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Evidence of Innocence in Duke Rape Investigation?; President Bush Meets With Chinese President; Iraq Reconstruction Fraud?

Aired April 20, 2006 - 22:00   ET


ANDERSON COOPER, CNN ANCHOR: One day after a major White House shake-up, the president's troubles just keep on growing.

ANNOUNCER: Sinking ship? With Iraq, shake-ups, soaring gas prices, and plunging approval ratings, the White House goes into survival mode to rescue the president.

Wasting your money -- allegations of widespread fraud and scams in the rebuilding of Iraq. We're "Keeping Them Honest."

And the Duke sex scandal.

UNIDENTIFIED MALE: She was victimized. And she was raped. She was beaten.

ANNOUNCER: Will the suspects' timeline clear the lacrosse players of rape? We will have the latest.


ANNOUNCER: Across the country and around the world, this is ANDERSON COOPER 360.

Live from the CNN Broadcast Center in New York, here's Anderson cooper.

COOPER: And good evening. Thanks for joining us.

At the White House today, it was supposed to be the kind of presidential event that would take attention way from the president's troubles, a carefully stage diplomatic dance, President Bush meeting with Chinese President Hu Jintao. They exchanged pleasantries, talked about strengthening ties. But things didn't go according to that script.

A heckler somehow got into the White House welcoming ceremony, jeering the Chinese president -- more on that in a moment.

Bush later apologized. But, with new sinking poll numbers, soaring gas prices, there staff shake-up, and persistent calls for Rumsfeld's resignation, tonight, we look at a White House in crisis.

We are covering all the angles -- first, those gas prices. Americans are fed up. But things are only getting worse. We will take you inside the squeeze.

And, if you think oil is hard to find now, wait until you hear what will happen when China starts buying more cars.

And we will have the latest on the White House shake-up -- what Karl Rove's new job description really means.

We begin with the rising gas prices and CNN's Gary Tuchman.


GARY TUCHMAN, CNN NATIONAL CORRESPONDENT (voice-over): Lynn Wilson drives a 1991 Jaguar that only cost him 3,000 bucks, but he can't afford to drive it anymore. So, he has come to a pawnshop in Norcross, Georgia...

UNIDENTIFIED MALE: I will give you 500 out of that check.

TUCHMAN: ... where he has decided to use his car as collateral for a loan, and where he's decided to pawn this.

LYNN WILSON, PAWNSHOP CUSTOMER: I'm selling this Bulova watch, which was made in the early 1900s.

TUCHMAN (on camera): It's a beautiful watch.

(voice-over): Pawnshops around the country are reporting a significant increase in business from people who say they need money for gas.

WILSON: It was made in 1906.

TUCHMAN (on camera): So, this watch is 100 years old?

WILSON: One hundred years old.

TUCHMAN: And you're -- you're feeling like you have to sell it.

WILSON: Well, I don't have any choice, because I'm a -- I'm a veteran, and I only get a check once a month.

TUCHMAN: And you're selling it basically for gas money.

WILSON: I'm selling it for gas -- for gas money. I mean, it's not food or anything like that. I mean, this is strictly gas.

TUCHMAN: How much are you selling it for?

WILSON: Two hundred dollars.

TUCHMAN (voice-over): They sell most anything. The owner of this pawnshop says business is up about 30 percent because of people who need gas money.

(on camera): What's the most expensive thing you think you have gotten pawned for gas money? UNIDENTIFIED MALE: Rolexes.

TUCHMAN (voice-over): The cheapest gas in the neighborhood is at this station. But it has still gone up a lot in just the last few days.

UNIDENTIFIED FEMALE: I remember, when I moved to Georgia, back in '96, when I got out of the military, I was paying 99 cents a gallon. Look at this now. This is ridiculous.

TUCHMAN: Far more ridiculous is the price a station owner in Brooklyn, New York, was charging, $4.14 a gallon. And that was for the cheapest gas. In Northern California, only one-tenth of a penny separates premium gas from the $4 mark.

And, in Chicago, only one-tenth of a penny separates the cheapest gas from the $3 mark.

UNIDENTIFIED MALE: Honestly, we need to start looking at opening up Alaska or something. I mean, we have to become more self- sufficient and quit relying on the Middle East.

TUCHMAN: Speaking of Alaska, a gas station in Barrow, Alaska, which is only 200 miles way from the nation's largest inland petroleum reserve, is at $3.95 a gallon.

(on camera): In the attempt to rationalize high gas prices, many people point out that a gallon of milk is still more expensive than a gallon of gasoline. And, indeed, in many cases, it's still true. I just bought this gallon of milk for $3.25. But, practically speaking, it's not too often that you go into a grocery store and buy 15, 20 or 25 gallons of this stuff.

(voice-over): A recent ABC News/"Washington Post" poll shows, a large majority of people blame the White House for the high cost of gas. Nearly three-quarters of respondents say they disapprove of the way the president is handling the situation with gas prices. Democrats see this as benefiting them.

MORRIS REID, DEMOCRATIC STRATEGIST: I think the Democrats have to be careful how they use this, but it should be used as a political football, and they should be able to gain some seats. I'm not for sure if it's going to change the House of Representatives or it flips the Senate, but it certainly could be something they can position for 2008.

