Return to Transcripts main page

ANDERSON COOPER 360 DEGREES

Bailout Battle; Probe on Blagojevich Scandal Continues; Interview with Michael Phelps

Aired December 12, 2008 - 23:00   ET

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


ANDERSON COOPER, CNN ANCHOR: Tonight, breaking news involving President-elect Obama's chief of staff, Rahm Emanuel, and his connection, if any, to Illinois Governor Rod Blagojevich's alleged scheme to trade Obama's old Senate seat for campaign cash.
Rahm Emanuel is not talking but CNN has learned new details about where he stands in the eyes of federal investigators.

Joining us with the latest is Jessica Yellin. What have you learned?

JESSICA YELLIN, CNN CORRESPONDENT: Hi, Anderson. I've learned from a source who's been briefed on the investigation that Rahm Emanuel is not a target of this probe.

Now, that's significant for two reasons. First, because it's initial confirmation of something that Barack Obama said earlier this week, which is that he's confident none of his staff has participated in any deal-making. Clearly investigators believe Rahm Emanuel did nothing wrong.

But it's also significant because presumably investigators would not notify him that he was not a target unless he had some contact with some of the people implicated in this case. So if you connect the dots, it does suggest that he may have been one of those aides who did make contact the Blagojevich's office.

And let me underscore again that would not be surprising or unusual because, in fact, you would hope that the President-elect vacating a senate seat would have his top advisor reach out to the governor to ask about replacement for that seat.

But we are not going to get more details about this until Barack Obama releases the entirety of his investigation. He is working at his own speed. And as we know, he takes his time. He doesn't move at our pace. We're going to have to get used to this. This is how he operates -- Anderson.

COOPER: All right Jessica, thanks for the breaking news. The Emanuel story comes on another bad hair day for the governor. His top law enforcer asking the state Supreme Court to declare him unfit for the office. Colleague calling him literally insane.

And as if jealous of the light, his predecessor George Ryan from federal prison apologizing today for his crimes. As for Governor Blagojevich, he went to work today seemingly oblivious to it all when Drew Griffin caught up with him. (BEGIN VIDEO CLIP)

DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT: Drew Griffin with CNN. Can you say anything to the people of the state of Illinois, sir? Do you have anything to say?

GOV. RODNEY BLAGOJEVICH, (D) ILLINOIS: I will at the appropriate time. Absolutely.

GRIFFIN: Are you going to resign, sir?

BLAGOJEVICH: I'll have a lot to say at the appropriate time.

GRIFFIN: Governor, are the authorities right in their petition that criminal complaint, did you do what they say you did? Governor? Just 30 seconds for anybody? For the state of Illinois?

(END VIDEO CLIP)

COOPER: I guess not. Stay tuned for more on that. In the meantime, here's Drew with more on today's developments.

(BEGIN VIDEOTAPE)

GRIFFIN: In perhaps a sign he has nowhere else to turn for help, pastors of local churches showed up at the governor's door this morning, emerging to say they came to offer support.

LEONARD BARR, FELLOWSHIP MISSIONARY BAPTIST CHURCH: We're here to have a prayer with my governor. He called me.

UNIDENTIFIED FEMALE: What was your prayer? What did you say?

BARR: That he continue to be a great governor. Stay the course.

GRIFFIN: The governor waved to the press and waved off any questions on what he is going to do. At the downtown office building where the governor works, Illinois's attorney general announced she had filed a motion with the state Supreme Court to have the governor stripped of his power.

LISA MADIGAN, ILLINOIS ATTORNEY GENERAL: We think it is very clear that he is incapable of serving. And we are certainly hopeful that the Illinois Supreme Court will hear this matter and appoint Lieutenant Governor Quinn as the acting governor.

GRIFFIN: Behind the scenes, the legislature is gearing up to start their own removal procedures. Meeting on Monday, the House and Senate are expected to take up motions to strip the governor of his ability to name a U.S. senator to the vacant seat prosecutors say he was trying to sell.

And Democratic House members are circulating this letter asking colleagues to join them in impeaching the Governor. But that will take time. Politicians agree the best thing for the state is for the Governor to resign. And while his accused chief of staff John Harris did submit his letter of resignation, the governor apparently is still on the job, working and not telling his press secretary much else.

UNIDENTIFIED MALE: People are trying to deal with today's issues as opposed to what's been going on this whole week.

GRIFFIN: In the meantime, we still are waiting for the list of contacts between President-elect Obama's transition team and Governor Blagojevich's office. And also Rahm Emanuel, the chief of staff for President-elect Obama, continues to remain silent on his role in talking with Governor Blagojevich.

Drew Griffin, CNN, Chicago.

(BEGIN VIDEOTAPE)

COOPER: Now there's new developments as well concerning Jesse Jackson Jr., senate candidate # 5, in the government's criminal complaint but not a target of the investigation.

Today the Chicago Tribune reporting that two businessmen with ties to Jackson and Blagojevich discussed with the governor raising at least a million dollars in campaign cash in exchange for Jackson getting the senate seat.

According to the Trib, that meeting let to a fundraiser last weekend attended by Jackson's brother. Congressman Jackson denies any wrongdoing and met with Blagojevich on Monday, one day before the Feds arrested him.

Today Jackson spoke out talking with CNN's Don Lemon.

