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THE SITUATION ROOM

Russian Bombers Fly Near Alaska; Plans for War with Iran?; Seymour Hersh Interview

Aired October 1, 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: Thanks very much, Kitty.
Happening now, Russian bombers on a frightening course within miles of the United States, tonight, we have exclusive video of U.S. war planes moving in and why a top U.S. commander is so concerned.

Also this hour, carnage in Iraq captured on tape, tough new questions about whether Blackwater security guards were trigger-happy and whether the U.S. government turned a blind eye.

And a scathing attack on Rush Limbaugh from the Senate majority leader. The Democrat is trying to turn the tables on the Republicans in a venomous war of words over Iraq.

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

Exclusive video of Russian bombers buzzing the coast of Alaska in a show of force and the United States responding by intercepting. The number of these incidents is growing. And you can see images of them for the first time anywhere outside the U.S. military right here.

Our Pentagon correspondent Barbara Starr is joining us with these exclusive images. Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, the video of this September 7th incident has just been declassified.

(BEGIN VIDEOTAPE)

STARR (voice-over): This is a Russian long range bomber flying off the coast of Alaska last month. Two U.S. F-15 fighters scrambled to intercept the plane which came within 50 miles of the coastline. CNN obtained exclusive video from the North American Aerospace Defense Command, NORAD. They are the first pictures of a U.S. intercept of a Russian plane since Moscow announced this summer it was resuming flights. The grainy footage is shot from a camera mounted to the helmet of a U.S. pilot.

GEN. GENE RENUART, U.S. NORTHCOM NORAD COMMANDER: They're flying what they call long range aviation patrols or they're really navigation missions. They're also practicing their normal tactics. Of course a long range bomber is designed to drop a bomb or fire a missile somewhere.

STARR: NORAD Commander General Gene Renuart says the Russians aren't a threat, but that doesn't mean he's not concerned. RENUART: We can't afford to have an unidentified aircraft replicate what we saw on 9/11. And so in the issue of long range aviation these aircraft launch and are flying out in regions that are not on a flight plan, they're not following a traditional air traffic route.

STARR: There have now been eight intercepts of Russian bombers off Alaska since July.

(END VIDEOTAPE)

STARR: General Renuart says so far all of the encounters with the Russians have been professional and polite. But the U.S. military, he says, will continue to keep an eye on any Russian bomber flights that approach the U.S. coastline. Wolf.

BLITZER: Barbara thanks very much -- Barbara Starr reporting. And as Barbara reported, there have been eight incidents off Alaska since July. Among the latest, one on September 5th when six F-15s from Elmendorf Air Force Base intercepted six Russian bombers along the northwest coast of Alaska and two similar incidents on August 16th, one near Cape Lisburne (ph), Alaska, the other Cold Bay. That's west of the Aleutian Islands -- more coming up on this story including Vladimir Putin, the Russian president now taking some steps to try to consolidate his grip on power. That's coming in.

There's also new concern tonight the Bush administration may be laying the groundwork for military action against Iran. Let's bring in CNN's Brian Todd. He's following this story for us. What are the signs of a possible new U.S. strategy, Brian, toward Iran?

BRIAN TODD, CNN CORRESPONDENT: Well Wolf, there has been stronger language recently from the president and commanders in Iraq accusing Iran of aiding militants who are attacking U.S. forces there. Now it's reported those attacks, rather than Tehran's alleged pursuit of nuclear weapons, could be the selling point for military action.

(BEGIN VIDEOTAPE)

TODD (voice-over): Late August, the president levels a serious charge about Iran's involvement in Iraq.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The attacks on our bases and our troops by Iranian supplied munitions have increased in the last few months.

TODD: Iran has always denied that, but now the administration is confronting reports that it's using that charge to justify a surgical attack inside Iran.

SEYMOUR HERSH, "THE NEW YORKER" MAGAZINE: Instead of saying to the American people, instead of saying internally it's going to be about nuclear weapons, it's now going to be about getting the guys that are killing our boys.

TODD: In "The New Yorker" magazine, investigative journalist Seymour Hersh writes of a videoconference early this summer where he says President Bush told U.S. ambassador to Iraq, Ryan Crocker, he was thinking of hitting Iranian targets across the border and that the British were on board. The White House response...

(CROSSTALK)

DANA PERINO, WHITE HOUSE PRESS SECRETARY: I'm not going to comment -- one, I don't know. I wouldn't have been at any -- at that type of a meeting. Any commander in chief would not take any option off the table. But the option that we are pursuing right now is diplomacy.

TODD: A spokeswoman for British Prime Minister Gordon Brown would not comment on the report, nor would officials at the CIA or National Security Council to Hersh's contention that they've stepped up planning operations against Iran. Analysts say whatever the rationale even a surgical air strike inside Iran would not be a clean operation.

GEN. DON SHEPPERD (RET), CNN MILITARY ANALYST: Logical reaction to the Iranians would be to try to close the Persian Gulf. They would mine the Persian Gulf. They would fire shore-to-ship missiles attacking shipping and U.S. forces.

