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THE SITUATION ROOM

Senator Craig Caught on Tape; Interview With Mitt Romney

Aired August 30, 2007 - 19:00   ET

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


WOLF BLITZER, CNN ANCHOR: Thanks, Christine.
Happening now, a senator caught, scandal captured on tape, police releasing an audio interview of Larry Craig after his bathroom bust and an officer's allegation that he is lying. Will this only add to intense pressure for him to resign?

Fellow Republican Mitt Romney calls Craig's case disgraceful. The Republican presidential contender is opening up about the scandal.

And Hillary Clinton takes action to distant herself from a wanted man who helped pack her campaign war chest, tonight new developments on the Democratic front runner and the fugitive.

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

It may be the last thing Larry Craig's fellow Republicans want to hear and the last thing the senator needs in the height of the scandal, police audiotapes of Craig's arrest in an airport men's room. They are out tonight. They capture Craig angry and claiming entrapment. We also hear the undercover officer in the sex sting accuse Craig of lying.

Let's begin our coverage with the tape. Carol Costello is here in THE SITUATION ROOM -- Carol.

CAROL COSTELLO, CNN ANCHOR: I've been listening to these tapes but I want to set the scene for our audience first off. Senator Craig had just been arrested in that bathroom; he was going in this interrogation room in this tiny police department within the airport. We presume he had never been arrested before. He's probably scared. He's probably a little intimidated, so that's the scene as this interrogation starts by officer Dave Karsnia.

(BEGIN VIDEOTAPE)

(CROSSTALK)

SEN. LARRY CRAIG (R), IDAHO: Don't do that. You -- you...

KARSNIA: I'm not going to bring you to jail.

CRAIG: You solicited me.

COSTELLO (voice-over): At this point, the officer asks Senator Craig if he can read him his rights. Craig agrees. KARSNIA: You have the right to remain silent. Anything you say can and will be used against you in court of law. You have the right to talk to a lawyer now or have a present -- a lawyer present now or any time during questioning.

If you cannot afford a lawyer, one will be appointed to you without cost.

Do you understand each of these rights the way I have explained them to you?

CRAIG: I do.

KARSNIA: Do you wish to talk to us at this time?

CRAIG: I do.

COSTELLO: Craig waived his right to an attorney and agrees to tell the officer his side of the story.

CRAIG: I sit down to go to the bathroom. And you said our feet bumped. I believe they did, because I reached down and scooted over, and the next thing I knew, under the bathroom divider comes a card that says "Police."

Now, that's about as far as I can take it. I don't know of anything else. Your foot came toward mine. Mine came towards yours. Was that natural? I don't know. Did we bump? Yes. I think we did. You said so. I don't disagree with that.

KARSNIA: OK. I don't want to get into a pissing match here.

CRAIG: We're not going to.

KARSNIA: Good.

CRAIG: I don't -- I am not gay. I don't do these kinds of things and...

COSTELLO: But the officer doesn't buy Craig's story, later pressing him again.

KARSNIA: OK. Did you do anything with your feet?

CRAIG: Positioned them, I don't know. I don't know at the time. I'm a fairly wide guy.

KARSNIA: I understand.

(CROSSTALK)

CRAIG: I bend to spread my legs...

KARSNIA: OK.

CRAIG: ... when I lower my pants so they won't slide. KARSNIA: OK.

CRAIG: Did I slide them too close to yours? Did I -- I looked down once your foot was close to mine.

COSTELLO: Officer Karsnia then asked Craig about the position of his hand.

KARSNIA: You -- you're -- you're skipping some parts here, but what about your hand?

CRAIG: What about it? I reached down with my foot like this. There was a piece of paper on the floor. I picked it up.

KARSNIA: OK.

CRAIG: What about my hand?

KARSNIA: Well, you're not being truthful with me. I'm kind of disappointed in you, Senator. I'm really disappointed right now.

OK? I'm not -- just so you know, just like everybody...

CRAIG: Yes?

KARSNIA: I treat with dignity.

We deal with a lot of people that are very bad people. You're not a bad person.

CRAIG: No, I don't think I am.

COSTELLO: At this point, the officer urges Craig to be truthful, telling him, you're going to get out of here.

KARSNIA: So we'll start over. You're going to get out of here. You're going to have to pay a fine, and that will be it. OK. I don't call media. I don't do any of that type of crap.

(END VIDEOTAPE)

COSTELLO: And you know he said that sort of thing to Senator Craig over and over, this officer. He said I'm not going to bring you to jail. You're going to have to pay a fine. If you pay a fine, you're not going to have to explain anything because you won't have to go to court. He also said, you know, he's not going to tell the media.

