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CNN Wolf Blitzer Reports

Martha Stewart Indicted

Aired June 04, 2003 - 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: WOLF BLITZER REPORTS starts right now.
(BEGIN VIDEOTAPE)

BLITZER (voice-over): The diva of design indicted.

JAMES COMEY, U.S. ATTORNEY: ...not because of who she is, but because of what she did.

BLITZER: Are they picking on Martha Stewart? There have been much bigger business scandals.

Intimate details of betrayal and pain in a marriage.

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: I touch on the good times, the not-so-good times.

BLITZER: Finally, Hillary Clinton's true feelings.

On the road to peace? A summit sets a new starting point.

UNIDENTIFIED MALE (through translator): (UNINTELLIGIBLE) and resort to peaceful means.

ARIEL SHARON, ISRAELI PRIME MINISTER: Thus, we will immediately begin to remove unauthorized outposts.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We will expect both parties to keep their promises.

BLITZER: Will this time be any different?

(END VIDEOTAPE)

ANNOUNCER: CNN live this hour, WOLF BLITZER REPORTS, live from the nation's capital with correspondents from around the world.

WOLF BLITZER REPORTS starts now.

BLITZER: It's Wednesday, June 4, 2003. Hello from Washington. I'm Wolf Blitzer reporting.

For Martha Stewart, it's been a year-and-a-half of hell and a year-and a-half of waiting. Today, the other shoe dropped and her nightmare is only just beginning. A double blow for Stewart, now facing criminal and civil charges, along with her stockbroker, stemming from allegations of insider trading.

CNN's Allan Chernoff is covering this story. He begins our coverage live from New York -- Allan.

ALLAN CHERNOFF, CNNfn CORRESPONDENT: Wolf, the investigation started way back in January of 2002, and, as you said, it has been going on for a year-and-a-half. Negotiations also between the parties, the government and Martha Stewart's attorneys.

Well, today, finally, Martha Stewart began her fight against the government.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): Martha Stewart arrived in court to face charges she and her stock broker engaged in a cover-up to hide the truth about her sale of ImClone stock.

COMEY: This criminal case is about lying. Lying to the FBI, lying to the SEC and lying to investors. That is conduct that will not be tolerated by any one. Martha Stewart is being prosecuted not because of who she is, but because of what she did.

CHERNOFF: The criminal charges include obstruction of justice, false statements and securities fraud.

In court, Stewart and broker Peter Bacanovic plead not guilty. Their lawyers are pledging to win at trial.

The Securities and Exchange Commission filed a separate civil charge against Stewart and her broker of securities fraud alleging illegal insider trading.

UNIDENTIFIED MALE: This is information that would be important to any investor. Martha Stewart had the information and Martha Stewart had no right to have the information or to trade on it.

CHERNOFF: In a written statement, Stewart's attorney said, "Martha Stewart has done nothing wrong. The government is making her the subject of a criminal test case."

Stewart was released without posting bond and left the court to squeeze through a mob of photographers.

(END VIDEOTAPE)

CHERNOFF: The charges facing Stewart carry a maximum penalty of 30 years in prison, plus fines of $2 million although, Wolf, we should point out, those are theoretical maximum numbers. Little chance, if Martha Stewart, in fact, is convicted, that she would have to serve any thing close to 30 years in prison. And, again, she and her attorneys are pledging to fight these charges -- Wolf.

BLITZER: Allan Chernoff outside the federal courthouse in New York City. Allan, thanks very much. Shares of Martha Stewart Living Omnimedia rallied today, gaining 48 cents, or more than 5 percent. They closed at $10 even, but still are down 47 percent from last year.

The drama surrounding Stewart is just the latest in a long line of high-profile cases involving some of the world's biggest businesses and most powerful people.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): By the standards of recent corporate scandals, at least if you're counting the money, Martha Stewart's mess is small time indeed.

JEFFREY TOOBIN, CNN LEGAL ANALYST: The amount of money that Martha Stewart saved by selling her stock on December 27, as opposed to December 28, was $47,000. This for a woman who for awhile was a billionaire.

BLITZER: Her sale of ImClone stock in 2001 netted Stewart about $225,000. Her shares in her company were once worth $1 billion, her representative has said. Now they're worth $300 million.

But take a look at how it compares with other corporate scandals, and there are consequences.

Enron, once ranked the sixth largest energy company in the world. November 2001 -- the company admits overstating its earnings by several hundred million dollars. The bankruptcy that follows cost thousands of people their jobs and life savings. Its chairman, Kenneth Lay, and president, Jeffrey Skilling, as of today, still not indicted. The fall guy, Chief Financial Officer Andrew Fastow, charged by the federal government with more than 100 counts of fraud.

WorldCom, a communications giant, at one time handled about half the world's Internet traffic, a third of all e-mail. June last year, WorldCom reports a so-called accounting irregularity that would later total more than $11 billion. WorldCom, employer of 80,000 people, becomes the largest corporate bankruptcy in U.S. history. Former WorldCom CEO Bernard Ebbers, as of today, not indicted. His former chief financial officer, Scott Sullivan, charged with several counts of securities fraud.

Tyco, maker of medical supplies, fire detectors and undersea cables. Former CEO Dennis Kozlowski accused of living extravagantly on the company's dime. Kozlowski and two others charged with theft and securities fraud to the tune of about $600 million. He could get 25 years if convicted.

Martha Stewart's numbers, not in their ballpark. Her public image, out of their league.

KEVIN DONOVAN. FBI: This isn't about celebrity. It's about accountability.

(END VIDEOTAPE) BLITZER: And joining us now for some more insight into the case against Martha Stewart, our legal analyst Jeffrey Toobin, who interviewed Martha Stewart in January for "New Yorker" magazine.

What -- were you surprised by the extend of these charges today, Jeff?

TOOBIN: Well, I was actually surprised by what was there and what wasn't there.

I mean, what wasn't there was an insider trading criminal charge. That was the real basis of this case. She is not charged with insider trading. She's charged with obstruction of justice, and that was expected. But there was also an unexpected charge there of securities fraud conspiracy that by saying to the public she was innocent of these charges, she was defrauding the public by artificially propping up her stock price. I've never heard of a criminal charge like that, and I think that's likely to be heavily challenged, even before the case gets to the jury.

BLITZER: So is this an evidence that the cover-up is almost always worse than the actual crime in these white collar kind of allegations?

TOOBIN: You know, Wolf, that's the rule in Washington, and it's certainly further proof of it here.

If she's convicted of anything, it will be entirely based on what she said after the allegedly wrong conduct took place. It's all about obstruction, and there's an important new disclosure in the indictment, at least a new claim that she altered documents, that she altered a telephone message slip potentially very damaging because it's one thing to testify falsely, bad enough. But to alter evidence, that could sour her case before the jury. That's for sure.

BLITZER: You have to believe the U.S. attorney for the southern district of New York would have charge her with insider trading if he had the goods, but apparently he didn't. That's the only explanation you come away from this indictment with.

TOOBIN: He didn't.

And also, another very unusual thing about this case is that the civil charges from the SEC do include insider trading. So apparently the government concluded that they can meet a probable cause standard, a, you know, 50 percent more probable-than-not standard on insider trading. But they can't prove it beyond a reasonable doubt.

Government doesn't usually work that way. They're allowed to, but it's another unusual thing about this case.

BLITZER: You're one of the few journalists that's actually spoken to Martha Stewart since this story broke a year-and-a-half ago. Go into her mind if you can a little bit and speculate what is going through her mind. TOOBIN: I think she is so outraged about this. I mean, the idea -- she just frankly, I think, didn't take it seriously at first. She has such an enormous empire where millions of dollars and billions of dollars are the usual currency that she's talking about.

Here a small stock trade by her standards, something that she did on the airport, while she was going on vacation to Mexico. She didn't apparently think that much about it. And now it is haunting her and haunting her, and her life will never be the same, win or lose, at this point. I think she finds it maddening.

And also just one more thing. You know, she finds it incredible and very hurtful that she's been such a figure of fun for so many people. The idea that she's sort of a person people are enjoying watching suffering. That's something that hurts her a lot and is surprising to many people, but it's certainly true.

BLITZER: Jeffrey Toobin, our legal analyst, thanks for the good work, as usual.

When we come back, peace talks, promises and protests: President Bush in the Middle East pressure cooker. Will this historic summit make any real difference?

Also, proof or propaganda? The Pentagon comes under increasing fire over weapons of mass destruction.

Plus -- Hillary Rodham Clinton tells all. Hear what she told her husband after he confessed.

First, today's news quiz. Who received the biggest book advance for nonfiction in history? Bill Clinton, Hillary Rodham Clinton, Pope John Paul II, Richard Nixon? The answer coming up.

(COMMERCIAL BREAK)

BLITZER: President Bush at this hour is in Qatar, tomorrow will meet with U.S. troops and their commanders at coalition headquarters, just outside the capital of Doha. Earlier, an historic making summit hosted by Jordan. The president met with the Israeli and Palestinian prime ministers, and won their pledges to start following up on the U.S.-backed road map for peace. Our CNN White House correspondent John King reports now from the Aqaba summit.

