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THE SITUATION ROOM

An Intelligence Report is Saying al Qaeda is Boosting Efforts to Infiltrate the United States. Congressional Operatives went Under Cover to buy Radioactive Ingredients for a Dirty Bomb. The White House Hands Out some Mixed Grades on the Iraqi Report Card. An Undercover Investigation in a Beijing Neighborhood Reveals yet Another Problem with Chinese Products

Aired July 12, 2007 - 1900   ET

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


WOLF BLITZER, CNN ANCHOR: Thanks very much, Lou.
Happening now -- there's breaking news on a growing threat from al Qaeda. A secret intelligence report saying the terror network is boosting efforts to infiltrate the United States and is much more capable of carrying out an attack, despite six years of President Bush's war on terror.

Iraq's report card -- the White House handing out some mixed grades, but says there's progress in the war. Democrats give the president an "F". I'll speak with war critic with Congressman John Murtha.

And more trouble for the McCain campaign -- a Florida co-chairman now accused of soliciting an undercover officer for sex.

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

But we begin with the breaking news tonight on al Qaeda's attack plans. In just the past hour CNN has confirmed the terror network is redoubling efforts to try to sneak agents into the United States and has regained much of its ability to strike in this country. That from a secret U.S. government intelligence report. It is still in the works.

Let's go straight to our justice correspondent Kelli Arena. Kelli, what are you learning?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well Wolf, this report known as the National Intelligence Estimate represents the latest intelligence from all the key intelligence agencies about what to expect from al Qaeda. Officials tell us that the report states al Qaeda is increasing its effort to get operatives inside the United States and that it has nearly all the capabilities to carry out an attack, including a safe haven along the Pakistan/Afghan border where leaders can operate from.

The report also expresses some concern about the possibility of a growing number of extremists who may already be in the country. As you know, Wolf, counterterrorism experts are particularly concerned about extremists in Europe coming here. As you know, it is very easy for them to travel to the U.S. without a visa; other key points from the report that al Qaeda is still in hot pursuit of chemical, biological and nuclear weapons.

Now, Wolf, the officials that we spoke to spoke anonymously because as you said this report is not final yet, but a lot of this should sound familiar. Senior intelligence officials have been expressing similar concerns quite openly. And we do expect a declassified version of this report to be released soon.

BLITZER: Here is a question a lot of people are asking, Kelli. If al Qaeda is rebuilding that capability along the border between Pakistan and Afghanistan, why not simply go in there and crush them? What is the issue on that front?

ARENA: Well first of all, you know that border is owned by Pakistan, so it is sovereign territory. But there is a great deal of concern that if they go in and disrupt that area, that that will disrupt all of Pakistan, and as you know, this is a nation with nuclear weapons, Wolf. You don't want that kind of chaos. It is a very delicate balance if the U.S. has to strike.

BLITZER: Very delicate indeed -- Kelli thanks very much.

Meanwhile, there's been a secret sting operation underway, congressional operatives going undercover to buy radioactive ingredients for a dirty bomb. Could terrorists just as easily do the same thing right here in the United States?

Let's go to Brian Todd. He's got more on this very disturbing report. Brian?

BRIAN TODD, CNN CORRESPONDENT: It is disturbing, Wolf. Investigators said they posed as businessmen and got past the government agency that is supposed to keep those materials out of the hands of terrorists.

(BEGIN VIDEOTAPE)

(SOUNDS)

TODD (voice-over): The panic of a dirty bomb attack. A blast of radiological material designed, as seen in this simulation, to inflict mostly chaos and moderate harm. Who can pull it off?

GREGORY KUTZ, GAO INVESTIGATOR: We were able to beat the system with a basic ruse.

TODD: Congressional investigators say that earlier this year they conducted a clandestine operation, created a bogus company, used it to get a real license for radioactive material from the Nuclear Regulatory Commission. They doctored up that license, then used it to at least start to buy enough material to make a moderate-sized dirty bomb.

KUTZ: We bought, from public sources that anyone could buy from.

TODD: They say aside from a couple of phone calls and faxes, no one at the NRC checked to see if they were legitimate. The NRC says it is plugging the gaps.

EDWARD MCGAFFIGAN, NRC COMMISSIONER: We have to have greater defense and depth in our system. We are going to have to do a better job at these manufacturers and distributors to make sure that they're not putting the dollar ahead of the American people.

TODD: NRC officials also say the amount of dirty bomb material the investigators were after would have only had the radiation equivalent of a CAT scan to the chest. The investigators say that's not the point. They say they could have kept right on buying material until they had enough to do some real damage. And homeland security expert David Heyman, who's done several exercises on radiological attacks, adds this.

DAVID HEYMAN, CTR. FOR STRATEGIC & INT'L STUDIES: Any amount of stuff will be considered dangerous in the public mind. If you have a dirty bomb that goes off, that's a large explosion with a little bit of radiation in there; once we start detecting radiation, people will get scared.

(END VIDEOTAPE)

TODD: An even greater threat, according to Heyman, radiological material abroad, in the former Soviet Union and elsewhere. Much of that, he says, is still not secured, and the small amount needed for a dirty bomb could easily be brought across U.S. borders, Wolf.

