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THE SITUATION ROOM

Alleged Russian Spies in Court; LeBron James Sweepstakes Begin

Aired July 1, 2010 - 18:00   ET

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


SUZANNE MALVEAUX, CNN ANCHOR: You are in THE SITUATION ROOM.

Happening now: There is breaking news. Alleged Russian spies appear in court and prosecutors say that one suspect has already confessed. They say the deception began with a false name.

And hungry bacteria -- could oil-eating germs help clean up the Gulf of Mexico? We are going to show you the scenario.

And teams and cities can now begin bidding for the services of NBA superstar LeBron James, but will the high-priced free agent actually stay home in Cleveland?

Welcome to our viewers in the United States and around the world. Wolf Blitzer is off today. I'm Suzanne Malveaux, and you are in THE SITUATION ROOM.

MALVEAUX: We begin with breaking news in the case of the alleged Russian spy ring. Federal prosecutors say that one of the suspects has admitted working for Russia's intelligence service, and they say the deception started with a false name. Some suspects were in court today.

Our Brian Todd, he is outside of the federal courthouse in Alexandria, Virginia.

Brian, you have learned a lot today about what is taking place in this case. What do we know right now?

BRIAN TODD, CNN CORRESPONDENT: Well, the most breaking thing right now, Suzanne, is the information we got just a short time ago this afternoon.

As you mentioned, one of the key suspects in the case named Juan Lazaro has admitted, has confessed to working for the Russian intelligence service. This is according the a bail letter that was released by the U.S. attorney's office in Southern New York. And they describe a session on Sunday, a post-arrest interrogation in which Lazaro almost immediately started talking and confessed at that time.

They say he waived his Miranda rights shortly after he was picked up and started talking. The key confession, that he did work for the Russian intelligence service. And here's a quote from the bail letter.

Lazaro admitted that Vicky -- and that is Vicky Pelaez, who is identified as his wife in this case and is a suspect along with him -- that Pelaez had delivered letters to the service on his behalf, that the Yonkers house had been paid for by the service, and that although he, Lazaro, loved his son, he would not violate his loyalty to the service, even for his son.

According to the bail letter, Lazaro said that Juan Lazaro was not his real name, that he was not born in Uruguay as had previously believed and that he would not give them his real name. So that a key development in this case. Although it happened Sunday, we just learned about it in a bail letter released just a few hours ago.

And came right on the heels of kind of a strange hearing here that we went through with three of other suspects here in the case. Remember there are 11 total suspects here. Three of them were brought into this courtroom, one of them a married -- two of them are a married couple. Patricia Mills and Michael Zottoli, they're a married couple.

They were brought here for a pretrial detention hearing. One of their attorneys said, your honor, I have just learned some information from the government. I have to confer with my client. He whispers into his client's ear and then he says we need more time to go over some information, and the judge postponed this detention hearing until tomorrow.

What we know from a source with knowledge of the investigation is that the confession of Juan Lazaro was not the reason that they asked for this delay. So, there are other pressing developments in this case that forced this attorney to ask for a delay in the detention hearing. A delay was also given for a third suspect brought into this courtroom, Mikhail Semenko. He asked also for the court to appoint an attorney for him.

Also, the pretrial detention hearing for two other suspects in Boston was postponed until later in July. So a lot of developments here today, but the key one that we know now, a confession by suspect Juan Lazaro that he worked for the Russian intelligence service -- Suzanne.

MALVEAUX: And, Brian, I suspect we will get a lot more information as those proceedings unfold tomorrow. So thank you once again for that breaking news.

Now, one of the 11 alleged Russian agents is now missing. Robert Metsos was arrested in Cyprus and released on bail, but he has failed to check in with the police there.

Joining me now is CNN national security contributor Fran Townsend. She was homeland security adviser to President Bush and worked in the Justice Department during the Clinton administration. She's also a member of the CIA's external advisory board.

Fran, thanks for joining us here in THE SITUATION ROOM.

I want to start off, how does this something like this happen? They have the guy in custody and then they say, OK, check in with the police and then he disappears?

FRANCES TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: Really sloppy. And, look, the Cypriots have got to be embarrassed by this.

We don't know for certain, but it appears that in addition to just being released and being told to check in with the police, he was not -- he did not have to surrender his passport, which meant they left him with travel documents which are presumably false, A, and, B, spies normally travel with many sets of travel documents, so we don't even know what name he is traveling under, what country's passport, other than we know he did have -- the one passport he did have was a Canadian passport.