(BEGIN VIDEO CLIP)

REP. JESSE JACKSON JR., (D) ILLINOIS: I've got a great name given to me by great parents. And I've got a great father who has a great legacy of public service.

DON LEMON, CNN ANCHOR: But it's plain now what people say --

JACKSON JR.: It's so great, it's so great, that I named my daughter Jessica and I named my son Jesse. So I'm fighting now for my character and I'm also fighting for my life.

(END VIDEO CLIP)

COOPER: More on that and all the angles shortly with our panel including former federal prosecutor CNN's Jeffrey Toobin and David Gergen as well.

On now to the auto bailout next, for weeks, the President has resisted using money from the $700 billion financial rescue fund to help Detroit. Now perhaps as soon as this weekend, he's ready to sign off on precisely that.

The reason, Senate Republicans last night snubbing him, voting against the $14 billion loan package he supported. And the reason for that, as you're about to see, is "Raw Politics." Here's David Mattingly.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: On this vote, the yeas are 52, the nays are 35.

DAVID MATTINGLY, CNN CORRESPONDENT: It's kind of like a war between the north and the south. Senators in the south are saying no to bailout loans to carmakers up north in Detroit. Eight Senate votes from just these four southern states could have saved the bailout. Instead, all their Senators voted no.

RON GETTELFINGER, PRESIDENT, UNITED AUTO WORKERS: Regardless of their motivation, they thought perhaps they could have a twofer here or maybe, you know, pierce the heart of organized labor while representing the foreign brands.

MATTINGLY: Foreign brands in Kentucky, Tennessee, Alabama, and Georgia have spent billions on plants creating thousands of jobs. They are adding thousands more next year. Almost all southern states have right to work laws, no union membership required.

By one industry estimate, non-union workers make about $3 per hour less than their union counterparts.

MIKE RANDLE, SOUTHERN BUSINESS AND DEVELOPMENT: Labor is for an automaker their number one cost factor. But other factors, taxes, utility costs, real estate costs, they all factor in, in terms of the south being extremely competitive.

MATTINGLY: Talks to save the bailout deadlocked over Republican demands for United Auto Worker cuts in pay and benefits in 2009. But some say southern Republicans also practice backyard protectionism.

This Hyundai plant was built in Alabama, taking advantage of more than a quarter of a billion in state and local incentives.

MICHAEL ROBINET, CSM WORLDWIDE: By 2014, over 80 percent of total production in the south will be of companies other than the Detroit three. So that certainly tells you that they have a vested interest in protecting those companies.

MATTINGLY: A good way to illustrate how the battle lines are drawn is to follow the money. One nonpartisan calculation by maplike.org shows the UAW contributed an average of $7,400 to each yes vote it got in the senate.

Compare that to the $147 it spent for each no vote and that's over a period of seven years. This fight started a long time before the big three bailout hit the senate floor.

David Mattingly, CNN, Atlanta.

(END VIDEOTAPE)

COOPER: Interesting. Well, do you think Senators were putting local politics ahead of the national interest? Let us know. Join the live chat happening now at AC360.com. You can also check out the live web cast for crew Friday during the break.

Up next, our panel weighs in on the bailout and the senate for sale developments. David Gergen, and Joe Johns and Jeffrey Toobin.

Also, the Obama's is asking for an earlier move-in date in Washington and getting rejected. Why can't the Obama's use a government house to live in so their kids can go to school? We'll explain.

Later, one of the kings of Wall Street, the massive scam this guy is accused of running and the family drama that ended with his kids turning him in.

And no sharks this time; just the fastest swimmer on earth. My "60 minutes" profile Olympic hero Michael Phelps and my race against the world's greatest swimmer tonight.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GETTELFINGER: Bankruptcy is not an option and it won't just be one company that's impacted. It'll be two, three others, the supply bases, they'll all be impacted. Every auto manufacturer in this country, if they go bankrupt, let me tell you they won't just go bankrupt. They will go into liquidation.

(END VIDEO CLIP)

COOPER: UAW president, Ron Gettelfinger, his union accused by Republicans of scuttling a loan package for Detroit carmakers. But as you saw on David Mattingly's report, people are also pointing fingers at southern Republicans with big taxpayers-subsidized nonunion car companies in their states.

Let's talk "Strategy" about Detroit and also about Chicago politics with CNN's senior political analyst, David Gergen, Joe Johns and CNN's senior legal analyst, Jeffrey Toobin.

So David, how does this play out? The White House now says it's ready to take money from the $700 billion bailout to help the big three automakers. But besides a couple of months, what does that really get the automakers?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Not very much, Anderson, except a bridge that keeps them alive. I think the White House looks like it's been backed into a corner by its own failures to get Congress to pass a compromise bill.

And the question now is, why weren't they ready with plan B today? If they'd really thought they wanted to go into those TARP funds to do this, something they rejected before but then now are apparently willing to do?

I don't understand what the slowdown is today. It's like both in Obama land and in Washington we've got a case of the slows today.

COOPER: I want to talk about Obama land in just a second.

But Joe, Republicans went along with the $700 billion bailout. How much of their opposition yes, last night, late last night, do you think is based on principle, how much is just politics?