(END VIDEOTAPE)

TODD: (UNINTELLIGIBLE) grain of salt here from administration officials who we spoke to, they point out Seymour Hersh has written several stories over the past year that stepped-up planning for attacks on Iran and nothing has happened. We went and checked on that. This latest piece is the sixth one he's written on that subject since April of 2006, Wolf.

BLITZER: All right, Brian. Thanks very much.

And we're standing by to speak live with Sey Hersh. He's here in THE SITUATION ROOM. That's coming up in a few moments, Seymour Hersh of "The New Yorker" magazine.

Meanwhile, years after being rocked by the discovery of a double agent inside the FBI, the agency still is vulnerable to moles. That's the finding of a new report that's raising some serious concerns.

Let's go to our justice correspondent Kelli Arena. She is joining us live. Kelli, what can you tell us about this new report?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well Wolf, it's been written by the Justice Department's inspector general. And the bottom line is this. It says the FBI remains vulnerable to espionage from within its own ranks. As you know, the review comes six years after the FBI arrested Robert Hanssen for spying. Now at the time critics faulted the FBI's culture of protecting its own.

And this new report says the FBI still doesn't have a system in place to collect and analyze negative information about its employees. It also says the FBI is not regularly reviewing employees that are exposed to the most sensitive and classified information. The inspector general says the best example of how the FBI remains vulnerable is the security breach involving former FBI analyst (UNINTELLIGIBLE). Now he was arrested, you may remember Wolf, back in 2005.

That was four years after Hanssen. And the report lays out how information about how his suspicious behavior was not followed up on. Now the FBI says look we're still working on implementing changes and you know they point out that the report does say that the FBI has already made some significant progress in this area, Wolf.

BLITZER: Kelli arena reporting -- thank you, Kelli.

Jack Cafferty is off today. He'll be back tomorrow.

Coming up, we'll talk a little bit more about the possible shift to a new case for war against Iraq. Standing by live Seymour Hersh of "The New Yorker" magazine, we're going to continue our conversation with him.

And Democrats slap Rush Limbaugh with some stinging criticism. Limbaugh recently talked about, quote, "phony soldiers who oppose the war in Iraq." Democrats say it's the ultimate insult. But wait until you hear what Rush Limbaugh's response is.

And it involves crude slurs against women, alleged sexual harassment and a man who once had a squeaky clean image. In the $10 million lawsuit against Isiah Thomas, there's word of what the jury might be thinking.

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

(COMMERCIAL BREAK)

BLITZER: Let's get some more now on the Bush administration and what some say is a growing call for war with Iran. Seymour Hersh of "The New Yorker" magazine is here in THE SITUATION ROOM.

Sey thanks for coming back. We spoke extensively yesterday on "LATE EDITION". I want you to listen to what the White House, the press secretary, Dana Perino said today about your latest article in "The New Yorker" in which you describe some stepped-up activity for a possible, possible war against Iran. Listen to this.

(BEGIN VIDEO CLIP)

PERINO: Every two months or so Sey Hersh writes an article in "The New Yorker" magazine and CNN provides him a forum in which to talk about his article and all the anonymous sources that are quoted in it. The president has said that he believes that there is a diplomatic solution that we can use to solve the Iranian problem, and that's why we're working with our allies to get there.

(END VIDEO CLIP)

BLITZER: All right, so you heard what she said. You've written six articles or so over the past year and a half or two years making the case that the administration was moving toward a possible war against Iran. What's your response?

SEYMOUR HERSH, "THE NEW YORKER" MAGAZINE: Well you know in the beginning when I first began to write those stories, it was la-la land. And now everybody knows this is on the table. This is very serious and you have a lot of people, hardliners like Norman Pot Horowitz (ph) and others saying in print we've got to do it; we've got to do it. This is an existential threat. And so I don't think there's any question there's a lot of serious planning going on inside the administration.

BLITZER: But aren't they always planning for all sorts of contingencies? That's what the Defense Department does.

HERSH: Well this is really a lot more. This is operational planning. This is down -- yes, of course there is always contingency planning. This is going to the next phase operational. It doesn't mean the president is going to put his finger down you know and say, do it. But now they have a short range using cruise missiles and Navy planes in the area.

BLITZER: Do you really believe that they believe they could get the job done to set back Iran's nuclear program, for example, just by using air power with their cruise missiles or bombers?

HERSH: Well, that's why they changed the focus. What they've done -- the story that I wrote about that she was dismissing -- she actually didn't deny it. It was just a careful statement saying that there's some sort of -- we're in collaboration. It's called the news business, by the way, I would say to the White House. But nonetheless, what they've done is they've changed the focus.

What I was writing about in "The New Yorker" this week is that the focus was once on hitting all of the nuclear facilities. There's a place called (UNINTELLIGIBLE) that's 75 feet underground hard rock. You really have to hit it hard. What they've done is they've decided you can't sell this to the American people because the American people simply did not share the White House's real concern -- I believe the president and Dick Cheney as vice president really worry about Iranian nukes but they could not transfer that concern into public opinion.

BLITZER: Because the credibility was so weakened, is that what you're saying?