But this is really embarrassing and sloppy police work.

MALVEAUX: Is this typical, that the Justice Department would rely on the police in Cyprus to handle this? I mean, wouldn't there be some sort of intermediary that would get involved so that this kind of thing doesn't happen?

TOWNSEND: Well, you know, he is picked up in another sovereign country and you don't have much choice in the Justice Department and the FBI but to rely on your allies. You rely on them to be competent. You rely on them to not be corrupt in any way, and so, you don't really have much choice other than what you do is you put in paper a written request for his extradition.

He then has to go through a process by which the reviewing court, that is, the court in Cyprus, has an opportunity to review the papers and determine whether or not they are adequate and whether or not they are going to turn him over to U.S. authorities. We never got to that stage because of course he was released on bail and escaped.

MALVEAUX: This might be a tough question for you to answer, but this is a guy who obviously is experienced in changing identities and moving from country to country and false papers, that type of thing. How likely is it that the Justice Department or even the police from Cyprus will be able to get this guy, find this guy, now that he is out of their custody?

TOWNSEND: You know, the longer the time period goes from his disappearance. And, of course, we don't know -- we know when the Cypriots realized he was gone. That is when he didn't check in that evening.

We don't know how long before that he left. But with every passing hour, the likelihood of their ability find him gets less and less unless he makes a mistake. Frankly, if he is smart, where he is headed for is to Russia, where we will never be able to reach him and he will be protected by the Russian government.

MALVEAUX: OK. Fran Townsend, thank you so much. Appreciate your time.

TOWNSEND: Thanks, Suzanne.

MALVEAUX: Jack Cafferty is next with "The Cafferty File."

Then, President Obama pushing immigration reform and taking jabs at Republicans. CNN's John King is standing by with analysis.

Also, can hungry germs help to clean up the Gulf of Mexico? A look at oil-eating microbes.

And bidding begins on NBA superstar and free agent LeBron James. We will look at how much he might be able to bring cash to all those cities.

(COMMERCIAL BREAK)

MALVEAUX: Jack Cafferty is here with "The Cafferty File."

Hey, Jack.

JACK CAFFERTY, CNN ANCHOR: The United States' national debt level is the highest it's been since World War II. The Congressional Budget Office is warning President Obama's deficit commission that something has got to be done and quickly.

By the end of this year, our debt level will represent 62 percent of this nation's economy, and it will rise to 80 percent in 2035, just 25 years out. That means that simply paying the interest on the national debt will consume one-third of all federal revenue, just to pay the interest. And that's the Budget Office's most optimistic scenario.

Their worst-case scenario has the debt level hitting 185 percent of GDP by 2035 and then the interest payments will consumer 9 percent of GDP, or more than two-thirds of all federal revenue.

And getting to that point is not at all improbable. The CBO says extend the tax cuts of 200, 2003 for most people, permanently protect the middle class from the Alternative Minimum Tax, and permanently increasing Medicare payments to doctors, and, bingo, we're there.

The president's bipartisan deficit commission has until December to come up with some ideas on how to bring down debt and stabilize the deficit. But none of their recommendations will be binding on anyone. And it's no accident their report isn't even due until after the midterm elections. In the meantime, we have a ticking financial time bomb on our hands and our government is sitting on theirs.

Here's the question: What's the answer to America's deepening financial crisis?

Go to CNN.com/caffertyfile and post a comment on my blog -- Suzanne.

MALVEAUX: All right, thank you, Jack.

President Obama today made a push for immigration reform, and he said it is time to put politics aside in order to resolve the status of millions of illegal immigrants, but he aimed a few barbs at the Republicans in the process. Take a listen to this.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: And just a few years ago, when I was a senator, we forged a bipartisan coalition in favor of comprehensive reform. Under the leadership of Senator Kennedy, who had been a long-time champion of immigration reform, and Senator John McCain, we worked across the aisle to help pass a bipartisan bill through the Senate.

But that effort eventually came apart. And now, under the pressures of partisanship and election-year politics, many of the 11 Republican senators who voted for reform in the past have now backed away from their previous support.

Into this breach states like Arizona have decided to take matters into their own hands. And given the levels of frustration across the country, this is understandable. But it is also ill-conceived.