BLITZER: So, where do these federal investigators go from here, Brian?

TODD: Well I spoke with two congressional staffers close to the investigation. They say they will have a dialogue with the NRC. They will follow up on the agency's promise to tighten up all of their procedures. But they are leaving open the possibility of another secret probe if the climate doesn't change here.

BLITZER: All right. Very disturbing report indeed -- thank you, Brian.

There's another important story we're following. The House of Representatives ignoring a presidential veto threat again. Only moments ago, it backed a U.S. troop withdrawal from Iraq by April 1 of next year -- the vote -- 223 to 201. This is President Bush telling Congress he's in charge of running the war, and that Congress should stick to simply funding it.

Also today, the White House put out a progress report on Iraq. Our White House correspondent Suzanne Malveaux is watching all of this. It was a mixed report, I should say, that emerged from the White House today, Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: It was a mixed report. There were new digs in the briefing room, but really an old message from this president. He's under an incredible amount of pressure to prove that something is working in his Iraq strategy, but that progress report showing mixed results, and, of course, President Bush, trying to explain why.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The President of the United States.

MALVEAUX (voice over): President Bush laid out plenty of reasons why his Iraq strategy must continue.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm not making excuses. But it is hard.

MALVEAUX: Whatever you call them, Mr. Bush offered many, starting with the Iraqi progress report sent to Congress. While a 50-50 report card usually constitutes a failing grade, not so for this administration.

BUSH: The bottom line is that this is a preliminary report.

MALVEAUX: Mr. Bush excused the Iraqi government's failure to meet key political benchmarks.

BUSH: It is hard work for them to get law passed. And it's -- sometimes it is hard work for people to get a law passed here.

MALVEAUX: Here, lawmakers, both Democrats and a growing number of Republicans, are urging Mr. Bush to change course. The president accused them of crossing into his lane.

BUSH: I don't think Congress ought to be running the war. I think they ought to be funding our troops.

MALVEAUX: The troops, Mr. Bush says, must now stay in Iraq to fight al Qaeda, the terrorist group that was largely absent there before the U.S. invaded.

BUSH: The same folks that are bombing innocent people in Iraq were the ones who attacked us in America on September the 11th.

MALVEAUX: And as for who's responsible for keeping U.S. troops in Iraq, Mr. Bush stressed several times his reliance on his military command and their belief that now is not the time to pull out forces.

BUSH: If that were to happen, we would then have to go back in with greater force in order to protect ourselves.

MALVEAUX: Mr. Bush offered this explanation for Americans' discontent...

BUSH: There's war fatigue in America. It's affecting our psychology.

MALVEAUX: And as for the president's own psychology?

BUSH: You know, I guess I'm like any other political figure. Everybody wants to be loved. Just sometimes the decisions you make and the consequences don't enable you to be loved.

(END VIDEOTAPE)

MALVEAUX: And he says he can look himself in the mirror and know that he made the right decision. Obviously, Wolf, it is statements like this that really give his critics the perception that he is out of touch. Wolf?

BLITZER: Suzanne Malveaux watching all of this at the White House. Thank you.

Still ahead here, by the way, in THE SITUATION ROOM, I'll be speaking with a leader critic of the war, Democratic Congressman John Murtha. He calls the White House progress report on Iraq, and I'm quoting him directly, he says "it is delusional."

Let's go to Jack Cafferty. He's watching all of this all in New York as well. Jack?

JACK CAFFERTY, CNN ANCHOR: How is this for a title -- "Leveling the Praying Field". It's the title of this week's "TIME" magazine cover story and it talks about how the three Democratic frontrunners in the presidential race are changing how their party thinks about religious Americans. Including efforts to court Catholic and evangelical voters.

Meanwhile, the Republican candidates are trying to get approval from people like Pat Robertson and James Dobson. The "TIME" poll of registered voters show 26 percent say that Mitt Romney is a person of strong religious faith. Twenty-four percent feel that way about Barack Obama.

Fifteen percent said John McCain and Hillary Clinton are people of strong faith. And Rudy Giuliani ranked at the bottom of the survey, just 13 percent. What remains unclear, though, is whether a candidate's religious faith is a good thing or a bad thing. The same poll shows 50 percent of voters say President Bush's faith makes him too close minded.

Thirty-four percent said it makes him a strong leader. Forty- three percent of those polled say that the president's use of his faith has divided the country. Ten percent say it's united the country. And one other interesting note here. The poll found that Republicans, by a two to one margin say a president should use his faith to guide his decisions while in office. Democrats reject that idea by a similar margin.

So, here's the question. How important is it that a presidential candidate has a strong religious faith? E-mail your thoughts on that to CaffertyFile@CNN.com or go to CNN.com/CaffertyFile. Wolf?

BLITZER: Jack, thank you for that.