(BEGIN VIDEOTAPE)

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT (voice-over): Dramatic first steps toward reviving the Israeli-Palestinian peace process. And the president voiced hope this time it will reach the end of the road.

BUSH: All here today now share a goal. The holy land must be shared between the state of Palestine and the state of Israel.

KING: Both the Israeli and Palestinian prime ministers embraced the president's so-called road map for peace and pledged at this summit to meet its immediate test. Prime Minister Sharon's promises include quickly dismantling settlements built since March 2001 and support for a provisional Palestinian state, which would require a significant Israeli military pullback. But he also made clear his skepticism.

SHARON: There can be no peace, however, without the abandonment and elimination of terrorism, violence and incitement.

KING: Palestinian Prime Minister Abbas promised aggressive efforts to end violence against Israelis and urged militants to lay down their arms and renounce violence.

MAHMOUD ABBAS, PALESTINIAN PRIME MINISTER (through translator): We will accept all of our efforts using all our resources to end the militarization of the intifadah, and we will succeed.

KING: Summits are carefully scripted, though not every handshake is picture perfect. Mr. Bush hopes the summit lifts Mr. Abbas' standing back home, and the White House wants help from Jordan's King Abdullah and other Arab leaders in making the case, Mr. Abbas, not Yasser Arafat, is the man who can deliver a Palestinian state.

All on hand in Jordan know the more difficult road map challenges comes later. An Israeli pullback to September 2000 lines, more Palestinian political and security reforms, and an independent Palestine by 2005. Mr. Bush will send a new Mideast envoy immediately and says National Security Adviser Condoleezza Rice will be his personal representative in the peace process.

BUSH: And we expect both parties to keep their promises.

KING: Keeping those promises will require a trust not evident when the summit began, when the two prime ministers refused a request to shake hands. But there was a quick handshake later, and it had been two and a half years since the United States was in the middle of Middle East peacekeeping. So the president left convinced peace is a possibility.

(on camera): Upbeat after the summit talks, the president told reporters he believes there's an opening for peace now because both sides are "sick and tired of death." But the president also said it is critical that the Israelis and Palestinians deliver on their summit promises within days. Or, as Mr. Bush put it, "the trust is going to come from performance."

John King, CNN, Aqaba, Jordan.

(END VIDEOTAPE)

BLITZER: Both the Israeli and Palestinian prime ministers face enormous challenges at home. The militant Islamic group Hamas immediately rejected the call to end the armed intifadah against Israel. Hamas vowed war if the Palestinian Authority moves to disarm it, but did not rule out the possibility of a cease-fire. The Islamic Jihad group said it would also continue what it called "military action." Meantime, tens of thousands of Jewish settlers have rallied in Jerusalem, calling the summit, and I'm quoting now, "a humiliating surrender to Palestinian terror." Security has reportedly been tightened around Prime Minister Sharon over possible threats from fringe groups. And Israeli authorities are said to be concerned extremists could use weapons in resisting the evacuation of settlement outposts.

With protests and promises on both sides, does the Middle East peace plan have a chance this time around? We'll have a debate when we return.

Also -- Hillary on Bill, Monica and right-wing conspiracies. Revelations from her new book on life at the White House.

And more on Martha's big mess, indicted on criminal charges. Is she getting a bad rap? We'll take a much closer look at the rise and fall of the queen of clean. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

Hillary Clinton tells all. Revelations from her new book on life inside the White House after Monica. We'll talk to a close adviser, Ann Lewis. That's coming up.

But first, while the Israeli and Palestinian leaders have promised to follow the paths to peace set out in the U.S.-backed road map, can they actually keep their promises? Both have renounced violence and affirmed the right of the other side to statehood. But Palestinian Prime Minister Mahmoud Abbas must work to disarm terror cells and end their attacks. And Israel's Ariel Sharon is obligated to dismantle settlement outposts and freeze all settlement construction. All of this and much more must happen to meet the goal of creating a Palestinian state by 2005.

Earlier peace efforts have failed to bridge the gap between the Israelis and the Palestinians from dismantling settlements to cracking down on terror. Can they make it work this time?

Joining me now from New York, Mort Zuckerman. He's editor-in- chief of "U.S. News and World Report." He's also the chairman of the Conference of Presidents of Major American Jewish Organizations.

Here in Washington, Jean AbiNader. He's managing director of the Arab American Institute.

Thanks to both of you for joining us. Mort, let me begin with you. Do you think that there's a real chance for peace right now?

MORT ZUCKERMAN, CONF. OF PRESIDENTS OF MAJ. AMERICAN JEWISH ORGS.: Well, there certainly is a chance for peace, but what we've had to date is basically rhetoric; rhetoric on the part of Abu Mazen, the prime minister-select of the Palestinian community. But he has a limited amount of power. Maybe 15 percent of the security forces will be reporting to him; 85 percent still report to Arafat, who still basically has control of the situation.

There have been no arrests of any terrorists. There has been no disarmament, no collection of arms and on the Israeli side the prime minister announced he's going to dismantle the settlement outposts that have been built since September of 2000. That has not yet happened. So it's all rhetoric at this point.

But having ....

BLITZER: All right.

ZUCKERMAN: ....said that, there are some basic changes in the region that should help.

It is the first time that the Arab leadership in Jordan and Egypt and Saudi Arabia have really spoken out this way on terror and violence. It is the first time that the...

BLITZER: All right. Let me interrupt, Mort, for a second.

I wanted Jean to respond to the first points you made that Mahmoud Abbas is not yet delivering. What about that, Jean?

JEAN ABINADER, ARAB AMERICAN INSTITUTE: I think the president and Ariel Sharon recognize that Abbas has a real hill -- actually a mountain to climb here. That's why they addressed so much the importance of reinvigorating the security services, giving him more power and Israel taking very concrete steps to improve the humanitarian condition of the Palestinians.

So what we've got to do is really commit to strengthening his hands, strengthening the security services he does control and marginalizing Arafat in a way that's non-confrontational. I think trying to put our finger in his eye is just going to make it worse. We should just not talk about him and go ahead and work with the Palestinians who want to work with us.

BLITZER: Mort, that sound reasonable.

ZUCKERMAN: No, I actually agree with every thing he said. As he also said though, it's a mountain to climb.

Arafat, like most leaders in that part of the world, has no intention of just lying down and going away. He has spent 35 years leading the PLO. I don't think he wants Abu Mazen to be the person to bring about statehood. So he has been working very hard against Abu Mazen.

And I agree that we should ignore Arafat, but all of the European foreign ministers, including the French foreign minister, are making a point of visiting him. And the Egyptian foreign minister basically said the same thing. So I don't know if we are going to be able to marginalize him. I think it's critical that we do.

BLITZER: What about that, Jean?

ABINADER: I think we can do it. I think the Europeans are committed to this.

I think the reality is just as the president has built a consensus bringing on, as Mort said, the Arab leaders to help work with this, which is a first and really critically important, I think now it's Powell's job to go to Europe and say, OK, this is your road map, to -- and it is their road map too -- and we've got to work on this together.

And I think you're going to find the Europeans very helpful in this regard. They do not like being kept out of this process. And I think by bringing them into it, by giving them a role here, we can actually use them to help bring leverage in the Palestinian situation that we don't have right now.

BLITZER: Mort, you know Ariel Sharon quite well. Do you believe in the coming days, we'll see Israeli soldiers by force removing Jewish settlers from what he called illegal outposts on the West Bank?

ZUCKERMAN: Yes, I do know him. I know what he intends to try and accomplish. I do believe he will do that. I would just point out to you that when there was a settlement with Egypt, he led the Israeli forces that forced out settlers in a community called the Amet. There were 3,000 families -- Jewish families there. He forced them all out because that was a part of the agreement.

He knows what has to be done. He's willing to do it. If he has a partner on the other side, I think he will astonish the world. I've had many conversations with him and I know what he's committed to, but he really does need a partner for the other side and for that, as we have said earlier, we have to marginalize and weaken Arafat and strengthen Abu Mazen. This is one step in that process.

BLITZER: Jean, do you have confidence Sharon will do?

ABINADER: Yes, I think Sharon is a survivor. He understands that the most important thing now is creating conditions for Israel's survival and that they can't turn this into an apartheid situation, vis-a-vis the Palestinians. He's said that very clearly.

And -- but we'll know by his actions, not by his intentions, not by his words, but by his actions. He calls them illegal settlements, Israel supporters in this country have a problem with that. But he's the guy that has to bring about his decision in Israel, and I think he's capable of doing it, if he really wants to.

BLITZER: A final question to both of you.

U.S. policy, Mort -- the president said that John Wolf, a career diplomat and ambassador is going to be left behind to do the day-to- day work. That doesn't sound very robust. It's not the kind of special envoy that you really need in that part of the world.

ZUCKERMAN: No, but he said some thing else. He also said that Condi Rice is going to be his principal interlocketter on this issue, and Condi Rice is clearly some body who has the president's ear and the president's confidence and I believe she knows this issue well enough to be able to guide whoever it is on the ground.