And it's not just that the law Arizona passed is divisive, although it has fanned the flames of an already contentious debate.

I'm ready to move forward. The majority of Democrats are ready to move forward. And I believe the majority of Americans are ready to move forward.

But the fact is, without bipartisan support, as we had just a few years ago, we cannot solve this problem.

Reform that brings accountability to our immigration system cannot pass without Republican votes. That is the political and mathematical reality.

The only way to reduce the risk that this effort will again falter because of politics is if members of both parties are willing to take responsibility for solving this problem once and for all.

(END VIDEO CLIP)

MALVEAUX: Our CNN's John King is joining us now.

John, if the president says he needs to get this thing done, why is no one willing to bring this to the floor for a vote?

JOHN KING, HOST, "JOHN KING, USA": Well, the answer to that was in his compliment that he paid to George W. Bush today.

Usually, when the president talks about problems he inherited, he criticizes President Bush. Today, he gave President Bush his due, because this one is so hard. It frustrated President Bush. It is now frustrating him.

He's absolutely right when he says, to get it done, you need Republican votes. You also need something else. You Democratic risk- taking and Democratic courage, because the Republican votes are not going to be volunteered in this election-year climate. So would to Democrats bring it to the floor in the House, bring it to the floor in the Senate, and call their bluff, give a bill that gives you more border security, but deals with issues that Lindsey Graham, John McCain, many Republicans in the House, the Chamber of Commerce have supported in the past?

But they won't, because so many Democrats don't want to take that vote. And they will only take that vote if you have guaranteed Republican support, so this is a bit of a game of chicken going on in Washington.

MALVEAUX: Is it possible that both sides win, both parties win if they don't bring it forward and they can blame each other?

KING: That is a great point. And that's what just most -- about every cynic in Washington says, in the sense that the president had to do this because Latino groups are furious at him and furious at Speaker Pelosi and Leader Reid.

The president, you remember as a candidate, he promised to do this in his first year in office. He promised repeatedly he would have an immigration bill in his first year in office. There is no Obama White House immigration bill. There are proposals he supports in Congress, but the Latino groups are saying, where are you, Mr. President? We gave you our votes. Keep your promise.

They say the same thing to the speaker and to the leader, but there are so many moderate and conservative Democrats in tough races this year who would rather not cast this vote. They would cast it if you had plenty of Republicans with them. They're not going to get those Republicans, Suzanne.

So, can the president say, I tried? Yes, he can. Is that enough? We will find out in November. Watch Latino turnout in November. Is trying enough or do they think it is a promise broken?

MALVEAUX: Now, you and I both covered President Bush, and he tried and tried and tried. He couldn't get this. Does President Obama, does he have enough political capital to take this risk, to move this thing forward?

KING: At this moment, most people would tell you probably not.

However, he is still the leader of his party. He is still about 50 percent approval rating. He is more popular than anybody else nationally.

But this one has turned so emotional. John McCain, who was essentially on the same page as this president as a candidate for president and in his prior life in the Senate, won't do it right now. They all say border security first, border security first.

Maybe in a lame duck session after the election, is there a slight possibility? If there is any chance, most people say, of getting it done this year, it would be then, after the election, when Congress comes back, and a whole lot of Democrats and some Republicans who won't be here in January who will have lost in November. Maybe it would different then, but I would not bet the ranch on it.

MALVEAUX: OK. All right, thanks again, John. We will see you soon.

More than a million Americans could lose their unemployment benefits starting this weekend. We are going to look at why some lawmakers actually oppose an extension.

Plus, a stunning fossil find. Scientists say this ancient whale was practically a sea monster.

(COMMERCIAL BREAK)

MALVEAUX: More than a million jobless Americans may soon lose their unemployment checks. Today, the House of Representatives approved extending long-term benefits, but a similar measure is still stalled in the Senate, and its future very much uncertain.

Our CNN's Mary Snow, she is joining us live.

Tell us, what is at play here? Why the holdup? What is the issue?

MARY SNOW, CNN CORRESPONDENT: Well, Suzanne, opponents in Congress are citing the cost of extending the benefits, but what it comes down to is this. Without congressional approval, the unemployed who are tapping out state unemployment benefits that last 26 weeks can't get additional jobless checks that use federal money.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Thirty-nine-year-old Lesley Pink has been hitting the pavement since January, sending out an estimated 800 resumes, but still no job. She has documented her search on a blog site since being laid off in January from her marketing job. Her unemployment checks are running out in a few weeks, and she is hoping for an extension.