TUCHMAN: Back at the pawnshop, Lynn Wilson believes there is plenty of blame to go around.

WILSON: I don't feel good about it. And I have got several more antique watches. And if I have to, you know, I will sell those as well.

TUCHMAN: He leaves in his beloved Jaguar with his $200, which won't even buy him four tanks of gas.

Gary Tuchman, CNN, Norcross, Georgia.


COOPER: Well, fair or not, with the president being blamed by most Americans for the high gasoline prices, and poll after poll showing his approval ratings at new lows, today's visit by China's president was supposed to be a sign the White House was once again back on track. It didn't quite work out that way.

Here's CNN's senior political analyst Bill Schneider.


WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): Finally, today, welcome relief from all of the stories about shake-ups in the White House, a high-level diplomatic visit by the president of China. But look what happened.

A protester obtained a press credential and loudly heckled the welcoming ceremony, embarrassing President Bush. The White House even got the protocol wrong, introducing the national anthem of the People's Republic of China this way.

UNIDENTIFIED MALE: Ladies and gentlemen, the national anthem of the Republic of China.

SCHNEIDER: Oops. Wrong country. That's Taiwan.

Meantime, polls keep coming out showing President Bush's job approval reaching new lows, 36 percent, 35 percent, and a new poll today showing -- gulp -- 33 percent. It has been like this all week. President Bush, who makes it a rule not to comment on personnel matters, broke that rule.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And I know the speculation, but I'm the decider. And I decide what is best. And what's best is for Don Rumsfeld to remain as the secretary of defense.

SCHNEIDER: Even Rumsfeld defended Rumsfeld.

DONALD RUMSFELD, SECRETARY OF DEFENSE: People who are often talking about what's taking place inside here don't know what's taking place inside here.

SCHNEIDER: Then came the White House staff shake-up. Karl Rove gave up his policy portfolio. Was that a demotion?

DAN BARTLETT, COUNSELOR TO PRESIDENT BUSH: This does free up Karl to focus on a lot of areas of his portfolio that he has.

SCHNEIDER: That would be politics, like this year's midterm election, which a lot of congressional Republicans are getting extremely nervous about. The White House press secretary is leaving, and talking about the need for change.



COOPER: Well, Bill Schneider joins me now from Washington, along with CNN senior international correspondent John Roberts, and White House correspondent Suzanne Malveaux.

Suzanne, I have got to start with -- off -- off with you. With today's events at the White House, how embarrassed were they? How big a deal was it?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Anderson, this really was a diplomatic disaster, when you think about it. This was an event that was planned for about a year, down to the finest detail -- the Chinese already sensitive that it was an official visit, not a state visit.

And, of course, some of it is not even the White House's fault, the mistake by the announcer, of course, in the beginning, and then this credentialed journalist who actually was a visiting journalist who ends up screaming at the president and -- and Hu Jintao, accusing him of killing members of the Falun Gong.

I mean, this was really seen as quite an embarrassment. The president had to apologize, ultimately, to the Chinese leader later in the day.

Anderson, the bar was so low already set for this visit. They really kind of exceeded their lowest expectations...


COOPER: And, Suzanne, we're seeing video now of the woman, the protester. Do you know how she got in? I mean, you said she was a visiting journalist. How was she credentialed? Who was she working for?

MALVEAUX: She's actually working for "Epoch" newspaper. It is based here in Washington, in New York. She has been to the White House before. She faxed her credentials, Social Security, date of birth. She has attended other White House functions, covered certain events. So, she was completely legitimate, in terms of getting inside of the White House.

She is simply a journalist who decided that she was going to make her views known.

COOPER: John Roberts, today included, it -- it seems as if this White House just can't catch a break lately.


Everything that it's done in the last couple of months has been wrong, from the Dubai Ports World deal, to the nomination of Harriet Miers, to the NSA spying, the CIA leak investigation. It just keeps going on and on and on. And -- and what the White House is hoping that it can do with this staff shake-up, which a lot of people are saying is just moving around some pieces that were already there, and unless and until they bring in somebody from the outside, they're -- they're still not really getting the new blood.

But what the White House is trying to do, at least in the interim, is just stop the bleeding, I mean, let -- you know, let alone get anything positive on the table. All they want to do is, they just want to stop the blood from flowing out of the veins that were locked up so tight before.

COOPER: Well, Bill Schneider, John Roberts talked about the staff shake-up -- Karl Rove now focusing on politics, these midterm elections coming.

What are the main issues out there for voters that this White House has to address?

SCHNEIDER: Iraq, Iraq, Iraq. Oh, gas prices. Those are the two things that really bother voters. They want to see something happening in Iraq that encourages Americans to believe that there's a possibility of withdrawal, that this -- this terrible conflict will eventually end.

And they don't see a government formed. And it's -- it's over four months since Iraq had an election. And, then, the gas prices, that really has -- as Gary Tuchman just reported, it hits ordinary Americans right in the face.