It is important that there be some body on the ground to make sure that both parties live up to their commitment. So I think that this is a very positive step forward, that she'll be the key player.

BLITZER: Jean, I'll give you the last word, but briefly.

ABINADER: I think it's key. The United States, this is the first time we're going to have a presence on the ground holding both parties' feet to the fire. I think it's essential and I think it's the right step that the president made and sends a strong message to both parties.

BLITZER: All right, Jean AbiNader, Mort Zuckerman, good discussion. Thanks to both of you. Let's hope this peace process does, indeed, get off the ground. Appreciate it very much.

Love or hate her, Hillary Rodham Clinton is telling all. Is she considering a run for the White House down the road? Revealing details on her life in and out of the White House. Hear what she said to Bill Clinton after finding out about Monica.

Plus, feet to the fire over weapons of mass destruction. Was the world misled to justify the war? Tony Blair and the Pentagon answer back.

And Martha Stewart hits her boiling point. The queen of clean indicted. But does the government have a case?

That, much more in the next half hour. Stay with us.

(COMMERCIAL BREAK)

ANNOUNCER: CNN live this hour. WOLF BLITZER REPORTS. Correspondents from around the world. Here now is Wolf Blitzer.

Welcome back to CNN. Hillary Rodham Clinton's tell-all book. Hear her side of the story on love, life, Bill Clinton and politics.

First, the latest headlines.

(NEWS BREAK)

Hillary Rodham Clinton says her husband's relationship with Monica Lewinsky caused her so much pain that at one time she wanted to ring his neck. She minces few words about the sex scandal in her new book "Living History" which goes on sale Monday. When the former president finally told her the truth about the affair the week before he testified about it before a grand jury.

Senator Clinton writes, and now I am quoting, "I could hardly breathe. Gulping for air, I started crying and yelling at him. What do you mean? What are you saying? Why did you lie to me? I was furious and getting more so by the second. He just stood there saying over and over again, I'm sorry. I'm sorry. I was trying to protect you and Chelsea. I was dumbfounded," she continues, "heartbroken and outraged that I'd believed him at all. As a wife, I wanted to ring Bill's neck." Today Mrs. Clinton explained why she hopes people will read her new book.

(BEGIN VIDEO CLIP)

CLINTON: I think it will give people more insight and perhaps answer questions. But it's also my story. And obviously I'll be pleased when the book is available and people can judge for themselves.

(END VIDEO CLIP)

BLITZER: Joining me with some special insight into all of this, Ann Lewis, former counselor to President Clinton, now the chairwoman of the Democratic National Committee. A good friend of both of the Clintons.

Ann, thanks very much for joining us.

Why is she telling us all of these details now?

ANN LEWIS, FORMER COUNSELOR TO PRES. CLINTON: I think Hillary Clinton had this great experience, this privilege of being first lady of the United States. Living in the White House for eight years, getting to work on issues she's cared about all her life. She's been an advocate for children. They were able to make great steps on children's health. She could be a voice for women around the world. She wanted to tell that story as other first ladies have done. And she realized she couldn't tell just the high spots. She couldn't tell just the great moments without also talking about the difficult times. And that's what she's done.

BLITZER: Her critics say it took $8 million, the advance for her book for her finally to come clean and tell the American public how she really felt betrayed.

LEWIS: I thin, if you listen to the critics, they've been criticizing Hillary for years. First they complaining that she didn't talk. Now, then they're saying, well, she did because it's in a book contract. There are some people who only want to oppose, only want to criticize. We have heard from the for years. Now for the first time we're going to hear Hillary Clinton talking in her own voice, telling her story and it's a great and powerful story.

BLITZER: Here's another quote from the book, the book "Living History," out next week. "The most difficult decisions I have made in my life were to stay married to Bill and to run for the Senate from New York."

Why do you believe she stayed married to this guy?

LEWIS: I think people will have to read the book and see for themselves. This is a marriage, this is a couple, this is a woman who has been talked about by so many people for so long. Now in her own words, in her own voice, she's going to tell that story for herself. BLITZER: Another quote from the book, "For me the Lewinsky embroil, seemed like just another vicious scandal manufacture by political opponents." She blamed a right wing conspiracy for all of this. In the book she obviously comes clean. There was no right wing conspiracy. The president did have an affair with this White House intern.

LEWIS: Which was a very private matter that should have been between husband and wife. And instead it was seized on by political opponents, of both of the Clintons by the way, who had never been able to defeat them politically, who couldn't win against their policies, because they were moving this country in the right direction. So instead they tried to use the politics of personal destruction.

BLITZER: Even when he came clean with his wife, he apparently wasn't telling her everything. Here is another quote from the book, 'He now realized he'd have to testify that there had been an inappropriate intimacy. He told me that what happened between them had been brief and sporadic." But in the real world, of course, it had gone on for months and months and months this relationship between the president and Monica.

LEWIS: You know, again, this was a personal matter that should have been worked out between them. It did get work out between them. But what happened instead is for political reasons, people seized on it, because they didn't want to talk about the issues. They prosperity we were having in the Clinton years. They didn't want to talk about the progress. They didn't about going in the right direction. They were trying to use this to overturn the presidency.

BLITZER: Ann Lewis, unfortunately we've got to leave it there. But all of use will awaiting the entire book to get the full sense, other than these quotes which the Associated Press managed to dig up.

LEWIS: So, will I.

BLITZER: Thanks very much.

Here's your turn to weigh in on this story. Our web question is this, "Should Senator Hillary Rodham Clinton run for president? "

We'll have the results later in this broadcast. You can vote. Go to cnn.com/wolf.

While you're there, I'd like to hear from you. Send me your comments. I'll try to read some at the end of the program. That's also where you can read my daily online column, cnn.com/wolf.

Weeks after the war and still no weapons of mass destruction. British and Spanish leaders now under fire. Now pressure mounting on President Bush as well.

Plus, is Martha Stewart the victim of a double standard?

We'll have more on that. First, the answer to today's news quiz. Earlier we asked, "Who received the biggest book advance for nonfiction in history?" The answer, President Bill Clinton. He landed a cool $10 million for the rights to his autobiography.

(COMMERCIAL BREAK)

BLITZER: British Prime Minister Tony Blair, under fire at home for his role in the Iraq war, says he'll work with the parliamentary probe into the matter. The prime minister's accused of exaggerating intelligence reports on Iraq's weapons of mass destruction and of secretly agreeing with President Bush to go to war. Today the war of words erupted between the prime minister and one of his harshest critic in the opposition conservative party.

(BEGIN VIDEO CLIP)

TONY BLAIR, BRITISH PRIME MINISTER: In the end there have been many claims made about the Iraq conflict, that hundreds of thousands of people were going to die that it was going to be my Vietnam, that the Middle East was going to be in flames. And this latest one, the weapons of mass destruction were a complete invention by the British government.

The truth is, some people resent the fact it was right to go to conflict. We won the conflict, thanks to the magnificent contribution of the British troops. And Iraq is now free and we should be proud of that.

IAIN DUNCAN SMITH, CONSERVATIVE PARTY LEADER: The truth is, nobody -- nobody believes a word now that the prime minister is saying. That's the truth.

(END VIDEO CLIP)

BLITZER: They have lively politics the House of Commons.

The Spanish Prime Minister Jose Maria Aznar's also feeling the heat from the controversy over Iraq's weapons of mass destruction. The opposition socialist party is calling on the prime minister to explain to parliament what happened to Iraq's banned weapons which still haven't been uncovered. A spokesman says the prime minister could hold off on appearing before parliament or reject the request altogether. Spain, of course, was a strong supporter of the U.S. and the British position on Iraq.

Just like his allies in Britain and Spain, President Bush is being hard-pressed to explain what happened to Iraq's weapons of mass destruction. CNN national security correspondent David Ensor has the latest reaction from Capitol Hill and from inside the Bush administration.

(BEGIN VIDEOTAPE)

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): The simple fact that eight weeks into the occupation of Iraq, U.S. forces still have not found any of the weapons of mass destruction that American intelligence predicted were there, is raising the political pressure on the administration almost daily.

REP. JOSEPH HOEFFEL (D), PENNSYLVANIA: Like millions of Americans, I'm wondering where the hell the weapons of mass destruction are.

REP. ELIOT ENGEL (D), NEW YORK: I'm deeply concerned about reports that the administration twisted the arms of our intelligence analysts to produce analysis which agree with the policies that you wanted to pursue.

JOHN BOLTON, UNDER SECRETARY OF STATE: I personally never asked anybody in the intelligence community to change a single thing that they presented. And I am not aware of any other official in this administration who did that.

ENSOR: Under Secretary of State John Bolten said finding weapons of mass destruction may take time.

BOLTON: The finding of the weapons, the production means, will occur in due course. If this stuff had just been lying around on the ground, UNMOVIC would have found it.

ENSOR: But critics suspect a conspiracy to justify the war. Some dissident former CIA officers say Pentagon hawks took hearsay from Iraqi defectors around exile leader Ahmed Chalabi and presented it to the president as fact.

