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ANDERSON COOPER 360 DEGREES

Iraq Money Waste; CIA Leak; Insurance Surprises; Astronaut Arrested, Lisa Nowak Back Home

Aired February 7, 2007 - 23:00   ET

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


PAUL MCNULTY, DEPUTY ATTORNEY GENERAL: ... fund lost more than $3.6 million.
JOE JOHNS, CNN CORRESPONDENT (voice-over): Nice try, but keeping them honest, in this game, $3.6 million isn't even chump change. You want to talk about real money? Talk about this -- $12 billion in cash, stacks and stacks of it, only a third of which has been accounted for, sent over to Iraq to get the economy going after the invasion.

REP. HENRY WAXMAN, CHAIRMAN OVERSIGHT AND GOVERNMENT REFORM COMMITTEE: The Federal Reserve Bank in New York had to pack 281 million individual bills onto wooden palettes to be shipped to Iraq. The cash weighed more than 363 tons and was loaded on C-130 cargo planes to be flown into Baghdad.

JOHNS: The good news? This time it wasn't your money. It was Iraq's money from Iraqi oil sales. Until then, frozen assets held by the Federal Reserve, shipped home to a place where almost anything could happen.

WAXMAN: Worst of all, did some of this money get in the hands of the insurgents and those who are fighting us today in Iraq?

JOHNS: There's no evidence of that. Still, why did they carry over tons and tons of cash? An explanation from the guy who was put in charge at the time.

When you take over somebody else's country, people still have to get paid, even if it's a war. And it's not like they take American Express.

L. PAUL BREMER, FORMER ADMINISTRATOR: The banks were closed and in any event were unable to transfer funds electronically. So we had to pay Iraqis in cash wherever in Iraq they lived.

JOHNS: And then there's that other pile of money that's being investigated by Congress. The billions of dollars paid to U.S. contractors, some with close ties to the White House.

(On camera): And speaking of getting paid, the investigation in the House Oversight Committee turned to the issue of security contractors today, with an angry exchange that sort of sums up the raw feelings on the Hill between Republicans who used to control the place and Democrats who are showcasing past administration failures. REP. PATRICK MCHENRY (R) NORTH CAROLINA: I think it shows that, you know, the new majority and the new leadership of this committee is intent on making political hay out of something that simply is not a valid point. And I apologize that you have to be brought in to be a part of this spectacle.

WAXMAN: I know the gentleman wants to look at partisanship under every rock, but I suggest he return under that rock and look at his own reasons for trying to make everything partisan. This is not a partisan investigation, nor it should be.

MCHENRY: I think it's rather partisan...

(CROSSTALK)

WAXMAN: And I resent that you're trying to make it a partisan one.

JOHNS: Between Iraq and a hard place over Iraq.

Joe Johns, CNN, Washington.

(END VIDEOTAPE)

COOPER: Well, talking about money now, in Congress there's a minor storm brewing tonight over how House Speaker Nancy Pelosi gets back and forth from Washington.

Some Republicans objecting to her request for an Air Force C-32, the military equivalent of a Boeing 757. Her predecessor, Dennis Hastert flew a smaller jet. Speaker Pelosi says it's not a question of size, but fuel capacity, enough to reach San Francisco non stop. Congressman Hastert's home district is outside Chicago.

Just a few steps away from the capitol, inside the E. Barrett Prettyman Federal Courthouse, the prosecution brought out a star witness in its case against Vice President Dick Cheney's former top aide "Scooter" Libby. The witness was Tim Russert, the host of NBC's "Meet the Press." But there was another voice in court, as well today, and that was the voice of "Scooter" Libby himself on tape.

Details now from CNN's Brian Todd.

(BEGIN VIDEOTAPE)

BRIAN TODD, CNN CORRESPONDENT (voice-over): For the first time in his own voice, we hear Dick Cheney's former chief of staff tell a grand jury his version of conversations with reporters about the wife of administration critic Joe Wilson and her job at the CIA.

LEWIS "SCOOTER" LIBBY, GRAND JURY TESTIMONY: I told a couple of reporters what other reporters had told us. I didn't see that as a crime.

TODD: That excerpt, part of more than eight hours of audiotapes just released by the court from Lewis "Scooter" Libby's grand jury testimony in March 2004.

Libby, grilled with surgical precision by Prosecutor Patrick Fitzgerald about key events and conversations. One crucial date, June 12, 2003, when Libby claims he first heard that Valerie Plame Wilson worked for the CIA. He heard it, he says, from his boss, Dick Cheney.

LIBBY: I didn't think it was under the super super secret categorization.

TODD: Libby told the grand jury he forgot about that conversation with Cheney and claims when he heard about Plame's status a month late from Tim Russert of "NBC News," he believed he was hearing it for the first time.

LIBBY: Then he said, you know, Did you know that this -- excuse me, did you know that Ambassador Wilson's wife works at the CIA? And I was a little taken aback by that. I remember being taken aback by it. And I said -- he may have said a little more, but that was -- he said that. And I said, no, I don't know that.

TODD: But Russert rebuts Libby, telling the court today he never said anything about Joe Wilson's wife to Libby. Russert says Wilson's wife never came up in that conversation.

Russert, a star witness for the prosecution as it tries to prove Libby lied to investigators about what he told reporters about Plame and when he told them.

Libby denies he intentionally misled investigators, claiming he simply didn't remember key dates and conversations.