Still to come tonight, right here in THE SITUATION ROOM get this. A politician busted in a bathroom. A Republican lawmaker now accused of offering money for sex to an undercover male cop. He also happens to be John McCain's Florida campaign co-chairman. We're watching this story. And "made in China" -- undercover cameras finding disturbing ingredients in dumplings. You are not going to believe what they found inside and shouted down, the first ever Hindu prayer in the United States Senate interrupted by Christian protestors.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Lots of problems for John McCain's presidential campaign. Among other things, it now appears McCain's money problems are far, far worse than a lot of people thought they were. At the same time, he has a serious problem in Florida, as well. That's coming up.

First, let's go to our White House correspondent Ed Henry. Ed?

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Wolf, just when you thought things couldn't go more downhill for John McCain, CNN has learned the already dire situation for the senator's presidential campaign has actually gotten even worse. With two sources close to the candidate saying the campaign only has a paltry $250,000, even though, initial reports suggested he had $2 million.

The sources tell CNN that next week the campaign will reveal it has about $1.75 million of unpaid debts, wiping out the $2 million in cash on hand the campaign currently has in the bank. Now even though McCain has raised just over $11 million overall in the last three months, his campaign has spent huge sums of money, a controversy that helped lead to the departure earlier this week of his top two aides, Terry Nelson and John Weaver (ph). A McCain spokesman had no comment on the latest financial woes, which will spark a whole new round of speculation about the candidate's viability. Wolf?

BLITZER: Ed Henry reporting for us, our White House correspondent.

And we're going to have more on John McCain's problems in his campaign, including a scandal that's breaking out in Florida, involving one of his chairmen down there. That's coming up.

But first I want to update you on what's going on in China. There's growing concern over what's going into products made in China and now there is word of a truly stunning new example.

CNN's Jason Carroll is in New York with details. Jason?

JASON CARROLL, CNN CORRESPONDENT: Well Wolf, once again, it involves a problem with food. An undercover television crew discovered an ingredient that belongs in a factory, not on a dinner plate.

(BEGIN VIDEOTAPE)

CARROLL (voice-over): An undercover investigation in a Beijing neighborhood reveals yet another problem with a Chinese product -- this time, dumplings called jiaozi (ph). Listen as a Chinese television reporter asks the dumpling maker about his ingredients.

UNIDENTIFIED MALE: (SPEAKING FOREIGN LANGUAGE)

UNIDENTIFIED FEMALE: These jiaozi (ph) are kind of tough. Not much taste.

UNIDENTIFIED MALE: That is from the cardboard made in the big pot.

UNIDENTIFIED FEMALE: This stuff, after you cook it, can they taste the difference?

UNIDENTIFIED MALE: Generally, no, they can't taste it.

CARROLL: The dumpling maker admits 60 percent of the filling is made of cardboard.

UNIDENTIFIED MALE: (SPEAKING FOREIGN LANGUAGE)

UNIDENTIFIED MALE: Most people can't taste the difference.

CARROLL: Once again, this brings into serious question the credibility of some Chinese products, especially their exports. Intense scrutiny began in March after hundreds of dogs and cats in the United States died from eating pet foods containing toxic ingredients traced to China.

Earlier this month, Chinese seafood was found to be contaminated with unsafe antibiotics. Certain toothpaste exported from the country were also tainted with dangerous chemicals. Defective tires and toys were recalled in the United States when manufacturers discovered safety violations. The U.S. government warned Chinese officials to improve their inspection system or risk losing the United States as an export market.

CARLOS GUTIERREZ, COMMERCE SECRETARY: This is a watershed moment for China, and I believe that what they do now will determine whether they continue to be a growing exporting country, a country with future growth viability or they stop their growth. But this is probably the single-biggest challenge they have had to their economic growth.

CARROLL: The Chinese government has cautioned U.S. importers not to overreact, and say they are working to improve their inspection system. But consumer watchdog groups say with the growing number of problems with exports from China and other countries, government agencies, like the FDA, need to keep an even closer eye on what's allowed into the United States.

URVASHI RANGAN, CONSUMER REPORTS: Well, I think our government needs to step up the number of inspections that we do as well, with only testing one or 1.3 percent of all the imported products that come into this country. We're really not taking a close enough look at what's coming in, in order to ensure the safety of those products for the American public.

(END VIDEOTAPE) CARROLL: The FDA says there is no evidence the dumplings were shipped to the United States, so, there's no need for them to take any action. Wolf?

BLITZER: Jason Carroll, a very disturbing story on that front, as well.

Still ahead tonight right here in THE SITUATION ROOM, Democratic Congressman John Murtha, the Vietnam veteran has some very strong words for President Bush about the latest Iraq report card. He will join us.

Plus, a politician busted in a bathroom. We're going to find out why John McCain's Florida campaign co-chairman was arrested by an undercover cop.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Lots of problems for John McCain right now. In Florida, his co-chairman was actually busted for allegedly soliciting a lewd act. CNN's Carol Costello is following this story for us. Certainly, not anything that John McCain wants to see unfold right now.

CAROL COSTELLO, CNN ANCHOR: Oh, you better believe it. No, it's not. The police in Florida have certainly forced the issue. Bob Allen, who touts himself a man who loves his family, is now charged with soliciting a prostitute.