COOPER: Suzanne Malveaux, does the White House think it's fair that -- that Americans, if you believe these polls, seem to be blaming -- blaming the White House for the gas prices?

MALVEAUX: Well, the White House, of course, has always kind of stressed this kind of long-term strategy when it comes to energy and oil.

I mean, essentially, one thing, that they hoped about -- to talk about today, at least, was how China plays a role in all of this, with their thirst for energy and raising those prices for oil worldwide. And it's not something that they necessarily think they're to blame for.

COOPER: John Roberts, why -- I mean, you have covered this White House for a long time -- why do you think it is that they seem to be making these missteps one after the other? This from an administration which, for years, analysts were saying, you know, was -- was so well-oiled. Whether you supported them or not, people admired how they were run.

ROBERTS: A lot of people think that it was just plain arrogance; they figure that they're smarter than everybody else.

Other people believe that Karl Rove was spread too thin. He took his eye off the ball. On top of the CIA leak -- or the CIA investigation on top of that, he was distracted, so, a combination of -- of the two of those things.

But what the White House is really in now is, you know, as much as people are saying it's a struggle survival -- for survival -- it's really a struggle to remain relevant, because, if they lose control of the House and Senate in the November midterm elections, the president overnight becomes a lame duck, and would get literally nothing done right through in to the end of his term.

So, what they're really trying to do now is put the focus where they need it. That's on politics. Josh Bolten is probably going to be leading the policy shop in a de facto basis, even though Joel Kaplan is the guy who is actually going to be running it. And they want to try to get some victories on the scoreboard here.

As some very wise Republicans have said, they're not going to try to throw any Hail Marys. They're looking for three yards and a cloud of dust here, a bunch of small victories that they can wrap up -- rack up before November, and try to get things back on track.

COOPER: John Roberts, Suzanne Malveaux, Bill Schneider, thank you.

More trouble for the president on the horizon -- Iran's nuclear notions and corruption in Iraq. We will talk with David Gergen ahead.

Whistle-blowers allege, massive fraud has been committed by some U.S. contractors in Iraq. Bags of money disappearing? Tonight, we're "Keeping Them Honest."

Plus, getting rid of illegal immigrants.


RICK SANCHEZ, CNN CORRESPONDENT: If it was easier to get in, would you go back?




SANCHEZ: But they're making it harder now.

VARGAS: It makes it hard now.




COOPER: Making it harder. The U.S. is flying illegal immigrants out of the country, and doing it so fast that it might actually make a difference. We will -- we will explore that. Also, the latest on the alleged rape at Duke -- why police are so intent right now to find a white shoe with a 6-inch heel -- when 360 continues.


COOPER: Well, the heckler on the White House lawn we mentioned earlier was just about the only unscripted part of today's meeting between President Bush and Chinese President Hu Jintao. It wasn't shown on state television in China, the heckling. There was something else, of course, that went unmentioned on the South Lawn of the White House today: China's growing thirst for oil and what that means for the U.S. and for Iran.

Here's CNN's Candy Crowley.


CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice-over): Holy gas pains, America, $3.19 for regular in Los Angeles and in Chicago.

UNIDENTIFIED MALE: I think it sucks.

CROWLEY: Ever wonder how it came to this?

UNIDENTIFIED MALE: I think it's because of shortage of oil.

UNIDENTIFIED MALE: I know that the world situation is tenuous and that the oil companies will take advantage of any opportunity to stick it to us.

CROWLEY: Kind of. But think economics 101. Think supply and demand.

PHIL FLYNN, VICE PRESIDENT/ENERGY ANALYST/GENERAL MARKET ANALYST, ALARON TRADING: This has been a story of incredible demand growth in China. And -- and what people are starting to realize, that, if you look at the upside potential for China demand over the next 10 to 20 years, there's not going to be enough oil left for anybody else.

CROWLEY: Meet the leaders of the two biggest oil-consuming countries on the planet, the People's Republic of China, the United States of America.

BUSH: China is home to an ancient civilization, and it is helping to shape the modern world.

CROWLEY: It's not just about pandas anymore. This is no longer Ronald Reagan's China. No longer a waking giant, China is a walking giant, powering through the days on an economy growing by as much as 10 percent a year. And, increasingly, China is a speeding giant, dumping bicycles for cars, 10 million privately owned cars, and 75 million more Chinese are expected to buy a car in the next 15 years. They're going to need a lot more gas. Overall, energy needs are expected to more than double by 2020. Where in the world does China get all that supply? Same place the U.S. does, and elsewhere.

JEFFREY BADER, DIRECTOR, BROOKINGS INSTITUTION CHINA INITIATIVE: Well, they're getting 10 or 11 percent of their oil from Iran. So, it's going to be a -- kind of a push-pull with China on Iran.

CROWLEY: The United States thinks China, having used the global marketplace to prosper, needs to step up to the plate and help solve global problems -- case in point, Iran, where the Bush administration thinks China has been pulling punches on Iran's quest for nuclear weapons, because China wants to protect a key oil supply line.

And while the subject came up at the White House, it appears the U.S. got Milquetoast.

