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THE SITUATION ROOM

Newly Released Emails Tie Rove to Fired Prosecutor Flap; California Moves Up Primary to February

Aired March 15, 2007 - 19:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening right now. We're following breaking news. Newly revealed e-mail messages appear to put Karl Rove right in the middle of the fired prosecutor flap. Tonight, the president's political advisor under investigation and Democrats on the attack.
Also this hour, a California earthquake in the presidential campaign. Arnold Schwarzenegger seals the date for an earlier primary, giving him, and his state, more campaign clout. I'll have an interview with the governor on this big move. That's coming up.

And is presidential candidate Rudy Giuliani making money off of the man who calls President Bush, the devil? We'll take a closer look for the 9/11 hero's links to Venezuela's Hugo Chavez.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Breaking news tonight. He's one of the most powerful lightning rods within the Bush administration, tonight Karl Rove is the target of even more intense scrutiny and attacks. New e-mail messages offer some fresh evidence about the deputy White House chief of staff's connection to the firing of those eight federal prosecutors. Rove joins the Attorney General Alberto Gonzales right in the center of this political storm.

Brian Todd, Suzanne Malveaux, Dana Bash, they are standing by. They have new developments. First, our Justice Correspondent Kelli Arena, with the latest -- Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Wolf, this is just all pretty amazing. The Justice Department just released this e-mail within the last hour.

I clearly shows that Karl Rove was asking what the plan was for U.S. attorneys back in early 2005. Now, the internal message entitled "Questions from Karl Rove", shows that Rove raised the issue of dismissing all 93 U.S. attorneys.

Part of it reads: "Karl Rove stopped by to ask you, (roughly quoting) how we planned to proceed regarding U.S. attorneys, whether we were going to allow all to say, request resignations from all, and accept only some of them, or selectively replace them, etc." That message was eventually forwarded to Justice Department Official Kyle Sampson just a few weeks before Alberto Gonzales was sworn in as attorney general. Now, Sampson, who by the way, resigned this week. Says in the e- mail that he discussed the idea with Gonzales, but -- here we go -- in a statement released tonight, a Justice Department spokesman says Gonzales "has no recollection of any plan or discussion to replace U.S. attorneys while he was still White House counsel."

Now, Wolf, everyone keeps pointing out, the idea of replacing U.S. attorneys is not original. It's not illegal. It happens all the time. What makes this an issue is that the White House has insisted that the idea of getting rid of all 93 U.S. attorneys came from former White House Counsel Harriet Miers.

Now, Wolf, several Republicans that I spoke to earlier in the day said they feared if there was one more negative revelation, that Gonzales would be gone. We'll see.

BLITZER: There's another clip in this excerpt, in this e-mail that the Justice Department has now released, that points a pretty specific finger at Karl Rove.

ARENA: It does, Wolf. It talks about -- from Kyle Sampson saying I suspect that when push comes to shove, that home state senators, I'm going to paraphrase here, basically we're going to reject whole-heartedly or partial dismissal of some of their U.S. attorneys.

And he ends by say, you know, "That said, if Karl" -- as in Rove -- "thinks there would be political will to do it, then so do I."

BLITZER: Karl Rove clearly very much involved, at least according to this Kyle Sampson e-mail. Thank you, Kelli for that.

Democrats clearly seizing on these new e-mail messages, as evidence that Rove was right in the middle of plans to fire those U.S. attorneys. Brian Todd has some more now on this new ammunition for Rove's critics -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, that latest e-mail had hardly seen light of day when one of the Democrats' point man on this scandal started to put pressure on the White House.

(BEGIN VIDEOTAPE)

TODD (voice over): One of the Bush administration's toughest critics, lays the gauntlet before Karl Rove, after the release of an e-mail showing Rove's early involvement in discussions about firing U.S. attorney's.

SEN. CHARLES SCHUMER (D-NY): The new e-mails show conclusively that Karl Rove was in the middle of this mess from the beginning. It is now imperative that he testify before Congress and give all the details of his involvement.

TODD: Earlier, the president's top political adviser wouldn't address the topic.

(On camera): Mr. Rove did you play any role at all in the firing of those U.S. attorneys.

(Voice over): But he did defend the firings. One U.S. attorney in San Diego was replaced, he said, because:

ROVE: She would not commit resources to prosecute immigration offenses. She made a decision that wasn't going to be her priority of office. U.S. Justice Department asked her to make it so, she did not.

TODD: And on fired U.S. Attorney Paul Charlton.

ROVE: The U.S. attorney in Arizona said he would not ask for the death penalty. This administration has a policy of, where appropriate, asking for the death penalty.

TODD: Rove highlighting differences over policy. A seeming contradiction of this statement, by Attorney General Alberto Gonzales in January.

ALBERTO GONZALES, U.S. ATTORNEY GENERAL: What we do is, is make an evaluation about the performance of individuals.

TODD: So, which is it? Poor job performance by these attorneys or the fact they didn't follow the administration's policy goals? The language has evolved at the Department of Justice recently. And a top official sought to clarify it last week.