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): A perp walk -- the man in cuffs, Bob Allen, Florida State representative and co-chair of Senator John McCain's Florida campaign, accused of offering 20 bucks for sex in a bathroom in a park in Titusville.

UNIDENTIFIED MALE: Mr. Allen, what happened?

BOB ALLEN (R), FLORIDA STATE HOUSE: I don't know. I haven't been explained -- it hasn't been explained to me yet.

UNIDENTIFIED MALE: What were you doing in the park?

ALLEN: I helped build that park. And I have a strong interest in it. I was looking at it (UNINTELLIGIBLE) had lunch down there and it's been a very gross mistake.

COSTELLO: But Florida police charged him with soliciting a prostitute. It is the second time this week a politician supporting a presidential candidate has been embroiled in talk of sex scandals. Louisiana Senator David Vitter apologized after his phone number was discovered in the records of the woman dubbed the "D.C. Madam".

Vitter is Rudy Giuliani's most prominent southern conservative supporter. Allen is conservative too, who recently wrote the Lewd or Lascivious Exhibition Act, which, if passed, would have made public sex acts illegal, even if both parties consented. At a news conference after Allen was released from jail to await trial, he told reporters the ordeal had drawn him closer to his wife and daughter.

ALLEN: You've done a good job in trying to get the news out, people tend to take the fast news and make fast conclusions. I would ask people not to jump to any conclusions on this, to be fair, and slow down and look at it. The legal process is slow. It makes you look at each individual piece. That's why I cannot answer details today, as much as I would like to. And there are many details that they will lose the burden of proof.

COSTELLO: Allen denies the charges. He says he doesn't blame police, who were doing their jobs, but the undercover cop misunderstood and he will not resign his office.

(END VIDEOTAPE)

COSTELLO: But Florida police say they saw Allen go in and out of that park restroom three times, then propositioned an undercover male police officer. According to our affiliate WFTV, it was Allen who initiated the meeting. He was arrested as he left a bathroom. No comment from the McCain camp, Wolf.

BLITZER: They're not saying anything at all?

COSTELLO: Nothing at all.

BLITZER: All right. We'll see...

COSTELLO: We'll check again tomorrow.

BLITZER: OK. Thank you, Carol, very much.

Just ahead, Democrats are calling President Bush delusional, as he continues to defend the war in Iraq. The Vietnam veteran and Congressman John Murtha will join us. He has a very different take on the latest Iraq report card than the president does.

Plus, a royal uproar in Britain -- you are going to find out why the BBC is now apologizing to the queen.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now -- terrorists bent on attacking the United States, determined to sneak into the country. That among the frightening conclusions of a national intelligence report. It says not only is al Qaeda stepping up efforts to slip operatives into the United States, but it is getting the things it needs to mount a terror strike.

The Senate Health Committee will soon consider a bill to regulate cigarettes. Among other things, it would permit the FDA to restrict tobacco advertising, to tap down on cigarette sells to minors and to mandate even stronger warning labels.

And Democrats in favor of gun rights team up with some House Republicans. They've blocked local governments and law enforcement agencies from getting routine access to data about gun purchases. The move came from the House Appropriations Committee, seen as a victory for the National Rifle Association as well.

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

Democrats tonight are lashing out at the White House -- report on Iraq, some say President Bush is reading it through rose-colored glasses, others simply calling him delusional.

Joining us now from Capitol Hill, Democratic Congressman John Murtha of Pennsylvania; he was one of the early voices calling for a troop pullback in Iraq.

Congressman, thanks very much for coming in.

REP. JOHN MURTHA (D), PENNSYLVANIA: Nice to be with you, Wolf.

BLITZER: I'm going to play a little excerpt of what the president said earlier today and get your reaction. Listen to him.

(BEGIN VIDEO CLIP)

BUSH: I don't think Congress ought to be running the war. I think they ought to be funding our troops. I'm certainly interested in their opinion. But trying to run a war through resolution is a prescription for failure as far as I'm concerned and we can't afford to fail.

(END VIDEO CLIP)

BLITZER: All right. What do you say to the president?

MURTHA: Well it's delusional to say the least. As I said earlier, and you heard me say it, it's a failed policy wrapped in illusion. Nothing's gotten better. Incidents have increased. We have had more Americans killed in the last four months than any other period during the war.

More Iraqis have been killed. Incidents are up. Unemployment is still 40 to 60 percent. Oil production is below pre-war level. And this rhetoric about the Constitution and the changes, they say well they are making changes. There are no changes have been made. They haven't done the thing that's necessary in order to satisfy the Sunnis.

So, our troops are caught in a civil war. As I said over and over again, it can't be won militarily. There can only be a diplomatic effort. I think this surge is a perfect example where we aren't making any progress, and we've got to start to redeploy the troops as quickly as possible. BLITZER: He says Congress should not be running the war. That's the responsibility for the military commanders out in the field, as well as the commander in chief. You are stepping on his turf.

MURTHA: Well, the Constitution is very clear. It says we'll provide for the Army and the Navy and, of course, when the Constitution -- didn't have any other forces. But the Constitution is very clear, we're the people that decide whether you go to war. We're the people that decide whether the war should be funded.