You just heard him say that and, you're going to get out of here. Senator Craig apparently decided in August, because this incident happened in June that he was going to waive his right to an attorney altogether and plead guilty to this.

BLITZER: And I assume when he heard the officer say, you know what, you pay the fine and no one is going to know about, in effect that's what he was suggesting. Senator Craig said well that sounds pretty good going -- accepting these charges and going to a trial given the earlier history of Senator Craig going back to 1982 when he...

(CROSSTALK)

BLITZER: ... denied involvement with congressional pages.

COSTELLO: All these rumors going around that he's been gay through, what, 20 years, so maybe he just rolled the dice and he said if I go to court then it's really going to come out but maybe if I plead guilty I'm going to take a chance that it won't. Who knows?

BLITZER: It will be hushed up. All right, Carol. Thanks very much.

Let's get to the legal analysis on this. We'll talk to our senior legal analyst Jeff Toobin. Jeff, what do you make of what we heard?

JEFFREY TOOBIN, CNN SR. LEGAL ANALYST (via phone): Well, if Senator Craig had decided to fight the charges, this statement to the police might have been the beginning of a plausible defense, that this was simply a misunderstanding, that the officer tried to entrap him. But the unsolvable problem politically and legally for Craig is that he has pleaded guilty, so all of these defenses are gone. He's admitted that he did engage in disorderly conduct. So this statement by the senator is basically just beside the point.

BLITZER: And it also doesn't explain, you know -- he obviously wanted to keep this all very, very quiet -- why in the end he decided to wait the rest of June -- this incident occurred June the 11, wait the rest of June, all of July until early August when he signed that piece of paper pleading guilty. Apparently he never hired a lawyer to help him through this process.

TOOBIN: See, this is a very important point. If he had the day of the arrest signed a paper pleading guilty, maybe he would have a plausible argument that he simply panicked and he wasn't guilty. But as you point out, weeks passed between the arrest and the guilty plea, during which time he told the Minnesota authorities that he was consulting with lawyers.

Now, whether he did or not, we don't know. But the fact is he had the chance to think this over and, upon reflection, decided to plead guilty. That's why the argument he's making that he's not guilty is so completely implausible.

BLITZER: Jeff Toobin, thanks very much.

We also have some other audiotapes of Senator Craig. They're coming into THE SITUATION ROOM tonight. These are from interviews he gave to a newspaper in his home state of Idaho before -- before this latest scandal. And on them, the senator is equally defiant.

Carol is still here with us. You've had a chance to hear some of these audiotapes from the interview he did with "The Statesman", the newspaper in Idaho, in Boise there. Give us a little flavor.

COSTELLO: Yes, Senator Craig seems downright angry at times. You know the "Idaho Statesman," the local paper in Idaho, was doing this big investigation to address these persistent rumors that Senator Craig was gay. They taped some of their interview with Senator Craig. Here's a bit of it for you.

(BEGIN AUDIOTAPE)

QUESTION: A lot of the people as you know who repeat these rumors acknowledge that they don't have clear evidence, but they acknowledge that they want it to be true because they don't like you and your politics.

ANSWER: Thank you.

QUESTION: In '82 you said you were mad as hell about the dirty tricks, mentioned the Speaker and the majority leader as perhaps being connected to them. To what extent do you think that's been a factor in the long life of these rumors?

ANSWER: You know, Dan, I have no idea. There are several facts -- no, there are several realities out there. The gay movement in this country has grown aggressively and politically over the last two decades. And they love to stick their finger in people's eyes, if they can find any possible opening.

(END AUDIOTAPE)

COSTELLO: Now, when he was talking about 1982, he was talking about an investigation that was going on, on Capitol Hill about homosexual activity between Congressmen and pages, congressional pages. Senator Craig went to NBC News and gave this interview saying he denied any involvement, even though he was never charged in it. But there were those rumors circulating.

And, you know, you heard him say that the gay community, some of the gay community were out to get him. There was a blog last year that outs gay politicians. And Senator Craig's name was on that list.

BLITZER: And he claims the "Idaho Statesman" was on a witch hunt against him and that created the mindset where he simply wanted this incident in Minneapolis to go away and why he now says he regrets pleading guilty to that charge. Thanks very much, Carol, for that.

Let's check in with Jack Cafferty He's in New York for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: I'm anxious for the good senator to resign so we don't have to talk about this anymore. The network morning news shows have given a lot more air time to the Democratic presidential candidates than to the Republican ones. That's according to a conservative media watchdog outfit called the Media Research Center.