WILLIAM MOSCHELLA, ASSOC. DEPUTY ATTORNEY GENERAL: It was for reasons related to policy, priorities, and management, what has been referred to broadly as performance-related reasons that these United States attorneys were asked to resign.

TODD: U.S. attorneys are political appointees and it's permissible to fire them if they don't pursue White House policies. But a staff with the House Judiciary Committee tells CNN their investigators are now looking into whether these attorneys were removed for other partisan reasons, and whether their replacements were truly qualified.

(END VIDEOTAPE)

TODD: Questions that Karl Rove, former White House Counsel Harriet Miers, and several Justice Department officials may have to answer sooner rather than later before Congress. The Senate Judiciary Committee has indicated that it may subpoenaed them to testify if they don't agree to do so their own, Wolf.

BLITZER: Brian Todd reporting. Thank you. Let's go to the White House and it's defense of Karl Rove in the wake of these newly disclosed e-mail. We'll turn to our White House Correspondent Suzanne Malveaux.

What are they saying there, Suzanne?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, I've spoken with the Press Secretary Tony Snow, as well as his spokeswoman Dana Perino. Both of them defending Karl Rove. I want to read a statement from Dana Perino:

She says, "The e-mail does not directly contradict nor is it inconsistent with what we said. What we know and what we said is that following the 2004 elections, during the transition, a question was raised about whether we should consider removing and replacing all U.S. attorneys for the second term. Karl's recollection is that he heard about this idea from Harriet," -- that being Harriet Miers -- "and the thought it was a bad idea and it would be unwise."

The bottom line, here, Wolf, is that they say that Karl Rove has not changed his position in any way. That his recollection is he got it from Harriet Miers, and they're standing by that statement. All of this, of course, goes to the voracity of statements that have been made here at the White House, from those spokespeople that we've talked to.

And, clearly, that is something Senate Judiciary Committee is going to be looking into. Whether or not Karl Rove's role in all of this has been minimized. And the White House has been truthful in describing it, and characterizing it the way they have.

BLITZER: It's a bold and very upbeat, positive face. But what about privately, are they getting nervous?

MALVEAUX: Well, certainly, if this turns into a creditability problem, which it certainly could be. We've already seen Democrats speaking out about this. It could be a very big problem for this White House.

But they ultimately say, look at the e-mail. This is not an idea that originated from Karl Rove. It doesn't say that in the e-mail. That it would clearly be in his purview to go ahead and discuss this idea. But they say, bottom line is Karl Rove did not do anything wrong.

BLITZER: Suzanne, thank you for that. Suzanne Malveaux at the White House.

And yet another match being thrown on this political firestorm tonight. A second Republican senator now suggesting the Justice Department would be better off if Alberto Gonzales were no longer the attorney general of the United States.

Let go to our Congressional Correspondent Dana Bash; she's up on the Hill.

What is happening on that front, Dana?

DANA BUSH, CNN CONRESSIONAL CORRESPONDENT: He's not using the "F" word, "fired", but Republican Senator Gordon Smith is making clear that he's come to the conclusion that Alberto Gonzales has a credibility problem here in Congress.

Therefore, he said through a spokesman, quote, "For the institution of Congress, it would be helpful to have someone who comes before Congress to have more creditability. So, lawmakers don't have to ask, is this person telling me the truth."

Now, many, many Republicans that we've talked to have made very clear to us that they think that Alberto Gonzales does have a big problem here. But Smith is going further in saying, here, essentially that he thinks it's time for Gonzales to go.

Again, not using the "F" word, like Republican Senator John Sununu did yesterday, where he said, point blank, he thinks Alberto Gonzales should be fired.

BLITZER: Dana Bash, on the Hill. Thanks very much.

Let's check in with Jack Cafferty. He's got the "Cafferty File" in New York. Yesterday we were talking about Alberto Gonzales. Today, a lot of attention right on Karl Rove.

JACK CAFFERTY, CNN ANCHOR, THE SITUATION ROOM: Well, my guess is you'll be talking about this on the Sunday program, along with all the other pundits that do Sunday programs. Depending on how all those discussions go, we might see the end of Mr. Gonzales, come the first part of next week.

But we're getting ahead of ourselves. Has John McCain lost his mojo? Some former supporters of the Republican presidential candidate say he no longer has that maverick edge that he had the last time around. Remember when he ran for his party's nomination back in 2000.

An article in "The Washington Post" today put it this way, quote -- "the blunt-spoken senator from Arizona has become the very picture of highly managed presidential candidate he once scorned", unquote.

McCain took off today on his campaign bus, something called the Straight Talk Express, on a five-day trip to Iowa and New Hampshire, trying to get back his standing as a front-runner in the race. It may not be that easy. ] Some of the obstacles in McCain's way: He's been one of the strongest supporters of the very unpopular war in Iraq. He's facing a tough fight from former New York Mayor Rudy Giuliani, a hero of 9/11.

Supporters, though, say that McCain's reputation as a maverick is alive and well, proven by his dust ups with the president over torture, judges and campaign finance. They also point to polls that show almost 60 percent of Republicans view McCain favorably.