HU JINTAO, CHINESE PRESIDENT (through translator): Both sides agree to continue their efforts to facilitate the six-party talks to seek proper solution to the Korean nuclear issue. And both sides agree to continue their efforts to seek a peaceful resolution of the Iranian nuclear issue.

CROWLEY: The reality is, the U.S. no longer has the world playing field or the world oil supplies to itself. China, once an insular, isolated country, has long since thrown open its bamboo curtain, posing problems and offering possibilities.

Candy Crowley, CNN, Washington.


COOPER: Well, it is hard to overstate how fast China is growing, in so many different directs.

Here's the raw data. There are now more than one million privately owned cars in Beijing. That's a 140 percent increase since 1997. Now, there are more than 300 skyscrapers in Shanghai. In 1985, there was just one. And there are some 21,000 miles of highways across the country in China. In 1997, there were no highways at all.

One more fact: By one estimate, by 2020, those highways in China could be clogged with as many as 140 million vehicles. That is a lot of gas.

So, a lot for President Bush to discuss with his Chinese visitor today, a lot for us to discuss with former White House adviser David Gergen, who joins us from Boston.

David, good to see you again tonight.


COOPER: Bush's meeting today, I mean, it was not exactly the distraction this White House probably had hoped for. What do you make of it? I mean, can this White House just not catch a break? GERGEN: Well, you know, what's really interesting about this one, Anderson, is that we do have this new chief of staff on board now, Josh Bolten. What a heck of a start to his -- you know, this new, better executed, more efficient White House. He must be so -- he must be really angry, because he didn't have anything to do with it, but it comes on his watch.

So, I -- and they can't catch a break. But, you know, what we're facing, you know, this squeeze on Iran, because, as -- as -- as President Bush really pushes now hard on trying to get Iran to behave, Iran does hold the oil card. And we see with that, with the gas prices here, can the president afford to push too hard, if Iran's going to start jacking up prices? That's one heck of a dilemma for a politician, isn't it?

COOPER: Yes. I mean, is it fair that -- that so many Americans blame this White House for these high gas prices?

GERGEN: It goes with the territory, Anderson. We have had previous presidents, when gas prices go up, you get blamed. You -- you -- you -- when -- when -- when things go well, you get -- even though you have had nothing to do with it, you get the credit.


COOPER: Right.

GERGEN: Things go badly, you get the blame.

But here's -- here's the thing, I think, where they do deserve some blame. They have had an energy bill, you know, but it hasn't -- it wasn't a really serious energy bill. It wasn't a forward-looking energy bill. It wasn't the kind of bill that they said, we're going to solve this energy problem once and for all with a -- with a combination of high production and high conservation. They really didn't go out on the limb for it.

It was mostly a production bill, with a lot of, you know, goodies for the oil industry. And -- and to leave themselves in this position, I do think they're vulnerable now. And it's -- but it's -- it goes to how this administration, indeed, our political leaders now for a long time, haven't looked ahead, haven't seen the storms coming, haven't prepared us for it.

And a Katrina hits, and we get high gas prices. And, believe me, there's some -- a lot more storms gathering off our coasts right now.

COOPER: Well, I seem to be the only one who remembers that last State of the Union address. I mean, it wasn't all that memorable, to begin with.


COOPER: But I -- I remember, one of the big things in that was, you know, fuel economy and -- and looking for alternative sources of fuel. I -- I don't think we have heard much about that since that State of the Union.


COOPER: Maybe they will bring up that speech again.

GERGEN: Well, I think that's -- I think that is an issue, because they have been so distracted by Iraq that -- that, when it comes to other issues, there is this quality of attention-deficit disorder, you know, that it -- an issue that comes up this week is gone tomorrow -- is gone next week.

And I think that they haven't found their footing on domestic policy. I -- the -- their -- their essential domestic policy has been one of tax cuts. And conservatives argue, well, it has -- look at the economic prosperity it has brought.

But because it hasn't been going beyond tax cuts, they haven't prepared for the gasoline prices that are here. They -- they haven't prepared for the competitive threat that's coming from China very quickly. You talk about all the buildings that are going up in China -- you know, the new president of University of North Carolina, in the swearing-in last week, Erskine Bowles pointed out, in four years' time, 90 percent of the world scientists, 90 percent, will live in Asia.

COOPER: You know, also, I mean, there's this in new Gallup poll. Seventy-one percent of Americans are dissatisfied with the direction of the country.

In the past, presidents, I mean, have been in holes like this. How they dug themselves out? I mean, some of them you probably worked for. How have they dug themselves out? And can Bush do the same?

GERGEN: It's rare that they do dig themselves out.

We ought to understand that, once you get down this far, as Jimmy Carter learned, as -- as -- as -- as George H.W. Bush learned, when he started crashing, and he couldn't -- he couldn't reverse it, it's very -- very rare.

Ronald Reagan was one of the few that reversed it. Another one who reversed it was Franklin Roosevelt. He was starting to go down in his second term. And along came the Nazi jackboots marching across Europe. That, and getting ready for war, was really what revived his presidency.