Now, when they keep making mistakes, as they have made, we have to intercede. The public spoke in the last election and it said very clearly, we want these troops redeployed. Congress has agreed with that, basically. But it's a matter of getting a resolution through to convince the White House.

Now, I see more and more people coming around. I'm more optimistic than I've ever been that we're going to start redeployment before long. The problem we've had, Wolf, and the thing that has happened and so -- hurting the troops so badly is they extend these people and break all of the rules and guidelines they have because they haven't been able to raise the number of forces that they have.

So we're looking at a poorly managed war, a war -- we went to war unnecessarily.

BLITZER: All right.

MURTHA: We didn't have weapons of mass destruction. We had no al Qaeda connection. And now they're saying things are going better. There's no way you can measure things going better.

BLITZER: On a couple of the points, they say things are moving in the right direction. It says the government of Iraq has made satisfactory progress toward providing three trained and ready Iraqi brigades to support Baghdad operations. And then it says the government of Iraq has made satisfactory progress in ensuring the Baghdad security plan does not provide a save haven for any outlaws, regardless of their sectarian and political affiliations.

Do you acknowledge that some progress over these past several months has been made?

MURTHA: I don't acknowledge there has been any progress made. Maybe in Baghdad. But it just breaks out someplace else. We called for extra troops two years ago. We put money in for 30,000 troops. They haven't even been able to raise the 30,000 troops they have. So they have to break all their guidelines. But there's no progress being made. And the way you measure it is, is the security itself.

Are the incidents decreased? No. Have the civilian deaths gone down? No. Have the American deaths increased? Yes. That's the way you measure whether we're making progress.

We need a diplomatic effort rather than a military effort. The chief of the Joint Chiefs said we can't win this militarily. The secretary of defense said it before our subcommittee, you can't win it militarily. I've been saying it for two years.

The only answer is to let the Iraqis handle this themselves. They have to step up. We can't intercede every time they fail.

BLITZER: Well, the president says if you do that, if the U.S. were to simply withdraw, as bad as the situation is now, it would be a whole lot worse, not only for the Iraqis, but for the entire region. And he also raises the specter of al Qaeda having a base there from which to attack America.

MURTHA: Well, first of all, let me say there's more al Qaeda because we're in Iraq. That's the incentive for the Iraqis -- or for the al Qaeda. They see us as occupiers and they fire up the Sunnis and the Shias. As soon as we leave, the Shias and the Sunnis will get rid of al Qaeda, because they're such a small group.

They actually incentivize them. So, because the president and the White House says that we're going to have chaos, it doesn't mean we're going to. Heaven's sakes, the Iraqis want us out of there. They think we're occupiers.

And they said there's weapons of mass destruction. They said there's an al Qaeda connection. They continue to say for four-and-a- half years there's progress. So why would I believe that there's going to be chaos just because they say it?

BLITZER: Congressman John Murtha, thanks, as usual, for joining us.

(END VIDEOTAPE)

BLITZER: John Negroponte is the deputy secretary of state and served as the U.S. ambassador to Iraq and the director of national intelligence. I asked him about plans by Iraq's parliament to take vacation in the month of August while U.S. troops in Iraq are fighting and dying.

(BEGIN VIDEOTAPE)

JOHN NEGROPONTE, DEPUTY SECRETARY OF STATE: Well, I think what is important is that they keep working on the different aspects of legislation that is before them, whether it has to do with national reconciliation, oil revenue, provincial governance and so forth.

And as the report -- the interim report, I would want to stress, that was issued today indicates, the results are mixed. On about eight fronts they are making progress. On eight others, they have not made satisfactory progress. And on a couple of them, it is just too early to assess.

But again, I just want to stress, this is an interim report, it is work in progress. And I think we have to give the Baghdad surge and the other elements of the policy at work a chance to show the results.

(END VIDEOTAPE) BLITZER: Secretary Negroponte here in THE SITUATION ROOM earlier.

Coming up, out of rehab, Congressman Patrick Kennedy.

(BEGIN VIDEO CLIP)

REP. PATRICK KENNEDY (D), RHODE ISLAND: I have an addiction, and an alcoholism disorder as well as bipolar disorder.

(END VIDEO CLIP)

BLITZER: Congressman Kennedy comes clean on his own battle with booze, teams up with the former first lady Rosalynn Carter to get help for others suffering from mental illness. They are here in THE SITUATION ROOM.

Plus, beauty queen blackmail. Miss New Jersey strikes back at a person trying to force her to give up her crown by releasing her embarrassing pictures first. Stay with us, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Newly released documents from the Nixon presidency are shining a rare spotlight on the role his wife Pat played in the importance of managing spouses in modern campaigns. CNN's Tom Foreman is joining us here.

How important are the wives, the spouses, if you will, to these respective presidents?

TOM FOREMAN, CNN CORRESPONDENT: Well, more than ever before, especially these candidates right now, you have got to talk about the "wife support," as we call it. No matter how much we talk about the issues, fund-raising, credibility, all of these things, many people give their vote just because they have a generally good feeling about a candidate, and every campaign these days knows that feeling must include the spouse.