JOE JOHNS, CNN CORRESPONDENT: Well, you know, this right to work state versus organized labor state has been going on a long time on Capitol Hill. Senators, members of Congress they really get dug on in on this issue, and it doesn't seem to me that you're going to be able to change that in a few days or a few weeks.

I was up there for 10, 12 years covering the Congress. It was always like that. They just don't get along. Democrats actually get a lot more money from unions than do Republicans.

So are they going to get a deal? Well, they'd have to have a real sweetener of somehow they're going to actually try to salvage it this year. Next year, the new Congress, there are going to be some more Democrats in both the House and the Senate. They'll have more votes. They might try to get together and get a whole restructuring deal in there for the automakers and do it that way and also send some more money to them at the same time.

COOPER: Jeff, let's talk about what's going on in Chicago. Rahm Emanuel has been told he's not a target in this investigation. And he's still not talking to reporters. But there are all these questions which remain over his contacts with the governor and his staff.

Is it a mistake for him to let this thing drag out? It's been yet another day.

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: I don't think it's a big mistake. I think it is much more --

COOPER: Are you saying that from a legal perspective or from a political perspective?

TOOBIN: Both. Both. I think it is far more important to get the story accurate and out at a reasonable time. It doesn't matter if it's today or next Wednesday. This story is not consuming the country or the future Obama administration.

All that matters is that the story come out accurately and that it be not incriminating. If both those things are true, it doesn't matter when it comes out. And if it's next week, that's perfectly fine.

COOPER: David, do you agree with that? Is that all that matters?

GERGEN: No, I do not agree with it. Listen, I think Barack Obama has a great reservoir of goodwill among the public. Over 70 percent of people do approve of the way he's running his transition.

And there's no indication at all that anything has gone wrong in this case with the governor. However, the way they have let this -- this is not that difficult to figure out. I mean, Rahm Emanuel can sit down in an hour, they can figure out what kind of contacts he had and another hour they can figure out everybody else in this case.

And they can get out a statement. The fact that this has now gone on three days without a response, without a serious, real response from the Obama team about what happened has allowed this story to go into the weekend.

And contrary to Jeffrey, I do believe it's starting to consume a lot of time, especially in the cable. It's going to move into the newspapers. And it's going to bleed into the weekend. I think every day that goes by allows more suspicion to grow that something is amiss here, when by any indication there's nothing amiss. But the fact they've let it drag out is starting to sow some suspicions.

TOOBIN: Well, I just also think once a statement comes out, regardless of what the statement is, it's going to breed more questions, which is entirely appropriate.

GERGEN: Right.

TOOBIN: So the idea that the Obama administration could somehow release a statement and make this whole thing go away, I don't think that's even possible.

COOPER: Joe, the head of the RNC said the President-elect has been and I quote, "Less than forthcoming." How much time does the Obama team think that they have to put some of these questions to rest?

JOHNS: Well, look, I mean, this has been very much about reaction time in the first place. And Obama kind of got behind the eight ball by first sort of mealy-mouthing around out there with this thing.

COOPER: Which I've got to say he has a record of doing.

JOHNS: Yes, sure.

COOPER: I mean, he tends to respond, I mean, perhaps it's the legal training, it's the legal background.

JOHNS: Right.

COOPER: But he tends to respond on very sort of tentatively to many things at first; at least in the public eyes.

JOHNS: Yes, right, exactly and then what you have is you have Republicans and the drumbeat starts because you know in this town guilt by association is just something that happens. Everybody knows that. They do it in politics. These guys are from Illinois. They do it there.

So the longer they sit and let the thing fester, the more likely they are to get tied to Blagojevich, at least with inference and suggestion and innuendo. And it's just trouble for this guy as he's trying to build up this administration, get sworn in, and get going. COOPER: Jeff, we saw this remarkable statement by the Illinois attorney general asking the state Supreme Court to declare Governor Blagojevich unfit to serve. Is that -- I mean is that possible?

TOOBIN: Well, it is. You know, Illinois has a very unusual law. I'm unaware of other states that have this law, and probably it exists somewhere. But it's certainly very unusual where the Illinois Supreme Court can declare the governor unable to serve and remove him.

What's happening now is the Attorney General Lisa Madigan is going to the court and saying, invoke this law. Take Blagojevich out of office. Now, this will not happen immediately, if it happens at all.

Certainly the Illinois Supreme Court will ask Blagojevich's lawyers to be heard. There'll be an exchange of briefs. There may even be some evidence filed. But this is just Lisa Madigan positioning herself as the anti-Blagojevich and saying, look, I am trying harder than anybody else to get rid of this guy, which is good for the state, she says, and good for her politically because she wants the governor's job or perhaps the Senate job that started this whole controversy.

COOPER: David, very briefly, does Jesse Jackson Jr. still have a shot at this job?

GERGEN: Not through the appointment process. He could still win an election.

COOPER: All right, David Gergen, Joe Johns, and Jeffrey Toobin, thanks very much.

Up next, is Governor Blagojevich unfit to serve? We're going to take an "Up Close" look at what some of his own colleagues are saying about his state of mind, including one who says he is literally insane.

Also ahead -- they picked a school for their daughters and the Obama's are ready to move to Washington, only one problem. They have no place to live. Why the new First Family was told they cannot move into the presidential guesthouse, coming up.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BLAGOJEVICH: I don't believe there's -- I think there's nothing but sunshine hanging over me.