They claim that through last month the ABC, CBS and NBC morning news programs devoted 284 segments to Democrats compared to just 152 for Republicans. The network news executives say there's no bias and that they've had a harder time getting the Republican White House hopefuls to appear on their programs. They say they strive to present fair picture of the campaign but that the news drives their decisions and that's why, for example, the Clinton/Obama campaign, which you'll recall began way back in January, that rivalry started heating up, that meant more coverage for the Democrats especially that month.

But morning news aside it does point to a larger issue of whether or not the Republican and Democratic candidates for the White House are getting equal coverage and that's our question tonight. Are the media being fair to both sides in the 2008 presidential race? E-mail your thoughts to CaffertyFile@CNN.com or go to CNN.com/CaffertyFile -- Wolf.

BLITZER: We're asking all the candidates to come and appear here in THE SITUATION ROOM. The Democratic candidates, the Republican candidates and a lot of the front-runners, they are simply declining, Jack, at this point.

CAFFERTY: Yes, there is a point to be made that it's hard to get some of these people. And with all you know appearances they have scheduled and stuff, but I don't know, we'll see what the viewers think.

BLITZER: Good idea -- Jack, thanks very much.

Massive sums of money, enormous sacrifice from U.S. troops, and yet there's still major failure in Iraq, an audit hands out grades on the Iraqi government's progress. It's not a good report card.

Also, the (UNINTELLIGIBLE) may be the targets of a bomb scare. Thirteen states are involved and the FBI has a special message for the public.

And presidential candidate John Edwards says help the environment by giving up your SUV. But are you willing to do that? Jeanne Moos has been investigating.

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

(COMMERCIAL BREAK)

BLITZER: Right now there is serious concern Iraq is not seeing the kind of progress Americans desperately hope for. We're learning about a draft of a government audit that grades how well things are going. According to both "The Washington Post" and The Associated Press, the report concludes Iraq is failing to make positive advances on almost all of the measures of political and security progress.

Joining us now our correspondent in Baghdad, Michael Ware -- Michael, you've seen all the reports of this draft Government Accountability Report Office study which is going to suggest presumably that, what, 15 of the 18 so-called benchmarks are not -- have not yet been met. I don't know why people should be all that surprised given all the gloomy reporting that's coming from Iraq. MICHAEL WARE, CNN CORRESPONDENT: Exactly, Wolf. I mean, I don't know about you, but I'm starting to feel like Bill Murray halfway through the movie "Groundhog Day". I mean we've already seen a slew of these pessimistic and, to be honest, increasingly frank and realistic assessments of the situation on the ground. And we've still got another two and a half weeks of more reports to come.

I mean, surely the American public must slowly becoming aware at last that the mission here in Iraq is not working out anything like it was ever planned to. And it's not going to get better any time soon. Yes, there are some successes on the security side. But like everything, Wolf, they don't come without cost and we discussed that many times.

And, honestly, on the political front, it's beyond dropping the ball. They have dropped it, lost it, it's gone into the bushes and they don't know where it is. It ain't coming back. So this tells us really nothing new. It's just slightly more pessimistic and realistic than what we've heard before and we've still got more to come.

BLITZER: Michael, what about next? What happens next? We're going to get all these reports coming in. As far as the day-to-day situation, I take it you don't see any significant change.

WARE: Well, this is the question one -- well, America has to ask itself. Is it ready to perform the radical surgery that is necessary here in Iraq? Now, that's going to be on all number of fronts. But bottom line is the Maliki government isn't working. I think by and large, that there's a consensus of opinion on that. So the question is what comes next.

What comes next, Wolf is going to be ugly, one way or another. Essentially, America has to choose between the least bad of a host of terrible scenarios. So is America ready to do what it's going to be required to reclaim some kind of preservation of U.S. interests and avoid complete and outright perception of defeat here in Iraq.

BLITZER: We'll continue this conversation, Michael, in the days to come. Thanks very much.

WARE: Thank you, Wolf.

The FBI is now circulating information to help businesses protect themselves against bomb threats and the banks or stores you visit could be some targets of these threats. Over a dozen states are involved. We're going to tell you where, what's going on.

And amid the tenth anniversary of her death, questions still linger. Now a formal British inquiry will take a look back into whether or not Princess Diana's death was an accident or intentional.

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

(COMMERCIAL BREAK)

BLITZER: The FBI is circulating an e-mail and posting advice on its Web site, FBI.gov, to help businesses protect themselves against bomb threats meant to extort money from them. It advises what to ask the caller, what to look for, what to listen for during the call. The alert is prompted by a string of cases over the past week around the country in which stores and banks have received threatening phone calls aimed at extorting money. The frightened people on the receiving end often do exactly as they're told.