HERSH: Well one of the issues of course is -- in the White House briefing today she was peppered, the spokesman, with questions about why should we believe that you're not -- you know you said the same thing you were interested in negotiations before the Iraqi war and you bombed. So if you can't sell the nuclear issue, one thing that is -- that you can convince the public of is that Iran is helping to kill American boys and British boys in Iraq.

And Iran, in effect, what the president is really saying, is that our problem in Iraq is really a problem with Iran. It's not really a problem with the Iraqis. It's an Iranian problem. Therefore, the solution is to do something with Iran. This is the whole new strategy, if you will, at least the public relations strategy and on that they're getting traction. So if you go to your allies...

BLITZER: But if you're going to go after the Cuds (ph) force...

HERSH: Right.

BLITZER: ... or the Iranian Revolutionary Guard, for example, you can't just do that. They're spread out all over the place. You have to send in some special operations, some ground forces, if you will, right?

HERSH: Oh absolutely. Not only do you have to go across the border to get to the training camps, more importantly than that -- the Israelis of course are very upset about any plan that doesn't destroy the nuclear facilities.

BLITZER: They're obviously concerned about the nuclear program much more than what the Iranians might be doing to support their Shiite allies in Iraq.

HERSH: You don't tear off a fingernail off of somebody is what they say. You go for the whole thing. But having said that, here's the argument the White House makes. The critics like the Israelis and they say look the Revolutionary Guards control the missiles and they also believe they control the nuclear development.

We're going to hit the guards a lot harder than you think. We're going to hit the camps. We're also going to hit their barracks, decapitation. We're going to kill some of their leadership and we're also going to hit all of the command and control nodules, nodes they call them. It means we're going to do some bombing in Tehran, which means it's going to be very precision bombing. We're going to have teams there with laser guidance and cruise missiles carefully calibrated but we also have to have the special operations boys.

BLITZER: There's got to be a catch -- surgically clean air strikes, you have got to go in on the ground. But have they thought through the consequences of what that could result in?

HERSH: You know, I'd like to say yes. My friends on the inside believe that it's a very hard sell to get them to focus on what the bad -- the down side is. And right now there was an -- in the article I mentioned a European intelligence chief told me that we know -- our community and the European community knows the Iranians are building up air defenses. They also have Hezbollah, the one time very hot terrorist group, which has been quiet.

BLITZER: Because for every action there's going to be a reaction and that reaction could be disaster. At least that's some of the concerns that have been raised. What you do point out in the article is that there is a new attitude coming from the French government right now, the government of President Nicolas Sarkozy and the Foreign Minister Bernard Kushner (ph). And you say the British government, the new government there is on board swell. Is that what you're hearing? HERSH: The Brits are definitely interested. They're not on board. They're interested in the idea of a cross-border attack that could be explained to the world that you're only killing those people that are trying to hurt those people that are hurting your troops. As I say, they can't deal with the nuclear, so they like that. They think they can mobilize international support and justify -- that kind of a raid might be justifiable and might shake up the leadership in Iran.

You get rid of Ahmadinejad, the big mouth. Get more rational people in there. The French actually are not interested in bombing but they're very worried about the nuclear issue. They think Washington by walking away from the nuclear issue is making a mistake. That may be -- I don't know. Sarkozy is off the wall with...

BLITZER: Some people have suggested, Sey that these stories about a possible, possible military strike against Iran are deliberately coming out to sort of try to rattle the Iranians right now and get them to be more flexible, shall we say, on their negotiations with the International Atomic Energy Agency and the U.N. Security Council. Do you sense that there is that sense of trying to scare the Iranians?

HERSH: You know that came up when I first began to write on this a couple of years ago. It was -- Iran, for example, was quick to dismiss it as just fantasy talk, you know propaganda. I'm very careful about that. That was a huge issue for me in reporting on this.

BLITZER: Because you don't want to be used for propaganda purposes?

HERSH: You know of course not but I deal -- I don't want to get into sources. But there are people I know -- this is beyond that issue. The White House is seriously interested in doing -- the president and the vice president want to do something about Iran.

And, you know what? They talk a lot in the White House about diplomacy. This president will not talk to the Iranian leadership. He will not talk to the Syrian leadership. He will not talk to Hamas. He will not talk to Hezbollah. He doesn't talk to people he doesn't like. And that's not good in terms of long range prospects for not going to war.

BLITZER: Sey Hersh of "The New Yorker" magazine, thanks for coming in.

HERSH: Glad to be here.

BLITZER: New developments in the probe of that controversial Blackwater shooting in Iraq. Iraqi police reportedly believe they can show that Blackwater's guards opened fire without any reason, killing civilians.

And his accuser says he's a foul-mouthed sexual harasser. But what does the jury thing in the $10 million lawsuit against Isiah Thomas? Tonight there's word of which way the jury might be leaning.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The FBI is now joining the investigation into that controversial shooting by American security contractors in Iraq that left at least 11 Iraqi civilians dead. Now there's new video of the aftermath of that incident.

Our senior Pentagon correspondent Jamie McIntyre has more. Jamie.

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT: Wolf, the FBI is going to need more than this video to sort out what happened. And we're told there is more video that we haven't seen yet. But for now, we're left with two highly conflicting versions of events.