So, it's not -- it's not obvious how this president gets out of it. He has been in this hole so long. It's much tougher to climb out now than it would have been six months -- had he done these changes, started changing things six months ago, and really accompanying that by change of direction.

COOPER: You think just six months ago could have made the difference?

GERGEN: I think timing is everything in politics, just as it in is love.

And six months ago, he had a -- he had a window, when, you know, after Katrina, when he could have -- he could have brought in the new teams, settled -- started setting a new direction, a new tone, reached out to Democrats. There were a lot of us who believed that, argued that. And we were -- you know, we were cavalierly dismissed: Oh, that's a stupid idea. We don't want to shake up anything. We don't want to change the team.

You know, that's a terrible temptation: Let's just go -- let's stay with the team. Let's go to our conservative base. Let's stay the course in Iraq. Things will all turn out better.

Six months later, they're now starting to do some of those things -- not very many of them, some of them -- but it's really late now.

COOPER: David, did you say timing is everything in politics, as it is in love?

GERGEN: I said that. Yes, I did, indeed.

COOPER: David Gergen, I...


COOPER: This is a whole new side of you.

GERGEN: Well, now...

COOPER: David Gergen, philosopher, lover, thank you for being on the program tonight.


GERGEN: Thanks, Anderson.

COOPER: David, thanks. Always good to talk to you.

GERGEN: Thank you.

COOPER: Coming up, "Keeping Them Honest" -- accusations of fraud in Iraq. We are talking about bags of money, duffel bags just filled with wads of cash, possibly billions of dollars, your tax dollars. This is all your money. We will take a look at that -- "Keeping Them Honest" tonight.

But, first, Erica Hill from Headline News joins us with some of the other stories we are following -- Erica.

ERICA HILL, HEADLINE NEWS CORRESPONDENT: Politics and love, I caught that one, too. Threw me for a loop.

Anderson, we start off with thousands of pro-democracy protesters who tried storm the Nepalese capital of Kathmandu today. Three people were killed, about 100 injured in clashes with armed security forces, who fired on the crowd as it attempted to get into the center of the city. The rally was the culmination of more than two weeks of protests against the king's rule.

Meanwhile, back stateside, former presidential candidate Senator John Kerry says he is considering another run for the White House in 2008. At the United Nations today, Kerry said he will make a decision toward the end of the year.

Five teenage boys have been arrested, after police say the students planned a shooting rampage at their Kansas high school on the anniversary of the Columbine massacre. Authorities say they were tipped off after a warning appeared on the Web site

And this has got to be one of best stories of the night. An 84- year-old New Jersey great-grandmother now $10 million richer, after playing the nickel slots. Josephine Crawford is a retired waitress. She spent 10 minutes and $40 to collect the largest haul ever from a casino in Atlantic City. She says she plans to spend the money on her family.


HILL: Apparently, she was down 20 bucks, and she was like: Yes, what the heck. I will try again.

COOPER: Oh, that's good. Good for her.

HILL: Not bad.

COOPER: Ten million dollars, not bad at all for the nickel slots. Excellent.

Erica, thanks.

Your tax dollars wasted in Iraq -- they weren't playing slot machines. They were carrying around duffel bags of money. In fact, some are calling Iraq a free fraud zone -- accusations that billions of your honey have been spent like play money. Tonight, we are "Keeping Them Honest."

Plus, an angle on illegal immigration you probably haven't seen before. The U.S. is flying people back to their home country in record time. We will take you along on one flight -- when 360 continues.


COOPER: Well, there's no way to sugarcoat this. While thousands of U.S. troops have been killed or maimed to bring democracy to Iraq, some U.S. contractors have apparently seized the opportunity to get rich quick.

We are talking about allegations of fraud, theft, and waste on a mind-numbing scale, as I keep saying tonight, duffel bags filled with cash.

CNN's Tom Foreman tonight, "Keeping Them Honest."


TOM FOREMAN, CNN CORRESPONDENT: After the Shock and Awe came rebuild, more than $30 billion worth from U.S. taxpayers, billions more from other countries, including Iraqis themselves, money for roads, schools, power lines, bridges, prisons.

What troubles attorney Alan Grayson is how some of that money was doled out.

ALAN GRAYSON, ATTORNEY: No, they were getting cash. There was over $600 million of cash disseminated, with essentially no controls at all.

FOREMAN (on camera): Cash?

GRAYSON: Cash, that's right.

FOREMAN: Bundles of money?

GRAYSON: That's right. They -- they took 1,000 $100 bills and they put a rubber band around it, and that was called a football. It was called a football because they would take it and they would pass it to each other.

FOREMAN (voice-over): Grayson has filed dozens of lawsuits for whistle-blowers who say they witnessed widespread fraud by U.S. firms in Iraq and often nonexistent accounting by coalition officials.

The law prevents him from naming the companies or talking about how they have responded. But the Office of the U.S. Special Inspector General for Iraq Reconstruction says, undeniably, there have been problems.

GINGER CRUZ, SIGIR: A lot of cases we're talking about cash that was handed out to people in duffel bags and finding out what happened to that cash if those projects were completed and holding people accountable has been a difficult challenge for us. But we are doing it.