Our homeland security correspondent Jeanne Meserve has some additional details -- Jeanne.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Wolf, the FBI believes one person or one group is responsible for this extortion scam, and a source tells CNN that investigators are looking for a suspect in Portugal. Over the past week, the FBI says banks and stores in 13 states are believed to have gotten phone calls saying there is a bomb on the premises which will be detonated if money isn't electronically moved into an account.

A law enforcement source says it has work in some instances to the tune of about $13,000. In one incident, employees and shoppers at a Dillons grocery store in Hutchinson, Kansas, were convinced the caller was watching them and some complied with the demand that they take off their clothes.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: They told all the women to disrobe and a lot of the women, elderly and stuff, I started handing out paper bags for them to cover themselves with. Some did, some didn't.

(END VIDEO CLIP)

MESERVE: A grocery store in the Maine town of Millinocket appears to have been the latest target. The local police chief says Wednesday 38 shoppers and employees were put in lockdown for at least three hours while police investigated a call. On Tuesday, a call to a Wal-Mart store in Newport, Rhode Island, demanded that $10,000 be wired to a location outside the United States.

A federal law enforcement source says several thousand dollars were sent but not the 10,000 requested. Police say the call was eventually traced to outside the U.S. And a source says the suspect in Portugal appears to have ties to the account number involved -- Wolf.

BLITZER: Jeanne Meserve reporting for us. Thank you, Jeanne.

When we come back, the Republican presidential candidate Mitt Romney is facing questions about the cash he's putting into his campaign. That would be his own cash, as well as about abortion, the Larry Craig scandal. John King interviews Mitt Romney. That's coming up.

And will questions about Princess Diana's death finally be put to rest 10 years later? There's a formal British inquiry about to begin. We have details. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, a major victory for gay rights advocates in Iowa, a district court has struck down a state law banning gay marriage. The gays are ruling in a lawsuit filed on behalf of six same-sex couples who want to marry. The court says they must be allowed to marry based on the state's constitution's guarantee of equal treatment.

The resigning Attorney General Alberto Gonzales is facing a broader inquiry by the very department he headed. The Justice Department confirming today it will investigate whether Gonzales misled Congress. The department will examine his sworn testimony on the dismissal of nine U.S. attorneys, plus government surveillance programs.

And in Brazil at least eight people are dead after a train crash in a suburb of Rio de Janeiro. Authorities say a passenger train at high speed smashed into an empty stationary train. Rescuers are still trying to get people out.

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

Tonight, there's growing speculation about whether Senator Larry Craig may try to escape the red-hot glare of scandal by simply calling it quits. The pressure to resign may be even more intense this hour after the release of police audiotapes from his arrest in an airport bathroom. Let's go to our congressional correspondent Dana Bash.

She's following this story for us in Boise, Idaho. Now that the police audiotapes have aired, we've aired them here on CNN, they're airing all over the place right now, what's the reaction that you're getting there in Boise?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, first of all, reaction from Senator Craig's office, Wolf, I asked his spokesman if they do have any reaction and I got a very -- a simple quick e-mail back and it just said, no, it speaks for itself. And I can tell you I just got off the phone with an influential Republican here in Idaho. And he said that his reaction and the word on the street here in Republican circles is that Senator Craig should just, quote, "pull the plug" and the faster he does it, it would be better for his family because already the sense here was -- here in Idaho was that, first of all, they didn't think Senator Craig was telling the truth.

But, also, that they have been upset and angry and embarrassed about what the senator did and about this story and what it is doing here in Idaho. And having that audiotape, that kind of detail from Senator Craig talking about what went on inside a men's bathroom, again, quite in detail, it only adds to the embarrassment here in Idaho. BLITZER: And he took another devastating hit today from Senator John Ensign of Nevada. He may not be all that familiar to a lot of our viewers but he heads the committee that's supposed to get Republicans elected or reelected to the U.S. Senate. Ensign is now joining others like Senator McCain, Norm Coleman, in saying that he should resign. What are you picking up on that specific point?

BASH: That was a very important message that Senator Craig got from Senator John Ensign. And that is essentially what I'm hearing from sources in Washington and here in Idaho that the expectation at this point is that they do think that Senator Craig will likely resign pretty soon. That is sort of the sense that people are getting. And in fact, I caught up, Wolf, with the governor of Idaho. He's somebody who has known Senator Craig for decades, worked closely with him. He's a good friend of his. He was very careful with his words. But his message and his words was crystal clear. Take a listen.

GOV. BUTCH OTTER (R), IDAHO: Nobody likes these kinds of problems because these kind of problems you just can't get rid of it and you can't get rid of with simple explanations and it takes a long time. And then you never really unring the bell. And the bell has been rung. And so as we go forward, I suspect there's going to have to be additional consideration by Larry and his family on where exactly they're going.