LESLEY PINK, UNEMPLOYED: I can get through the summer, July, August, and then I'm really going to have to think about my next step, whether that is leaving my apartment, whether that is leaving New York, moving in with family. I don't know what I am going to do.

SNOW: Pink's fears are shared by many. Without Congress approving extensions that allow some states to provide benefits for up to 99 weeks, an estimated 1.6 million Americans will be cut off from unemployment checks come Saturday.

But some critics like Republican Senate candidate Sharron Angle in Nevada say extensions should not be granted. In an interview on Nevada's "Face to Face" program, Angle says people are being encouraged not to work.

SHARRON ANGLE (R), NEVADA SENATORIAL CANDIDATE: The truth about it is, is that they keep extending these unemployment benefits to the point where people are afraid to go out and get a job, because the job does not pay as much as the unemployment benefit does.

SNOW: Andrew Stettner could not disagree more. He is the deputy director of the National Unemployment Law Project, an advocacy group for lower-wage workers. He says unemployment checks cover about 40 percent of what people had been making.

ANDREW STETTNER, NATIONAL UNEMPLOYMENT LAW PROJECT: The average paycheck in America is close to $1,000 a week. And most people are going to prefer that to an unemployment check. Unemployment benefits are low. You can't survive on them, so people are looking for a job. They're desperate for a job.

SNOW: Average weekly unemployment benefits range from Hawaii's $419 a week to Mississippi at $190 a week. In New York, Lesley Pink's weekly check is just over $400.

PINK: I have paid my taxes. I have done everything a responsible citizen is supposed to do, and they are going to cut me off, and they have bailed the banks out? It is infuriating to me.

(END VIDEOTAPE)

SNOW: And, Suzanne, the next step comes with the Senate, where many Republicans had said they would have voted for the $30 billion bill if Democrats came up with a way to offset costs. Now, lawmakers are taking a weeklong break. By the time they reconvene, it is estimated that roughly two million people will have lost their jobless benefits -- Suzanne.

MALVEAUX: Going to be a lot of people suffering in the meantime, while they work it out. Thank you, Mary.

(NEWS BREAK)

MALVEAUX: Well, a stunning charge leveled at the oil cleanup effort: why a Republican congressman says that the government may be actually making things worse.

And oil-eating bacteria, why hungry germs might make the Gulf cleanup operation work better.

Plus, LeBron James is officially a free agent. As the bidding begins for the NBA's valuable player, even the president of the United States has an opinion where James should play.

(COMMERCIAL BREAK)

MALVEAUX: Our top story, federal prosecutors say one of the alleged Russian spies has admitted working for Russia's intelligence service, and it comes as some of the suspects appear in court today.

I want to go directly to CNN's Deborah Feyerick. She has just left the courthouse in New York.

Deb, what are we seeing? What did you learn? DEBORAH FEYERICK, CNN CORRESPONDENT: Well, Suzanne, I can tell you that this has been a two-hour-long hearing. The judge temporarily left the bench in order to make a decision as to whether he is going to let at least three of the four out on bail.

The one that you mentioned, the alleged spy who has apparently made statements to prosecutors, apparently they say that their case is even stronger now because of those statements, that Juan Lazaro acknowledged that that is not his real name, that he was not born in Uruguay, but in fact raised in the Soviet Union.

And apparently Lazaro told prosecutors that loyalty to the Russian intelligence service trumps even loyalty and love for his son. His son was in the courtroom along with some other relatives, it seemed, and some journalists from "El Diario."

That is where one of the defendants, Vicky Pelaez, works. She is the mother of the 17-year-old. Prosecutors argued really that to let these people out on bail would be a huge flight risk. They say that, in fact, they don't have to leave Manhattan to try to find safety, that all they have to do is to make it to the Russian Consulate in New York City or even the Russian Mission to the United Nations and then they would be essentially untouchable.

And one thing prosecutors said which was pretty interesting, and that is that in fact there is a network in New York City, that a lot of the Russian government officials in the United States were apparently actively helping in this particular conspiracy, that the alleged spies had a lot of resources, and because there are so many people involved in this, and that in fact government officials would not stop to bring these resources to bear to help these people disappear, as that one accused spy did in Cyprus earlier.