(END VIDEO CLIP)

COOPER: That's Governor Blagojevich on Monday, hours before all that sunshine apparently vanished, the world around him falling apart fast. It's not just his political future that has people talking. It is his state of mind. Some think the governor has just lost it.

"Up Close" tonight, here's Gary Tuchman.

(BEGIN VIDEOTAPE) GARY TUCHMAN, CNN CORRESPONDENT: The mind of Rod Blagojevich is being discussed in polite company. The President-elect --

SEN. BARACK OBAMA, PRESIDENT-ELECT OF THE UNITED STATES OF AMERICA: I can't presume to know what was in the mind of the governor.

TUCHMAN: The Illinois attorney general --

LISA MADIGAN, ILLINOIS ATTORNEY GENERAL: And I'm not qualified to make any psychological diagnosis, but clearly something is wrong.

TUCHMAN: What do you say about a governor who knows he's been under investigation for years yet says something like this just this week?

BLAGOJEVICH: I don't care whether you tape me privately or publicly. I can just tell you that whatever I say is always lawful.

TUCHMAN: But then prosecutors say they caught the Democratic governor on tape saying this about his chance to appoint somebody to fill Barack Obama's Senate seat.

Quote, "I've got this thing and it's bleeping golden and I'm just not giving it up for bleeping nothing.

Well, here's what another fellow Democrat, a state Senator, says.

MIKE JACOBS, ILLINOIS STATE SENATOR: I think at the very least he's having some kind of mental breakdown.

TUCHMAN: And he exclaimed that before this all went down when he was summoned into the governor's office and said he wouldn't support a bill Blagojevich wanted.

JACOB: The Governor blew up at me and he began to make threats to me, including, I will destroy you. I will destroy you personally. I will destroy your family. I will [bleep] do whatever I have to do to make sure that you end up in a bad position in Illinois.

TUCHMAN: The Governor who has not commented to CNN has had disagreements with reporters in the past.

BLAGOJEVICH: And you're not just interested in sensationalizing something so you can do your big news story. You don't bother asking a question.

TUCHMAN: Here's what other state politicians have said. Representative Joe Lyons, another fellow Democrat, said the governor was quote, "insane." And Democratic Representative Jack Frank says, Blagojevich has quote, "delusions of grandeur."

But they are not psychologists. Dr. Gail Saltz of New York Presbyterian hospital is.

DR. GAIL SALTZ, CLINICAL PSYCHOLOGIST: I would say it's highly likely that there is some mental or emotional issue that this man is dealing with. TUCHMAN: A true diagnosis needs a face to face assessment. But Dr. Saltz and Chicago psychologist Dr. Scott Ambers share a feeling that the governor is not insane and does know right from wrong. But --

DR. SCOTT AMBERS, CLINICAL PSYCHOLOGIST: He probably does suffer from some form of psychopathology, some form of psychiatric disturbance which I think is best captured by a diagnosis called narcissistic personality disorder.

TUCHMAN: Which in plain English they say is exaggerated or grandiose fantasies of oneself, which isn't that uncommon of a condition.

The Chicago Tribune reporter thinks it's much simpler, though.

JOHN KASS, CHICAGO TRIBUNE REPORTER: He's merely a Chicago politician who was caught on tape.

TUCHMAN: But recent comments like this --

BLAGOJEVICH: I'm not interested in the U.S. Senate. I like my job as governor.

TUCHMAN: -- and his own experiences make Senator Jacobs feel much differently.

JACOBS: Well, he got over the top of me and doubled his fist this way. I'm not a shrinking violet myself. I'm a good-sized man, I'm 6'3", I played football at the University of Iowa. I know when somebody is about to strike.

TUCHMAN: The governor did not strike, which indeed sounds like a most sane decision.

Gary Tuchman, CNN, Chicago.

(END VIDEOTAPE)

COOPER: Well, ahead on "360," a speed bump in the presidential transition or just an awkward moment. The new First Family asked if they can move into the presidential guesthouse early. But guess what? They're told there's no room at the inn. Why? We'll find out.

And whatever possessed me to challenge Michael Phelps to a race and then insist on rules that actually made it harder for myself? What was I thinking? Find out, ahead.

(COMMERCIAL BREAK)

COOPER: Just ahead, he was a Wall Street big wig, what they call a major market maker. Only no one realized he was making up the markets, allegedly operating a scam on steroids.

First, Erica Hill has our "360 Bulletin" -- Erica.

ERICA HILL, CNN CORRESPONDENT: Anderson, nine days before winter's official start, a nasty ice storm across the northeast has left more than a million homes and businesses without power and caused at least one death. That misery stretches from Pennsylvania to Maine tonight.

Stocks rising as the Treasury Department signaled it might bail out the troubled automakers. The DOW added nearly 65 points, the NASDAQ and S&P 500 also finished in positive territory.

And the incoming First Family, it turns out won't be able to move into the presidential guesthouse early as they'd hoped. An aide says, when the Obama's asked if they could push that date up so their daughters could start their new school when classes resume on January 5th, they were told that Blair House was actually booked for some previously scheduled events and they will have to wait until January 15th.

COOPER: Previously scheduled events like parties for the Bush administration people?