RAY MCGOVERN, FORMER CIA OFFICER: When Rumsfeld couldn't get the answers that he wanted from the Central Intelligence Agency, he created his own mini-CIA in the bowels of the Pentagon.

ENSOR: At the Pentagon officials held a special briefing Wednesday to respond to that charge, saying a small special plans office did analyze but never collected intelligence, and never twisted arms.

DOUGLAS FEITH, UNDER SECRETARY OF DEFENSE: See, this suggestion that we said to them, this is what we're looking for, go find it, is precisely the inaccuracy that we are here to rebut.

ENSOR: At the CIA officials say an internal review is looking at whether an October classified report, saying Iraq had chemical and biological weapons and was seeking to reconstitute its nuclear program, was based on solid intelligence.

(on camera): But the real answer to that question will await the work of the 1,400-plus member Iraq Survey Group now assembling in Baghdad. And including Australians and Britons as well as Americans, U.S. intelligence officials say they still believe that that group will find, at a minimum, Iraqi chemical weapons unaccounted for since the end of the first Gulf War.

David Ensor, CNN, Washington.

(END VIDEOTAPE)

BLITZER: Would Martha Stewart's case play differently, let's say, if she were a man? Is there a double standard at play right now? We'll talk about that immediately when we come back.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): Iran warns the United States. Supreme leader Ayatollah Ali Khomeini is warning the Bush administration that an attack on Iran would be committing suicide. This follows warnings from the U.S. and the other G-8 members that Iran and North Korea won't be allowed to develop nuclear weapons.

Deadly train crash in Spain. A passenger train collided head-on with a freight train, killing at least 19 people. Dozens of others were injured. It happened about 155 miles southeast of Madrid. Officials say the accident may have been caused by human error.

Killer heat wave. No let-up in large parts of India, where a three-week heat wave has killed more than 1,200 people. The heat has also sparked forest fires across the lower Himalayas claiming at least seven lives since Monday.

Saving Venice. The Italian government is going ahead with a hotly debated $3 to $4 billion plan aimed at saving Venice from floodwaters of the Adriatic Sea. It's centerpiece is a series of 79 massive steal gates that would rise automatically as sea water is expected to enter the lagoon surrounding the city.

Big man versus Coke. Chinese media report NBA star Yao Ming has won the right to have his lawsuit against Coca-Cola heard in a Shanghai court. The 7'6" Chinese native, who plays for the Houston Rockets, is suing Coke for using his image in China without his permission.

Surf's up. A 20-year-old Brazilian set a world record for surfing for 34 minutes and 8 seconds in the Amazon's River Surfing Championship.

And that's our look "Around the World."

(COMMERCIAL BREAK)

BLITZER: This is a story just coming in to CNN here. An F-15 Eagle from the Seymour Johnson Air Force Base in North Carolina, that's about 15 miles outside of Raleigh, has gone down. Reports say both pilots have ejected safely, though one of them, according to the Associated Press, has landed in a tree.

There are no reports of any injuries on the ground. Authorities say they have made contact with one of the pilots. You're looking at the smoke that followed the crash of this F-15 Eagle at Seymour Johnson Air Force Base. We'll continue to check out this story. You're now looking at live pictures of the scene. We'll get more on the details, bring them to you as they become available. We're also getting another story now in from our senior Pentagon correspondent, Jamie McIntyre. He's reporting that the superintendent of the U.S. Naval Academy in Annapolis, Maryland is stepping down. Vice Admiral Richard Naughton was accused of improper conduct after an allegedly aggressive encounter with a sentry. There also reportedly are investigations of other allegedly aggressive confrontations that academy staff and faculty had with the vice admiral. Naughton has been academy superintendent for only a year. We'll continue to monitor that story as well.

But more now on our top story, the announcement of criminal and civil charges against Martha Stewart. Is she the victim of a double standard? Would the situation play the same for a man?

Joining me now to talk about it from Chicago, Jennifer Openshaw. She's the founder of the Women's Financial Network.

Jennifer, thanks very much for joining us.

I know you think that there's a double standard under way right now. Tell our viewers why.

JENNIFER OPENSHAW, WOMEN'S FINANCIAL NETWORK: Well, I don't think if his name was Mike Stewart that I would even be sitting here talking to you about this issue.

I mean, I think that she's getting so much attention in part because she's a woman, a woman who is a CEO of a company that built its brand around her and because we see her every day on television and so that's bringing so much attention to this whole matter, and we'll have to see, of course, what happens to this whole case as to whether or not she survives it and we continue to see her products and services available to the consumer.

BLITZER: But Jennifer, if Mike Stewart -- let's say there's a man who created this empire, was on television all the time, had a magazine, was incredibly visible, was either loved or hated, and was accused of doing this, you really don't think the SEC, the Justice Department, would come down on him?

OPENSHAW: Well, first, let me say I give the prosecutors the benefit of the doubt. I don't think they would be pursuing something if they didn't think they had something here.

But I think that, again, because she's a woman and a woman who has built a company that is around her as a brand, she's unique. And it's unique to the public, it's unique to the press and she's getting an enormous amount of publicity. And that publicity is certainly having an affect on her company because it depends on publicity, obviously, to keep it going and to build its market.

BLITZER: So you're basically are arguing there's a double standard when it comes to federal prosecutions against men and women. Is that what you're saying?

OPENSHAW: Well, again, I'm saying that man or woman, if some body has done something wrong, and they certainly should be prosecuted -- and, Wolf, my biggest issue here is that there have been issues that have gone on for decades on Wall Street and people have gotten away with a slap on the hand. I mean, nobody has gone to jail. The laws against spinning have not been passed, and my biggest concern is middle America, who is feeling the brunt of it on their retirements.

And so I think the system needs to change. I think that if Martha did something wrong, absolutely, she should be convicted, and she should be treated appropriately. But so should everybody else who has engaged in improper activities.

BLITZER: Well, as you heard, the indictments don't accuse her of insider trading, but they do accuse her of covering up, if you will, after the fact.

If she lied to authorities as part of their investigation, as they allege right now, she deserves to be punished, I assume.

OPENSHAW: I think if she has lied, yes, as would any body else.

I think it's really critical here for Martha, if she wants to keep her company continuing, that, of course, that she's vindicated. And if she is, I think that the public, in particularly women, because we see it in surveys, will be on her side. I think in the shorter term we're going to see an impact on advertisers who don't want to be involved in controversy. She's got a magazine. She's got media properties.

But I still think, Wolf, that when you look at her product, which is furniture and bath items that are now accessible to middle Americans in a tasteful and elegant matter, that's what people want. And I think that people trust her for her expertise in that area. And, again, if she can come through this and if she is vindicated, then I think she can continue serving the public in that area.

BLITZER: In the meantime, very briefly, now that she's been indicted, should she step down as chairman and CEO of her company?

OPENSHAW: The only reason I think that's a good idea, Wolf, is because I think she needs to really focus on what's ahead of her and I don't want to see so much attention on her company for her personality, but for what it is as a company that is products and services in the home decorating area.

BLITZER: Jennifer Openshaw, thanks for joining us.

OPENSHAW: Thank you so much.

BLITZER: And our hot "Web Question of the Day" is this: "Should Senator Hillary Rodham Clinton run for president?" You can vote now at cnn.com/wolf. We'll give you the results immediately when we come back.

(COMMERCIAL BREAK)

BLITZER: Now here's how you're weighing in on our "Web Question of the Day." Remember, we've been asking you this question: "Should Senator Hillary Rodham Clinton run for president?" Look at this: 63 percent of you say yes, 37 percent of you say no. You can find the exact vote tally, continue to vote, by the way, on our Web site, cnn.com/wolf. We'll leave that question up for a while. As always, we remind you this is not a scientific poll.

Let's get to some of your e-mail. We're getting flooded with e- mail on a lot of issues, especially Martha Stewart.

Baxter writes this: "Martha Stewart is fine, hard-working woman who built her company by herself. Martha is being set up by people whose main goal is to destroy every thing she has made and every thing she stands for."

J.R. totally agrees: "Martha is being indicted for possibly making $220,000 from insider trading? Come on. Is this for real, or is this the good ol' boy network getting even with an outspoken and successful woman?"

Julie sends us this: "Every one is equal in the eyes of the law, regardless of whether you are a celebrity or a regular person. Martha must face the same punishment for her actions that any one else would."

Finally, this clarification from a story we reported on yesterday. I recalled yesterday that when then U.S.-attorney in the southern district of New York Rudy Giuliani used to arrest some high- profile white collar criminal suspects, he often allowed photographers to take pictures of them in handcuffs during their so-called perp walks. I mentioned specifically the case of Michael Milken.

I'm now told, reminded by one of Milken's associates, that Michael Milken was never actually handcuffed. He eventually, of course, as you all know, did serve his time in prison, paid an enormous fine and he's now out. He's doing incredibly important work, incredibly important work for all sorts of causes. Michael Milken, just that correction.

You're now looking at these live pictures from that F-15 crash at -- outside the Seymour Johnson Air Force Base in North Carolina. And we're going to continue to monitor -- both pilots ejected. We'll get details coming up.