FOREMAN: One of the few fraud cases to reach court so far involved a company called Custer Battles, which contracted to provide security at the Baghdad Airport. Last month a federal jury here heard accusations that Custer Battles used padded invoices and forgery to rake in millions. And although the company has steadfastly denied those charges, the jury ordered Custer Battles to pay $10 million in damages.

And taxpayer rights advocates are convinced, fraud incompetence and overcharging by many U.S. contractors large and small, have taken a grave toll on rebuilding.


FOREMAN: U.S. taxpayers?

MOORMAN: U.S. taxpayers.

FOREMAN: How much?

MOORMAN: No one knows for sure, but it's in the billions. And the Iraqi people lost money. Their money is lost too.

ALLAN GRAYSON: The development fund of Iraq was looted by war profiteers and war whores.

FOREMAN: Government investigators are now using satellite photos to monitor work sites and inspectors in Iraq to try to track down all the unaccounted for billions. They have more than 70 criminal investigations under way.

CRUZ: I would say that the taxpayers should feel fairly comfortable that we are doing a fairly adequate job and we are seeing progress, because of our work.

FOREMAN: But Allan Grayson is pessimistic. You think there's been a genuine gold rush in Iraq.

GRAYSON: Well, what I see every day in my own work is that the fraud is rife.

FOREMAN: He is convinced many U.S. companies went to Iraq took the money and ran. And they are running still. Tom Foreman, CNN, Washington.


ANDERSON COOPER, CNN ANCHOR: Wow. Back in the U.S. the latest on the Duke rape case. Lawyers for the two students charged said they weren't even at the party. Tonight we have new details on the search warrant, what exactly are police looking for right now? And a 911 call from one of the women at the party that night.

Also tonight, illegal immigrants deported and destined for home. We'll take you on the plane ride that thousands of illegal immigrants are taking out of America in this exclusive report.


COOPER: Well now we turn to Duke University. Tonight according to the "Associated Press" a defense attorney for one of two Duke Lacrosse players accused of raping a stripper, says they will not accept any plea deal. We've also learned tonight that police are searching for evidence, in particular a woman's white shoe with a six- inch heel. CNN's Jason Carroll has the latest including a 911 tape from one of the women at the party that night.


JASON CARROLL, CNN CORRESPONDENT: We now know what investigators were looking for when they showed up at Collin Finnerty's dorm room at Duke University Tuesday. The same day he and his teammate Reade Seligmann were arrested for sexually assaulting an exotic dancer. A copy of the search warrant revealed they wanted to find clothing related to the suspect and the alleged victim. Photographs of the party where she was allegedly assaulted and a white six-inch shoe the young woman says she lost that night at the lacrosse team members' home located just a few miles from Finnerty's dorm. The warrant doesn't say whether any of those items were found.

The warrant released today, does show investigators retrieved a news article on the case from Finnerty's dorm as well as an envelope addressed to him from a woman from another school. In a previous search they did confiscate some of his electronic equipment. Defense attorneys met with Reade Seligmann and his father today. They maintain he was not at the party when the alleged assault took place. They also say they have documented time stamped evidence and eyewitnesses to prove it. Including Moez Mostafa, a cab driver who says he remembers driving Seligmann and a friend to this ATM, the Cookout Restaurant and then to Seligmann's dorm that night. Mostafa also remembers going back to the lacrosse house a little after 1:00 a.m. to pick up four more players just as their party was breaking up.

MOEZ MOSMTAFA, "ON TIME TAXI" DRIVER: The second fare I remembered because there's some kind of trouble outside the house that time.

CARROLL: This is in line with what both defense lawyers and the district attorney's office say that there was a commotion outside the house after the two dancers, hired for the party, had finished performing. At 12:53 a.m. a 911 call the defense suspects may have been made by the second dancer came in complaining about racial slurs.

DURHAM COUNTY 911 RECORDING: And it's me and my black girlfriend and the guy, there's sort of like a white guy by the Duke wall and he just hollered out Nigger to me and I'm just so angry I didn't know who to call.

CARROLL: Mostafa says he only remembers seeing a woman who appeared angry outside the house. The four players who got into his cab said, very little about that woman.

MOSTAFA: I hear one guy he said, she just a stripper.

CARROLL: The defense says it will prove all of this happened long after both Seligmann and Finnerty left the house. And sources close to Finnerty's defense say, his legal team is gathering evidence to show he may have left the team's party before the two dancers ever showed up. Jason Carroll, CNN, Durham, North Carolina.


COOPER: Well, get ready to take a trip aboard the red eye for illegal immigrants. A CNN exclusive, the plane is waiting for them whether they like it or not. Also the heat is on, parts of Alaska melting. Parts of America may soon be next. We'll show you the reality of global warming. What is really happening right now when 360 continues.

(COMMERCIAL BREAK) COOPER: Well today the government said more than 1,000 undocumented workers in 26 states were arrested in a massive raid on a crate making company. The current and former company executives were also arrested accused of encouraging the illegal immigrants to cross the border. The executives will have their day in court of course. The illegal immigrants will be deported. And they could be on a plane home as early as tonight. It is part of the tough new policy called catch and return. So far this year more than 80,000 illegal immigrants have left the country in lightning speed. CNN's Rick Sanchez went on board one flight for this exclusive report.


