, because it makes them feel safer, seeing this defensive barrier that there is, protecting the hotel district in Netanya.

BLITZER: Most of the people in the city's Independent Square are probably unaware of the threat as they spend their evening outside in the cool. Some say Israelis are getting used to dealing with the consequences of suicide bombings.

MARC KAHLBERG, TOURIST POLICE CHIEF: I don't want to prepare myself anymore. I've seen enough carnage in the last three or four months. You can never forget this carnage. And we have to prevent them. Prevent them doing what they've been doing. Prevent the bloodshed, the swimming pool of blood in the Park hotel. We have to prevent that.

BLITZER: The Park Hotel attack in March is what the authorities blame for the absence of tourists in Netanya this year. April saw a 73 percent drop in tourists from 2001. And hotels are seeing half the number of Israelis they usually see.

UNIDENTIFIED MALE: We just pray that peace will come someday. And after the peace, that the tourists will come back again to Netanya.

BLITZER: Praying for new beginning, Ofir and Leyor (ph). Their wedding goes on without a hitch. But the owner of the wedding hall remembers the times when his hall was booked most days. Now he's lucky to get two bookings a week. How does he see the future?

KAHLBERG (through translator): It will be good. There will be peace, a good life. Security and only good.

BLITZER: Netanya sleeps. And alleged suicide bomber is intercepted by the security forces about 100 kilometers away. The sun rises over the West Bank, only 13 kilometers from Netanya. For many in this city, the Palestinian threat is continuous.

UNIDENTIFIED MALE: When you get the information that the guys have been caught and he hasn't succeeded, it's a feeling of joy. It's saving lives.

BLITZER: But nobody was celebrating in the streets of Netanya. Shops are closing and even the most successful are just hanging on. This diamond center has seen a 95 percent drop in sales. Still, the owner believes Israel will prevail.

ERIC MIMOUN, DIAMOND STORE OWNER: If it needs to take longer to help our government to do their good job, then we will wait.

BLITZER: In a city where serenity seems the natural backdrop, security is still the main consideration.

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BLITZER: And this note: Netanya has been struck by terrorists some 12 times since this most recent intifada began. More than 40 Israelis have been killed, more than 1,000 have been injured.

When we come back, Steve Fossett has some smooth sailing, but by no means is he home free in his quest to go around the globe in his balloon. Our "Picture of the Day" is just ahead.

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O'BRIEN: All right, it's gadget time. There are some cool gadgets and gizmos that have been catching the eye of technology fans in New York City this week. It's the final day of an expo showcasing the technology of the future -- some of it available right now, some of the beta testing-type stuff.

"Popular Science" technology editor Suzanne Kantra joins us with a look at what's up.

Suzanne, what's impressed you the most so far?

SUZANNE KANTRA, TECHNOLOGY EDITOR, "POPULAR SCIENCE": Well, as you can imagine, the desktops and laptops are not the most exciting products at the show.

But you have to admit that this Sony Clia (ph) is wonderfully eye-catching. Not only does it have a wonderful display, but it has a twist. It turns around and opens up to reveal a full keyboard. And this little device here, it is a digital camera, so you can take pictures. And it also has am MP3 player built right into it.

One of the other things that people are looking at is audio. And this device here -- you know, your sound card in your computer really was generated for those clicks and beeps, not for high-quality sound. This removes that to the outboard, so you can direct it to your stereo and get wonderful quality sound.

Video is also something that's very hot. Panasonic's multiDVD (ph) player is the next generation in DVD recording. And you'll be able to record video programs onto that and share it with your family and friends. This will also be incorporated into consumer electronic products later this year for about $600.

O'BRIEN: All right, I think we're going to have to leave it at that, unfortunately. Elizabeth (sic) Kantra with "Popular Science" taking a look at that show in New York, we appreciate it.

Just two minutes to weigh in our "Question of the Day": Do you think cyber terror attacks could be as devastating as a bomb?

Go to cnn.com/wolf and weigh in. The unscientific results when we return.

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O'BRIEN: This just in to CNN. In the investigation on the disappearance of Elizabeth Smart, the 14-year-old Salt Lake city girl. The father-in-law of Richard Ricci, the potential suspect in this case, the handyman who did work in and around the Smart household in Salt Lake City, has told CNN's Jeanne Meserve that among the items that were taken by authorities from the vehicle in question that Ricci used and received as a gift from Mr. Smart was a machete -- a machete -- and a baseball cap which apparently matches the description given by Elizabeth Smart's 9-year-old sister, who saw something on the night of her disappearance.

Once again, the source of this is Richard Ricci's father-in-law in an interview with CNN's Jeanne Meserve; he telling Jeanne Meserve the police removed a machete and a baseball cap from the vehicle operated by Richard Ricci.

We're following this story very closely, obviously, and we'll have more details for you as soon as they become available.

Now let's send it back to Wolf in Jerusalem.

BLITZER: Thank you very much Miles. And Miles also has our "Picture of the Day," which takes us halfway around the world.

O'BRIEN: Actually, it's now slightly more than halfway for balloonist Steve Fossett in his third quest to become the first person to circumnavigate the globe in a balloon all by his lonesome.

He's now floating about 20,000 feet above the South Atlantic, sucking on oxygen, homing in on Africa. His latest excellent adventure in what looks like a giant Jiffy Pop bag began in Australia a week ago Wednesday. But we doubt he is resting easy. During his first try four years ago a violent thunderstorm sent him into the Coral Sea just as he entered the home stretch.

And that's our "Picture of the Day."

Back to you Wolf.

BLITZER: Thank you very much Miles.

Let's take a look at how you're voting on our Web question of the day which, of course, is this -- earlier we asked: DO you think a cyber terror attack could be as devastating as a bomb?

Look at this: 56 percent of you say yes, 44 percent no.

This is not a scientific poll.

Let's get to some of your e-mails on the Pledge of Allegiance decision yesterday out in California.

Suzanne writes this: "Saying `God' while reciting the Pledge of Allegiance is not unconstitutional. American citizens have the right to free speech. They can choose whether or not to include God's name in the pledge. I hope this ruling will be overturned."

Elsa writes: "The fundamental constitutional provision for separation of church and state has been violated since 1954 when the phrase `under God' was added to the Pledge of Allegiance. I was delighted with the California court ruling."

Finally, Richard writes: "I believe that the pledge, with or without the words `under God' remains what it was intended to be: a pledge to the nation, not to religion."

OK, good views.

That's all the time we have today. I'll be back tomorrow, 5:00 p.m. Eastern. Once again, for Miles O'Brien, thanks very much for watching.

I'm Wolf Blitzer in Jerusalem. "LOU DOBBS MONEYLINE" begins right now.

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