Lou Dobbs is standing by in New York for more coverage.

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 June 4, 2003 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: WOLF BLITZER REPORTS starts right now.
(BEGIN VIDEOTAPE)

BLITZER (voice-over): The diva of design indicted.

JAMES COMEY, U.S. ATTORNEY: ...not because of who she is, but because of what she did.

BLITZER: Are they picking on Martha Stewart? There have been much bigger business scandals.

Intimate details of betrayal and pain in a marriage.

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: I touch on the good times, the not-so-good times.

BLITZER: Finally, Hillary Clinton's true feelings.

On the road to peace? A summit sets a new starting point.

UNIDENTIFIED MALE (through translator): (UNINTELLIGIBLE) and resort to peaceful means.

ARIEL SHARON, ISRAELI PRIME MINISTER: Thus, we will immediately begin to remove unauthorized outposts.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We will expect both parties to keep their promises.

BLITZER: Will this time be any different?

(END VIDEOTAPE)

ANNOUNCER: CNN live this hour, WOLF BLITZER REPORTS, live from the nation's capital with correspondents from around the world.

WOLF BLITZER REPORTS starts now.

BLITZER: It's Wednesday, June 4, 2003. Hello from Washington. I'm Wolf Blitzer reporting.

For Martha Stewart, it's been a year-and-a-half of hell and a year-and a-half of waiting. Today, the other shoe dropped and her nightmare is only just beginning. A double blow for Stewart, now facing criminal and civil charges, along with her stockbroker, stemming from allegations of insider trading.

CNN's Allan Chernoff is covering this story. He begins our coverage live from New York -- Allan.

ALLAN CHERNOFF, CNNfn CORRESPONDENT: Wolf, the investigation started way back in January of 2002, and, as you said, it has been going on for a year-and-a-half. Negotiations also between the parties, the government and Martha Stewart's attorneys.

Well, today, finally, Martha Stewart began her fight against the government.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): Martha Stewart arrived in court to face charges she and her stock broker engaged in a cover-up to hide the truth about her sale of ImClone stock.

COMEY: This criminal case is about lying. Lying to the FBI, lying to the SEC and lying to investors. That is conduct that will not be tolerated by any one. Martha Stewart is being prosecuted not because of who she is, but because of what she did.

CHERNOFF: The criminal charges include obstruction of justice, false statements and securities fraud.

In court, Stewart and broker Peter Bacanovic plead not guilty. Their lawyers are pledging to win at trial.

The Securities and Exchange Commission filed a separate civil charge against Stewart and her broker of securities fraud alleging illegal insider trading.

UNIDENTIFIED MALE: This is information that would be important to any investor. Martha Stewart had the information and Martha Stewart had no right to have the information or to trade on it.

CHERNOFF: In a written statement, Stewart's attorney said, "Martha Stewart has done nothing wrong. The government is making her the subject of a criminal test case."

Stewart was released without posting bond and left the court to squeeze through a mob of photographers.

(END VIDEOTAPE)

CHERNOFF: The charges facing Stewart carry a maximum penalty of 30 years in prison, plus fines of $2 million although, Wolf, we should point out, those are theoretical maximum numbers. Little chance, if Martha Stewart, in fact, is convicted, that she would have to serve any thing close to 30 years in prison. And, again, she and her attorneys are pledging to fight these charges -- Wolf.

BLITZER: Allan Chernoff outside the federal courthouse in New York City. Allan, thanks very much. Shares of Martha Stewart Living Omnimedia rallied today, gaining 48 cents, or more than 5 percent. They closed at $10 even, but still are down 47 percent from last year.

The drama surrounding Stewart is just the latest in a long line of high-profile cases involving some of the world's biggest businesses and most powerful people.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): By the standards of recent corporate scandals, at least if you're counting the money, Martha Stewart's mess is small time indeed.

JEFFREY TOOBIN, CNN LEGAL ANALYST: The amount of money that Martha Stewart saved by selling her stock on December 27, as opposed to December 28, was $47,000. This for a woman who for awhile was a billionaire.

BLITZER: Her sale of ImClone stock in 2001 netted Stewart about $225,000. Her shares in her company were once worth $1 billion, her representative has said. Now they're worth $300 million.

But take a look at how it compares with other corporate scandals, and there are consequences.

Enron, once ranked the sixth largest energy company in the world. November 2001 -- the company admits overstating its earnings by several hundred million dollars. The bankruptcy that follows cost thousands of people their jobs and life savings. Its chairman, Kenneth Lay, and president, Jeffrey Skilling, as of today, still not indicted. The fall guy, Chief Financial Officer Andrew Fastow, charged by the federal government with more than 100 counts of fraud.

WorldCom, a communications giant, at one time handled about half the world's Internet traffic, a third of all e-mail. June last year, WorldCom reports a so-called accounting irregularity that would later total more than $11 billion. WorldCom, employer of 80,000 people, becomes the largest corporate bankruptcy in U.S. history. Former WorldCom CEO Bernard Ebbers, as of today, not indicted. His former chief financial officer, Scott Sullivan, charged with several counts of securities fraud.

Tyco, maker of medical supplies, fire detectors and undersea cables. Former CEO Dennis Kozlowski accused of living extravagantly on the company's dime. Kozlowski and two others charged with theft and securities fraud to the tune of about $600 million. He could get 25 years if convicted.

Martha Stewart's numbers, not in their ballpark. Her public image, out of their league.

KEVIN DONOVAN. FBI: This isn't about celebrity. It's about accountability.

(END VIDEOTAPE) BLITZER: And joining us now for some more insight into the case against Martha Stewart, our legal analyst Jeffrey Toobin, who interviewed Martha Stewart in January for "New Yorker" magazine.

What -- were you surprised by the extend of these charges today, Jeff?

TOOBIN: Well, I was actually surprised by what was there and what wasn't there.

I mean, what wasn't there was an insider trading criminal charge. That was the real basis of this case. She is not charged with insider trading. She's charged with obstruction of justice, and that was expected. But there was also an unexpected charge there of securities fraud conspiracy that by saying to the public she was innocent of these charges, she was defrauding the public by artificially propping up her stock price. I've never heard of a criminal charge like that, and I think that's likely to be heavily challenged, even before the case gets to the jury.

BLITZER: So is this an evidence that the cover-up is almost always worse than the actual crime in these white collar kind of allegations?

TOOBIN: You know, Wolf, that's the rule in Washington, and it's certainly further proof of it here.

If she's convicted of anything, it will be entirely based on what she said after the allegedly wrong conduct took place. It's all about obstruction, and there's an important new disclosure in the indictment, at least a new claim that she altered documents, that she altered a telephone message slip potentially very damaging because it's one thing to testify falsely, bad enough. But to alter evidence, that could sour her case before the jury. That's for sure.

BLITZER: You have to believe the U.S. attorney for the southern district of New York would have charge her with insider trading if he had the goods, but apparently he didn't. That's the only explanation you come away from this indictment with.

TOOBIN: He didn't.

And also, another very unusual thing about this case is that the civil charges from the SEC do include insider trading. So apparently the government concluded that they can meet a probable cause standard, a, you know, 50 percent more probable-than-not standard on insider trading. But they can't prove it beyond a reasonable doubt.

Government doesn't usually work that way. They're allowed to, but it's another unusual thing about this case.

BLITZER: You're one of the few journalists that's actually spoken to Martha Stewart since this story broke a year-and-a-half ago. Go into her mind if you can a little bit and speculate what is going through her mind. TOOBIN: I think she is so outraged about this. I mean, the idea -- she just frankly, I think, didn't take it seriously at first. She has such an enormous empire where millions of dollars and billions of dollars are the usual currency that she's talking about.

Here a small stock trade by her standards, something that she did on the airport, while she was going on vacation to Mexico. She didn't apparently think that much about it. And now it is haunting her and haunting her, and her life will never be the same, win or lose, at this point. I think she finds it maddening.

And also just one more thing. You know, she finds it incredible and very hurtful that she's been such a figure of fun for so many people. The idea that she's sort of a person people are enjoying watching suffering. That's something that hurts her a lot and is surprising to many people, but it's certainly true.

BLITZER: Jeffrey Toobin, our legal analyst, thanks for the good work, as usual.

When we come back, peace talks, promises and protests: President Bush in the Middle East pressure cooker. Will this historic summit make any real difference?

Also, proof or propaganda? The Pentagon comes under increasing fire over weapons of mass destruction.

Plus -- Hillary Rodham Clinton tells all. Hear what she told her husband after he confessed.

First, today's news quiz. Who received the biggest book advance for nonfiction in history? Bill Clinton, Hillary Rodham Clinton, Pope John Paul II, Richard Nixon? The answer coming up.

(COMMERCIAL BREAK)

BLITZER: President Bush at this hour is in Qatar, tomorrow will meet with U.S. troops and their commanders at coalition headquarters, just outside the capital of Doha. Earlier, an historic making summit hosted by Jordan. The president met with the Israeli and Palestinian prime ministers, and won their pledges to start following up on the U.S.-backed road map for peace. Our CNN White House correspondent John King reports now from the Aqaba summit.