RICK SANCHEZ, CNN CORRESPONDENT: Shackles scrape against the tarmac at Williams International Airport in Mesa, Arizona. These are the first close-up images of the U.S. government's new initiative to get rid of undocumented immigrants not within months or years anymore, but rather within days. From this airport alone, three full flights leave each week bound for Central America.

It's now 7:30 in the morning we're about a half hour from wheels up on this MD83 that's going to literally remove 110 immigrants from the United States. The expedited removal program began last September but because there are so many undocumented immigrants, the number of flights not just from here in Arizona but nationally have already been increased to 12 a week. On board, one of the men who handles the new program for the Bush administration.

GARY MEAD, ICE ASSISTANT DIRECTOR: It's our hope that these people, when they get back, will explain that there is no safe haven anymore, that when people are apprehended they are processed quickly and they're returned quickly.

SANCHEZ: But is the message getting through? On board we find immigrants separated by two classifications, criminal aliens whose crimes range from heroin smuggling, murder and petty offenses, to those whose only crime is being in the country illegally. An hour into the flight we find Marlin Vargas a 23-year-old with a boyish grin who says he came to the U.S. because he was hungry. Is this the first time you tried to come to the United States?


SANCHEZ: No? How many times?

VARGAS: Seven times.

SANCHEZ: Then there's Jose Membrero a criminal alien who admits to a rap sheet that dates back to 1991 with crimes that include selling drugs, domestic violence, parole violations and finally a DUI arrest that's now getting him deported. Although not a citizen, Membrero was in the U.S. legally. He's lived in Colorado for 19 years and speaks English with hardly a trace of a Spanish accent. You feel like you blew it?

JOSE MEMBRERO, IMMIGRANT: Yep. SANCHEZ: It's now about noon. And the flight dubbed Conair is maneuvering the tricky approach through the mountains into the capital city of Tegucigalpa. Once on the ground, their welcomed by Honduran immigration officials using the plane's P.A. to tell them they're happy to have them back. At the refugee return and welcome center, Membrero, remember he's the one with the long rap sheet, clear immigration and Interpol almost immediately. However, Marlon Vargas has a problem. Honduran officials spot his tattoos and question him about gang activity.

MS-13 is a dangerous gang. Here as well says the police official who decides Vargas' tattoo is not a gang logo after all. He is free to go. As is Membrero who tells us he won't return to the U.S. because now, as a deported ex-con, he would face a federal sentence of 20 years if caught. However, Honduras is a country he hardly knows.

MEMBRERO: I'm lost.

SANCHEZ: You're lost?

MEMBRERO: Yeah, I'm lost.

SANCHEZ: Vargas knows where he's going. It's now 3:00 PM and we follow him back to his village, a two-hour ride through the Honduran countryside. Santa Rosa is poor, but the greeting he gets from his mom is rich. One look inside Vargas' home and you immediately understand why half the boys here have left for America. Leaving behind fathers like Vargas' dad.

Does it bother you when he leaves? I need him, says Thomas Vargas who tells me he only makes $3 a day, shows me his empty cupboards, the holes in his roof and his next meal. And every meal. Beans and corn.

To say that life is hard here in Santa Rosa would be an understatement. For running water, for example, you have to go outside. That's if it works. Like this squeaky faucet, everyone seems to agree, U.S. immigration policy is in disrepair. Will this newest initiative fix it? That's up to Marlon Vargas and tens of thousands like him. If it was easier to get in, would you go back?

VARGAS: Probably.



SANCHEZ: But they're making it harder now.

VARGAS: It's harder now.

SANCHEZ: Vargas plans, instead to join the Honduran military. But his is just one story. A snapshot of one family, one village, where America's immigration dilemma begins.


COOPER: So, Rick, is this working this idea of sending people back immediately?

SANCHEZ: It maybe a little too earl to assess. I mean the things only been going for six months. But I can tell you this, in Marlon's case, he's decided he's not even going to try it any more because it's just too much trouble and the possibility that he could be fined and sent back again is just too high. On the other hand, Anderson, there was also a woman on the plane who we talked too who'd been sent back just last month. Guess what? She was back on the plane again being sent back to, this time Guatemala and apparently she had a $2,000 debt that she had with one of the coyotes who snuck her across.

COOPER: Wow. All right, Rick Sanchez, thanks. Interesting report. All this week on 360 we're also on the front lines of global warming. Take a look.


NAT SOT: Sea ice is receding dramatically. The amount of sea ice in the summer today is of the order of 25 percent reduced over what it was in just 1979.


COOPER: The heat is on. Alaska parts of it melting. Some locals aren't worried, we'll tell you why. And it sounds like a nightmare but it could be reality. Our nation, our economy crippled by the soaring price of gas. We'll investigate just how vulnerable our oil supplies really are. "We Were Warned" a special edition of 360 is coming up.