So here is the question: How can Senator John McCain recapture his maverick reputation? E-mail your thoughts to caffertyfile@cnn.com, or go to CNN.com/Caffertyfile.

One of the things that probably did him as much damage as anything was that little trip he took down there to see The Reverend Falwell. I think that didn't probably sit well with a lot of his core fans.

BLITZER: I think you're probably right on that front. He got a lot of criticism for that, but he's got deal with the conservative religious base of the party, as well. And I assume he thought it was worth it.

All right, Jack. Thanks very much.

Coming up a seismic shift in presidential politics, California moving its primary to February. Will California be the driver's seat this time around? My interview, the complete interview with Arnold Schwarzenegger coming up this hour.

Plus, down, but not out yet, Fidel Castro. A Top Cuban official says he's making a comeback and has a hand in running the government again.

Also, more troops to Iraq. Pentagon speeding up deployment and acknowledging the violence there has all of the markings, and makings, of a civil war. That's coming up next. Stick around, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: On Capitol Hill today the Democrats launched a two- pronged offensive on the president's Iraq policies. In the House, they won Appropriations Committee approval for a troop withdrawal deadline of next September 1. But in the Senate they failed to get the 60 votes they needed for approval of a resolution setting a timetable for a withdrawal. It would have set a goal of troop pull out by March of next year.

Those U.S. reinforcements being deployed to Iraq will soon be getting more reinforcements of their own. Thousands more U.S. troops now getting the go-ahead. Was this part of the president's original plan? Let's turn to our Pentagon Correspondent Barbara Starr.

Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, keeping the so- called troop surge going in Iraq, once again, is requiring more troops.

(BEGIN VIDEOTAPE)

STARR: CNN has learned that Defense Secretary Robert Gates signed orders speeding up the deployment of up to 3,000 additional forces, most of them from a combat aviation brigade.

Armed with dozens of attack helicopter gun ships, and troop transports, the brigade will likely leave the U.S. in May. Their main job? Airborne support for the 20 brigades of ground combat forces.

There aren't enough helicopters in Iraq right now to keep the so- called troop surge on the ground going. General David Petraeus, the new commander in Iraq, has made it clear. He wants to mass as many troops, as fast as he can. While some levels of violence are down, there are still many skeptics.

LAWRENCE KORB, CENTER FOR AMERICAN PROGRESS: Petraeus doctrine is too little, too late. If we were going to do this, we should have done it right from the beginning. Listen, to the General Shinseki, who had enough troops on the ground to get the situation under control after the fall of Saddam Hussein.

STARR: For the first time, the Pentagon has openly acknowledged, in congressionally mandated report, that some of the violence in the last quarter of 2006 in Iraq is properly descriptive of a civil war.

With signs the troop increase is making a difference, that acknowledgment is winning kudos from at least one long-time Pentagon critic.

REP. JOHN MURTHA (D-PA): I just read the report that we get every quarter. We're starting to get realistic reports. Since Secretary Gates came in we're getting much more realistic reports.

STARR: The request for the helicopter unit was made just a few weeks ago. So for now it means another plus up in overall troop levels in Iraq -- Wolf.

BLITZER: All right, Barbara. Thank you.

Four more U.S. troops were killed today in Iraq. U.S. military says a roadside bomb exploded near their vehicles in eastern Baghdad. Two other soldiers were wounded in the attack, 206 Americans have died in Iraq, already this year.

As many in Congress step up efforts to try to pull the troops out of Iraq could Senator Hillary Rodham Clinton find herself in trouble for wanting to keep some of those troops there? CNN's Mary Snow joins us with this part of the story -- Mary.

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, Democratic presidential hopeful Senator Hillary Clinton is explaining her plan to keep some troops in Iraq. The question is, does it carry political risks with antiwar activists and liberals?

(BEGIN VIDEOTAPE)

SNOW (voice over): On the campaign trail, Senator Hillary Clinton is calling to put a stop to the war in Iraq.

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: We should end this escalation now.

SNOW: But in a "New York Times" interview, the Democratic presidential hopeful said if she's elected she sees remaining military as well as political mission in Iraq, trying to contain extremists, but avoiding sectarian violence.

Clinton aides say it's consistent with a broader plan by congressional Democrats to redeploy troops. Some political observers say Clinton's blueprint could touch a nerve with the Democratic Left.

They're not really sure that she's with them on Iraq and other issues. And so they're suspicious. And that suspicion shows itself in what they say about her. SNOW: Why the suspicions? It stems back to her 2002 vote authorizing the war. A vote she refuses to call a mistake. She's been repeatedly grilled about it on the campaign trail.

CLINTON: Well, I have said, and I will repeat it, that knowing what I know now, I would have never voted for it.

SNOW: Of her Democratic rivals? Former Senator John Edwards has said that his vote to authorize the war was a mistake. Senator Barack Obama wasn't in the Senate at the time, but he's openly opposed the war all a long.