Now, defense lawyers say that is just not the case, that, in fact, the ties of all of these people to their communities is in fact very, very strong, that one of the couples, the Murphys, they have two young children, 8 and 11 years old, and that she's got a good career, he is a stay-at-home dad, and so that they would stay here to try to prove that they are innocent -- Suzanne.

MALVEAUX: All right, Deb, thank you so much, a lot of details to digest there, a fascinating case. Thank you, Deb.

A Republican congressman today is accusing the White House of waging a P.R. campaign on the oil spill that he says is actually harming the cleanup effort.

Darrell Issa is California released a report on this explosive allegation.

And our Lisa Sylvester has been looking into this.

I thought it was fascinating that this is a Republican report from a certain committee, that it was not the full committee itself.

Tell us what that means. LISA SYLVESTER, CNN CORRESPONDENT: Yes, that is a key point here.

Now, it is a staff report. And what Representative Issa says in this report is that the reality in the Gulf is actually more dysfunctional and dire than what is being portrayed in official White House reports. And he is accusing the administration of overstating the number of resources in the field. Quoting one official who called them phantom assets. Quote, this blurring of reality is exacerbating problems with the cleanup effort. The report goes on to say it also charges the administration with more concerned with winning the public relations battle than cleaning up the oil spill.

REP. DARRELL ISSA (R), CALIFORNIA: This case is looking a lot like hurricane Rita and Katrina, because we are seeing the locals are not listened to, but rather told, we will take care of you if you just shut up. That is a mistake.

SYLVESTER: Among the specific charges, Plaquemines' parish president Billy Nungesser was given an official BP and coast guard map that had pinpointed 140 skimmers in the gulf, but when he requested a flight over to see the skimmers in action, he was later told only 31 of the 140 skimmers were deployed and the rest are at port. Nungesser told CNN he sees a lot of oil, but no the skimmers.

BILLY NUNGESSER, PRES. PLAQUEMINES PARISH, LOUISIANA: We are losing the battle. We were out there ahead of BP, and we saw the oil on the marches inside of the isle and outside of the wake and that is not one skimmer boat.

SYLVESTER: Former coast guard Admiral Thad Allen has been overseeing the gulf cleanup responded to charges of inflating the number of resources.

ADM. THAD ALLEN (RET.), NATIONAL INCIDENT COMMANDER: Every indication I have that the numbers are coming up are the numbers that are there. You can find a place on the beach where somebody that is not cleaning or where you can find a water where there is not a skimmer, because it is that big of an area.

SYLVESTER: White House Press Secretary Robert Gibbs took aim at another criticism in the report that the administration is slow to accept international help.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: It is a myth debunked literally hundreds of times. We are already 24/4 in vessels operating in the gulf before the state department announced two days ago additional international assistance. As of May 11th, boom had arrived from Mexico, Norway and Brazil.

(END VIDEOTAPE)

SYLVESTER: Now Representative Issa says that the report is not meant to take direct aim at the Obama administration, but rather with the system. The same system Issa says operated under President Bush with hurricane Katrina, and bureaucracy, and red tape and the need to get various agencies to sign off on the waivers, and Issa says what is needed is a simple process and one person in charge who has the executive authority to get things done. Suzanne.

SUZANNE MALVEAUX, CNN ANCHOR: All right. Lisa, thank you.

The massive oil cleanup effort may be getting some giant-sized help. A whale billed as a super-tanker has been turned into the world's largest skimming ship. Its owners say it will have 250 times the capacity of the modified shipping boats now used to skim oil in the gulf. It could process half a million barrels of oily water every eight to ten hours. The coast guard is inspecting it for suitability.

The Navy is deploying a blimp that will fly slowly over the gulf at a top speed of 50 miles an hour which is to view where the oil is flowing and how it is coming ashore and used to direct skimming operations.

Over 400 miles of shoreline has been hit with oil, but now some microscopic organisms may be called upon to fight the spill. Our CNN's John Zarrella has the story.

JOHN ZARRELLA, CNN CORRESPONDENT: Suzanne, we have not heard much about them to date, but there is a good chance as more beaches become soiled, we are all going to start hearing a lot more about bugs, microbes that literally eat oil.