(BEGIN VIDEOTAPE)

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT (voice-over): Dramatic first steps toward reviving the Israeli-Palestinian peace process. And the president voiced hope this time it will reach the end of the road.

BUSH: All here today now share a goal. The holy land must be shared between the state of Palestine and the state of Israel.

KING: Both the Israeli and Palestinian prime ministers embraced the president's so-called road map for peace and pledged at this summit to meet its immediate test. Prime Minister Sharon's promises include quickly dismantling settlements built since March 2001 and support for a provisional Palestinian state, which would require a significant Israeli military pullback. But he also made clear his skepticism.

SHARON: There can be no peace, however, without the abandonment and elimination of terrorism, violence and incitement.

KING: Palestinian Prime Minister Abbas promised aggressive efforts to end violence against Israelis and urged militants to lay down their arms and renounce violence.

MAHMOUD ABBAS, PALESTINIAN PRIME MINISTER (through translator): We will accept all of our efforts using all our resources to end the militarization of the intifadah, and we will succeed.

KING: Summits are carefully scripted, though not every handshake is picture perfect. Mr. Bush hopes the summit lifts Mr. Abbas' standing back home, and the White House wants help from Jordan's King Abdullah and other Arab leaders in making the case, Mr. Abbas, not Yasser Arafat, is the man who can deliver a Palestinian state.

All on hand in Jordan know the more difficult road map challenges comes later. An Israeli pullback to September 2000 lines, more Palestinian political and security reforms, and an independent Palestine by 2005. Mr. Bush will send a new Mideast envoy immediately and says National Security Adviser Condoleezza Rice will be his personal representative in the peace process.

BUSH: And we expect both parties to keep their promises.

KING: Keeping those promises will require a trust not evident when the summit began, when the two prime ministers refused a request to shake hands. But there was a quick handshake later, and it had been two and a half years since the United States was in the middle of Middle East peacekeeping. So the president left convinced peace is a possibility.

(on camera): Upbeat after the summit talks, the president told reporters he believes there's an opening for peace now because both sides are "sick and tired of death." But the president also said it is critical that the Israelis and Palestinians deliver on their summit promises within days. Or, as Mr. Bush put it, "the trust is going to come from performance."

John King, CNN, Aqaba, Jordan.

(END VIDEOTAPE)

BLITZER: Both the Israeli and Palestinian prime ministers face enormous challenges at home. The militant Islamic group Hamas immediately rejected the call to end the armed intifadah against Israel. Hamas vowed war if the Palestinian Authority moves to disarm it, but did not rule out the possibility of a cease-fire. The Islamic Jihad group said it would also continue what it called "military action." Meantime, tens of thousands of Jewish settlers have rallied in Jerusalem, calling the summit, and I'm quoting now, "a humiliating surrender to Palestinian terror." Security has reportedly been tightened around Prime Minister Sharon over possible threats from fringe groups. And Israeli authorities are said to be concerned extremists could use weapons in resisting the evacuation of settlement outposts.

With protests and promises on both sides, does the Middle East peace plan have a chance this time around? We'll have a debate when we return.

Also -- Hillary on Bill, Monica and right-wing conspiracies. Revelations from her new book on life at the White House.

And more on Martha's big mess, indicted on criminal charges. Is she getting a bad rap? We'll take a much closer look at the rise and fall of the queen of clean. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

Hillary Clinton tells all. Revelations from her new book on life inside the White House after Monica. We'll talk to a close adviser, Ann Lewis. That's coming up.

But first, while the Israeli and Palestinian leaders have promised to follow the paths to peace set out in the U.S.-backed road map, can they actually keep their promises? Both have renounced violence and affirmed the right of the other side to statehood. But Palestinian Prime Minister Mahmoud Abbas must work to disarm terror cells and end their attacks. And Israel's Ariel Sharon is obligated to dismantle settlement outposts and freeze all settlement construction. All of this and much more must happen to meet the goal of creating a Palestinian state by 2005.

Earlier peace efforts have failed to bridge the gap between the Israelis and the Palestinians from dismantling settlements to cracking down on terror. Can they make it work this time?

Joining me now from New York, Mort Zuckerman. He's editor-in- chief of "U.S. News and World Report." He's also the chairman of the Conference of Presidents of Major American Jewish Organizations.

Here in Washington, Jean AbiNader. He's managing director of the Arab American Institute.

Thanks to both of you for joining us. Mort, let me begin with you. Do you think that there's a real chance for peace right now?

MORT ZUCKERMAN, CONF. OF PRESIDENTS OF MAJ. AMERICAN JEWISH ORGS.: Well, there certainly is a chance for peace, but what we've had to date is basically rhetoric; rhetoric on the part of Abu Mazen, the prime minister-select of the Palestinian community. But he has a limited amount of power. Maybe 15 percent of the security forces will be reporting to him; 85 percent still report to Arafat, who still basically has control of the situation.

There have been no arrests of any terrorists. There has been no disarmament, no collection of arms and on the Israeli side the prime minister announced he's going to dismantle the settlement outposts that have been built since September of 2000. That has not yet happened. So it's all rhetoric at this point.

But having ....

BLITZER: All right.

ZUCKERMAN: ....said that, there are some basic changes in the region that should help.

It is the first time that the Arab leadership in Jordan and Egypt and Saudi Arabia have really spoken out this way on terror and violence. It is the first time that the...

BLITZER: All right. Let me interrupt, Mort, for a second.

I wanted Jean to respond to the first points you made that Mahmoud Abbas is not yet delivering. What about that, Jean?

JEAN ABINADER, ARAB AMERICAN INSTITUTE: I think the president and Ariel Sharon recognize that Abbas has a real hill -- actually a mountain to climb here. That's why they addressed so much the importance of reinvigorating the security services, giving him more power and Israel taking very concrete steps to improve the humanitarian condition of the Palestinians.

So what we've got to do is really commit to strengthening his hands, strengthening the security services he does control and marginalizing Arafat in a way that's non-confrontational. I think trying to put our finger in his eye is just going to make it worse. We should just not talk about him and go ahead and work with the Palestinians who want to work with us.

BLITZER: Mort, that sound reasonable.

ZUCKERMAN: No, I actually agree with every thing he said. As he also said though, it's a mountain to climb.

Arafat, like most leaders in that part of the world, has no intention of just lying down and going away. He has spent 35 years leading the PLO. I don't think he wants Abu Mazen to be the person to bring about statehood. So he has been working very hard against Abu Mazen.

And I agree that we should ignore Arafat, but all of the European foreign ministers, including the French foreign minister, are making a point of visiting him. And the Egyptian foreign minister basically said the same thing. So I don't know if we are going to be able to marginalize him. I think it's critical that we do.

BLITZER: What about that, Jean?

ABINADER: I think we can do it. I think the Europeans are committed to this.

I think the reality is just as the president has built a consensus bringing on, as Mort said, the Arab leaders to help work with this, which is a first and really critically important, I think now it's Powell's job to go to Europe and say, OK, this is your road map, to -- and it is their road map too -- and we've got to work on this together.

And I think you're going to find the Europeans very helpful in this regard. They do not like being kept out of this process. And I think by bringing them into it, by giving them a role here, we can actually use them to help bring leverage in the Palestinian situation that we don't have right now.

BLITZER: Mort, you know Ariel Sharon quite well. Do you believe in the coming days, we'll see Israeli soldiers by force removing Jewish settlers from what he called illegal outposts on the West Bank?

ZUCKERMAN: Yes, I do know him. I know what he intends to try and accomplish. I do believe he will do that. I would just point out to you that when there was a settlement with Egypt, he led the Israeli forces that forced out settlers in a community called the Amet. There were 3,000 families -- Jewish families there. He forced them all out because that was a part of the agreement.

He knows what has to be done. He's willing to do it. If he has a partner on the other side, I think he will astonish the world. I've had many conversations with him and I know what he's committed to, but he really does need a partner for the other side and for that, as we have said earlier, we have to marginalize and weaken Arafat and strengthen Abu Mazen. This is one step in that process.

BLITZER: Jean, do you have confidence Sharon will do?

ABINADER: Yes, I think Sharon is a survivor. He understands that the most important thing now is creating conditions for Israel's survival and that they can't turn this into an apartheid situation, vis-a-vis the Palestinians. He's said that very clearly.

And -- but we'll know by his actions, not by his intentions, not by his words, but by his actions. He calls them illegal settlements, Israel supporters in this country have a problem with that. But he's the guy that has to bring about his decision in Israel, and I think he's capable of doing it, if he really wants to.

BLITZER: A final question to both of you.

U.S. policy, Mort -- the president said that John Wolf, a career diplomat and ambassador is going to be left behind to do the day-to- day work. That doesn't sound very robust. It's not the kind of special envoy that you really need in that part of the world.

ZUCKERMAN: No, but he said some thing else. He also said that Condi Rice is going to be his principal interlocketter on this issue, and Condi Rice is clearly some body who has the president's ear and the president's confidence and I believe she knows this issue well enough to be able to guide whoever it is on the ground.