BASH: That would be the governor who would have to appoint somebody to succeed Senator Craig. I asked him if he is quietly figuring on who to appoint. He said he didn't have to. Why? Because he said he's getting calls from the people who want Senator Craig's job. That gives you a sense where people think this is headed here in Idaho.

BLITZER: All right. We'll see what happens tomorrow as far as Senator Craig is concerned.

Dana, thanks very much.

Let's turn to the presidential race right now. Republican Fred Thompson has set the date for his long-awaited campaign announcement. The "Law & Order" star and former U.S. senator will make it official at midnight on September 6 with a posting on his website, and then hit the campaign trail in earnest for a five-day swing through make or break states of Iowa, New Hampshire, South Carolina and Florida. Thompson will cap the kick off with an event in his home state of Tennessee.

Our senior political correspondent Candy Crowley here in THE SITUATION ROOM watching all of this. The significance of it happening on September 6th, what's the significance -- why that day?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: It comes the day after a republican debate which is interesting. It tends to sort of suck the wind out of whatever might be said there.

BLITZER: There's a debate on the 5th? CROWLEY: Yes, there's a debate on the 5th. What you get maybe a couple of hours interest of play for that debate and then you have this announcement.

BLITZER: He may not want to participate in that debate. Right now he may feel he's not yet ready to debate all the other republican candidates so he conveniently perhaps waits until the next day and makes the announcement then.

CROWLEY: Absolutely although I will tell you his campaign said, no, no, he is perfectly ready, but nonetheless it comes after the debate.

BLITZER: People are asking, is it too late for him given the head start that Giuliani and Romney and McCain and the other republican candidates have?

CROWLEY: It's a lot tougher than the Thompson campaign will admit to at this point. The reason for the delay had in part to do with the fact that they had to get the infrastructure together. That takes time. From July 4th when we thought he would make his announcement until now, they've been trying to put together something so he could hit the ground running, but he also has to be prepared personally, to give speeches that are -- that get not criticized but vaunt as they are listened to because, as you know, he's had some fairly bad speeches. He has to enter into these debates. So it is tough to come in at this time, but the Thompson campaign is betting that he will look like something new, that there is an unsettled republican field and that he goes into it and immediately gets a lot of attention and a before the in the polls.

BLITZER: All right. We'll watch next week together with you. Thanks very much, Candy.

He's a top tier presidential candidate who says you might not actually know much about him. Today the republican presidential candidate Mitt Romney talked to CNN about a range of issues including how he hopes to become a household name. He also spoke about Senator Craig's bathroom bust, the situation in Iraq. Our chief national correspondent John King is joining us now from Charleston, South Carolina.

You got him to answer some questions on these issues, John.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Wolf, an interesting conversation with Mitt Romney today. Your discussion just now with Candy proves as we move past Labor Day looking ahead to the fall, a great deal of attention will go to the Fred Thompson campaign for republican nomination. But if you kept score this summer and wanted to say which republican did best, he, it would be Mitt Romney.

Ask Mitt anything is the format. But first, the candidate looking to build on a strong summer has a point to make.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: If there's ever been a time we needed change in Washington, it's now. But the question is, are we going to take a sharp turn to the left or are we going to stay true to the values that have made us such a great nation?

KING: He leads in Iowa and New Hampshire and is focusing more and more on South Carolina.

With momentum comes challenges. Senator Larry Craig was Romney's Idaho chairman. The campaign moved quickly to sever ties once it learned of his disorderly conduct plea, but Romney won't go as far as other republicans, demanding Craig resign.

ROMNEY: The right course is for him to make this decision. Looking at his own conscience.

KING: A much bigger challenge, Romney has spent months working to convince social conservatives like Iowa activist Steve Scheffler his change of heart on abortion rights is genuine, not a political calculation.

STEVE SCHEFFLER, IOWA ACTIVIST: A lot of us who have been around for several years are kind of tired of the lip service we've gotten from candidates.

KING: But the questions continue. At one recent event, Romney backed a constitutional amendment banning abortions nationwide. At another, he said each state should decide. In an interview with CNN, he insists there is no contradiction.

ROMNEY: I would welcome an America that didn't have abortion, but that's not where we are, that's not where the people are. Therefore, in my view, the right course for it for those pro-life is fight to change hearts and mind and see Roe v. Wade overturned and that would allow states and the elected representatives of the people make their own decisions with regards to abortion.

KING: More than $5 million in TV ad spending is a leading reason for the summer upswing.

ROMNEY: Hi, how are you? Mitt Romney.

KING: He has the most in the bank among republicans in part because he has pumped in $8 million of his own money. How much are you willing to give to your own campaign?