(BEGIN VIDEOTAPE)

MCINTYRE (voice-over): This silent Iraqi police video obtained by "Newsweek" magazine shows the carnage after the September 16th incident, a smoking wreck with charred human remains, another car with blood-soaked seats. On the ground, dozens of shell casings and an Iraqi police officer gun in hand surveying the aftermath.

The initial State Department account called a spot report said the Iraqi deaths were the result of defensive fire after a convoy was engaged with small arms. That's the security contractor Blackwater's version of events and, in fact, CNN has learned that that spot report was written by a Blackwater employee. The State Department insists that doesn't make any difference.

TOM CASEY, STATE DEPT. SPOKESMAN: That spot report does not represent an investigation, a review or anything more than a first blush account of the basic incident itself.

MCINTYRE: The Iraqi police argue the video evidence and eyewitness accounts suggest that innocent actions by Iraqis were met with indiscriminate shooting. But a Blackwater spokesperson tells CNN all the initial statements given by guards at the scene are consistent with self-defense.

The concern that Blackwater's hired guns may have itchy trigger fingers is echoed in a memorandum prepared for a House committee investigating Blackwater and obtained by CNN. Among the findings, Blackwater has been involved in 195 escalation of force incidents in Iraq since 2005 and 84 percent of the time fired first. The State Department counters and some outside experts concur that that's because Blackwater gets the most dangerous assignments.

ROBERT YOUNG PELTON, AUHTOR, "LICENSED TO KILL": Statistically they're not any more violent or less violent than other security companies.

(END VIDEOTAPE) MCINTYRE: That congressional memo cites what it calls previously undisclosed deaths at the hands of Blackwater forces, including a civilian shot in the head, the alleged cover-up of the shooting of an innocent bystander and a traffic accident that left an Iraqi vehicle in a ball of flames. It will all be a subject of tomorrow's congressional hearing. Wolf.

BLITZER: We'll cover it with you, Jamie. Thanks very much.

Rush Limbaugh versus the Democrats, the radio talk show host squaring off with critics over what he called some phony soldiers.

And disturbing new information about a woman arrested at an airport, handcuffed, shackled and eventually found dead.

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

(COMMERCIAL BREAK)

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

Happening now, a new tactic in the hunt for al Qaeda and Taliban leaders, the U.S. military announcing it will use the most wanted posters and offer rewards of up to $200,000 for the capture of some top level al Qaeda and Taliban leaders.

Also, the Russian president, Vladimir Putin, is hinting his next job could be that of prime minister. He says he'll lead the United Russia Party's candidate list in the upcoming election, putting him in line for the premiership. He's jockeying for continued power.

And U.S. troops and Iraqi civilian deaths both down significantly in September, the U.S. military says troop deaths were at their lowest level in a year while civilian deaths fell more than 50 percent from August.

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

Tonight, a top Democrat is coming out guns blazing against conservative radio talk show host Rush Limbaugh. It's an angry new shot in the dispute over the war in Iraq and Limbaugh's charge that some veterans who are criticizing the war are, in his words, quote, "phony soldiers".

Our congressional correspondent Dana Bash is watching all of this unfold. Dana, the Senate majority leader, Harry Reid, he took this straight to the Senate floor today.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: He sure did and Senator Harry Reid is part of this controversy now that Rush Limbaugh calls a Democratic campaign to smear him. But Senator Reid made clear today that he was using this controversy to, in his words, to make clear that neither party holds a patent on patriotism.

(BEGIN VIDEOTAPE) BASH (voice-over): The Senate majority leader took the floor and took aim not across the aisle or at the president but at a conservative radio host.

SEN. HARRY REID (D-NV), MAJORITY LEADER: Rush Limbaugh took it upon himself to attack the courage and character of those fighting and dying for him and for all of us. Rush Limbaugh got himself a deferment from serving when he was a young man.

BASH: Harry Reid combined a budding attack on Limbaugh with a demand for an apology for what Democrats call an insulting rant against soldiers who join Democrats in opposing the war. Limbaugh spoke with a caller last week.

UNIDENTIFIED MALE: They never talk to real soldiers. They like to pull these soldiers that come up out of the blue...

UNIDENTIFIED MALE: The phony soldiers.

UNIDENTIFIED MALE: The phony soldiers. If you talk to a real soldier, they're proud to serve.

BASH: Limbaugh insists he was only talking about one anti-war soldier, Jesse Macbeth (ph) recently convicted of falsely claiming to have served in Iraq. But Limbaugh's comments are burning up the liberal blogosphere. Watchdog group Media Matters, among the first to blast Limbaugh, says it doesn't buy his explanation. And this new escalation of the Iraq debate has Democrats looking to turn the tables after the controversy over MoveOn.org's attack on the commanding general in Iraq.

REID: If we take the Republicans' side at their word at last week's vote on anther controversial statement related to the war was truly without patriotism, not politics, then I have no doubt that they will stand with us against Limbaugh's comments.

BASH: Limbaugh's response?

RUSH LIMBAUGH: His -- he's got to be a nut. This is -- I cannot believe that they are actually going this far with this.