TODD: Tim Russert's reputation is also on the line as defense attorneys try to punch holes in his memory and his credibility.

(On camera): Russert, likely one of the prosecution's final witnesses. Still to take the stand for the defense, possibly Vice President Cheney, possibly "Scooter" Libby, himself.

Brian Todd, CNN, Washington.

(END VIDEOTAPE)

COOPER: Well, whatever happens to "Scooter" Libby, his trial is providing a rare look inside the Bush administration.

CNN's John Roberts is following that angle for us tonight. I talked to him earlier.

(BEGIN VIDEOTAPE)

COOPER: John, one of the many fascinating things about this trial is that for this White House, which is so secretive, this is really providing a first glimpse in many ways behind the curtain.

JOHN ROBERTS, CNN SENIOR NATIONAL CORRESPONDENT: Yes, you know, they have struggled to maintain control, control the message, to shape the message. And now we're seeing exactly how that was done.

And We're witnessing through the testimony of "Scooter" Libby a White House that was extremely worried about the repercussions of this Joe Wilson accusation, so worried in fact that they weren't just talking about it on a daily basis. They were talking about it multiple times during the day.

And while it's not unusual for a White House to beat back against accusations like this, what is extraordinary, Anderson, is the amount of involvement, the amount of influence that the vice president had.

The vice president was extremely upset by this, according to "Scooter" Libby. He wanted to get information out. He wanted to get information to the press. The only way to do that was to open up that classified national intelligence estimate. And it's something that the vice president was pushing for.

Here you hear "Scooter" Libby in his testimony to the grand jury talking about what vice president Cheney wanted to do and also checking with Vice President Cheney's counsel at the time, who is now his chief of staff, David Addington.

LIBBY: So the vice president thought we should get some of these facts out to the press, but before it could be done, the document had to be declassified. I reconfirmed with David Addington about this. And he then undertook to get, to get permission from the president to talk about this to a reporter. He got permission. Told me to go off and talk to the reporter.

ROBERTS So there you hear "Libby" saying that he got the order to go off and talk to the reporter from David Addington, who was Cheney's counsel, and that the word came from Cheney through the president.

And it really kind of reinforces, Anderson, this perception of Cheney as the dark lord, you know, working in this very cloaked office over in the old executive office building, dispatching his aides to do what he thinks is correct.

And what's most amazing about this is that while "Scooter" Libby knew about this, Addington knew about it, the president and the vice president knew about it, the president's chief of staff at the time, Andrew Card, his National Security Advisor Condoleezza Rice and the head of the CIA at that time, George Tenet, had no idea what was going on.

COOPER: John, thanks, appreciate it.

ROBERTS You bet.

(END VIDEOTAPE)

COOPER: Some perspective now of the legal and political fallout from CNN's Senior Legal Analyst Jeffrey Toobin and former Presidential Advisor David Gergen.

Guys, good to see you.

This case, Jeff, does not seem to be going very well for "Scooter" Libby.

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: It's been a very effective prosecution. And you know how you can tell? It's been short. All of the examinations, less than an hour on direct examination. Not a lot of witnesses. This is a confident, experienced prosecutor who is not over-trying his case and it's really very simply presented for the jury.

COOPER: And lots of people are contradicting what Libby said.

TOOBIN: That's right. And it's one thing not to remember what one person says. Because the defense here is Libby didn't remember where he heard that Valerie Wilson worked at the CIA. But witness after witness has said, we had specific conversations about Valerie Plame working for the CIA. His staff, Ari Fleischer, Mark Grisman (ph) of the State Department.

And it's going to be difficult to tell this jury he didn't remember any of these conversations and then he apparently invented this conversation with Tim Russert, who denies having anything like this.

(CROSSTALK)

COOPER: David, does it surprise you the level of involvement of Vice President Dick Cheney in all of this? I mean, behind the scenes, in this effort about Valerie Plame?

DAVID GERGEN, FORMER PRESIDENTIAL ADVISOR: I think, Anderson, that we have known sort of through whispers and rumors that the vice president was very heavily involved. This is the first direct evidence of the vice president's extraordinary involvement. I just don't -- I can't remember any other vice president who has played this much of a role in the day-to-day operations of the White House, especially in damage control.

(CROSSTALK)

COOPER: And do you think this is emblematic of many issues...

(CROSSTALK)

GERGEN: Yes, I thin it's symbolic of the rest of it. And then (UNINTELLIGIBLE) of the rest of his activity with regard to this war. He clearly had a great deal to do with building the case against Iraq. And then once that case began to fall apart, he was very much in the lead of the defense.

COOPER: And very much -- I mean, attacking, seeking ways to counter what was being published in, you know, Joe Wilson's op-ed piece.

GERGEN: Oh, absolutely. And clearly they were panicked over that. But I can't stress enough, Anderson, how unique this is for a vice president to be in this kind of role.

The vice president's role has generally been increasing in power since Walter Mondale. You know, there have been more -- vice presidents now sit in the West Wing. They spend more time with the president. But it's rare you see a vice president acting almost like a chief of staff, in effect, and directing the staff.

And very importantly, on the disclosure -- directing "Scooter" Libby to disclose part of a highly classified document without the CIA knowing it...

(CROSSTALK)

COOPER: Right. And to get that document unclassified just by the president.

GERGEN: Yes, but -- not even the chief of staff of the White House. Just the president and the vice president knew.