On leaving some troops in Iraq, Obama said, Wednesday:

SEN. BARACK OBAMA, (D-IL), PRESIDENTIAL CANDIDATE: The withdrawal would be gradual and would keep some U.S. troops in the region to prevent a wider war and to got after Al Qaeda and other terrorists.

SNOW: It appears similar to Clinton's plan, but observers say it resonates differently with antiwar activists.

LARRY SABATO, UVA CENTER FOR POLITICS: They are not inclined to cut her very much slack. They are inclined to cut Barack Obama, quite a bit of slack, and John Edwards some slack as well.

(END VIDEOTAPE)

SNOW: And observers say its not likely that those on the Left will give Senator Clinton more slack because of her history on the Iraq war -- Wolf.

BLITZER: All right, Mary. Thank you.

The U.S.-lead multi-national force is going on the popular website YouTube, to give Americans an inside look at the military operations in Iraq. Jacki Schechner is taking a closer look at that web site.

Jacki, what do you see?

JACKI SHECHNER, CNN INTERNET REPORTER: That's right, Wolf, take a look at this video. This is U.S. troops firing on a suspected Al Qaeda stronghold in Iraq. This incredible video was online from the multi-national force in Iraq. They decided to start their own channel on YouTube.

They say the idea is to reach a younger audience and tell the story of the war from their perspective. They say they have all kinds of video, from predators, from gun cameras, even from soldiers on the group.

Clearly, this is the kind of video that has been sanctioned and edited by the military, and on YouTube there are hundreds and hundreds of videos that the military would probably prefer that you don't see, that are just a click away. So, we asked them today why draw people to YouTube when they can see the things you want, but also the things you might not want them to see? They say that they know that's what YouTube is all about. They are not concerned, Wolf, they say people are going to watch what they want to watch.

BLITZER: I suspect they think it could help recruitment as well. Thank you, very much for that, Jacki.

Up ahead, Arnold Schwarzenegger, he's changing the course of the presidential election right now. He's standing by, he's in THE SITUATION ROOM. Our interview, the full interview, that's coming up.

Plus, Rudy Giuliani's you law firm making some big bucks off Hugo Chavez? Carol Costello taking a closer look at the company ties that are raising eyebrows.

(COMMERCIAL BREAK)

BLITZER: Brutal, barbaric and bold, we're learning more details now about the attacks and the plots hatched by an Al Qaeda alleged kingpin. Once again, let's go to our Justice Correspondent Kelli Arena -- Kelli.

ARENA: Wolf, for years, Khalid Sheikh Muhammad has been considered the mastermind of September 11 attacks, but that it seems wasn't the half of it.

(BEGIN VIDEOTAPE)

ARENA (voice over): In chilling detail, Al Qaeda operative and self-proclaimed 9/11 mastermind, Khalid Sheikh Muhammad, described how he personally slashed the throat of "Wall Street Journal" reporter Daniel Pearl.

"I decapitated with my blessed right hand the head of the American Jew, Daniel Pearl" It was one of the more startling statements the government said Mohammed made in a closed hearing this weekend at Guantanamo Bay. That's saying a lot. Because the rest of what Mohammed said was hard to top.

Mohammed confessed and claimed credit for more than 30 of the world's most heinous terrorist attacks. From bombings in Bali, to plans to blow up nuclear power plants in the U.S. His resume reads like a horror novel. He claims responsibility for the shoe bomber operation, where Richard Reid , tried to blow up an airplane. Numerous assassination attempts on several American presidents, including President Carter and Clinton; and a plot to kill Pope John II, while he was visiting the Philippines.

What sets him apart from other Muslim terrorists, say experts, is his cold-blooded professionalism.

PETER BERGEN, CNN TERRORISM ANALYST: I think Khalid Sheikh Muhammad was sort of a professional terrorist. Unlike a lot of the other people in Al Qaeda who seem to be motivated by some sort of religious belief.

ARENA: The list of exploits Muhammad provided is so long that some experts wonder if he really could have had a hand in them all.

(END VIDEOTAPE)

ARENA: But as one legal expert put it, even if he was exaggerating, so what. 9/11alone would be horrible enough. In any case, if there is a trial, the statement will be used against him -- Wolf.

BLITZER: Thanks, Kelli. Kelli Arena reporting.

And just ahead, here in THE SITUATION ROOM" Governor Arnold Schwarzenegger gets more political muscle. Listen to this.

(BEGIN VIDEO CLIP)

BLITZER: Bottom line, you want California in this presidential selection process to once again become a king maker?

GOV. ARNOLD SCHWARZENEGGER (R-CA): I tell you, Wolf, that it is very important that California is part of the mix, on a decision making of who should be our nominees.

(END VIDEO CLIP)

BLITZER: He and the state are changing the presidential campaign big-time. My interview, the full interview coming up.

And Stephen Colbert plays it for laughs and that has members of Congress, at least some Democrats -- one Democratic leader, specifically, scared. Stick around, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM. Happening right now. The top White House adviser Karl Rove sharing the hot seat with Attorney General Alberto Gonzales.

Newly released e-mail messages, tonight, raising new questions about the specific role Karl Rove may have played in the firing the federal prosecutors.