(BEGIN VIDEOTAPE)

FOREMAN (voice-over): The decisive factor for voters may lie in a look. A touch of hands, a triumphantly shared smile. But as Bill and Hillary Clinton learned the hard way, just like marriage itself, political partnerships between candidates and spouses, like John and Teresa Kerry, are for better or worse.

In the latest release of Nixon papers, then TV adviser Roger Ailes told Nixon to remember that voters were always watching him and his wife Pat. Nixon should "show a little more concern for Mrs. Nixon as he moves through the crowd. From time to time, he should talk to her and smile at her. "Women voters," he wrote, "are particularly sensitive to how a man treats his wife in public. The more attention she gets, the happier they are." The management of spouses, however, is a slippery slope. Even on the campaign trail right now. Elizabeth Edwards' brave battle with cancer, for example, has made her an admired public figure. So, she made headlines saying she favors gay marriage. Problem is, her husband does not.

Fred Thompson is not in the race, yet. But already tongues are wagging over his wife, because she is younger than he is, and looks much younger.

And even the most honest affection can be tricky. Al Gore and wife Tipper once celebrated with a public kiss.

PAUL BEGALA, CNN POLITICAL ANALYST: Well, it was like being at a wedding, where you know that they love each other, but they are standing at the altar and they are kissing, you're going, five minutes, 10 minutes, you know, hey, get a room, break it up.

FOREMAN: As a congressman, J.C. Watts experienced it all, and says hitting the right note can be tough for everyone.

J.C. WATTS (R), FMR. U.S. REP.: You are going to have to choose between the campaign and the family, or congressional responsibilities and the family. And, in both cases, about 80, 85 percent of the time, the family loses.

(END VIDEOTAPE)

FOREMAN: This is very tricky stuff. Remember, a lot of these spouses are not professional campaigners. Look at these pictures back here. Campaigns live and die by images like this, the impression of a happy family person. A good person getting along with somebody else, under the pressures of a campaign.

Think about it this way, Wolf. You go to a party with your wife after you just had an argument, and you walk in and you have to say, hey, Bob, hey, Sue, and act like everything is fine. These people, Democrat and Republican, have to do it every day under the enormous pressures of campaigns. It's tough. And don't discount for a minute that the spouses make an enormous difference.

BLITZER: Good point. Thanks, Tom, very much.

Right now, two people whose last names are very well-known are teaming up. The former first lady, Rosalynn Carter and Congressman Patrick Kennedy. They are hoping to use their political celebrity to call attention to some personal demons that have plagued so many people. I spoke with them about their efforts.

(BEGIN VIDEOTAPE)

BLITZER: Are you encouraged that something really different is about to happen, whereby people who have serious mental problems will be able to get the insurance, the coverage that they need on par with other problems? ROSALYNN CARTER, FMR. FIRST LADY: It is so exciting to me. I have been working on this issue for so many years. And, for the last six or seven years, there has been no chance of getting it, because we couldn't get it out of committees onto the floor for a vote. We have had votes in the House and the Senate at one time or another to pass the legislation. But it has been stuck in committees.

And now there's a big signing possibility that we might be able to have parity in insurance. It's...

(CROSSTALK)

BLITZER: Let me -- let me bring Congressman Kennedy...

(CROSSTALK)

BLITZER: ... into the conversation.

We all remember the experience that you had, what, about a year or so ago. I take it you're on a new mission now, in part as a result of what you went through.

REP. PATRICK KENNEDY (D), RHODE ISLAND: Yes. But let me thank Mrs. Carter, because it was people like her who have been on this mission for decades now, helping to break down these barriers of stigma. This really is a civil rights battle, because people who have this mental illness, like myself -- I have an addiction and an alcoholism disorder, as well as bipolar disorder.

I'm able to get my illness treated because I'm a member of Congress, and have parity, meaning my insurance coverage is complete. Most Americans who have insurance do not have equal insurance coverage. That is what we're trying to pass, is the Paul Wellstone Mental Health Insurance Coverage Act.

And that's what I would like to ask people to call Congress to support. Call up your members of Congress and tell them to support the Paul Wellstone bill, which will guarantee equal mental health insurance for the rest of America that members of Congress currently enjoy.

BLITZER: How are you doing, Congressman?

KENNEDY: Well, it's one day at a time. It's an illness that you have to take one day at a time. But I feel very fortunate to have survived that, and to be able to have had treatment. And I'm very fortunate to have the strong support from my family and friends, and very blessed, Wolf. Thank you.

BLITZER: And strong support from your constituents as well?

KENNEDY: Well, I -- ironically, I received the strongest reelection that I have ever received in all my years in Congress. I went up over 8 points in my election, if you can believe it, my 69 percent reelection rate. My constituents actually wanted to talk about this issue, Wolf. My senior citizens, when I walked into the room, actually invited me to talk about my experience, because they wanted to talk about their problems with mental illness, the depression that they felt when they lost their spouse, with the depression they felt when they lost their independence, because they were living alone.