(END OF VIDEOTAPE)

BASH: Now, Limbaugh accused Democrats of engaging in McCarthyism and he even alluded to a quote, "Used against Senator Joseph McCarthy himself." As Limbaugh said, have you no decency left, have you no shame whatsoever? A spokesman for Senator Reid responded in kind with a quote from Edward R. Murrow, Wolf. That quote, "We must not confuse dissent with disloyalty." Wolf?

BLITZER: I guess this battle is going to continue for some time. Dana, thanks very much.

Presidential candidate John McCain is talking about religion but some people listening are offended. It's a story involving politics and members of the Muslim and Jewish communities, other faiths as well. Let's go to CNN's Mary Snow, she's watching the story for us in New York. His comments are drawing some fire, Mary. Tell us what happened.

MARY SNOW, CNN CORRESPONDENT: Wolf, that fire only grew today. A number of Jewish organizations voiced complaints today about Senator John McCain's comments about religion and the race for the White House.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Senator John McCain is responding to critics after drawing fire for saying this during an interview with the website Beliefnet. He was asked if America is a Christian nation.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: I would probably have to say yes, that the constitution established the United States of America as a Christian nation. But I say that, again, in the broadest sense. We -- the lady that holds her lamp besides the golden door doesn't say, I only welcome Christians.

SNOW: The comments have drawn fire.

LARRY SABATO, UNIVERSITY OF VIRGINIA: There are certain triggers in American politics, and this is one of them.

SNOW: The constitution does not state the U.S. is a Christian nation. In fact, it advocates the separation of church and state. The Anti-Defamation League for one demanded McCain withdraw his statement calling it disturbing, inaccurate and ill advised.

The Republican presidential candidate is not backing down. He wrote to the head of the ADL saying his interview was misconstrued. He said he made repeated references to the Judeo Christian values that, in his words informed our founding fathers' respect for human rights. McCain also said he wasn't trying to seek political gain as some critics have charged. Political observers say his comments may gain favor with the religious right.

SABATO: Thirty-five to 40 percent of the people who vote in the key primaries and caucuses on the Republican side are fundamentalist evangelical Christians. This kind of statement is designed to appeal to them.

SNOW: In the past McCain has not been the favorite son of the religious right. In 2000 he described the Reverend Jerry Falwell as an agent of intolerance. Last year in what was viewed as an attempt to repair the damage, McCain spoke at Falwell's Liberty University.

(END OF VIDEOTAPE)

SNOW: Now McCain also drew fire for another part of his interview. He was asked about voting for a Muslim candidate and indicated he preferred a Christian president. Now he quickly clarified that saying he would vote for a Muslim if he or she was the best candidate. Wolf?

BLITZER: Mary Snow watching this story for us in New York, thanks.

Something new for Republicans to worry about. Tonight, some powerful Christian conservatives are so uneasy about the current crop of GOP candidates that they're now making a dire threat to possibly, possibly back a third party candidate. Let's bring in our chief national correspondent John King, he's watching this story for us. How serious John is this threat?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well they insist, Wolf, it is very serious. You've seen this frustration building for months and months and months, indeed throughout the Bush presidency. But these conservatives now say they're at the boiling point. While they don't like the entire Republican field, their frustration is fueled especially by the continued strength of one of the candidates.

(BEGIN VIDEOTAPE)

KING (voice-over): Conservative icon Richard Viguerie calls it a warning shot not only to Rudy Giuliani but the entire Republican Party.

RICHARD VIGUERIE, CONSERVATIVE STRATEGIST: If they go third party this will I guarantee you not be a one time effort. It will be that we have determined that the Republican Party is beyond salvation, that they have lied and betrayed the conservative voters one time too many. And that this will be a major effort that will go far beyond the '08 election.

KING: The tough talk follows a weekend meeting that included Focus on the Family's James Dobson, Tony Perkins of the Family Research Council, Viguerie and others. Social conservatives for months have complained about what they call lip service from the Bush White House, congressional Republicans and the leading GOP presidential hopefuls.

TONY PERKINS, FAMILY RESEARCH COUNCIL: To the degree that the party moves away from those principle issues, social conservatives, evangelicals will move away from the party.

KING: Giuliani is of most urgent concern. He supports abortion rights, including taxpayer funded abortions as New York mayor. Giuliani also marched in gay rights parades and called the city's domestic partners benefits a model for the nation.

PERKINS: These are fundamental issues, these are black and white issues. These are issues that there's just no room for negotiation.

KING: Should he win the GOP nomination, social conservative leaders vow to oppose him. And more and more view a third party effort is preferable to just urging conservatives to stay home. Giuliani camp plays down the threat noting polls showing strong support among church going evangelicals and Catholics. Asked Monday about the conservative opposition, the mayor played what he views a trump card with conservatives who might disagree with him on abortion or any other issue. RUDY GIULIANI, (R) PRESIDENTIAL CANDIDATE: I run the most competitive against Hillary Clinton by a big, big margin. And I take some Democratic states from her, nobody else does that.

KING: Perhaps, but while there are huge hurdles to third party candidacies, one born of social conservative frustration, would be a huge threat to Giuliani.