HILL: I don't know. Maybe it's a discussion as to the plurality of candy like we're having here in the studio.

COOPER: Yes, you have to log on until tomorrow to find out what were talking about.

HILL: It's a very important event.

COOPER: -- at AC360.com.

All right, time now for our "Beat 360" winners. It's our daily challenge to viewers, a chance to show up our staffers by coming up with a better caption for the picture we post on our blog every day.

A star burst if you will, tonight's picture, former president George H. Bush and his wife Barbara Bush listen to their son President George W. Bush as he delivers the commencement address at Texas A & M's graduation ceremony today.

There you are, father Bush there sort of making a face. Our staff winner tonight, is Joey, and his caption, "Are you sure you never dropped him?"

HILL: It's nice to have Joey back in the winner column by the way isn't it?

COOPER: Our viewer winner is Mark from an undisclosed location and his caption, "Of course -- I've got to get this straight, "Of course, --

HILL: Graduaticians?

COOPER: Oh, I messed up I was going to -- "Of course, graduaticians isn't a word, Barbara --

HILL: Blagojevich.

COOPER: "But just go with it." I know, I've been practiced on Blagojevich.

HILL: Everything else falls by the way side it happens -- COOPER: It's Friday night.

Mark, your "Beat 360" t-shirt is on the way. You can check out all the entries we received on the blog and play along tomorrow at AC360.com.

Up next, "Crime & Punishment." A huge surprise actually -- this story is unbelievable. One of Wall Street's biggest names is under arrest, accused of pulling off maybe a $50 billion scam, bigger than Enron. What's almost as incredible is who turned him in.

Also, if swimming with great white sharks wasn't enough, I decided to challenge Michael Phelps to a race. What was I think being? The "60 Minutes" report on Michael Phelps, coming up next.

(COMMERCIAL BREAK)

COOPER: One of the most powerful players on Wall Street, a former stock exchange chairman, is accused of being a crook, a con artist who defrauded investors out of $50 billion.

Prosecutors say this financial giant used a Ponzi scheme to fool clients into thinking they were getting rich. In reality, they say he was just stealing their money. And it seems his downfall began with a tip from his kids.

"360's" Joe Johns has the latest in tonight's "Crime & Punishment" report.

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN CORRESPONDENT: In hindsight, it's one of those things that just seemed to too good to be true. Invest with a former Wall Street pioneer, a former Nasdaq chairman of the board, Bernard Madoff, a guy who is supposed to know the ropes, and get huge double-digit returns on investment year after year when other people are losing money.

Anyway, you know how this goes, right? Of course it was too good to be true. And now Madoff is just another Wall Street high roller who went down hard, leaving some very rich people with nothing to show for it but a big question -- how could I be so stupid?

BOB LENZNER, NATIONAL EDITOR, FORBES: How come some of the people who were feeding him these billions of dollars weren't suspicious, which they should have been, about the steady double-digit returns year after year? I mean, Bernie Madoff was considered to be a magician. Everybody wanted to be in Madoff's fund. I wanted to be in his fund.

Reporter: Forbes Magazine national editor, Bob Lenzner, never got in, and it's good for him he didn't. According to a federal criminal complaint against him, Madoff made it all up. He apparently got turned in by his own family.

The complaint says he told senior executives of Madoff Investment Securities identified as his own two sons by the "Wall Street Journal," that it was a $50 billion fraud. It's all just one big lie, the complaint says, "basically a giant Ponzi scheme;" a fast money rip-off that rewards people who get in early with investments that come later.

LENZNER: I believe that what he was doing is he was paying off his older investors and a lot of the charitable accounts with the newer investors. And what happened is that the volatility of this market here, he wasn't able to do his -- whatever strategy he was doing.

JOHNS: When the FBI came to arrest Madoff here at his New York penthouse, the complaint says, Madoff told the agent there was no innocent explanation and that he "expected to go to jail." The former Nasdaq chief is free on bond. His attorney has not responded to our request for comment.

Madoff faces a single count of securities fraud that could lead to a 20-year prison term and an investigation by the Securities and Exchange Commission. And there's a bunch of big-time investors wondering how a guy named Madoff made off with their money.

Joe Johns, CNN, Washington.

(END VIDEOTAPE)

COOPER: Unbelievable.

Just ahead, something else that's kind of unbelievable for a whole different reason; in the pool with Aqua man a.k.a. Michael Phelps. Note to self -- next time you challenge the fastest swimmer on the planet to a race, you might want to brush up on your physics.

(BEGIN VIDEO CLIP)

COOPER: How about if I get to dive and I get to do freestyle.

MICHAEL PHELPS, OLYMPIC SWIMMING CHAMPION: Okay.

(END VIDEO CLIP)

COOPER: I thought I was getting the better of the deal. The joke was on me. You can see for yourself when we broadcast my "60 Minutes" interview with Michael Phelps, coming up, and the race.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

COOPER: He showed up after the dropping that I gave you in the pool.

PHELPS: I was close.

COOPER: Yes.

PHELPS: Absolutely right.

I thought it was funny, actually, you chose for me to go under water because it's faster to go under...

COOPER: Is it?

PHELPS: ... than to swim on top of the water.

KELLY RIPA, CO-HOST, "LIVE WITH REGIS AND KELLY": OK.