(END VIDEOTAPE)

BLITZER: Congressman Patrick Kennedy, speaking with me earlier, together with the former first lady, Rosalynn Carter.

Still ahead tonight, Britain's BBC now apologizing for suggesting there was a royal tantrum when a photographer dared to ask Queen Elizabeth to take off her crown.

And a beauty queen fights off a blackmail attempt. A Jeanne "Moost Unusual" look at the latest tiara drama in the pageant world. Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Talk about a journalistic screw up. The BBC is now offering a formal apology to Queen Elizabeth II over a trailer for an upcoming special that shows her in a less than flattering light.

ITN's Nina Nanar reports.

(BEGIN VIDEOTAPE)

NINA NANAR, ITN CORRESPONDENT (voice-over): It is the jewel in the crown of the BBC's forthcoming schedule. But this trailer for their documentary, "A Year With the Queen," shown to journalists yesterday, got it badly wrong.

This is what was shown of Her Royal photo shoot with Annie Leibovitz.

(BEGIN VIDEO CLIP FROM "A YEAR WITH THE QUEEN" PREVIEW)

ANNIE LEIBOVITZ, PHOTOGRAPHER: I think you would look better without the crown, less dressy. The garter robe is so...

QUEEN ELIZABETH II OF ENGLAND: Less dressy? What do you think this is?

I'm not changing anything. I've done enough dressing like this. Thank you very much.

(END VIDEO CLIP)

NANAR: She appears to have walked out. But this is how the trailer should have been edited.

(BEGIN VIDEO CLIP)

ELIZABETH: I'm not changing anything.

(END VIDEO CLIP)

NANAR: This was actually the queen on the way to the photo shoot, not leaving it in an apparent huff, as was shown.

(BEGIN VIDEO CLIP)

LEIBOVITZ: The garter robe is so...

ELIZABETH: Less dressy? What do think this is?

(END VIDEO CLIP)

UNIDENTIFIED MALE: Straight back to our main story, that the BBC has apologized to the queen, the apology...

NANAR: After the palace contacted the BBC, the broadcaster issued an embarrassing on-air apology. In a statement, it said: "The BBC would like to clarify that the clips shown were not intended to provide a full picture of what actually happened, or what will be shown in the final program. The BBC would like to apologize," it said, "to both the queen and Annie Leibovitz for any upset this may have caused."

ARTHUR EDWARDS, ROYAL PHOTOGRAPHER: You know, like us all, she has bad days, and I think that day was a pretty bad day. You know, maybe putting all that gear on, the robes, the dress underneath, having the tiara carefully placed by the hairdresser beforehand. And, you know, can you take off the crown? I think that was a bit the last straw for the queen.

NANAR: The apology, however, did not come in time to stop these headlines this morning. The apparent storming out, a widely reported "royal wobbler," even a "very royal flounce."

Nina Nanar, ITV News.

(END VIDEOTAPE)

BLITZER: What a story. Carol Costello is monitoring some other stories in THE SITUATION ROOM.

Do you think ITN loved showing that BBC mistake?

CAROL COSTELLO, CNN ANCHOR: I think they loved it. Any publicity is good publicity, as they say. The poor queen, though. She's really a nice person.

On to other news now. A massive water main break flooded a Detroit freeway for hours. The water got so deep, some drivers on Interstate 96 had to be rescued from their cars. The water main was finally shut down, some two hours after the break. It is not clear what caused it to rupture.

A report warns stepped up security on the U.S.-Mexican border is forcing migrants to risk their lives even more to get in the country. The Mexican congressional report says at least 275 Mexican bodies have been found so far this year. And it predicts there will be a record 500 by the end of the year. Most are dying from hypothermia in the desert or by drowning in the Rio Grande.

If you care where your burger comes from, you might like to know Wendy's has beefed up its animal welfare guidelines. The fast-food chain says it will give preferential treatment to pork and chicken suppliers who treat their animals more humanely. Some of the competitors have taken similar steps. So, they will treat them more humanly so that you can eat them later -- Wolf.

(LAUGHTER)

BLITZER: Thank you, Carol, for that.

Let's go to Jack Cafferty, he's in New York. He's watching this and a lot more -- Jack.

CAFFERTY: Oh, I try some of that Chinese food made out of the cardboard boxes.

(LAUGHTER)

CAFFERTY: Was looking forward to that.

BLITZER: Good.

CAFFERTY: The question this hour is, how important is it that a presidential candidate has a strong religious faith?

We heard from E.B. in Michigan: "I think that religious conviction has become a bad word in today's society. Our nation was founded on the freedom of religion, but not on the freedom of the religious to make their beliefs and mandate for the rest of society. The will of the majority should be what determines the law of the land, and not what the religion of the people in leadership positions mandates."

Neil in New York writes: "I expect my president to use his reasoning ability, common sense, and his experience when making decisions affecting my life and not do his job on a 'wing and a prayer.'"

Greg in Massachusetts: "The separation of church and state crowd has been living in a Don Quixote dream world for 47 years. JFK's biggest hurdle was his religion, but he got over it. Now, it seems faith is a good thing, so long as you are not a Republican.