Iran's President Mahmoud Ahmadinejad wants to defend his country's nuclear program, personally, before the United Nations. Iran has requested visas for travel to New York City, where the Security Council is taking up the issue of new sanctions against Iran.

And the Palestinian President Mahmoud Abbas today agreed today on a unity government with the militant Islamic group Hamas. Israel, though, is boycotting the new leadership calling on world community to do the same. Saying its platform failed to recognize the Jewish state.

I'm Wolf Blitzer. You're in THE SITUATION ROOM. Tonight, Senator John McCain is trying to drive himself out of a presidential campaign slump. His campaign bus, the so-called "Straight Talk Express" is on the road once again. So is our senior political correspondent Candy Crowley. She is joining us tonight from Iowa. How is it going out there, Candy?

CANDY CROWLEY, CNN CORRESPONDENT: So far, so good as far as McCain is concerned. He's drawing pretty good crowds here. But consider this, Wolf. The senator has been in the U.S. Senate for two decades now. That's a pretty rough spot from where to launch an independent maverick campaign of the kind he did just seven years ago.

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): All aboard the Straight Talk Express, as John McCain tries, in picture and rhetoric, to recreate his insurgent candidacy, the one that almost overthrew the campaign of George W. Bush.

SEN. JOHN MCCAIN, (R) AZ: Deja vu all over again.

CROWLEY: The problem is, the maverick of 2000 has been swimming in the mainstream lately. Can he find his mojo there for 2008?

MCCAIN: I'm still the same candidate I was, a little bit older, but still the same candidate. We're still having fun, still on the bus, still have the town hall meetings in the same way that we were before. And I'm convinced we're doing fine.

CROWLEY: Now a 20-year veteran of the U.S. Senate, McCain has spent the past few years in the mainstream, courting the party faithful, making up with evangelicals he once dissed, picking up Bush staffers, Bush fun raisers, Bush supporters. It has taken the glow off.

And now the outsider looks like ex-Mayor Rudy Giuliani, and he has the poll numbers to prove it, leading McCain by double digits among Republicans. There is also the matter of the war. McCain is so hawkish, it often seems to be his war as much as the president's. The position has cost him support, but he greets it head on.

MCCAIN: I am convinced that, if we lose this war -- this conflict, and leave, they will follow us home.

CROWLEY: McCain's strategists believe, even if the country is now predominantly anti-war, voters will give McCain credit for his years as a Vietnam prisoner of war and his credentials as a military expert. In short, they believe voters will see McCain as having the right stuff for dangerous times.

MCCAIN: The transcendent issue of this campaign will be this conflict we are in between good and evil, between the forces of radical Islamic extremism that are trying to destroy America and everything we believe in. I'm qualified. I know the face of war. I know the face of evil. I will win. We will win.

(END VIDEOTAPE)

CROWLEY (on camera): Traveling across Iowa with the senator there's plenty of time to talk to him about the state of his campaign in 2008. He compares it to spring training and says, I'm very happy where we are. Wolf?

BLITZER: Candy, have safe troubles out there in Iowa. Thanks very much for that.

Is Arnold Schwarzenegger upping the ante for '08? California's governor today signed a bill moving up the state's presidential primary from June to February. Early February to be specific.

Could that early vote give the biggest state the biggest say in the race for the White House?

(BEGIN VIDEOTAPE)

BLITZER: And joining us now, the Republican governor of California, Arnold Schwarzenegger.

Governor, thanks very much for coming in.

This is a significant day. Bottom line, you want California in this presidential selection process to once again become a kingmaker?

GOV. ARNOLD SCHWARZENEGGER (R), CA: Well, I tell you, Wolf, that it is very important that California is part of the mix in the decision-making of who should be our nominees, because up until now, by having the June primary, you know, by that time, before the voters ever had a chance to vote, it was already locked in who the candidate is. And I think that is unfair to California, because we are number one, the number one state in the union.

So now we have changed it. We've signed a bill today that moves the June primary up to February. Now we will be part of the mix and we will be part of the decision-making.

BLITZER: On the Republican side, a lot of analysts already predicting this will help the more moderate Republican candidates. Specifically, Rudy Giuliani.

Is that your assessment as well, given his moderate views or social issues like abortion rights and the views of Californians in general?

SCHWARZENEGGER: Well, to be honest with you, we don't analyze it that way. All we want to do is, if it is a Democrat or a Republican that is in the White House, I think it is advantageous for California, if those candidates come out to California, know what our issues are, know that we care about infrastructure, about health care reform, about the environment, about political reform. All of those things.

We want them to talk about that. We want them to talk about it and see what their commitment is for California if they get in to the White House. So that's what this is all about, is let them pay attention to us, because remember, we're only getting right now 79 cents on the dollar that we're paying in federal tax. We want to improve all of those kinds of things.

BLITZER: You said the other day about -- about John McCain, you said this -- and I'll read it to you. You said, "John McCain is a great, great senator, a great national leader."

Is he your personal choice for the Republican presidential nomination?