TOOBIN: The thing you see in that courtroom is that Iraq was a cancer in this White House, that this -- remember, this is July 2003. This is when the war itself was going well. But they were so panicked about the absence of WMD, they start lashing out at these critics, because they're worried that, you know, hey -- who's going to say that we didn't -- we went to war under false pretenses?

Remember, this isn't the time of mission accomplished. This is when the war itself was going well.

COOPER: It's also interesting to hear them talk about using the media. I mean, this is a White House which has been disdainful, you could say, of the press in many ways. We've heard on tape, you know, Vice President Cheney long ago during campaigns calling a reporter from "The New York Times" an a-hole, I believe was the term. And yet, they're selectively leaking documents or talking about making contacts with Judith Miller and individual reporters in order to try to get a message out.

(CROSSTALK)

COOPER: And I guess that's the way it's done in Washington.

(CROSSTALK)

GERGEN: ... Tim Russert testified today, he said basically it was a customer complaint call, that "Scooter" Libby was calling to complain about the coverage and what Chris Matthews was doing, and what other people at NBC were doing.

So they play it. I mean, they've had a history, I think -- and other administrations have done this. This is not at all unique to this administration. You play it both ways.

Look, you complain like hell and then privately you leak in order to manage. TOOBIN: Well, and also, I mean some of the criticism of the Bush administration seems a little unfair. It's like, you know, did you know that they put out bad news on Friday so it wouldn't get a lot of attention. Come on, you did that at the Clinton White House.

GERGEN: We used to call it the Bermuda Triangle. Put it out on Friday and you never heard from it again.

(CROSSTALK)

Toobin: They didn't invent it.

COOPER: Should Libby take the stand?

Toobin: You know, I don't know how he cannot take the stand, given the defense that he's put in. The defense is, look, I was busy, I didn't remember which conversation I had with whom.

The problem is, he's going to be confronted with so many different people.

COOPER: Right. It's not just that he had like one conversation. He had multiple conversations about this.

TOOBIN: With different people. So it's one thing to forget. But I don't know how you go to a jury. I mean, you can. But go to a jury and say, well, look, he didn't remember, without the defendant saying, I didn't remember. And, look, he's an intelligent person. He probably would be a fairly good witness. But it's a big risk with all those lined up against him.

COOPER: Politically is all this moot? I mean, he's probably a high candidate for a presidential pardon if in fact it got to the point where he was convicted.

GERGEN: I think they would have a hard time doing it any time soon.

COOPER: Really?

GERGEN: Anderson, I, I felt...

(CROSSTALK)

COOPER: Not even one of those last day in the office parties?

(CROSSTALK)

GERGEN: ... paid a heavy price in 2005, in the build up to who did what. And then it all sort of went out. And I think the early days of the trial, which had been very fast, as Jeffrey points out, have been sort of a side show. But this is starting to build now.

And if he doesn't testify and if he is found guilty, then I think that's going to be a blow to the administration. Now the vice president's chief of staff, a pivotal player in the administration go down, possibly face jail time, would be a serious blow to the administration.

Could they pardon him? Sure, they could legally do it. Would that be smart to do under the circumstances until the end of the administration? I have to tell you, that's going to be...

COOPER: He could drag it out on appeals until then.

TOOBIN: Well, you know, it's hard to think that he could drag it out that long. You know, let's say he's convicted in the next couple of weeks. You know, an appeal would probably take less than a year. Let's say it did take a year. That still leaves considerable time when he would go to prison. So if Bush wanted to wait until after the 2008 election, if Libby is convicted, he'd probably be in jail by that point.

So, if he wants to wait that long, you know, when he's a total lame duck, you know, Libby might be in jail by that time.

GERGEN: It's hard for a law and order administration too to say, well, if somebody else does it, they have to go to jail, but if it's one of ours, they don't, you know, they don't have to pay a price. That's a hard argument for...

(CROSSTALK)

TOOBIN: And, and Bush has been very stingy with pardons. And remember, he came into office following Clinton's use of the pardon for Mark Rich and all sorts of people who were really seemingly undeserving.

Bush wanted to set himself in a different way. If he pardoned Libby, it would be a very different...

(CROSSTALK)

GERGEN: So this is building, legally and politically, this is really building.

TOOBIN: It's a big problem.

COOPER: We'll continue to watch.

David Gergen, thanks. Always good to have you.

Jeff Toobin, thanks.

(END VIDEOTAPE)

COOPER: Just ahead, you won't believe what a 360 investigation uncovered about the country's biggest auto insurance companies. Take a look.

Minor accidents that rack up major medical bills. Guess who's left with the tab?

(BEGIN VIDEO CLIP) UNIDENTIFIED FEMALE: I was just very insulted.

(END VIDEO CLIP)

COOPER: When she fought back, she got burned.

The latest on the space odyssey that's left NASA spinning.

(BEGIN VIDEO CLIP)

BILL OEFELEIN, SHUTTLE PILOT: As I got older, I wanted to see even more.

(END VIDEO CLIP)

COOPER: He's the man in the middle, and she's the woman Lisa Nowak couldn't seem to stay away from.

(BEGIN VIDEO CLIP)

BILL BAILEY, SHIPMAN'S NEIGHBOR: She was all excited when the shuttle came back. All happy, you know, that they didn't have trouble or anything.

COOPER: How their lives came together, next on 360.