It is important that there be some body on the ground to make sure that both parties live up to their commitment. So I think that this is a very positive step forward, that she'll be the key player.

BLITZER: Jean, I'll give you the last word, but briefly.

ABINADER: I think it's key. The United States, this is the first time we're going to have a presence on the ground holding both parties' feet to the fire. I think it's essential and I think it's the right step that the president made and sends a strong message to both parties.

BLITZER: All right, Jean AbiNader, Mort Zuckerman, good discussion. Thanks to both of you. Let's hope this peace process does, indeed, get off the ground. Appreciate it very much.

Love or hate her, Hillary Rodham Clinton is telling all. Is she considering a run for the White House down the road? Revealing details on her life in and out of the White House. Hear what she said to Bill Clinton after finding out about Monica.

Plus, feet to the fire over weapons of mass destruction. Was the world misled to justify the war? Tony Blair and the Pentagon answer back.

And Martha Stewart hits her boiling point. The queen of clean indicted. But does the government have a case?

That, much more in the next half hour. Stay with us.

(COMMERCIAL BREAK)

ANNOUNCER: CNN live this hour. WOLF BLITZER REPORTS. Correspondents from around the world. Here now is Wolf Blitzer.

Welcome back to CNN. Hillary Rodham Clinton's tell-all book. Hear her side of the story on love, life, Bill Clinton and politics.

First, the latest headlines.

(NEWS BREAK)

Hillary Rodham Clinton says her husband's relationship with Monica Lewinsky caused her so much pain that at one time she wanted to ring his neck. She minces few words about the sex scandal in her new book "Living History" which goes on sale Monday. When the former president finally told her the truth about the affair the week before he testified about it before a grand jury.

Senator Clinton writes, and now I am quoting, "I could hardly breathe. Gulping for air, I started crying and yelling at him. What do you mean? What are you saying? Why did you lie to me? I was furious and getting more so by the second. He just stood there saying over and over again, I'm sorry. I'm sorry. I was trying to protect you and Chelsea. I was dumbfounded," she continues, "heartbroken and outraged that I'd believed him at all. As a wife, I wanted to ring Bill's neck." Today Mrs. Clinton explained why she hopes people will read her new book.

(BEGIN VIDEO CLIP)

CLINTON: I think it will give people more insight and perhaps answer questions. But it's also my story. And obviously I'll be pleased when the book is available and people can judge for themselves.

(END VIDEO CLIP)

BLITZER: Joining me with some special insight into all of this, Ann Lewis, former counselor to President Clinton, now the chairwoman of the Democratic National Committee. A good friend of both of the Clintons.

Ann, thanks very much for joining us.

Why is she telling us all of these details now?

ANN LEWIS, FORMER COUNSELOR TO PRES. CLINTON: I think Hillary Clinton had this great experience, this privilege of being first lady of the United States. Living in the White House for eight years, getting to work on issues she's cared about all her life. She's been an advocate for children. They were able to make great steps on children's health. She could be a voice for women around the world. She wanted to tell that story as other first ladies have done. And she realized she couldn't tell just the high spots. She couldn't tell just the great moments without also talking about the difficult times. And that's what she's done.

BLITZER: Her critics say it took $8 million, the advance for her book for her finally to come clean and tell the American public how she really felt betrayed.

LEWIS: I thin, if you listen to the critics, they've been criticizing Hillary for years. First they complaining that she didn't talk. Now, then they're saying, well, she did because it's in a book contract. There are some people who only want to oppose, only want to criticize. We have heard from the for years. Now for the first time we're going to hear Hillary Clinton talking in her own voice, telling her story and it's a great and powerful story.

BLITZER: Here's another quote from the book, the book "Living History," out next week. "The most difficult decisions I have made in my life were to stay married to Bill and to run for the Senate from New York."

Why do you believe she stayed married to this guy?

LEWIS: I think people will have to read the book and see for themselves. This is a marriage, this is a couple, this is a woman who has been talked about by so many people for so long. Now in her own words, in her own voice, she's going to tell that story for herself. BLITZER: Another quote from the book, "For me the Lewinsky embroil, seemed like just another vicious scandal manufacture by political opponents." She blamed a right wing conspiracy for all of this. In the book she obviously comes clean. There was no right wing conspiracy. The president did have an affair with this White House intern.

LEWIS: Which was a very private matter that should have been between husband and wife. And instead it was seized on by political opponents, of both of the Clintons by the way, who had never been able to defeat them politically, who couldn't win against their policies, because they were moving this country in the right direction. So instead they tried to use the politics of personal destruction.

BLITZER: Even when he came clean with his wife, he apparently wasn't telling her everything. Here is another quote from the book, 'He now realized he'd have to testify that there had been an inappropriate intimacy. He told me that what happened between them had been brief and sporadic." But in the real world, of course, it had gone on for months and months and months this relationship between the president and Monica.

LEWIS: You know, again, this was a personal matter that should have been worked out between them. It did get work out between them. But what happened instead is for political reasons, people seized on it, because they didn't want to talk about the issues. They prosperity we were having in the Clinton years. They didn't want to talk about the progress. They didn't about going in the right direction. They were trying to use this to overturn the presidency.

BLITZER: Ann Lewis, unfortunately we've got to leave it there. But all of use will awaiting the entire book to get the full sense, other than these quotes which the Associated Press managed to dig up.

LEWIS: So, will I.

BLITZER: Thanks very much.

Here's your turn to weigh in on this story. Our web question is this, "Should Senator Hillary Rodham Clinton run for president? "

We'll have the results later in this broadcast. You can vote. Go to cnn.com/wolf.

While you're there, I'd like to hear from you. Send me your comments. I'll try to read some at the end of the program. That's also where you can read my daily online column, cnn.com/wolf.

Weeks after the war and still no weapons of mass destruction. British and Spanish leaders now under fire. Now pressure mounting on President Bush as well.

Plus, is Martha Stewart the victim of a double standard?

We'll have more on that. First, the answer to today's news quiz. Earlier we asked, "Who received the biggest book advance for nonfiction in history?" The answer, President Bill Clinton. He landed a cool $10 million for the rights to his autobiography.

(COMMERCIAL BREAK)

BLITZER: British Prime Minister Tony Blair, under fire at home for his role in the Iraq war, says he'll work with the parliamentary probe into the matter. The prime minister's accused of exaggerating intelligence reports on Iraq's weapons of mass destruction and of secretly agreeing with President Bush to go to war. Today the war of words erupted between the prime minister and one of his harshest critic in the opposition conservative party.

(BEGIN VIDEO CLIP)

TONY BLAIR, BRITISH PRIME MINISTER: In the end there have been many claims made about the Iraq conflict, that hundreds of thousands of people were going to die that it was going to be my Vietnam, that the Middle East was going to be in flames. And this latest one, the weapons of mass destruction were a complete invention by the British government.

The truth is, some people resent the fact it was right to go to conflict. We won the conflict, thanks to the magnificent contribution of the British troops. And Iraq is now free and we should be proud of that.

IAIN DUNCAN SMITH, CONSERVATIVE PARTY LEADER: The truth is, nobody -- nobody believes a word now that the prime minister is saying. That's the truth.

(END VIDEO CLIP)

BLITZER: They have lively politics the House of Commons.

The Spanish Prime Minister Jose Maria Aznar's also feeling the heat from the controversy over Iraq's weapons of mass destruction. The opposition socialist party is calling on the prime minister to explain to parliament what happened to Iraq's banned weapons which still haven't been uncovered. A spokesman says the prime minister could hold off on appearing before parliament or reject the request altogether. Spain, of course, was a strong supporter of the U.S. and the British position on Iraq.

Just like his allies in Britain and Spain, President Bush is being hard-pressed to explain what happened to Iraq's weapons of mass destruction. CNN national security correspondent David Ensor has the latest reaction from Capitol Hill and from inside the Bush administration.

(BEGIN VIDEOTAPE)

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): The simple fact that eight weeks into the occupation of Iraq, U.S. forces still have not found any of the weapons of mass destruction that American intelligence predicted were there, is raising the political pressure on the administration almost daily.

REP. JOSEPH HOEFFEL (D), PENNSYLVANIA: Like millions of Americans, I'm wondering where the hell the weapons of mass destruction are.

REP. ELIOT ENGEL (D), NEW YORK: I'm deeply concerned about reports that the administration twisted the arms of our intelligence analysts to produce analysis which agree with the policies that you wanted to pursue.

JOHN BOLTON, UNDER SECRETARY OF STATE: I personally never asked anybody in the intelligence community to change a single thing that they presented. And I am not aware of any other official in this administration who did that.

ENSOR: Under Secretary of State John Bolten said finding weapons of mass destruction may take time.

BOLTON: The finding of the weapons, the production means, will occur in due course. If this stuff had just been lying around on the ground, UNMOVIC would have found it.

ENSOR: But critics suspect a conspiracy to justify the war. Some dissident former CIA officers say Pentagon hawks took hearsay from Iraqi defectors around exile leader Ahmed Chalabi and presented it to the president as fact.