ROMNEY: It's a closely held secret.

KING: More than four months until the first votes and a new entry next week could reshape the republican field. But if you're keeping score this summer, this is the republican with the most to smile about.

It's here in South Carolina, Wolf, when you talk to activists around the state, this, they believe is Senator Fred Thompson's best opportunity to get in and shake up the race. Governor Romney is ahead in Iowa, ahead in New Hampshire. Make no doubt about it. He will put more TV ads, spend more money to keep those leads. He's had more trouble here. All of the republican campaign says if you want to see the Thompson impact starting next week, start looking right here in South Carolina.

BLITZER: All right John. Thanks very much. We'll be watching.

Senator Hillary Clinton takes, she also gives back. Why is the democratic presidential candidate returning tens of thousands of dollars in campaign contributions?

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

(COMMERCIAL BREAK)

BLITZER: Supporter contributions are the lifeblood of any presidential campaign, but democratic presidential candidate Hillary Clinton is returning tens of thousands of dollars to one fundraiser. His name is Norman Hsu. Our Brian Todd is following this story. Why is Senator Clinton, Brian, giving the money back?

BRIAN TODD, CNN CORRESPONDENT: Well Wolf, they found out that among other questionable dealings, Mr. Hsu is a fugitive. Now there's no indication of any illegal activity by the Clinton campaign but this development has them doing damage control because of the specter of past fundraising scandals.

She says she's not reverting back to the days of campaign donors staying in the Lincoln bedroom.

SEN. HILLARY CLINTON (D), NEW YORK: I don't think it's analogous at all.

TODD: But Hillary Clinton is dumping $23,000 donated to her campaign by Norman Hsu, a top democratic fundraiser who is also a fugitive in California. The state attorney general's office tells CNN, Hsu has been wanted for 16 years since he skipped out on his sentencing after pleading no contest to grand theft in a fraud case but Hsu's also involved in questionable fundraising for Mrs. Clinton.

As part of a practice called bundling, packing together donations from others after you've reached your legal limit, Hsu got the family of William Paw, a mailman who lives in this house near San Francisco to contribute to the Clinton campaign. Despite seemingly modest means, records show they gave more than $45,000 to Mrs. Clinton since 2005, more than $200,000 total to democrats. Records also show Norman Hsu once listed the Paw's home as his own address.

Bundling is not illegal. But if Hsu reimbursed the Paw's for their contributions, it would be. Hsu's lawyer tells us he never reimbursed the family, that the Paw's could afford the money they gave. We couldn't reach the family for comment. Hillary Clinton says her campaign simply can't catch everything.

CLINTON: When you have as many contributors as I'm fortunate enough to have, we do the very best job we can based on the information available to us to make appropriate vetting decisions, and this one was a big surprise to everybody.

TODD: But should it have been given the Clintons' heavily investigated practices in the 1990s when some big donors with checkered pasts got access to the White House?

JIM VANDEHEI, POLITICO.COM: The last thing they want to be seen is giving access to people giving a lot of money because that's what people were tired of in the 1990s.

TODD: We asked if the campaign would also return money from the Paw family, a spokesperson for Mrs. Clinton said they're always reviewing contributions and if they find a basis to return any, they will do that.

Now on his fugitive status, Mr. Hsu issued a statement saying he's surprised there's a warrant for his address. And, "I have not sought to evade any of my obligations and certainly not the law." But he says until this matter is resolved, he won't do any more fundraising, Wolf.

BLITZER: There are other democrats who are returning money to Norman Hsu as well.

TODD: That's right and Barack Obama's campaign says it's giving to charity about $7,000 that Hsu donated to Obama in the past. Members of Congress like Mike Honda of California, Joe Sestak of Pennsylvania, also returning their contributions from him as well as democratic senatorial candidate Al Franken, the comedian.

BLITZER: Brian, thanks very much. Brian Todd watching this story for us.

On a related development, Hillary Clinton put herself before the political firing line, at least a little bit. She's going to be on "The Late Show with David Letterman" tonight. That show has already been taped. We have an advance preview of her appearance.

DAVID LETTERMAN: It's true in college you were a republican?

CLINTON: I was. Yeah. I was.

LETTERMAN: What led you to the -- people gasping.

CLINTON: I think somebody fainted in the first row.

BLITZER: From "The David Letterman Show" later tonight. A lot of the presidential candidates making their public appearances on a late night talk shows.

Just ahead, accidental or intentional? Ten years after Princess Diana's death, a formal British inquiry now is going to try to answer the question. We have details of what's going on in England.

And give up your SUV, that's one presidential candidate's recommendation to all of you. But are people ready to make that sacrifice for the environment? Jeanne Moos with a most unusual story.