SCHWARZENEGGER: I have not chosen anyone, and I have said that I most likely would not endorse anyone before the primaries. What I'm interested in as governor of California is to represent all the people of California, Democrats and Republicans.

So I'm welcoming all candidates to come in here and talk about the issues that are important to California. We've got to get more attention from the federal government. And this is what this is all about. Californians feel disenchanted about the fact that we have never had for many, many years, a chance to participate in this kind of election, in picking the candidate, if it's Democrats or Republicans.

BLITZER: You were reelected decisively the last time because you moved back towards the center, moved to the middle. You made global warming, for an example, an important issue for yourself.

This is what John McCain recently said about the Bush administration's record on global warming. He said, "I would assess this administration's record on global warming as terrible."

Do you agree, first of all, with him that the Bush administration's record is terrible?

SCHWARZENEGGER: I think it is very important that we as a state show leadership when it comes to the environment. I think all great things come from a grassroots level, come from a state level, and then eventually the federal government adopts it. It's never the other way around.

There's very rarely been anything that is great that comes from Washington or from the federal government. All ideas, even if you think back to welfare reform, it came from Tommy Thompson, from Governor Tommy Thompson. Then Clinton adopted it, then in a bipartisan way they passed it and they made it a national thing.

So I think it's going to be the same with the environment. We are forming regional partnerships right now with Western states, with Northeastern states, with England, with Tony Blair, for instance, and all this. And eventually I think there will be enough states where the federal government is going to look at this and say, we've got get our act together, too, just like the other states, and fight global warming and recognize this is a danger to our world, that we have to start fighting it now, and we have to cut down on our greenhouse gas emissions. BLITZER: How worried are you that the political momentum, at least last November and according to all the polls now, appears to be with the Democrats, and that the Republicans are not necessarily poised to stay in the White House next year? What's your recipe? What do the Republicans needing to do to regain the momentum? Or is it just the -- what many people see as the disaster of the Iraq War?

SCHWARZENEGGER: Well, I think that, you know, wars always have gotten people into trouble, because, you know, sometimes they go well and sometimes they don't go well. And so you can't really count on that.

I think the important thing here is, is that both of the parties talk about the issues that are important to the people, rather than just talking about the ideology and the things that they believe in, because in the end, when the people send you to Sacramento, or send you to Washington to take care and represent them, it is not just Republicans, it's not just Democrats.

Every district has both parties represented, and then you get to represent everybody. I think that's the important thing.

So I think that for Democrats, you know, to go and say, you know, for us, education is important, that ought to be important also for Republicans, because we have Republican children in the schools and Democrat children. I think when you talk about building the infrastructure, there is no Democratic road or Republican road. It's roads for everybody. I think when you talk about air quality and then you talk about the environment, we all breathe the same air.

I think that both of the parties have to represent the people.

BLITZER: If Senator Orrin Hatch and others get their way, there will be a constitutional amendment that will remove the restriction on people like you, who were not born in the United States, from becoming president. If that were to happen, and that certainly is a big "if", governor, as you know, would you rule out running for president?

SCHWARZENEGGER: I haven't thought about that at all. You know, there is so much work that needs to be done here in California. Wolf, I have my hands full.

I think for me, the important thing now is in this next four years to bring both of the parties together, and to do what we did today. Both parties come together, we sign bills, and we make things happen and create action for the people of California.

And we are going to continue doing that. We are going to go and reform health care here in this -- in this state, which is a very, very important issue so we can insure everybody. We're going to move forward and really do all of those things that need to be done here, including prison reform and helping just people that are vulnerable citizens, and so on, and education reform, and all this. So there's a lot of work.

For me, I don't even want to think about all of this running for president, not running for president. I'm happy the job that I have, and I'm not even thinking about, OK, this is something I can't do because I wasn't born here. I only think about the things that I can do.

And let me tell you, this is the land of opportunity. And I could do so many things. I was successful in many things. So I'm very happy the way things are.

BLITZER: We're out of time, governor. But there's one thing you could do in 2010, challenge Barbara Boxer for the U.S. Senate seat.

Have you given any thought to that?

SCHWARZENEGGER: No, absolutely not.

BLITZER: Governor, thanks very much for joining us.

SCHWARZENEGGER: Thank you very much, Wolf. Thank you.

(END VIDEOTAPE)

BLITZER: And there are new signs tonight Florida, yes, Florida, may be trying to one up California in the primary wars. Take a listen to what the Republican Party chairman, the U.S. senator from Florida, Mel Martinez told me earlier in THE SITUATION ROOM.

(BEGIN VIDEO CLIP)

SEN. MEL MARTINEZ, (R) FL: Florida is going to move its primary up. The legislation is in session now. They're talking about moving it ahead of California on January 29th. I heard your conversation with the governor. I think Florida views it the very same way. It is a way to be relevant and a way to be noticed.

(END VIDEO CLIP)

BLITZER: So the excitement just beginning.

Still ahead, Rudy Giuliani's law firm making money off the man who calls president Bush the devil?