We watched President Clinton walk out of church every Sunday for eight years and bring Jessie Jackson into the White House as a spiritual adviser to help cure his problems with his zipper. And yet Mitt Romney's faith is a problem?"

Vince in Carson City, Nevada, "Jack, the only faith I want a candidate to have is a rock solid faith in the Consitiution of the United States."

Earl in Mount Dora, Florida, "I don't believe a president's religious faith is very important. What is important is his or her spirituality. And they aren't even close to being the same thing."

Mike in Chicago, "More killing in the history of the world has been done in the name of God than for any other reason. I say let's elect an atheist."

And Molly in California, "I would rather no religion be mentioned as for what they do in the bedroom, I really don't want to know."

If you didn't see your e-mail here, go to CNN.com/caffertyfile, we post more of them online along with video clips of the Cafferty File.

Wolf?

BLITZER: Jack, thank you. See you tomorrow.

Let's find out what's coming up at the top of the hour, Paula is standing by.

PAULA ZAHN, HOST "PAULA ZAHN NOW": Thanks, Wolf. Appreciate it.

We're going to talk about that new report card on Iraq. Not the kind of report card you'd want to show your parents. You are going to get a viewpoint that is really unique.

Join me and hear from U.S. army troops who are training some of the Iraqis right now to eventually try to be independent.

Also, why does a man owe thousands of dollars in child support for a child that isn't his? That's coming up at the top of the hour. And you are going to be amazed, Wolf, just how many men across the country are paying for child support for children they never had. Simply because they never contested the paternity of the child, 60 days after it was suspected it wasn't their child.

BLITZER: All right. Thank you very much, Paula, we'll be watching.

Still ahead here, in the SITUATION ROOM, Miss New Jersey striking back. Jeanne Moos on a beauty queen scandal. Blackmail? Stay with us, you're in the SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Now the tale of beauty and the black mailer. Jeanne Moos has a Most Unusual look at the latest drama in the pageant world.

(BEGIN VIDEOTAPE)

MOOST (voice-over): Uh-oh. Another beauty queen photo scandal. Exhibit A.

UNIDENTIFIED MALE: That's a girl having fun.

UNIDENTIFIED MALE: Doesn't look good. At all.

MOOS: But this pageant scandal had a twist.

AMY POLUMBO: I'm presently the victim of blackmail and possible extortion.

MOOS: Someone sent private photos of Miss New Jersey to pageant officials and Miss New Jersey, herself, Amy Polumbo. Saying she should surrender her crown or the photos would be make public.

UNIDENTIFIED FEMALE: It's not a big deal. And only in America would we make a scandal out of such nonsense.

MOOS: Miss New Jersey had originally posted the nonsense on her private Facebook page. Next thing you know, she's on the Today Show calling the blackmailers bluff by tearfully going public with the pictures.

POLUMBO: I feel sick to my stomach. I really do.

MOOS: She described the photos at silly college fun.

Her friends were kidding her that she's flat. So she's playing with these pumpkins. And was the leggy one, taken in a limo.

MOOS: For all we know, though, she's just falling back.

UNIDENTIFIED MALE: I don't know about Jersey girls.

MOOS: What's that?

UNIDENTIFIED MALE: I don't know about Jersey girls.

MOOS: This is actually the worst. That's her boyfriend.

UNIDENTIFIED MALE: This one here, because it's actually, you know, something is in the mouth. That is probably where I would draw the line.

UNIDENTIFIED FEMALE: We don't need anymore Nicole Ritchies or Paris Hiltons. We need people that are going to be respectable.

UNIDENTIFIED FEMALE: Anyway, I don't think the crown should be taken away for things this foolish.

MOOS: Do you have pictures like at home?

UNIDENTIFIED FEMALE: That's personal.

MOOS: Not too personal for this woman, who says she has pictures of what she calls, her twins.

UNIDENTIFIED FEMALE: You know, I have to introduce America to the twins. MOOS: Twin peaks aside, in order to compete for the Miss America title, Amy Polumbo needed to keep her Miss New Jersey crown. And the pageant board had to decide, based on these photos. Not these photos, these were published by the "New York Daily News," but they got the wrong girl.

The one they circled was a friend of Miss New Jersey's. Hours after the Today Show first broadcast the real pictures, New Jersey pageant officials made their ruling.

UNIDENTIFIED MALE: Amy Polumbo should continue her reign as Miss New Jersey.

MOOS: Miss New Jersey apologized for the trouble the photos had caused. As for the ruling --

POLUMBO: It was absolutely relieving. I feel like I've been crowned again.

MOOS: And just so you don't miss anything about Miss New Jersey.

UNIDENTIFIED MALE: I don't think it's that bad.

MOOS: Better put on your glasses.

UNIDENTIFIED MALE: That's not good.

MOOS: Jeanne Moos, CNN, New York.

BLITZER: And that is it for us, remember we are here in the SITUATION ROOM weekday afternoons from 4:00 to 6:00 p.m., Eastern. Back for another hour at 7:00 p.m., Eastern. Until tomorrow thank's very much for joining us. I'm Wolf Blitzer in Washington.

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