COOPER: I knew it. I knew I made a mistake somewhere.

(END VIDEO CLIP)

COOPER: I was filling in for Regis Philbin on "Live with Regis and Kelly" this morning, became the punch line for Kelly Ripa and guest Michael Phelps. That's OK.

In case you missed it, on "60 Minutes," I challenged Michael Phelps to a swim race. I thought I made it tough for him. Instead, I clearly just embarrassed myself. You'll see what I mean in a few minutes.

Just days ago, another honor for Phelps, he's "Sports Illustrated's" Sportsman of the Year. I'm not really surprised. He broke the record books at Beijing over the summer, collecting eight gold medals.

I spent some time with Phelps for this "60 Minutes" interview. Here it is.

(BEGIN VIDEOTAPE)

COOPER: The red carpet at MTV's Video Music Awards in Hollywood. The loudest screams were not for a rapper or a rocker or even the usual suspects. They were for Michael Phelps, the guy who can barely carry a tune.

PHELPS: This is cool.

COOPER: The next day, an appearance on "The Tonight Show with Jay Leno." Then a red-eye flight to New York where he helped open the Stock Exchange the next morning.

But Phelps was starting to show the wear and tear of a tour that had taken him from Beijing to Portugal to San Francisco among other stops. By mid-September he had not been home for three months.

We caught up with him in New York between a commercial shoot and a rehearsal for "Saturday Night Live."

Do you worry that you're doing too much?

PHELPS: No. I'm having fun. Yes, it's, like, excuse me, after I think...

COOPER: I'm trying not to take your yawning personally.

PHELPS: No.

COOPER: How quickly could you fall asleep right now? PHELPS: Within seconds.

COOPER: Really?

PHELPS: Literally, probably within a minute I could, I could be out cold.

COOPER: And sure enough.

It took you 50 seconds to fall asleep.

We actually timed it.

PHELPS: I was exhausted that day.

COOPER: Are there moments when you're, like, this is just nuts.

PHELPS: There have been a few times when I've been like, wow, this is, you know, more than I expected or more than I thought would happen.

COOPER: What's happening is a just reward for a guy who's been training nonstop since age 11. His teenaged years were spent like this, swimming lap after lap, thousands of hours staring at a black line from the bottom of a pool.

Bob Bowman is his coach.

BOB BOWMAN, COACH: For about five years he did not take one day off.

COOPER: Christmas Day?

BOWMAN: Nope. We train on Christmas.

COOPER: His birthday?

BOWMAN: Yes, that's a given. Twice on his birthday.

COOPER: How did you do that every day?

PHELPS: To be honest, it's not wanting to lose. I wanted to do something that no one else has ever done before. That's what got me out of bed every day.

COOPER: The workouts were so intense, Bowman became known as the mad scientist.

What were some of the toughest workouts?

BOWMAN: 10,000 meters for time.

COOPER: That's 10,000 meters all-out.

BOWMAN: Yes. Ready, go. And that takes about 2 1/2 hours.

COOPER: All-out racing. BOWMAN: Yes, just swim as hard as you can for 2 1/2 hours.

PHELPS: Like horrible, horrible workouts. You only see them on paper, you're like, I can't do this. He makes us do it so we're more confident and we know that we can do anything that we put our mind to.

COOPER: Payoff came at the 2004 Athens Olympics. Phelps won six gold medals, an extraordinary achievement. But he just missed Mark Spitz' record of seven golds.

Then came Beijing and a chance to make history. To win eight golds Phelps needed to swim 17 times in nine days. So many things could go wrong in Beijing and they did. In the 200-meter butterfly final, his goggles filled with water, virtually from the start.

PHELPS: They started filling up more and more and more. And about 75 meters left in the race, I could see nothing. I couldn't see the black line. I couldn't see the T. I was purely going by stroke count. Then I couldn't take my goggles off because they were underneath two swim caps.

COOPER: Somehow he not only won his fourth gold medal of the games, he also set a world record.

But after winning his sixth gold, one short of Spitz's record, Phelps now admits for the first time he was whipped.

PHELPS: I remember saying, I got nothing left.

BOWMAN: I could just look -- see it in his face. If you look at the pictures right after the race and he was in the water, I thought, wow, he is really tired.

COOPER: Then came the 100-meter butterfly final, the race everyone remembers. With little left in his tank and a historic seventh gold medal on the line, Phelps was behind Serbia's Milorad Cavic with just 35 meters to go.

PHELPS: I was, like, please get your hand on first. Please get your hand on first. I remember, like, the last two or three strokes that I had misjudged the finish. I thought that was the race.

I saw I had won and turned around, looked at the board, saw it was by one-one hundredth. And that's where the emotion came out. That's where the big splash of the water, like, the big roar. You could tell that I was pretty intense after that race.

COOPER: A photo finish if ever there was one. That's Phelps on the left, Cavic on the right. Looking at these photos, Phelps noticed something.

What's going on there?

PHELPS: Do you see here he's picking his head up before he's finishing. So it was acting as a speed bump. So he's coming up and then trying to lift his head up before he touches the wall. And now mine is -- mine is in the straight streamline. So that's the difference in the race.

If his head's down there, he wins. Hands down wins the race.

COOPER: A tilt of the head helped Michael Phelps become an Olympic legend.