COOPER: All this week we are looking at global warming. "The Heat Is On" we're calling it. Scientists at the national snow and ice data center at the University of Colorado say that winter sea ice has not come back from last year's record minimum. Winter sea ice covers this year was the smallest since satellite records began nearly 30 years ago. CNN's Joe Johns reports that it's not just sea ice that is beating a retreat.


JOE JOHNS, CNN CORRESPONDENT: The glaciers of Alaska here for thousands of years and now some appear to be going away.

RICK STEINER, UNIVERSITY OF ALASKA: The glaciers are practically melting off the maps. You can look at maps from 50 years ago and peaks and valleys that were full of glacier ice, they no longer have this glacier ice.

JOHNS: Grewingk glacier has been photographed for decades, old black and white pictures show a towering block of ice. Today, not nearly as big. We flew out in a helicopter. This glacier is just 12 miles or so due east from the city of Homer, Alaska, the people who live out here don't need scientists to tell them something strange is going on. 30 years ago, the glacier extended all the way out to that rock in the middle of the lake. Now, between there and here, there's just ice and water. Retired school teacher Dave Brann brings tourists here during the summer.

DAVE BRANN, HOMER RESIDENT: When we used to be going over there on a regular basis during the summer it was receding maybe 50 feet in the summer. The last two years, maybe 500 feet in the summer.

JOHNS: Last year, satellites showed more sea ice had disappeared than anytime in the past few decades.

UNIDENTIFIED MALE: Sea ice is receding dramatically. The amount of sea ice in the summer today is of the order of 25 percent reduced over what it was in just 1979.

JOHNS: And in Correll's view, burning fossil fuels is at least partly to blame for the melting in Alaska.

UNIDENTIFIED MALE: If you take the models and you try to create what we have today out of the past, you can't get there without having CO2 from fossil fuels and the other greenhouse gases in the equation. You just can't get it.

JOHNS: The concern is that if the melting continues it could affect the weather everywhere.

BOB CORRELL, AMERICAN METEOROLOGICAL SOCIETY: The oceans will get much warmer, we'll see storm severities and we will lose our most important indigenous animals.

JOHNS: But one scientist who is skeptical whether burning fossil fuels is causing climate change is Professor Fred Singer.

PROFESSOR FRED SINGER: The climate does these things and we think that the basic reason is the sun. But there are oscillations in the sun, the solar radiation that we're just beginning to understand and measure. Very small oscillations tiny changes but they're enough to make a difference to the climate.

JOHNS: But many still argue that a disaster that's been predicted for years has already begun.

UNIDENTIFIED MALE: The frequency and intensity of storms has increased. And the oceans are causing more catastrophic storms. I mean anybody who watched hurricane Katrina and that disaster unfold out of the gulf knows what disaster means.

JOHNS: So while scientists dispute the cause of global warming, man-made, natural cycle or both, to some up here in Alaska it feels like the climate is changing faster than the debate. Joe Johns, CNN, Homer, Alaska.


COOPER: Heat waves, melting glaciers, rising sea levels, the affects of global warming and what you can do to reverse it. Don't miss "Too Hot Not to Handle" a special report on HBO this Saturday at 7:00 p.m. eastern.

It is the video that caught our eye today. The shot that's what we always call it is coming up. But first, Erica Hill from "Headline News" joins us with some of the business stories we're following. Erica?

ERICA HILL, CNN ANCHOR: Hey Anderson a mixed day on Wall Street this Thursday. The Dow actually closed at a six-year high up 64 points on positive earnings reports from General Motors and Merck. But the Nasdaq fell eight points as eBay shares stumbled. The S&P 500 basically flat, rising a little more than a point.

A class-action lawsuit is being sought against the makes of Teflon. Plaintiffs in 15 states who filed lawsuits against DuPont want their cases combined. They say for years DuPont told the government and customers that its nonstick Teflon coating was safe, even though its own studies show it could become toxic when heated enough to fry an egg. DuPont says Teflon has a 40 year history of safe use.

And mortgage rates on the rise again to the highest level in nearly four years now. The average rate on a 30-year fixed rate mortgage now stands at 6.53 percent. Freddie Mac says the higher rates are causing the housing market activity to slow. Not sure whether that means the bubble will burst, though, Anderson, the eternal question.

COOPER: The eternal question especially if you're in New York. Erica, thanks.

Time now for "The Shot." Our favorite picture, a piece of video of the day, here it is, a cab driver falling asleep at the wheel. This was captured on a video camera mounted on the dashboard. Watch what happens next.

Driver kind of loses control of the car a little bit and then there you go. Crashes. Yeah. Sending him flying across the seat. Hurling him into the back, as horrible as this all looks, incredibly he walked away from the accident unhurt. Just a little jostle then. He's a very lucky man. He did lose his job once his boss saw this tape. Unbelievable that's "The Shot" for tonight.

A lot ahead tonight, it is a terrifying but entirely possible scenario. A hurricane wipes out Houston, Texas. A terrorist attack, oil production in Saudi Arabia. We'll look at how vulnerable the world's oil supply really is and what we can do to avoid a catastrophe. You think gas prices are high now. Take a look at this coming up a special edition of 360 "We Were Warned."


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