(BEGIN VIDEOTAPE)

ZARRELLA: This is the Gulf of Mexico. Did you know that there are bugs out there, yep, billions of them, and a lot of them like, no, love eating oil.

JOE LEPO, MICROBIOLOGIST: They are ubiquitous in the ocean, and on the sand, and they are everywhere.

ZARRELLA: Microbiologist Joe Lepo is an expert when it comes to these naturally occurring oil-eating microscopic bacteria. These days for a good reason these days Lepo is bombarded with questions about the bugs. But here is the twist, it is not so much the bugs in nature that everyone is clamoring over, but oil munchers grown in laboratories and companies like Osprey Biotechnics in Sarasota, Florida believe their bugs applied to the oil along the shoreline and maybe in the water in concentrated amounts would accelerate the cleanup.

VICTORIA FINLEY, OSPREY BIOTECHNICS: It will degrade residue, absolutely. What cannot be removed manually or mechanically can be bio remunerated with this method.

ZARRELLA: Florida's governor, Charlie Crist, so interested he visited the Sarasota lab.

GOV. CHARLIE CRIST (I), FLORIDA: I am very impressed by what I have seen.

ZARRELLA: From what he has read, Jeff Sokol, a Louisiana man is so convinced they are the answer, he has set up a website expounding the virtues of it.

JEFF SOKOL, GULF COAST RESIDENT: Because I care. I became a proponent, because I saw that this technique has worked in the past.

ZARRELLA: Bugs naturally occurring in Prince William Sound did work after Exxon Valdez. When fertilized with nitrogen and phosphorus they got busy cleaning up the oil that could not be removed by hand or machines.

LEPO: Give them what they are missing, and they suddenly go crazy and grow exponentially.

ZARRELLA: But what about the ones grown in the labs?

FINLEY: Nature uses microbes to degrade petroleum, and I think that BP should, too.

ZARRELLA: Why isn't BP introducing them to give those in nature a little help? After days of asking questions, a unified command finally got back to us saying that microbes had not been quote required to meet operational needs. What that means they would not say, but the use of microbes has not been ruled in or out, but remains they say a potential tool if the situation dictates. Some scientists say that lab microbes might work polishing off remnant shoreline oil, but in open water, it would simply get washed or blown off.

LEPO: We tested about 20 of these for EPA, and essentially all of them claimed to have efficacy on open water, and we could not get any of them to work.

ZARRELLA: Experts say that stimulating the naturally occurring microbes might be the best bet. Give them a little fertilizer and they will treat the oil like an all-you-can-eat buffet.

(END VIDEOTAPE)

ZARRELLA: This beach is cleaned up, but as you can see, tar balls and stains are everywhere. This experts say is the kind of place where the bugs might work the best. Suzanne.

MALVEAUX: Thank you.

Well, he is a basketball superstar who could bring a fortune to a struggling city, so where will the new free agent Lebron James wind up?

(COMMERCIAL BREAK)

MALVEAUX: He is the most valuable player in more ways than one. NBA superstar Lebron James is a free agent and bidding for the services, well, that I can officially begin and everybody is weighing in. At a fund raiser in Cleveland vice president Joe Biden said that Lebron James is coming back. And listen to what President Obama told CNN's Larry King.

(BEGIN VIDEO CLIP) OBAMA: I think it would be a wonderful story if Lebron says I will stay here in Cleveland. He is from Ohio, and that is a town that has had some tough times. For him to say, I'm going to make a commitment to this city, you know, I think that it would be a wonderful thing.

(END VIDEO CLIP)

MALVEAUX: Joining me now is CNN contributor Max Kellerman, and Max, obviously, there are a lot of teams out there who want him for the championship, but there are cities, and mayors involved in the conferences who are like, we have to bring him to our city, because this is all about big bucks, isn't it?

MAX KELLERMAN, CNN CONTRIBUTOR: Sure. I mean, I suspect that a lot of the claims of the economic boom to whatever city he shows up in are actually, there are appeals to moral boosters in the guise of claims of economic growth if Lebron shows up there. It is certainly millions of dollars for a local economy and restaurants and taxi cabs, et cetera, but most of the wealth that Lebron will create is for the franchise, the equity of the franchise he ends up in will be worth hundreds of millions of dollars more than it would have been before he showed up, but that money is shared by a few, you know, wealthy individuals. It is not spread out through the entire economy.