We'll be right back.

(COMMERCIAL BREAK) BLITZER: Tomorrow marks the tenth anniversary of Princess Diana's death. British and French investigations concluded her death was an accident. Some people say she was still murdered.

CNN's Paula Hancocks reports from London.

Paula.

PAULA HANCOCKS, CNN CORRESPONDENT: Wolf, there have been at least two official reports into the death of Diana, Princess of Wales. Both said it was a tragic car accident, the driver was drunk and traveling too fast. And yet ten years on, there are still those who maintain there was something far more sinister behind the crash.

Ten years on, conspiracy theories still haunt the death of Diana, Princess of Wales. Mohammad Al Fayed, the father of Dodi Al Fayed, who died in the car alongside Diana, has single handedly kept the murder allegation alive.

MOHAMMAD AL FAYED, FATHER OF DODI: I am certain 100 percent that a leading member of the royal family have planned that.

HANCOCKS: Al Fayed has accused Diana's ex-husband, Prince Charles and the queen's husband, Prince Philip, of playing a hand in the deaths, a claim denied by the royals and no official reports have substantiated the allegations. Still, Fayed remains convinced saying Dodi and Diana were about to announce their engagement.

MICHAEL COLE, AL FAYED SPOKESMAN: They would not have wanted Dodi as a Muslim to be marrying Diana, Princess of Wales.

HANCOCKS: Fueling the allegations of foul play, Diana's former butler, Paul Burrell, claims Diana wrote him a letter less than a year before she died voicing fears she would be the target of a deliberate car crash. However, a French inquiry eight years ago ruled the driver Henri Paul was to blame. He was drunk, on antidepressants and driving too fast. A British police inquiry last year had similar findings. But Al Fayed refuses to accept his employee, Henri Paul, may have been responsible.

KEN WHARFE, DIANA'S FORMER BODYGUARD: This was a failure of the security that night that brought about the deaths of Diana and Dodi Al Fayed Diana simply based on the grounds or lack of experience.

HANCOCKS: The immediate public criticism was leveled at the paparazzi chasing Diana's car when it crashed. Some were arrested at the scene but subsequently released without charge.

KEN LENNOX, FORMER PHOTOGRAPHER: I think we all have a built of guilt about Diana's death. The night she died, watching the paparazzi being arrested live on television and the subject of trials and so on, there was a feeling of responsibility.

HANCOCKS: The full British inquest into the deaths of Dodi and Diana starts in October, more than ten years after the deaths. And even after that, it will take months before the coroner records a verdict. Even then, it's very unlikely that those that specialize in conspiracy theories will be silenced.

Wolf.

BLITZER: Paula, thanks very much. Paula Hancocks reporting for us from London.

Let's go back to Jack Cafferty in New York. It sort of reminds me of all the conspiracy theories involving the assassination of JFK. Some people will never believe what these official inquiries report.

JACK CAFFERTY, CNN CORRESPONDENT: And there are people who won't believe the story about Diana's death either because, you know, that's just the nature, I guess, of some folks -- the way some folks' minds work.

The question this hour is, are the media being fair to both sides in the 2008 presidential race?

Robert in California, "Heck no! Of course the media aren't being fair. The republicans are getting a free ride. Nobody is looking at the dirt and blood on the hands of the republican candidates. Everyone's too busy looking at haircuts and blouses."

Paul writes, "Come on. Just state the truth. The media are overwhelmingly biased in favor of the democrats. 90 percent of the media voted for Kerry. Can't you just admit it on TV or are you in a state of denial?"

Albert in Las Cruces, New Mexico, "It would only be fair if you were to give equal time to that write-in candidate (none of the above). Will any of these people respect us the morning after the election?"

Mary in New York, "The media aren't looking to be fair to either side or to the audience either. What we hear and see is just so much junk: Hillary's cleavage, Edwards' haircut, Rudy's wives. Please, where is the time allotted to hear what these people have to say? One minute answers, three minutes? The debates are political pinball. Tilt, anyone?"

Jim in Florida writes, "For more years than I can count, the democrats couldn't buy any airtime. Now that the networks smell a change in the White House next year, they want to be on the side of power when it happens. Thus, the democrats get the biggest share of exposure and the republicans shunned. Poetic justice after the opposite was true for far too long."

Harrison in Maryland writes, "No, they're not being fair at all. Legitimate candidates like Dennis Kucinich, Joe Biden, Ron Paul and others are only ever mentioned in the passing, not because they are not appealing candidates, but because they have not raised a tremendous amount of money. The reason they're unable to raise money is because they're not covered. It is a very sad circle."