RAY MCGOVERN, FORMER CIA OFFICER: When Rumsfeld couldn't get the answers that he wanted from the Central Intelligence Agency, he created his own mini-CIA in the bowels of the Pentagon.

ENSOR: At the Pentagon officials held a special briefing Wednesday to respond to that charge, saying a small special plans office did analyze but never collected intelligence, and never twisted arms.

DOUGLAS FEITH, UNDER SECRETARY OF DEFENSE: See, this suggestion that we said to them, this is what we're looking for, go find it, is precisely the inaccuracy that we are here to rebut.

ENSOR: At the CIA officials say an internal review is looking at whether an October classified report, saying Iraq had chemical and biological weapons and was seeking to reconstitute its nuclear program, was based on solid intelligence.

(on camera): But the real answer to that question will await the work of the 1,400-plus member Iraq Survey Group now assembling in Baghdad. And including Australians and Britons as well as Americans, U.S. intelligence officials say they still believe that that group will find, at a minimum, Iraqi chemical weapons unaccounted for since the end of the first Gulf War.

David Ensor, CNN, Washington.

(END VIDEOTAPE)

BLITZER: Would Martha Stewart's case play differently, let's say, if she were a man? Is there a double standard at play right now? We'll talk about that immediately when we come back.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): Iran warns the United States. Supreme leader Ayatollah Ali Khomeini is warning the Bush administration that an attack on Iran would be committing suicide. This follows warnings from the U.S. and the other G-8 members that Iran and North Korea won't be allowed to develop nuclear weapons.

Deadly train crash in Spain. A passenger train collided head-on with a freight train, killing at least 19 people. Dozens of others were injured. It happened about 155 miles southeast of Madrid. Officials say the accident may have been caused by human error.

Killer heat wave. No let-up in large parts of India, where a three-week heat wave has killed more than 1,200 people. The heat has also sparked forest fires across the lower Himalayas claiming at least seven lives since Monday.

Saving Venice. The Italian government is going ahead with a hotly debated $3 to $4 billion plan aimed at saving Venice from floodwaters of the Adriatic Sea. It's centerpiece is a series of 79 massive steal gates that would rise automatically as sea water is expected to enter the lagoon surrounding the city.

Big man versus Coke. Chinese media report NBA star Yao Ming has won the right to have his lawsuit against Coca-Cola heard in a Shanghai court. The 7'6" Chinese native, who plays for the Houston Rockets, is suing Coke for using his image in China without his permission.

Surf's up. A 20-year-old Brazilian set a world record for surfing for 34 minutes and 8 seconds in the Amazon's River Surfing Championship.

And that's our look "Around the World."

(COMMERCIAL BREAK)

BLITZER: This is a story just coming in to CNN here. An F-15 Eagle from the Seymour Johnson Air Force Base in North Carolina, that's about 15 miles outside of Raleigh, has gone down. Reports say both pilots have ejected safely, though one of them, according to the Associated Press, has landed in a tree.

There are no reports of any injuries on the ground. Authorities say they have made contact with one of the pilots. You're looking at the smoke that followed the crash of this F-15 Eagle at Seymour Johnson Air Force Base. We'll continue to check out this story. You're now looking at live pictures of the scene. We'll get more on the details, bring them to you as they become available. We're also getting another story now in from our senior Pentagon correspondent, Jamie McIntyre. He's reporting that the superintendent of the U.S. Naval Academy in Annapolis, Maryland is stepping down. Vice Admiral Richard Naughton was accused of improper conduct after an allegedly aggressive encounter with a sentry. There also reportedly are investigations of other allegedly aggressive confrontations that academy staff and faculty had with the vice admiral. Naughton has been academy superintendent for only a year. We'll continue to monitor that story as well.

But more now on our top story, the announcement of criminal and civil charges against Martha Stewart. Is she the victim of a double standard? Would the situation play the same for a man?

Joining me now to talk about it from Chicago, Jennifer Openshaw. She's the founder of the Women's Financial Network.

Jennifer, thanks very much for joining us.

I know you think that there's a double standard under way right now. Tell our viewers why.

JENNIFER OPENSHAW, WOMEN'S FINANCIAL NETWORK: Well, I don't think if his name was Mike Stewart that I would even be sitting here talking to you about this issue.

I mean, I think that she's getting so much attention in part because she's a woman, a woman who is a CEO of a company that built its brand around her and because we see her every day on television and so that's bringing so much attention to this whole matter, and we'll have to see, of course, what happens to this whole case as to whether or not she survives it and we continue to see her products and services available to the consumer.

BLITZER: But Jennifer, if Mike Stewart -- let's say there's a man who created this empire, was on television all the time, had a magazine, was incredibly visible, was either loved or hated, and was accused of doing this, you really don't think the SEC, the Justice Department, would come down on him?

OPENSHAW: Well, first, let me say I give the prosecutors the benefit of the doubt. I don't think they would be pursuing something if they didn't think they had something here.

But I think that, again, because she's a woman and a woman who has built a company that is around her as a brand, she's unique. And it's unique to the public, it's unique to the press and she's getting an enormous amount of publicity. And that publicity is certainly having an affect on her company because it depends on publicity, obviously, to keep it going and to build its market.

BLITZER: So you're basically are arguing there's a double standard when it comes to federal prosecutions against men and women. Is that what you're saying?

OPENSHAW: Well, again, I'm saying that man or woman, if some body has done something wrong, and they certainly should be prosecuted -- and, Wolf, my biggest issue here is that there have been issues that have gone on for decades on Wall Street and people have gotten away with a slap on the hand. I mean, nobody has gone to jail. The laws against spinning have not been passed, and my biggest concern is middle America, who is feeling the brunt of it on their retirements.

And so I think the system needs to change. I think that if Martha did something wrong, absolutely, she should be convicted, and she should be treated appropriately. But so should everybody else who has engaged in improper activities.

BLITZER: Well, as you heard, the indictments don't accuse her of insider trading, but they do accuse her of covering up, if you will, after the fact.

If she lied to authorities as part of their investigation, as they allege right now, she deserves to be punished, I assume.

OPENSHAW: I think if she has lied, yes, as would any body else.

I think it's really critical here for Martha, if she wants to keep her company continuing, that, of course, that she's vindicated. And if she is, I think that the public, in particularly women, because we see it in surveys, will be on her side. I think in the shorter term we're going to see an impact on advertisers who don't want to be involved in controversy. She's got a magazine. She's got media properties.

But I still think, Wolf, that when you look at her product, which is furniture and bath items that are now accessible to middle Americans in a tasteful and elegant matter, that's what people want. And I think that people trust her for her expertise in that area. And, again, if she can come through this and if she is vindicated, then I think she can continue serving the public in that area.

BLITZER: In the meantime, very briefly, now that she's been indicted, should she step down as chairman and CEO of her company?

OPENSHAW: The only reason I think that's a good idea, Wolf, is because I think she needs to really focus on what's ahead of her and I don't want to see so much attention on her company for her personality, but for what it is as a company that is products and services in the home decorating area.

BLITZER: Jennifer Openshaw, thanks for joining us.

OPENSHAW: Thank you so much.

BLITZER: And our hot "Web Question of the Day" is this: "Should Senator Hillary Rodham Clinton run for president?" You can vote now at cnn.com/wolf. We'll give you the results immediately when we come back.

(COMMERCIAL BREAK)

BLITZER: Now here's how you're weighing in on our "Web Question of the Day." Remember, we've been asking you this question: "Should Senator Hillary Rodham Clinton run for president?" Look at this: 63 percent of you say yes, 37 percent of you say no. You can find the exact vote tally, continue to vote, by the way, on our Web site, cnn.com/wolf. We'll leave that question up for a while. As always, we remind you this is not a scientific poll.

Let's get to some of your e-mail. We're getting flooded with e- mail on a lot of issues, especially Martha Stewart.

Baxter writes this: "Martha Stewart is fine, hard-working woman who built her company by herself. Martha is being set up by people whose main goal is to destroy every thing she has made and every thing she stands for."

J.R. totally agrees: "Martha is being indicted for possibly making $220,000 from insider trading? Come on. Is this for real, or is this the good ol' boy network getting even with an outspoken and successful woman?"

Julie sends us this: "Every one is equal in the eyes of the law, regardless of whether you are a celebrity or a regular person. Martha must face the same punishment for her actions that any one else would."

Finally, this clarification from a story we reported on yesterday. I recalled yesterday that when then U.S.-attorney in the southern district of New York Rudy Giuliani used to arrest some high- profile white collar criminal suspects, he often allowed photographers to take pictures of them in handcuffs during their so-called perp walks. I mentioned specifically the case of Michael Milken.

I'm now told, reminded by one of Milken's associates, that Michael Milken was never actually handcuffed. He eventually, of course, as you all know, did serve his time in prison, paid an enormous fine and he's now out. He's doing incredibly important work, incredibly important work for all sorts of causes. Michael Milken, just that correction.

You're now looking at these live pictures from that F-15 crash at -- outside the Seymour Johnson Air Force Base in North Carolina. And we're going to continue to monitor -- both pilots ejected. We'll get details coming up.

Lou Dobbs is standing by in New York for more coverage.

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