(END VIDEOTAPE)

COOPER: Tilt to the head. Amazing.

In a moment, my "60 Minutes" profile continues with the marketing of Michael Phelps. A look at how much he's making, how much he's really eating, and how did I do racing against him.

Believe me, it's not that easy.

And later, Obama's search for a puppy is still continuing, but who knew Joe Biden also wanted a puppy? He got one from his wife. Find out what kind of puppy the vice president now has. It's our "Shot" tonight.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

RIPA: Just wondering, Anderson, have you had these swimming trunks since college?

COOPER: I have actually.

RIPA: We actually searched the Internet and online we did, in fact, find a photo of Anderson Cooper wearing a Speedo. I'm proud to say I have it right here. He is a sexy beast of a man.

COOPER: That's not...

(END VIDEO CLIP)

COOPER: Of course, that's not me. That is actually Wolf Blitzer's body.

That was Kelly Ripa on "Live with Regis and Kelly" this morning. She was taking some shots at me for racing Michael Phelps, the swimming superstar, won a record eight gold medals in the summer.

And, yes, I wore a ridiculously old bathing suit. I admit it, I don't care.

I interviewed him for "60 Minutes." We're showing you the report tonight. I'm going to show you what happened when I challenged him to a one-lap race.

Here's more of my time with Michael Phelps.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: And look at me. Beauty.

COOPER: The cover shoot for "Sports Illustrated" was the kickoff to a marketing frenzy few other Olympic athletes have ever experienced.

UNIDENTIFIED MALE: Michael Phelps.

COOPER: Phelps had nine major sponsors even before Beijing. Now he's overwhelmed with proposals.

PHELPS: It's been a crazy ride.

COOPER: While visiting Visa's headquarters we caught him backstage as his agent, Peter Carlisle, showed him a big offer on his BlackBerry.

PHELPS: Shut up.

COOPER: It was rejected.

PHELPS: Five?

COOPER: $5 million turned down.

PHELPS: Sometimes I get a little frustrated, but in the long run I know why he rejected it and why he does stuff like that.

PETER CARLISLE, MICHAEL PHELPS' AGENT: These types of things were happening so frequently, the number of offers like that that just obviously didn't fit in. It was astounding.

This is Peter. Give me some numbers.

COOPER: Carlisle's office receives about 300 calls a day regarding Phelps. But he's only looking for companies that fit Phelps' lifestyle. Ten restaurant chain offered Phelps deals but he signed with Subway, in part, because they plan to market Phelps overseas.

A car endorsement in China will soon follow.

PHELPS: How you guys doing?

COOPER: To entice more kids to swim he set up a foundation and a Michael Phelps video game is in the works. He also appears in a commercial for the video game Guitar Hero. A new book will be out shortly as will a documentary with behind the scenes footage of Phelps.

In his lifetime, how much do you think Michael Phelps will earn?

CARLISLE: It's tens of millions of dollars.

COOPER: More than $100 million?

CARLISLE: If I had to bet, yes.

PHELPS: That's pretty good for a swimmer.

COOPER: Pretty good for a swimmer and for his pet. Even Michael's dog Herman may cash in.

CARLISLE: There -- actually, there have been...

COOPER: Wait a minute. Don't tell me that he's...

CARLISLE: There have been several sponsorship proposals...

COOPER: For Michael Phelps' dog.

CARLISLE: For Herman. No joke.

DEBBIE PHELPS, MOTHER: Hi, Michael. It's mom.

COOPER: And Michael's mom Debbie got so much airtime at the Olympics she made a commercial for Johnson & Johnson and struck a deal with the clothing company, Chico's.

COOPER: When you heard that someone was interested in having a sponsorship with you...

D. PHELPS: Crazy.

COOPER: Crazy.

D. PHELPS: This is crazy, you know?

Ladies and gentlemen, go to your door, please.

COOPER: Her life may have gotten crazy, but Debbie has not quit her day job.

D. PHELPS: Hi, everybody. How are you doing? Good to see you, Baby- O.

COOPER: She's a principal at a middle school in Baltimore. Her only complaint? One echoed by mothers everywhere. Her son doesn't call enough.

How do you communicate with him now most of the time?

D. PHELPS: Text.

COOPER: Text. Did he teach you to text? Or were you a big texter before?

D. PHELPS: I was not a big text person. But he -- I know he's always texting all the time so must know how to text.

COOPER: He may be too busy to call, but he's quick to tell you what his mom did for him as a single parent.

PHELPS: I'm happy that she's getting recognized for everything that she's done because it's been so much of a big impact on my life.

COOPER: You owe her a lot.

PHELPS: I owe her the world.

COOPER: He said he owes you everything. He told us that.

D. PHELPS: Make me cry, Anderson. That's -- a lot. I just -- I was a parent. I wanted my kid to do well.

COOPER: Michael's success has allowed him to buy a $1.5 million apartment in his hometown, Baltimore.

PHELPS: I walked in and I was, like, I want this place.

COOPER: What's so remarkable about Michael Phelps is how unremarkable he is outside the pool. Take a tour of the apartment and you quickly see he is, at heart, a 23-year-old kid.

Do you actually have food here?

PHELPS: Yes. Some stuff. Mostly just drinks, chips and cereal.

COOPER: Rice crispy treats, (INAUDIBLE), peanut butter cups.