ANDREW KOHUT, PEW RESARCH CENTER: Somewhere between a big problem and a nightmare. Christian conservatives, both white evangelicals and Catholics represent 40 percent, 50 percent of the Republican base. No, they're not all going to defect to a third party. But if a significant number of them do, it just adds to the troubles that the GOP can look forward to in November.

(END OF VIDEOTAPE)

KING: Now, these social conservative leaders clearly hope by talking about this now they will derail Giuliani's candidacy. But Wolf, they insist they're not bluffing, that if he gets the nomination, they will look at a third party candidacy. They acknowledge that would likely help the Democrats, but they say it's a price they're willing to pay rather than watch a social moderate like Giuliani take control of the party that those conservatives have dominated since the rise of Ronald Reagan.

BLITZER: Long time, all right thanks very much John. John King reporting.

The candidates' dash for cash. They're reporting critical new fundraising numbers tonight. We're getting those numbers. We're going to show you who got what.

Plus, a handcuffed and shackled woman dies in custody after being detained by airport police. We'll tell you what's going on. Stick around, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Senator Barack Obama is touting another quarter of what his campaign calls historic grassroots support. That's the Democrat's spin on his $20 million fundraising haul over the past three months alone. Today John Edwards announced $7 million raised during that same period. On this the first day of the new quarter we're zeroing in on the presidential candidates' bottom lines. Our senior political analyst Bill Schneider is standing by. Bill, the numbers are coming in. Are they coming in fast and furious in how much these candidates raised over the last quarter?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: No, they're not. They're coming in very slowly. And Wolf, that's part of the story.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): After the first and second quarters, campaigns were quick to come out with their fundraising totals. Why? Because the numbers were huge. So what are we hearing about third quarter totals? Not so much. Summer is a tough time to raise money. Many early donors are tapped out. Barack Obama reports raising $20 million this quarter. Impressive, if not quite the more than $30 million he raised last quarter. Can Hillary Clinton match him?

MARK PRESTON, CNN POLITICAL EDITOR: It is going to be neck and neck from what we hearing early on.

SCHNEIDER: John Edwards now says he will accept public financing and spending limits for the primaries. He raised $7 million this quarter, part of which the government will match.

PRESTON: He will receive matching funds up to $250 of every donation he receives from people.

SCHNEIDER: Mitt Romney topped first quarter Republican fundraising and Rudy Giuliani won the second quarter. The race is on with each estimating a third quarter take of about $10 million.

RUDY GIULIANI, (R) PRESIDENTIAL CANDIDATE: I think it will end up we have a very good quarter, probably one of the best of the Republicans.

SCHNEIDER: John McCain needs to show his campaign is turning around. Will an expected haul of about $5 million do that? He has long said money is not his biggest priority.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: I never was going to rely on money to win this campaign. I'm not a very good fundraiser.

SCHNEIDER: Big things were expected of Fred Thompson. Some may see his haul as disappointing.

PRESTON: $8 million, while respectable, probably will be viewed with some skepticism.

SCHNEIDER: Though maybe not by him.

FRED THOMPSON, (R) PRESIDENTIAL CANDIDATE: I don't feel compelled to raise $100 million this year, which they said was openers for -- to run for president.

(END OF VIDEOTAPE)

SCHNEIDER: Then there are the candidates who hope their numbers will show they can run with the big dogs, like Republican Mike Huckabee and Democrat Bill Richardson. Richardson raised $5.2 million this quarter. And guess what, he was one of the first candidates to report his total. Wolf?

BLITZER: Bill Schneider, thanks for the numbers. Bill Schneider is our senior political analyst.

They are some of the most sought after and fought over voters in this country. I'm talking about America's Latino electorate. Let's go to CNN's Rick Sanchez, he's following all the political action for us as part of CNN's "Uncovering America." Look, it's a pretty significant vote and it's expanding every day.

RICK SANCHEZ, CNN ANCHOR: Yeah, because a lot of these politicians are betting on assimilation down the line. They say that's where you've got to go. As a matter of fact, Wolf, there was a recent debate in Florida. It's a sign of just how powerful Hispanic and Latino voters are in the race for the White House right now.

(BEGIN VIDEOTAPE)

SANCHEZ (voice-over): Seven of the eight major democratic presidential candidates went to Miami to take part in a debate hosted by Univision, the nation's largest Spanish language network. Hispanics make up 15 percent of the country's population. And while there are only 9 percent of all eligible voters, they're the nation's fastest growing minority. Both political parties want a piece of that action.

Republicans made major gains with Hispanic voters, grabbing 44 percent of their vote in the last presidential contest. But that dropped to 30 percent in last year's congressional elections. The increasingly unpopular war in Iraq and the Republicans' tough stance against a pathway to citizenship for illegal immigrants contributed to the drop.

JUAN CARLOS LOPEZ, CNN EN ESPANOL SR. CORRESPONDENT: People feel that it's not a rejection of illegal immigration. They feel it's a rejection of Hispanics in America.

SANCHEZ: And the Republicans did not do themselves any favors by not taking part in the Univision debates. John McCain was the only GOP presidential candidate who agreed to show up. The rest of the field cited scheduling issues. And because of that, the debate was indefinitely postponed. New Mexico Governor Bill Richardson is the only Latino White House hopeful. But among Hispanics, he trails Hillary Clinton in the polls.