And he may still be recovering from surgery but Fidel Castro apparently is still helping to run Cuba. Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: It appears the real devil is in the details. Is Rudy Giuliani's law firm in bed with a company controlled by the man who uses words of evil about President Bush? Let's turn to our Carol Costello. She is watching the story for us.

Carol?

CAROL COSTELLO, CNN ANCHOR: Oh, Wolf, can you say Hugo Chavez? Yes, the man the United States says is uncooperative in the war on terror is tied to the candidate who touts himself as the toughest on terror.

(BEGIN VIDEOTAPE)

COSTELLO (voice over): One man revels in his anti-Americanism, calling President Bush a madman and a devil...

HUGO CHAVEZ, VENEZUELAN PRESIDENT (through translator): Yesterday the devil came here.

COSTELLO: ... taunting President Bush by offering discounted oil to poor Americans.

The other man revels in his image of red, white and blue American patriotism as a 9/11 hero and a strong leader.

RUDY GIULIANI (R), PRESIDENTIAL CANDIDATE: Republicans are essentially a party of strong national defense and fiscal discipline.

COSTELLO: It turns out opposites do attract. Rudolph Giuliani's law firm is making money off of Venezuelan president Hugo Chavez, and Chavez is gaining access to American lawmakers through Bracewell & Giuliani.

According to the Texas Ethics Commission, Giuliani's firm lobbies on behalf of Citgo, owned by Venezuela, and collected as much as $150,000 in 2005-06, and will collect up to $100,000 more this year. Hypocrisy? Giuliani as a corporate shill?

Wayne Barrett has written extensively about Giuliani's business practices. He says yes to all of the above.

WAYNE BARRETT, "VILLAGE VOICE": He got a chunk of money to join this law firm. They changed the name of the law firm to headline him. Lent his credibility to these folks, you know, and sort of toss the ball in the air.

COSTELLO: Giuliani's camp is quick to point out Giuliani himself is not involved in lobbying, saying, "Mayor Giuliani believes Hugo Chavez is not a friend of the United States, and his influence continues to grow because of our increasing reliance on foreign sources of oil."

But Barrett says that doesn't jive with the popular image Giuliani likes to project of an embattled mayor who bravely walked to the World Trade Center site while the fallen towers still smoldered, who famously refused to accept a donation from a Saudi Arabian prince, rejecting his $10 million check because the prince has suggested U.S. policies in the Middle East contributed to 9/11.

Giuliani was livid.

GIULIANI: There is no justification for it. The people who did it lost any right to ask for justification for it when they slaughtered 4,000, 5,000 innocent people.

COSTELLO: The Hugo Chavez affair is just the latest bad press for Giuliani -- his three marriages, his estrangement from his children -- and the first primary is still 10 months away.

(END VIDEOTAPE)

COSTELLO (on camera): As for whether this will hurt Giuliani in the polls, well, so far, Wolf, nothing else has. He still leads among Republicans.

BLITZER: Carol. Thank you. Carol Costello reporting. Up ahead. Maverick or traditionalist? What do you think about Senator McCain. Jack Cafferty of your e-mail. That's coming up.

And beware of Colbert? Why are Democrats warned to stay away from the "Colbert Report"? Jeanne Moos and only Jeanne Moos will have the story.

(COMMERCIAL BREAK)

BLITZER: There's Jack Cafferty. Let's go to Jack for the "File." Jack?

JACK CAFFERTY, CNN ANCHOR: Question this hour, Wolf, is, how can Senator John McCain recapture his reputation as a maverick, the one he had back in 2000. Remember?

Seth in Washington writes, "McCain was considered a maverick because he was thinking individually and speaking his minds. He has lost both of those traits, becoming the political Stepford wife of the Republican Party.

"How about he tries to stand up for what he believes again instead of new corporate masters. Truly he's the most disappointing candidate of the 21st century."

Judy in Exeter, California, "Stop sucking up to the power groping religious right and the Bush administration. Be yourself, Johnny, and say what you think. You might be surprised. As a Democrat I liked him before he decided to become a pathetic shadow of his former self."

Linda in New York. "He doesn't need to rescue his reputation as a maverick. Following your own drummer is fine. What he can't escape, however, was his blatant campaigning for Bush and over the top support for Bush. I would have expected him to keep his independence. I lost all confidence in McCain at that point.

Kay in Tennessee writes, "John McCain got off the Straight Talk Express at Jerry Falwell town. That bus has moved on without him."

Don in Texas, "Trying to make John McCain exciting as a candidate is like making it pleasant to put on a wet bathing suit. He is a failed candidate and senator who could do us all a favor by fading off into the Arizona sunset, never to be heard from again."

And A.P. in Aurora, Illinois. "How can McCain be a maverick? He just traded Straight Talk Express 2000 for Suck Up Express 2008."

If you didn't see your e-mail here, go to cnn.com/cafferty file. You can read more of them online. Wolf?

BLITZER: Jack, see you tomorrow in New York. Looking forward to it. Thank you very much. Let's find out what is coming up right at the top of the hour. That means Paula is standing by. Hi, Paula.