(COMMERCIAL BREAK)

COOPER: Traffic accidents, of course, are a fact of life. So is dealing with insurance companies. You pay them to protect you. That's the idea. But some accident victims say they're being forced to settle or go to court because the claims are denied.

We wanted to know the facts, and in a CNN investigation, we looked into whether some big name insurers are more interested in profit than policyholders.

CNN's Drew Griffin tonight, keeping them honest.

DREW GRIFFIN, CNN CORRESPONDENT (voice-over): I happened in Santa Fe, New Mexico, much the way Allstate describes it in its commercials.

Roxanne Martinez, driving down Sorios (ph) Road about noon, when the SUV pulled out from Tisuki (ph) Drive.

ROXANNE MARTINEZ, ACCIDENT VICTIM: I remember, you know, like hitting the driver's side window. And then I just -- I don't know.

GRIFIN: The passenger side had been sideswiped. On the driver's side, Roxanne was smashed against the window.

MARTINEZ: I had upper back pain. I went to chiropractors, physical therapists, massage therapists, acupuncture. They told me that my spine was damaged. GRIFFIN: The person driving the SUV that hit Martinez was ticketed and had insurance, Allstate. That was good because Martinez was racking up bills, plenty of them, CT scans, doctors visits, x- rays, all bills she thought Allstate would cover.

But after three years of fighting over bills and still hurting from the accident, Allstate came with a "take it or leave it offer," $15,000.

MARTINEZ: That was for, I guess, the car, medical. I mean, that was everything. You know, I thought they'd pay all your bills and, you know, keep on paying your medical bills.

GRIFFIN: Roxanne Martinez was battling Allstate, the second biggest auto insurer in the nation. What she didn't know was that both Allstate and the largest auto insurer State Farm, had changed the way they handled so-called minor crashes like hers.

(On camera): In an 18-month investigation across the country, CNN found that if you are injured in a minor accident, chances are high the two companies would challenge your medical claim, offering you barely a fraction of your expenses.

(Voice-over): They would do it by forcing people into court, dragging out court cases for years and by convincing the public it was all designed to fight growing fraud in the car accident business.

But documents examined by CNN indicate the motive was profit. And Allstate has gone to great lengths to keep those documents secret. In two states where Allstate has been sued, the company has defied judge's orders to make the documents public.

According to Nevada Insurance Law Professor Jeff Stempel, the new get tough strategy is adding up to billions in profit for the insurance companies and little, if anything, for the public.

JEFF STEMPEL, UNLV. LAW PROFESSOR: We can see that policyholders individually are getting hurt by being dragged into court on fender bender claims. And yet we don't see collateral benefit in the form of reduced premiums, even for the other policyholders. So, I think now we can say to continue this kind of program is, in my view, institutionalized bad faith.

GRIFFIN (on camera): We wanted to ask Allstate and State Farm all about this on camera in an interview, but they both said no. Allstate did send us an e-mail.

(Voice-over): In an e-mail, All State told us it did not believe it would have any real opportunity of being successful in getting CNN to do a balanced report.

State Farm sent an e-mail, too, saying, "we take customer service seriously and seek to pay what we owe, promptly, courteously and efficiently, and we handle each claim on its own merits."

And State Farm also added this -- "Any attempt to generalize that State Farm has adopted consultant recommendations as other insurers is just plain wrong. Who is the consultant State Farm refers to? The giant of the consulting industry, McKinsey & Company, hired by both State Farm and Allstate.

McKinsey and company said it does not discuss any of its clients' business. And at the same time Roxanne Martinez thought she was in good hands with Allstate, Allstate was advised by McKinsey in writing to put boxing gloves on those good hands.

That strategy, says Martinez's lawyer, was to take valid claims and pay pennies on the dollar.

Attorney David Berardinelli's has written a bout about it, and is challenging Allstate's strategy in what he hopes will be a class action lawsuit.

(On camera): So if you wanted to increase profit, you would try to chop the small claim?

DAVID BERARDINELLI, ATTORNEY: Sure. If you could take $1,000 off of a million claims, do the math.

GRIFFIN: A lot of money.

BERNARDINELLI: A lot of money.

GRIFFIN (voice-over): Shannon Kmatz was an Allstate claims agent in New Mexico before she became a cop. She says she was trained by Allstate to treat most minor accident victims as frauds and offer them as little as possible.

SHANNON KMATZ, FORMER ALLSTATE CLAIMS AGENT: $100? Yes, I've offered people $50. They have minimal damage to the back of their vehicle and they're claiming that they are hurt.

GRIFFIN: Then Kmatz got to see the insurance strategy firsthand from the other side.

KMATZ: I turn around and get in a car accident myself. My car has minimal damage, and I can't walk. And I realized, whoa, what am I doing? This is not right.

JIM MATHIS: It really came down to three basic elements. A position of delay. A position of denying a claim. And then ultimately, of course, defending that claim that you denied.

GRIFFEN: The three D's?

JIM MATHIS: Exactly.

GRIFFIN: Jim Mathis is a former insurance company insider who now testifies against insurance companies in court.

MATHIS: And the profits are huge. Profits are good. And as long as the public allows this to occur, the insurance companies will get richer and people will not get a fair and reasonable settlement, period.

ROBERT HARTWIG, PRES. INSURANCE INFORMATION INSTITUTE: Insurers don't blanket deny claims on any grounds whatsoever.