And Nancy in Massachusetts says, "All are being fair except for the F-word network!" If you didn't see your e-mail here, go to CNN.com/CaffertyFile. We post more on line along with video clips of the Cafferty File and she actually said Fox. I changed it.

BLITZER: I know you always do. Thanks, Jack, very much.

Let's see what's coming up right at the top of the hour. Rick Sanchez standing by with a little preview of what he's got on "OUT IN THE OPEN."

RICK SANCHEZ, CNN ANCHOR: Hey Wolf, you know I always hear you and others say how is something like this going to play in Peoria. Tonight we want to know how something like this, the Larry Craig scandal, how is going to play in Idaho. I mean that's where the man is from, right? So we're going to bring reports from there and obviously breaking down the tape for you just like everybody else because obviously Americans want to know.

And then there's this story. It's a couple of teenagers. They're really superstars as far as school is concerned. They've impressed everybody. They got lots of friends. They're probably going to do very well, except for one thing. They're undocumented. They're here in this country illegally. So do you find a way to keep people like that in the country or do you just kick them out? After all, illegal is illegal, right? This is a question we can only ask of one person. Figure out who it is, Wolf?

BLITZER: I'm guessing.

SANCHEZ: Tom Tancredo.

BLITZER: The republican presidential candidate, the congressman from Colorado.

SANCHEZ: He's going to be here on the show. He and I are going to go back and forth on this issue because it's very complex and also very personal. We'll be talking about that.

BLITZER: Good, I look forward to seeing it.

SANCHEZ: Always look forward to seeing you, Wolf, thanks.

BLITZER: And when we come back, SUV lovers take note. A presidential candidate wants to you make a big sacrifice. Jeanne Moos found some fans of utility vehicles who are honking mad. Jeanne Moos, and a most unusual story coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Americans love their cars so you might think white house hopefuls would steer clear of anything between the voters and their vehicles but democratic presidential candidate John Edwards is suggesting people should give up their SUVs and drive more fuel efficient cars. It's most unusual and here's CNN's Jeanne Moos.

JEANNE MOOS, CNN CORRESPONDENT: Here's a shocker. Not a single SUV driver we asked said yes to this. John Edwards wants people with SUVs to give them up.

UNIDENTIFIED MALE: No, I don't think so.

MOOS: So in light of Senator Edwards' suggestion that Americans sacrifice, we've compiled the top ten excuses for not giving up your SUV. Excuse number one.

BLITZER: Our tape machine over there crashed and Jeanne Moos, her excellent piece on SUVs unfortunately not happening right now. So let's try to fix that. See if we can recreate it. If not maybe we'll play it for you tomorrow.

In the meantime we'll take a look at some of the Hot Shots, pictures coming in from our friends over at the Associated Press, pictures likely to be in your hometown newspapers tomorrow. There they are. Let's take a look at some of them right now.

In Gaza City, Palestinian children wear green Hamas head bands during a police graduation ceremony.

In Turkey, members of the army's Special Forces hang from a helicopter during a ceremony marking the anniversary of a victory crucial to Turkey's independence.

In Pakistan, take a look at this, supporters of the former Prime Minister Shareef rally with a lion, an election symbol Shareef used in previous elections.

In Nevada, a man enjoys a light art installation at the burning man festival in the black rock desert.

Some of this hour's Hot Shots. Pictures often worth a thousand, thousand words.

Let's check back with Carol Costello monitoring some other stories incoming into THE SITUATION ROOM right now.

What do you have, Carol?

COSTELLO: A couple of things to tell you Wolf. At least 48 police officers and 50 demonstrators are injured after a violent protest in Santiago, Chile. Police arrested at least 750 people in flashes that extended through the night. Chile's largest labor federation organized the protest to demand better wages for workers. The protest grew increasingly violent and police used water canons and tear gas against the protesters, some of whom fired guns and hurled gasoline bombs.

Dramatic video of a deadly confrontation in Blue Ash, Ohio. A camera on a police car's dashboard recorded the indecent. Police cornered a stolen car. They say the car hit another officer who was on foot and they say that's when another officer shot and killed the driver. The driver had a suspended license and a record for drug trafficking. The passenger was in the car but was not charged.

The naked truth caught on a surveillance camera. A camera at a convenience store in De Soto, Missouri, captured a naked masked man doing the hula. Police say he was trying to create a distraction while another man stole a case of beer. The two left in a car with a third man. We've got the video for this one. A customer got the license plate number. All three men were caught a few days later. So see the tape machine was up and working on the right story, Wolf.

BLITZER: Carol, thanks very much. That's it for us. See you tomorrow.

Let's go to Rick Sanchez in New York with a special edition of "OUT IN THE OPEN."

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