MALVEAUX: So, why do you think that there is so much interest in this? I mean, you have people who are fighting, and mayors who are coming out, and officials coming out, and we see the video there of the people dancing and everything, but are we talking about billions of dollars potentially for which city gets Lebron James?

KELLERMAN: It is funny, because I think that it is potentially yes worth billions of dollars for instance if Lebron James wound up in New York, but that is mostly because a place like New York is the best broadcasting mechanism for Lebron's star. Right now, internationally, basketball is growing quickly, but domestically, it is still behind football and baseball and partly because of a franchise like the Knicks or the Nets, if they wind up in Brooklyn in a couple of years with Jay-Z as a face of the team, are not good because you are alienating a market of 20 million people and the reason that the big markets like New York and L.A. have more resources than other teams and even in a league with a salary cap like the NBA, because there are more people there and more wealth there. When those teams stink as the Knicks have for many, many years, you are deflating the economy of the game, itself. And the kind of level at which that game is perceived and domestically, it has certainly hurt the NBA.

MALVEAUX: Max, I have to call you out on the plug for New York. You are from New York, right? You are pushing your own city here?

KELLERMAN: Well, that is what is amazing about this, Suzanne. Any time you talk to any media type, if they are from Chicago, they will go down the list and clearly Chicago is the only place for Lebron. If they are from Miami, are you kidding? That is the only place to make sense. I'm from New York and it is amazing how selective the perception works. I can't imagine -- I will say this, wherever he winds up, whether it is I think the most likely option is either staying in Cleveland or going to the Knicks, but wherever he winds up, he will have opt outs in the contract, because given his relationship with Jay-Z and given the desire of Brooklynites especially since the Dodgers left town in 1957 to have a major league level franchise there, the sexiness with the Brooklyn Nets with Lebron as the centerpiece, will make it the hottest in sports, and we will go through this process again in a couple of years when he opts out of the contract he signs.

MALVEAUX: Well, Max not as sexy and he could wind up in Cleveland, because he grew up in nearby Akron, Ohio, and he feels a great sense of loyalty to the community and the people, there and all of the statements he has made so far, it looks like he could stay put.

KELLERMAN: He could, and Lebron was a guy who turned pro right out of high school and he kept the people in high school that he was hanging out with, he kept them around and taking care of people. He has that kind of personality. A lot of times, you will see a star of Lebron's magnitude and talent and the talent winds up isolating him. It happened to Michael Jordan in the beginning and happened to Kobe Bryant early in his career, but Lebron has a different kind of a gift where he uses the talent to uplift those around him, and he is certainly feeling a lot of loyalty to Cleveland and talked about it and shown it through the behavior in the career, and it would not be surprising if he stayed put, but -- even if he does stay put, I anticipate he will not end his career in Cleveland.

MALVEAUX: All right. Maybe he should go to Wizards here in D.C. We will see. All right. We have to leave it there. We will see what happens with King James.

Iran transfers a sophisticated radar system to Syria, and could that limit Israel's ability to strike at Iran and boost the accuracy of Hezbollah missiles aimed at Israel? We are looking into that.

Plus, we will take you to the set of a movie about Barack Obama's childhood in Indonesia.

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MALVEAUX: Lisa Sylvester is monitoring some of the other top stories coming into THE SITUATION ROOM right now. Hey, Lisa, what are you working on?

SYLVESTER: Hi, Suzanne. A U.S. official is confirming that Iran has transferred a sophisticated radar system to Syria. The "Wall Street Journal" quotes sources as saying that the radar could limit Israel's ability to launch an attack on Iran's nuclear facilities, and increase the accuracy of Hezbollah rockets fired at Israel. The Israeli military tells CNN, the radar is part of the disturbing cooperation between Iran and Syria.

Take a look at the exclusive video. What you are seeing here is the Somali capital of Mogadishu where the forces are engaged in deadly fighting. A local ambulance group reports that 26 civilians are killed and more than 71 injured. Most of the shelling is happening and what you are seeing here is happening in a neighborhood controlled by a group linked to al Qaeda.

A battle of the web giants may be looming. Google is said to be working on a social network site called Google Me to rival Facebook, but that could be just the beginning. Facebook has been under fire for gathering data about the users, but some of the observers are guessing that Facebook may use all of the personal information to launch a search engine based on the person's preferences and target ads.