GRIFFIN: Robert Hartwig is president of the Insurance Information Institute, an insurance industry trade group.

HARTWIG: What insurers are trying to do is monitor costs. And every insurer is under the same pressure to do it.

GRIFFIN (on camera): And this Allstate training manual obtained by CNN details how that was going to be done. By forcing what the manual calls smaller walk away settlements.

(Voice-over): The walk away settlement for Roxanne Martinez was a "take it or leave it offer" of $15,000 that came three years after her accident. She said that would pay a little more than half of her costs.

MARTINEZ: It's kind of hard when you're thinking, are they going to leave me broke? Or you know what? I mean, that's what -- that was very stressful.

(END VIDEOTAPE)

COOPER: But Roxanne Martinez decided that instead of taking Allstate's offer, she would take Allstate to court. We'll tell you what can happen if you take an insurance company to court, next on 360.

(COMMERCIAL BREAK)

COOPER: Before the break, we introduced you to a woman who said she was dragged through the ringer by car insurance giant Allstate. She said that Allstate wanted her to settle for thousands of dollars less than what she was entitled to. She refused the deal they offered her and went to court.

And that's where she says the battle got even tougher. Her case is not an isolated one, however. As our reporting reveals, accident victims across the country are fighting back against the insurance companies they thought would protect them.

Once again CNN's Drew Griffin.

(BEGIN VIDEOTAPE)

GRIFFIN (voice-over): When Ann Taylor's car was rear ended...

ANN TAYLOR, ACCIDENT VICTIM: I woke up the next morning, I couldn't move. I had severe pain in my back. Down both legs were numb and tingly.

GRIFFIN: The doctor diagnosed herniated disk muscle tears. And the treatment would mean time off work, therapy and medical bills. The person who hit her was a State Farm employee driving a State Farm car. So Taylor thought at least financially she'd be covered. It added up, said Taylor, to $15,000.

But after dragging out her claim, State Farm offered her only $2,000.

TAYLOR: I was just very insulted.

GRIFFIN: Taylor hired Attorney Jeff Cook and decided she would fight. It turned into a major legal battle eventually ending up in this courtroom.

Taylor's case is an example of how the two largest auto insurance companies, State Farm and Allstate, have changed the way they handle claims when people are hurt in minor impact crashes.

CNN's investigation reveals a strategy to increase profits by limiting payments to accident victims. And former insurance insiders say most of the industry has adopted the strategy. Allstate and State Farm, the industry leaders, would not talk to CNN for this report.

But Jim Mathis, a former insurance company insider, who now testifies against the insurance business in court, did. And he says cutting payments to people like Taylor has meant billions for the insurance companies.

MATHIS: It's not based on what should be a settlement value or offer to this claim. It is not based on ethics. It's based on -- it's not based on profits. It's based on how much profit.

GRIFFIN: Taylor's case finally got to court three years after her accident. The lawyer brought in medical testimony. To present its case, State farm just dug deep into Ann Taylor's past.

JEFFREY COOKE, TAYLOR'S ATTORNEY: The lawyer stands up and says to Ann Taylor during her cross-examination, tell the jury about your back injury when you were 16 years old.

GRIFFIN: In fact, the attorney for State Farm raised questions about Ann Taylor falling off a horse when she was in high school. And the lawyer also asked Taylor, a nurse, about throwing out her back when she moved a patient.

(On camera): The attorney even brought up personal things that Ann Taylor had to sell a horse, that Ann Taylor had to sell her house, that Ann Taylor had even broken up with a longtime boyfriend. And couldn't all these things add to stress and that could have caused her back pain?

TAYLOR: They didn't have any expert testimony. They never had a physician look at me.

GRIFFIN: They tried to make you out to be a liar.

TAYLOR: Exactly. GRIFFIN (voice-over): The attorney for State Farm did produce one piece of evidence -- very large photos of two slightly damaged cars.

TAYLOR: They expected the jury to see those and to say, she really wasn't hurt.

GRIFFIN: Michael Freeman is a crash expert, often called in to testify when insurance companies are trying to use photos to deny a crash victim was injured.

How did the insurance companies use photos? Well, take a look at a photo of a car with minimal damage, he says, and convince the jury what they probably were already thinking. That doesn't look like much. How could that person be hurt?

MICHAEL FREEMAN, FORENSIC EPIDEMIOLOGIST: You're eventually being judged by what your car looks like, not by what your doctor says. Or by what the impact of a particular crash has had or an injury has had on your life. That's not fair. It's not right. It's fraud.

GRIFFIN: What stunned Taylor in the end is that State Farm's strategy worked. The jury didn't believe she was hurt. They awarded her just $1,500, less than what State Farm originally offered.

We contacted three of the jurors. They said this photo played a big part in their verdict. And they thought the insurance company had already paid its share and Taylor was only trying to get more.

Why did they look at her and must have assumed this lady is trying to rip off the insurance companies, she's a fraud?

COOKE: When she walked in the courtroom and she walked to the jury box and she walked to the testimony box and she walked out of the courtroom at lunch and at the end of a day, they assumed that she was not significantly injured.

GRIFFIN: It's a case straight out of the McKinsey playbook, the three D's. By denying her claim, State Farm forced Taylor to hire an attorney and sue. After a three year delay, Taylor walked into a courtroom with no noticeable pain. And by defending the case for years, State Farm forced her attorney to front expensive litigation costs, which in the end, he didn't get back.