LOPEZ: He's trying to show people that he is Hispanic because a lot of people with the name Bill Richardson don't assume that he is.

(END OF VIDEOTAPE)

SANCHEZ: Here's the bottom line on this. Hispanics could have a big impact in the presidential primaries. Many would argue they already did. Remember Florida with the Bush win there. They're a sizable chunk of the population in such important early voting states as Nevada, Florida, California, Illinois, New York and New Jersey. And it's also part of a huge controversy that's taking place in this country. Tonight here on "OUT IN THE OPEN" Wolf, I should let you know we're going to be uncovering America. Here's a question that we're focusing on. If you're living in the United States, shouldn't you speak English, not Spanish but English? It's a huge issue and it's certainly one that has set off a lot of terse debates between a lot of people in this country. That's why we're going to be examining it and breaking it apart for you. Wolf, back over to you.

BLITZER: Good work, Rick. Sounds like a good hour coming up at the top of the hour. Rick Sanchez working hard in New York.

A woman on her way to rehab dies in the custody of airport police. It's a case raising a lot of questions tonight. We're going to have the latest.

Plus, details of a jury note hinting at a verdict in the sexual harassment case against the New York Knicks coach Isiah Thomas. Stay with us, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: There's a very disturbing case of death in custody incident down in Phoenix, Arizona. We're learning more about the woman arrested at the Phoenix Airport for disorderly conduct, handcuffed and placed in a holding room alone. Carol Costello is back for that. Carol, tell our viewers what happened.

CAROL COSTELLO: Somehow she wound up dead. And the question is, how does a handcuffed woman shackled to a bench strangle herself? Is it physically possible? Did she do it on purpose or, as her family wonders, was there something more sinister involved?

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): Carol Ann Gotbaum from a prominent New York City family, mother of three, found dead at the age of 45 handcuffed and shackled in a holding room at Phoenix's Sky Harbor Airport.

BETSY GOTBAUM, STEPMOTHER-IN-LAW: Carol was a wonderful, wonderful person. She was a wonderful mother. She was sweet and kind and loving.

COSTELLO: But she had problems. Gotbaum says her stepdaughter- in-law was on her way to Tucson to be treated for alcoholism, when she missed the plane and began screaming to be allowed to board, she cried out for help. But Gotbaum says her pleas appear to have been met with mistreatment. Phoenix Police disagree telling me Gotbaum was out of control, punching and kicking them. So on went the cuffs.

VOICE OF MIKE BROOKS, CNN SECURITY ANALYST: Whether at the airport or anywhere and you have a disorderly person, they're going to put her in handcuffs. That's standard operating procedure.

COSTELLO: Police then took Gotbaum to a holding area with her hands handcuffed behind her back. They shackled her by her wrists to a bench with a 16 inch chain. Somehow she brought her hands from the back of her body to the front, and it appears she strangled herself.

(END OF VIDEOTAPE)

COSTELLO: And when police found her, Gotbaum had her hands in front of her kind of like this with the shackles still attached. The chain was not wrapped around her neck, but it was pulled against the front of her neck area. But, you know, she had her hands cuffed behind her back and somehow they got up here. You know, police say they checked on Mrs. Gotbaum every 15 minutes or so. They found her unconscious during one of those visits. Her family sent me an e-mail just about an hour ago telling me Gotbaum was 5'7" and 105 pounds. They suspect something odd happened and they've hired a lawyer. Wolf?

BLITZER: What a story. All right, thanks. You'll stay on top of this for us.

COSTELLO: Sure.

BLITZER: Carol Costello reporting.

Meanwhile, there are strong indications tonight that the jury in the Isiah Thomas sexual harassment case is leaning against the Knicks' head coach and president. CNN's Jim Acosta is in New York with details. Jim?

JIM ACOSTA, CNN CORRESPONDENT: Wolf, the jurors handling this case sent out a note before wrapping for the day indicating that they have reached decisions on eight of the nine questions in their deliberations. The remaining undecided question deals with punitive damages, an indication that perhaps they're leaning towards a verdict against Isiah Thomas.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): For years hall of fame pro basketball player Isiah Thomas has always maintained a squeaky clean image, throughout a stellar NBA career. But then came the $10 million sexual harassment lawsuit against him and the owners of the New York Knicks. Thomas, now the Knicks' head coach and president, was accused of verbally abusing and basically coming on to a subordinate female employee. His accuser, 44-year-old Aniska(ph) Brown Sanders, a former college basketball star herself, claimed she was fired from her job with the Knicks after she complained about Thomas' behavior.

UNIDENTIFIED FEMALE: No woman regardless of the industry she works for should have to endure the type of abuse that I've endured on this job. Everyone has the right to expect that they're not going to be sexually harassed.

ACOSTA: Thomas denied harassing Brown-Sanders but did make this comment in a videotape deposition.

ISIAH WASHINGTON, NEW YORK KNICKS COACH: A white male calling a black female a (EXPLETIVE) is highly offensive to me.