California lawmakers have approved a $20 million settlement with Jaycee Dugard. She was kidnapped at the age of 11 and allegedly held for 18 years by paroled rapist registered sex offender Phillip Garrido. Dugard had filed a claim accusing state corrections officials of failing to properly supervise Garrido and failing investigate clues that could have lead to Dugard during her captivity. Suzanne?

MALVEAUX: OK. Thank you Lisa.

Jack Cafferty is next with you e-mail and we go on the set of a new movie about President Obama's childhood in Indonesia. We'll hear from the young man playing the role of a lifetime.

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MALVEAUX: Time to check back in Jack Cafferty. Hey Jack.

CAFFERTY: What's the answer to America's deepening financial crisis?

Mark in Massachusetts: "Simple, it's not rocket science. America is an addict. We're addicted to debt. You can't cure the addiction with more debt or arguing about how you became addicted, and more importantly beating our addiction will require withdrawal. It's either stop pointing fingers and go through the measures or die from the addiction he. We need to hurry while we still have a choice."

Randy in California writes: "The sad answer of the glory days of low taxes on individuals and corporations are over or else. What many forget is that as little as 50 years ago the tax rate on wealthy individuals was as high as 87%. Those who argue that Americans are taxed too much today are living in fantasy land."

Carol in Florida writes: "The answer is simple you tell big business the jobs are to be brought back home or we the government will tax your products coming back into the U.S. so it will be cheaper for you to make them here. You'd be putting our people in work who would pay taxes used to pay down the deficit. I retired from the auto industry, and I can tell you first hand a sub burden ban made in Mexico is the same price as one made in Texas or Janesville, Wisconsin".

Marguerite in Seattle writes: "I think our government needs to reduce spending first and foremost, and here's one of the first things I'd look at. We have 865 military sites around the world. Among the installations considered critical to our national defense, a ski center in the Bavarian Alps and resorts in Tokyo, and 234 golf courses the pentagon runs worldwide. I'm having a lot of trouble understanding why the government is wasting taxpayer money on ski centers, resorts and golf courses in other countries."

And Larry says, "Re-elect Clinton and go back to pre-Bush tax rates."

That's a rap on this deal. If you want to read more about how to solve the financial crisis, go to my blog, CNN.com/CaffertyFile. Take a couple of days off. See you again Tuesday -- Suzanne?

MALVEAUX: All right. Thank you, Jack. JOHN KING USA starts at the top of the hour. John will be talking about immigration reform with New York City mayor Michael Bloomberg.

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MALVEAUX: We have late breaking developments in the case of the alleged Russian spies. I want to go directly to Deborah Feyerick who is outside of a New York City court house. Deborah, what do you have?

FEYERICK: Well Suzanne, the couple, the Murphy's have been denied bail. The judge did not know them. However, as for the third person requesting bail, Vicky Pelaz, a Spanish language newspaper journalist, she was granted bail. The judge said that she does not appear to be trained an agent and she has an incentive to stay because she does have a career here. She was given strict conditions including $250,000 bail and very strict home monitoring. She has been released on bail. Her husband was not under consideration. He apparently is talking to prosecutors about what he did and about his role with the Russian intelligence unit, so there you go. Split decision. Two people denied bail, one of them granted it under strict circumstances.

MALVEAUX: Deb you're following the details. Anything surprise you from this?

FEYERICK: The one thing that was most surprises is the people in court today have an extensive he network in the United States, Russian government officials who would be willing to help them if, in fact, they were granted bail to make them disappear. That was an interesting acknowledgment, that these people were part of a larger conspiracy of agents here in the United States.

MALVEAUX: Tell us what you know about the confession, Deb, the one who confessed.

FEYERICK: Well, he won't even give his correct name, but he did say that he sent his wife with writings to deliver them to a soviet -- a Russian agent in Peru. He's basically saying that he's just not going to talk. He's not going to give up his loyalty to the Russian intelligence service. As much as he loves his son, his loyalty is to the intelligence service.

MALVEAUX: All right. Deb, thank you so much for the late- breaking news. Remember you can follow what's going on in THE SITUATION ROOM. I'm on twitter. You can get my tweets at twitter.com/suzannemalveaux. That's all one word.

I'm Suzanne Malveaux in THE SITUATION ROOM. JOHN KING USA starts right now.