FREEMAN: They make these cases so expensive to litigate, that attorneys won't want to take them.

GRIFFIN: Indianapolis Superior Court Judge David Dreyer says he hears it from colleagues across the country, courts bogged down with minor impact cases. He says the insurance companies' own lawyers admit to him they're being forced to drag the cases out.

JUDGE DAVID DREYER, INDIANAPOLIS SUPERIOR COURT: They've confided to me that they would rather settle a case and that they aren't allowed to settle by the insurance companies that of course control the defense.

GRIFFIN: It's a strategy spelled out in this affidavit from a former Allstate attorney in a lawsuit against Allstate. She explains how 10 years ago the insurance giant was changing the way it did business, driving lawyers out.

The former Allstate attorney says Allstate's strategy was to make fighting the company, quote, "so expensive and so time-consuming that lawyers would start refusing to help clients." The president of the Insurance Information Institute says the change was need.

HARTWIG: We have a group of attorneys, quite frankly, who are very upset because, guess what, the gravy train has ended.

MARTINEZ: She had like taken off the other way.

GRIFFIN: Remember Roxanne Martinez from the beginning of our investigation? She was sideswiped and Allstate offered her $15,000 to cover her medical bills and lost wages. Her case also dragged on for years.

But after listening to what her lawyer said was a deliberate attempt to drag Martinez through the ringer, her jury awarded $167,000 plus interest.

MARTINEZ: You know, I was happy. I thought, well, you know, all my bills are getting paid.

GRIFFIN: Industry insiders say 80 percent to 90 percent of accident victims don't fight. They take what the insurance company offers.

Drew Griffin, CNN, Santa Fe, New Mexico.

(END VIDEOTAPE)

COOPER: Interesting. You might think all the savings would mean lower premiums for drivers. Well, guess again. The Insurance Information Institute says auto insurance rates have actually gone up 30 percent over the 10 years since this went into effect. The president of that institute told us rates would actually be much higher if the companies hadn't cracked down on fraud.

How much you pay per year on car insurance depends on where you live in many cases. Here's the raw data. Last year the five cities with the most expensive auto insurance rates were Detroit, Philadelphia, Newark, New York and Los Angeles. The least expensive city was Roanoke at just over $900, followed by Chattanooga; Nashville; Green Bay, Wisconsin; and Raleigh, North Carolina.

Well just ahead, astronauts are supposed to have the right stuff, but sometimes things go terribly wrong.

The latest on the space odyssey that's left NASA spinning.

(BEGIN VIDEO CLIP) BILL OEFELEIN, SHUTTLE PILOT: As I got older, I wanted to see even more.

(END VIDEO CLIP)

COOPER: He's the man in the middle and she's the woman Lisa Nowak couldn't seem to stay away from.

(BEGIN VIDEO CLIP)

BILL BAILEY, SHIPMAN'S NEIGHBOR: She was all excited when the shuttle came back. She was all happy, you know, that they didn't have any trouble or anything.

(END VIDEO CLIP)

COOPER: How their lives came together, next on 360.

(COMMERCIAL BREAK)

COOPER: Well, tonight, the astronaut charged with trying to kidnap and murder her romantic rival is back in Houston. Lisa Nowak returned to Johnson Space Center today for a medical assignment. This, as NASA announced that it would review its psychological screening process for astronauts.

CNN's Ed Lavandera has today's developments.

(BEGIN VIDEOTAPE)

ED LAVANDERA, CNN CORRESPONDENT (voice over): Hiding under a black jacket, Lisa Nowak was brought to the Johnson Space Center, where she underwent a psychological and physical evaluation. NASA officials say they remain very concerned about her well-being.

BOB CABANA, NASA DEPUTY DIRECTOR, JOHNSON SPACE CENTER: Lisa was a vibrant, hard working -- is a vibrant, hard working, energetic person that did her job extremely well. She was a team player. And, you know, dedicated to what she did.

LAVANDERA: The mother of three children recently separated from her husband. But everything else appeared normal. NASA officials say Nowak was at work last week and was not acting strangely. The scandal has stunned Nowak's family and friend.

DAVID SILVA, NEIGHBOR: It was totally out of character. She's always just been a wonderful person. Very shocking.

LAVANDERA: Nowak has been placed on a 30-day leave and she's lost her job supporting the next shuttle mission. NASA officials won't say if this scandal will end her career in the space program, but they do say astronauts have a noble reputation to protect.

SHANA DALE, NASA DEPUTY ADMINISTRATOR: We expect astronauts, as we expect any NASA employee, to conduct themselves in a way that does not bring any dishonor to the space program. But we do not meddle into the private lives of astronauts.

LAVANDERA: Nowak's parents have come to Houston to take care of her, but she remains somewhere in seclusion.

So what made her drive to Orlando remains a mystery.

(On camera): NASA officials say they have preserved computers and e-mails that could help investigators untangle this alleged love triangle. Those items could provide key evidence and perhaps an explanation as to how and why Lisa Nowak's passion seems to have gone so awry.

Ed Lavandera, CNN, at the Johnson Space Center.

(END VIDEOTAPE)

COOPER: Well, police are saying it was her involvement in a love triangle that possibly made Lisa Nowak snap. Up next, what we've learned about the other two people involved -- Lisa's alleged target and the astronaut they were reportedly in love with. Both of them. You're watching 360.