PHELPS: Yes.

COOPER: Definitely a bachelor pad.

PHELPS: I'm hungry.

COOPER: His prodigious appetite remains intact.

PHELPS: Yes.

COOPER: Over breakfast of eggs (INAUDIBLE) with crab meat and a quesadilla with sour cream, he was anxious to dispel one myth.

The story that everyone knows about you or has heard about you is that you eat 12,000 calories a day.

PHELPS: It's not true.

COOPER: So how much does he eat? A mere 8,000 to 10,000 calories a day when he's training.

PHELPS: I mean like, with how much I work out, I have to always just constantly shovel food in because I can lose anywhere from, you know, 5 to 10 pounds in a week.

COOPER: In one week.

PHELPS: In a week.

COOPER: What are you at right now?

PHELPS: About 205.

COOPER: Is that the heaviest you've been?

PHELPS: Yes. I've never been over 200 pounds.

COOPER: Yes, you really look like you let yourself go, huh?

Phelps plans to resume training again in January for the London Olympics in 2012. This day was only the fourth time he'd been in the pool since Beijing.

While there, he and his coach Bob Bowman brought out a secret list.

And have you ever shown this to anyone before?

BOWMAN: No.

COOPER: The list was put together the year before the Olympics. On it, the times Phelps hoped to achieve in Beijing. Turns out he was off by nearly a second in the 200-meter butterfly when his goggles filled with water.

For you, was that still a successful race?

PHELPS: No.

COOPER: I think a lot of people would be surprised that you left Beijing a little disappointed.

PHELPS: There were two races I didn't hit.

COOPER: Yes.

PHELPS: The 100 and 200 fly.

COOPER: So it was disappointing.

PHELPS: I mean no...not as a whole but...

BOWMAN: Not -- it's all relative, right?

COOPER: Since he was in good spirits and relatively out of shape, we decided to see how the world's greatest swimmer would do against a middle-aged mortal. But there were conditions.

How about if I get to dive and I get to do freestyle...

PHELPS: OK.

COOPER: One lap. You go under water the whole way. You can't breathe and you can't take a stroke.

PHELPS: Let's go. Let's do it.

COOPER: And you'll still beat me.

PHELPS: Let's go.

COOPER: OK. I'll go change.

BOWMAN: Take your mark. Go.

COOPER: What does it feel like to race Michael Phelps? I couldn't tell you. He moved by me so quickly, I never even saw him.

All right. I got beat by Michael Phelps.

It's all right if I hold them?

PHELPS: Go ahead.

COOPER: Phelps is not one to brag about his victories.

They're very heavy.

PHELPS: Yes.

COOPER: He showed us his gold medals but only because we asked.

My heart just skipped a beat.

He keeps them in a safe place but has never brought them out just to admire them. This was only the second time he'd seen them together. The enormity of his achievement still hasn't completely sunk in.

It's amazing to see them all at once. It's even more remarkable when you think you have six others.

PHELPS: I was just thinking about that, I was just thinking about what six more would look like on the table.

COOPER: And maybe even more than that someday.

PHELPS: We'll see.

(END VIDEOTAPE)

COOPER: Michael Phelps begins training again soon.

Up next, he's cute, he's cuddly, he's the new vice puppy. While we were on first puppy watch, the Bidens got a pooch of their own. He's our "Shot of the Day."

(COMMERCIAL BREAK)

COOPER: Erica, I know you're a dog lover. So am I. We're dog- loggers, since we log around our dogs.

ERICA HILL, CNN ANCHOR. Sometimes I do log the Jake-man, it happens.

COOPER: Apparently so does Joe Biden. Tonight's shot, his new puppy. It's an adorable six-week old German Shepherd. Male. No name yet.

HILL: Very sweet.

COOPER: Biden is going to let his granddaughters -- settle down now -- his granddaughters pick the name. His wife Jill reportedly promised him a puppy if he stuck it out through the election.

HILL: Because he was thinking, maybe I'll drop out.

COOPER: I know, exactly, like she really had to say, I'll give you a puppy if you stay.

Biden has a soft spot, apparently, for German Shepherds.

HILL: You get VP and you get a dog, honey.

COOPER: And he's owned three. They bought this little guy from a breeder from Pennsylvania. She's going to take care of him until after the inauguration.

HILL: I'm not saying there's anything with breeders and I'm sure that this breeder is a lovely person, I'm just saying that there are a lot of rescue groups out there, even for pure bred dogs like the German Shepherds, which is a lovely breed, apparently very good with children. Just saying.

COOPER: This is a point of contention with you, isn't it?

HILL: There are a lot of dogs that need to be saved.

COOPER: I know. I know. I hear you. I hear you.

HILL: I don't want them to die.

COOPER: I got a dog -- I have to admit I got a dog from a breeder, too. I know. I feel guilty about it.

HILL: I knew there was something about you, Anderson Cooper; that and the old bathing suit.

COOPER: A program note. If you missed the premier of our documentary, "Planet in Peril: Battle Lines" last night or you want to see it again, you can catch it this weekend, Saturday and Sunday night at 8:00 p.m. Eastern.

That does it for this edition of "360." Thanks for watching.

"Larry King" starts right now.

Have a great weekend. I'll see you on Monday.