PAULA ZAHN, CNN HOST: Hi, Wolf, thanks. We're calling tonight's special hour "Hooked: When You Can't Stop."

We're going to take a look at America's epidemic of addiction to drugs and alcohol. A brand new study says half of all full-time college students either binge drink for abuse drugs.

We've also got some riveting commercials. They are part of Montana's effort to stop methamphetamines. Hopefully they will be seen across the country. Wolf, you are not going to be able to look away from them and hopefully any kid thinking about taking drugs who watches them might be discouraged to do so.

It's all "Out in the Open" coming up at the top of the hour.

BLITZER: Let's hope they are discouraged.

ZAHN: Yeah.

BLITZER: Thanks for that, Paula.

ZAHN: Pretty scary stuff to watch.

BLITZER: And still ahead here in the SITUATION ROOM, Fidel Castro, Havana says he's making a comeback in politics. We have that story.

Also Democrats going to some new lengths to avoid being spoofed by a man who makes mocking politics his business. "The Colbert Report." That's it. Stick around.

(COMMERCIAL BREAK)

BLITZER: Fidel Castro may still be taking part of some decision making process in Cuba. One Cuban official says Castro, in effect, is phoning it in. Let's get the specifics from Carol, once again. What's he doing, Carol?

COSTELLO: Well, he's back. Wolf. Fidel Castro is taking part in major decisions mostly by phone. That's according to Reuters, who quotes a member of the Cuban legislature.

Now, I don't know when the Cuban public will see him actually governing, but he did take a long walk with his good friend who said the walk seemed like kilometers. Castro, as you know, has been recovering from stomach surgery. And as you know, Wolf, back in February he did that live radio broadcast with his good friend Venezuelan President Hugo Chavez.

BLITZER: I remember that. Hugo said Fidel, you're on, go ahead.

COSTELLO: And he talked. He was.

BLITZER: See you tomorrow in New York as well, Carol. Thank you very much.

It's no joke. A popular political satirist on TV driving Democrats in Congress away? Here's CNN's Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Beware of Colbert. The eagle in the show open won't get you but the host might.

STEPHEN COLBERT, "THE COLBERT REPORT": You said by looking at your voting record you seem like a black woman. Congressman are you a black woman?

REP. STEVE COHEN, (D) TN: At Obviously not.

MOOS: The segment known as ...

COLBERT: Better know a district.

MOOS: Makes shows like "Meet the Press" and "Face the Nation" seem easy to face.

You'll never catch Tim Russert asking ...

COLBERT: Then why are you undressing me with your eyes, congresswoman.

DEL. ELEANOR HOLMES NORTON, (D) DC: Don't flatter yourself, sir.

MOOS: Which explains why the chairman of the Democratic Caucus confirms he's steering Democrats away from appearing on the "Colbert Report."

COHEN: At some point Congressman Emanuel said to me I wouldn't go on that show. I wouldn't do it.

MOOS: Too risky for Democrats even if the host is a parody of a right wing bloviator.

COLBERT: You tried to join the Congressional Black Caucus. Doesn't that make you one crazy honky?

COHEN: If you thought that was funny, if you would have seen what they cut out, I would have had an Emmy.

MOOS (on camera): Not only did Congressman Cohen completely ignore the advice not to go on the "Colbert Report", he even put out a press release announcing his appearance.

(voice-over): Even though things got hairy, he said he had fun. Is there such a thing as too much fun? Florida Congressman Robert Wexler was unopposed for re-election.

COLBERT: Let's say a few things that would really lose the election for you. If you were contested. I enjoy cocaine because ...

REP. ROBERT WEXLER, (D) FL: I enjoy cocaine because ...

COLBERT: Could you try not laughing because people will think it's a joke.

WEXLER: I enjoy cocaine because it's a fun thing to do.

MOOS: And when real TV news shows did stories on the coke comment ...

UNIDENTIFIED MAEL: They're calling it foot in mouth disease.

MOOS: Colbert rose to Wexler's defense.

COLBERT: Vote Wexler, the man has got a sense of humor, unlike, evidently, journalists.

MOOS: In Wexler's words, "There was no real fallout. Some of the media took it too seriously."

Politicians are drawn by the demo, the young audience.

REP. BRAD SHERMAN, (D) CA: The porn industry is not in the San Fernando Valley, sir.

COLBERT: Have you ever been to your district?

SHERMAN: What?

MOOS: Colbert ended up putting Congressman Brad Sherman in a mock gay porn film.

And Republican Congressman Lynn Westmoreland who tried to put the Ten Commandments in the capital ended up getting quizzed on them.

COLBERT: What are the Ten Commandments?

REP. LYNN WESTMORELAND, (R) GA:

MOOS: Thou shalt not appear on Colbert ...

COLBERT: This is "The Colbert Report."

MOOS: Unless you're prepared to leave the audience howling. Jeanie Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: Thank you, Jeanne Moos. Tomorrow, among our guests, Donald Trump. He'll weigh in on the 2008 race and Bob Woodruff of ABC News. He reveals the hidden injuries of U.S. troops.

Let's go to Paula in New York. Paula?

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