(COMMERCIAL BREAK)

COOPER: Astronaut Lisa Nowak went from space hero to criminal suspect in a matter of hours. Police say she was driven over the edge when she found out that another woman had a relationship with a male astronaut she considered her lover.

Tonight we're learning more about the other two people involved, although frankly not that much more.

CNN's John Zarrella has the details.

(BEGIN VIDEOTAPE)

JOHN ZARRELLA, CNN MIAMI BUREAU CHIEF (voice-over): A "no comment" next to a neighbor's door. Most of the folks who live in Air Force Captain Colleen Shipman's Cape Canaveral neighborhood weren't talking, but apparently knew she was dating astronaut Bill Oefelein. She let everyone know Oefelein was flying on board the shuttle Discovery in December.

BILL BAILEY, SHIPMAN'S NEIGHBOR: She was all excited when the shuttle came back. She was all happy, you know, that they didn't have any trouble or anything.

ZARRELLA: Oefelein spent almost all his youth in Alaska and is proud to call himself the only astronaut from the state he loved to explore.

BILL OEFELEIN, SHUTTLE PILOT: And, as I got older, I wanted to see even more. And one of the best ways, as you know, to -- to do that up in Alaska is by air.

ZARRELLA: He became a naval aviator in 1990. He and his older brother are both into flying, which never sat well with mom.

BILLYE OEFELEIN, MOTHER: And I told both of them, I would much rather have you flying a desk.

ZARRELLA: When Discovery lifted off, Oefelein's parents and friends came to the Cape to cheer him on.

B. OEFELEIN: I just started shaking. And I was going, oh, my God, that's my son going up there.

ZARRELLA: We don't know if Colleen Shipman was there. Her neighbor Bill Bailey says he never saw Shipman with Oefelein; she was a private person, but always smiling and friendly.

BAILEY: She would do anything for you. I mean, if you asked for -- if you wanted to go over there and ask sugar or anything, whatever, she would get it.

ZARRELLA: Shipman grew up in Pennsylvania and went to Penn State University. As an Air Force captain, she's part of the shuttle support team at Patrick Air Force Base, not far from Cape Canaveral, and not far from Helicopter Adventures.

PATRICK CORR, HELICOPTER ADVENTURES INC.: I was quite astonished.

ZARRELLA: Patrick Corr, who runs Helicopter Adventures, couldn't believe it when the woman who had been coming here for flying lessons suddenly showed up on the news. She had been coming here since October.

CORR: Initially, she was working on private pilot rating to fly helicopters. Our school is very oriented towards career training. And, ultimately, I think her goal was to prepare for a future career as a helicopter pilot.

ZARRELLA: Shipman took her first lesson October 9. She last flew January 29, just a few days before her encounter with Lisa Nowak. On the restraining order Shipman filed against Nowak, the flight school and this dance studio were listed as places she wanted off limits to Nowak.

On that petition, requested in a Titusville court, she referred to Nowak as, quote, "acquaintance of boyfriend," end quote.

But neither Oefelein or Shipman have talked publicly yet about their private relationship or how Lisa Nowak fits in.

(END VIDEOTAPE)

COOPER: Well, still to come, inside the mind of -- oh, hey, John. Sorry. I didn't even realize you were going to be there live.

There are new developments. What's going on?

(BEGIN BREAKING NEWS) ZARRELLA (on camera): Yeah, Anderson. I can tell you that quite a surprise out in Houston this evening. After spending the day at the Johnson Space Center, late tonight, just as a matter of fact, just a few moments ago, Lisa Nowak returned to her home. Ran the gauntlet of all the media surrounding her house, went inside through the garage entrance, driven there by her parents flanked on either side, apparently her parents. The car was being driven, we are told, by Michael Coates (ph). He is the director of the Johnson Space Flight Center. And he apparently drove her and her parents back to the residence.

But, again, Lisa Nowak apparently home tonight at her own residence -- Anderson.

COOPER: Do we know -- and I'm assuming we don't. But do we know if her children are there or are her husband with her husband, who they've separated?

ZARRELLA: Yes, your assumption is absolutely right. We do not know where her children are, where her husband is, if they're all in that house or someplace else.

COOPER: All right. But she still is wearing that ankle bracelet, as far as we know?

ZARRELLA: Oh, oh, she has to, absolutely, by rule of court. She cannot take that off. And that will not be removed from her until the time disposition of her case, whether she's ultimately found guilty or not guilty in this case.

COOPER: All right. John Zarrella, thanks, John.

(END BREAKING NEWS)

COOPER: Still to come, inside the mind of Lisa Nowak, as far as we can get. Police say her actions were bizarre. A lot of people are asking were there warning signs. Dr. Drew Pinsky weighs in, next on 360.

(COMMERCIAL BREAK)

COOPER: Lisa Nowak was one of fewer than 300 Americans to make it into space, and one of only 38 women. She underwent a tough screening process and years of intensive training.

Now NASA is asking itself, if this is all true, what went wrong? How did a woman who seemed to have it all, well, just crack, if that's in fact what happened.

I spoke to Dr. Drew Pinsky earlier tonight.

(BEGIN VIDEOTAPE)

COOPER: What do you make of this?

DR. DREW PINSKY, ADDICTION SPECIALIST: Well, you know, I have to think in terms of how I would -- what I would think about if somebody like this showed up in my hospital.