UNIDENTIFIED MALE: Would you find it also offensive for a black male to call a black woman a (EXPLETIVE) --

WASHINGTON: Not as much.

ACOSTA: Thomas recently backed away from that comment. WASHINGTON: Please, don't mischaracterize the video that was shown in court today. I don't think it's right for any man to ever call a woman a (EXPLETIVE) -- I didn't do it and I wouldn't do it.

ACOSTA: But during closing arguments Brown-Sanders' lawyer accused Thomas of subjecting her client to locker room behavior, that may be ok at Madison Square Garden, but not in the workplace. Attorneys for the Knicks organization say Brown-Sanders was fired for poor job performance.

(END OF VIDEOTAPE)

ACOSTA: Thomas' accuser walked out of court with a smile on her face. The jury resumes its deliberations tomorrow morning. Wolf?

BLITZER: Jim Acosta reporting for us.

Why is Senator Hillary Rodham Clinton's laugh getting so much attention all of a sudden? CNN's Jeanne Moos standing by with a most unusual story.

(COMMERCIAL BREAK)

BLITZER: A volcano spewing lava over a tiny island. Here's CNN's Tom Foreman.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT (voice-over): An island devastated. A threatened military base evacuated. And live and dead bodies plucked from the sea. All that after a catastrophic volcano explosion on a tiny island some 85 miles off the coast of Yemen. Today a Canadian ship assigned to a NATO task force recovered two bodies. They also pulled one survivor from waters around the Red Sea Island.

UNIDENTIFIED MALE: We managed to pluck him out of the water after he'd been in there for quite a long time. And moments later, my ship, the "SCHC Toronto" picked up another survivor.

FOREMAN: Allen says a six ship NATO fleet happened to be en route to the Suez Canal when the Yemeni Coast Guard asked them to help. The eruption on the island whose name means Bird Mountain began yesterday and it continues.

VOICE OF KEN ALLAN, CANADIAN NAVY: It was quite brilliant. Huge smoke, ash going of course up into the sky.

FOREMAN: It's collapsed part of the island, covered much of the rest with lava and forced Yemeni military personnel on a base on the island to flee. Allen says the Yemeni Coast Guard rescued all but eight of them, but four are still missing. Tom Foreman, CNN, Washington.

(END OF VIDEOTAPE)

BLITZER: Senator Hillary Clinton's laugh is under the media microscope. Here's CNN's Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Is it a cackle? Or is it a chortle?

UNIDENTIFIED MALE: It would require among other things --

HILLARY CLINTON: I'm sorry, Bob.

MOOS: Or is it a calculated cackle? Hillary Clinton's laughter is echoing all over the web. Who needs a laugh track to get a reaction to Hillary's laughter?

UNIDENTIFIED MALE: Let me ask you about health care.

CLINTON: Yeah, I'd love for you to ask me about health care.

UNIDENTIFIED MALE: You did come up with your response?

[ laughing ]

BLITZER: I wonder if you want to respond to the former mayor?

[ laughing ]

UNIDENTIFIED MALE: I'm joyful.

MOOS: Hillary's contagious laughter spread to the editorial page of "The New York Times" where heavyweight columnists snickered. Wrote Frank Rich, now Mrs. Clinton is erupting in a laugh with all the spontaneity of an alarm clock buzzer. Critics say she's trying to undercut difficult questions.

UNIDENTIFIED MALE: Why should Americans vote for someone who can be fooled by George Bush?

[ laughing ]

MOOS: While supporters say she's got a great sense of humor. Seems to run in the family.

UNIDENTIFIED MALE: You're a disaster.

BILL CLINTON: [ laughing ]

MOOS: Back when Russian President Boris Yeltsin called the press a disaster, Bill Clinton was beside himself. Some say Hillary's laugh is as overdone as Al Gore's kiss. But maybe Hillary should kiss off the criticism, though her campaign wouldn't comment, she may feel like she did after the time she said she had experience with bad men.

SEN. HILLARY CLINTON, (D) PRESIDENTIAL CANDIDATE: You know, you guys keep telling me lighten up, be funny. I get a little funny and now I'm being psychoanalyzed.

MOOS: Hillary is not the only front runner to be accused of calculated mannerisms.

RUDY GIULIANI, (R) PRESIDENTIAL CANDIDATE: This is my wife calling, I think. Hello, dear.

MOOS: That was September. This was June.

GIULIANI: This is my wife on the phone.

MOOS: September.

GIULIANI: I'm talking to the members of the NRA right now. Would you like to say hello?

MOOS: June.

GIULIANI: Say hello.

MOOS: September.

GIULIANI: Talk to you later, dear, I love you.

MOOS: June.

GIULIANI: Ok dear, I love you, bye.

MOOS: But at least no one described Rudy as cackling. Cackling is what witches do. I like Hillary's laugh, read one internet post. What was she laughing about, read another. And for once, web shorthand, LOL, laughing out loud, seemed perfect. At least they didn't say COL, cackling out loud. Jeanne Moos, CNN, New York.

(END OF VIDEOTAPE)

BLITZER: Up next, Rick Sanchez with "OUT IN THE OPEN." Rick?

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