And the first thing I would be thinking about was major psychiatric problems. Is there a major depression? As you mentioned, are there substances involved with this? Is this a bipolar patient who became decompensated? There are many, many reasons.

And one thing I have noticed over and again when I treat patients whose stories are in the media, it's just amazing how incomplete the stories are in the media.

(CROSSTALK)

COOPER: There's so much we don't know.

PINSKY: So much we don't know.

And, when you really dig in, when I see these people in, like -- in a clinical setting, the problems are very severe. And the situations are actually really quite intense often and much more than they appear at first brush on the television.

COOPER: And they're not necessarily new problems.

PINSKY: They're -- they're not.

COOPER: These are often deep-seated...

PINSKY: Well, they can be.

COOPER: ... or at least showed up earlier.

PINSKY: And that's really the question in this case. Is this -- you know, when you look at her profile, and it's someone who has been, you know, a stable relationship for a long period of time, highly functioning, extremely successful, and, all of a sudden, boom, this aberrant behavior.

I mean, for me, that, you know, goes to depression and substances, and things like that, or brain tumors and thyroid disease. You want to make sure she's medically OK, even.

On the other hand, if we find out, which we may, that there's been a longstanding history of chaos in relationships, other kinds of impulsive acting out, then, it starts to make more sense that things finally got to the point where she did, indeed, snap.

But I don't think that's the case here.

COOPER: It's strange, though. Her marriage, I guess, she separated three weeks ago, and yet we have this two-month-old restraining order.

PINSKY: There's no doubt -- I don't know -- that is the most confusing part of this, is the idea that she's been stalking for two months, because that kind of stalking behavior suggests much more severe, chronic problems than this story has suggested. So, we really need a lot more information. And we really don't know exactly what's going on here. But she deserves a lot of sympathy. Something horrible has happened. And her behavior was reprehensible. It's inexcusable. And she's going to pay the price for it.

COOPER: Well, it's interesting. Do you think there's a double standard, because, if this was a guy who drove 900 miles in a pair of diapers to assault someone -- or allegedly assault someone -- I'm wondering if people would be saying, this person should get sympathy?

PINSKY: You know, we tend to think of men of being a little more violent than sinister in their behaviors towards women. We might be a little harsher. I mean, there's certainly a double standard there.

But, again, let's not be too harsh about -- the diaper issue keeps coming up over and again. I mean, astronauts are trained to be able to use these implements to be able to take long trips. She knew how to do that. Astronauts wear these things in their trips. So, it wasn't that bizarre, that she had done that.

What's bizarre is that it's so out of character for her, this entire thing, based on what we know about her, that seems profoundly...

(CROSSTALK)

COOPER: But plenty of people do have relationships, and then when the relationship ends, they snap, or one partner snaps.

PINSKY: But -- you're absolutely right, that the stress can be so profound, that things can happen. And she's under a lot of stress right now.

But the reality is, to see violent acting out, you really tend to see a history of that throughout their lifespan, problems with relationships falling apart, you know, impulsivity, acting out, aggression.

This is -- appears to be none of that at all.

COOPER: And her -- I want to read this -- this family statement.

"Considering both her personal and professional, these alleged events are completely out of character and have come as a tremendous shock to our family."

PINSKY: And I would -- I believe that. I think that something has happened.

And, look, as I'm saying, if this were coming to my facility, boy, I would be thinking about things that effect major psychiatric events, major psychiatric pathology.

COOPER: What is the treatment? I mean, I guess you can't even say at this point, because who knows what the diagnosis... (CROSSTALK)

PINSKY: It depends what the diagnosis is.

You know, again, on -- in the media, so often, that you hear, somebody went to rehab. Somebody did this. And, you know, there's really no discussion about the diagnosis was. We should really keep our ear to the ground about what exactly this was.

(CROSSTALK)

COOPER: But, for someone who has done this, can they care for their children?

PINSKY: It depends what the diagnosis is.

(CROSSTALK)

PINSKY: I mean, yes, these -- all the things I'm thinking about are quite treatable conditions. They're usually acute problems precipitated by severe stress. She's in severe stress. Everyone has said that. And maybe that precipitated a major psychiatric event.

COOPER: It's obviously a fascinating case to a lot of people.

Drew Pinsky, thanks very much.

PINSKY: My pleasure.

COOPER: Dr. Drew.

(END VIDEOTAPE)

COOPER: Up next, a report on felons in the military and your reaction to the story. On the radar, next on 360.

(COMMERCIAL BREAK)

COOPER: On the radar tonight, our report on convicted felons being allowed to stay in the armed forces. This one's getting a lot of responses on the blog.

"Sure!" says John in Huntsville, Alabama. Just keep an eye on them. I know a lot of people who've gotten out of crimes by joining the military."

Em in Toronto writes, "You don't want a convicted felon to be in congress or collect their pension, and you don't want them to fight wars for you. So will you let the ones who fight your wars collect their pension or do they lose that too?"

And this from Kay in Stoneybrook, New York. "How interesting that a soldier or sailor can be dishonorably discharged simply for admitting to being gay. Yet, someone with violent felony convictions is allowed to continue to serve."

As always, we welcome your input. You can drop us a line by going to cnn.com/360blog and follow the links.

And we want you to help us keep them honest. If there's a wrong that needs to be made right in your community, go online, tell us about it at cnn.com/360.

We'll be live from New Orleans tomorrow night. Hope you watch.

"LARRY KING" is coming up next.

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