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Spitzer's Resignation Effective Monday; Geraldine Ferraro Steps Down from Finance Committee; Bickering Over Primary Re-Do; Scandal; Durham Man Charged With Death of UNC Senior

Aired March 12, 2008 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: I'm Wolf Blitzer at the CNN Election Center. You're in THE SITUATION ROOM.
It's a big step in the biggest scandal to rock New York politics in recent memory. New York's governor, Eliot Spitzer, resigning amid a sex scandal linking him to a high-priced prostitution ring.

Here's what he said just a few hours ago, with his wife at his side...


GOV. ELIOT SPITZER (D), FORMER NEW YORK GOVERNOR: In the past few days, I have begun to atone for my private failings with my wife Silda, my children and my entire family. The remorse I feel will always be with me. Words cannot describe how grateful I am for the love and compassion they have shown me.

From those to whom much is given, much is expected. I have been given much -- the love of my family, the faith and trust of the people of New York and the chance to lead the state. I am deeply sorry that I did not live up to what was expected of me.

To every New Yorker and to all those who believed in what I tried to stand for, I sincerely apologize. I look at my time as governor with a sense of what might have been. But I also know that as a public servant, I and the remarkable people with whom I worked, have accomplished a great deal. There is much more to be done and I cannot allow my private failings to disrupt the people's work.


BLITZER: So here are the latest developments in the Spitzer scandal. His resignation is effective Monday, when the lieutenant governor, David Paterson, will replace Spitzer for the duration of his term. A source close to the talks tells CNN Spitzer's lawyers are negotiating with federal prosecutors to try to avoid charges. But a U.S. attorney says -- and I'm quoting now -- "There is no agreement between this office and Governor Eliot Spitzer relating to his resignation or any other matter."

Meanwhile, we're learning other new details of the investigation into Spitzer and new details of what he allegedly did.

Let's turn to our justice correspondent, Kelli Arena. She's doing some major reporting on this.

Kelli, what are you picking up?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: You know, Wolf, prosecutors certainly have learned a lot of new details. But we've learned a lot of new details that help give us a clearer picture of the breadth of this investigation. And, you know, they have a ton to work with, those prosecutors, in deciding how to move forward.


ARENA (voice-over): He's out of a job, but not out of trouble. Eliot Spitzer still faces possible charges.

SPITZER: I have insisted, I believe correctly, that people, regardless of their position or power, take responsibility for their conduct.

ARENA: Sources with knowledge of the investigation say his legal team is talking with prosecutors. But the U.S. attorney handling the case went out of his way to say no deal has been struck. He even put it on paper. That doesn't mean that there won't be one.

RICHARD SMITH, FORMER JUSTICE DEPARTMENT OFFICIAL: He still has leverage because of the fact he has resigned. He's no longer a sitting public official and that should be considered.

ARENA: Legal experts say Spitzer's lawyers will use his resignation to argue he's already suffered enough and that if prosecutors go after him, they should go after the other nine clients of The Emperors Club. But investigators allegedly caught Spitzer with his hand in the cookie jar, on a federal wiretap. And new details are emerging all the time.

Sources say FBI agents in Washington put Spitzer under surveillance at the Mayflower Hotel at least twice this year to try to confirm that he met with a hooker.

ROSCOE HOWARD, FORMER U.S. ATTORNEY: It's a little hard to argue or even present a defense that smacks of I didn't know or I didn't understand.

ARENA: Especially when sources say Spitzer used the call girl service at least eight times in the past several months. And they're not done looking through the records.


ARENA: Now, the government still seems to be less interested in pursuing charges related to prostitution and are focusing on what Spitzer may have done to hide his money trail. That much has not changed -- Wolf.

BLITZER: Kelli Arena, thanks very much for that.

New York's Lieutenant Governor, David Paterson, who will take office, become the governor on Monday, released this statement on Spitzer's resignation.

Let me read it to you, in part: "My heart goes out to him and to his family at this difficult and painful time. I ask all New Yorkers to join Michelle and me in prayer for them. It is now time for Albany to get back to work, as the people of this state expect from them."

We have some breaking news coming into THE SITUATION ROOM right now involving another hot topic in the Democratic presidential contest -- controversial remarks about race by the party elder, the former vice presidential candidate, Geraldine Ferraro. You heard Jack Cafferty reporting on that just a little while ago.

Her comments are causing major problems and not necessarily just for the Clinton campaign. Now there's brand new fallout.

Let's go to CNN's Suzanne Malveaux. She's watching this story for us.

You're getting new information -- Suzanne. Break it here.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, I just got off the phone with Geraldine Ferraro, who simply said she is stepping down, leaving the Finance Committee. She has sent a letter to Hillary Clinton about 20 minutes ago.

I want to read it to you. She gave it to me verbatim here. She says: "Dear Hillary, I am stepping down from your Finance Committee so I can speak for myself and you can continue to speak for yourself about what's at stake in this campaign. The Obama campaign is attacking me to hurt you. I won't let that happen. Thank you for everything you've done and continue to do to make this a better world for my children and grandchildren. You have my deep admiration and respect. Gerry."

Now, this is after we had a conversation where she said she does not regret anything. Her comments, she says, they were taken out of context and she squarely puts the blame on the Obama campaign.


MALVEAUX (voice-over): Red hot racial politics thrust once again into the fight between Senators Hillary Clinton and Barack Obama.

GERALDINE FERRARO (D), FORMER VICE PRESIDENTIAL CANDIDATE: Every time somebody opens their mouth, Bill Clinton -- racist. Governor Rendell -- racist. Gerry Ferraro -- all of us have records of anything but racist.

MALVEAUX: But the former vice presidential nominee, Geraldine Ferraro, who's a big time fundraiser and financial adviser for the Clinton campaign, is in the middle of the racial controversy.

It began with comments she made to a California newspaper, saying: "If Obama was a white man, he would not be in this position. And if he was a woman, he would not be in this position. He happens to be very lucky to be who he is and the country is caught up in the concept."

Barack Obama dismissed Ferraro's comments as absurd.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Her comments were ridiculous. The notion that it is a great advantage to me to be an African-American named Barack Obama and pursue the presidency, I think, is not -- not a view that has been commonly shared.


MALVEAUX: And, Wolf, she insists that her words were taken out of context, that she was talking about the historic aspect of this, to have Barack Obama in the situation in which he is, as it was historic for her to be a vice presidential nominee.

I asked her if she was sorry, if there was anything to regret. She said absolutely not here. She said she and Hillary Clinton have been friends for quite some time, that nobody pressured her or asked her to send this letter or to step down from this Finance Committee.

She also thought it was quite unusual -- peculiar that they were asking her -- calling for her to step aside here. She says it really isn't a position -- she's not part of the staff or anything like that. She's raised $125,000 for the Clinton campaign. She says she'll continue to do that.

She says she also understands why it was that Hillary Clinton distanced herself from her remarks, that she understood how this all worked and that they've been friends for a long time here. But, clearly, she is quite angry with the Obama camp. She puts the blame squarely on them. But she sees the political handwriting on the wall and decided it wasn't worth it, that she is disassociating herself, at least from that Finance Committee -- Wolf.

BLITZER: Suzanne Malveaux doing some good reporting for us, as usual. Suzanne, thanks very much.

Let's go back to Jack. He's got "The Cafferty File." You've known Geraldine Ferraro since she was a Congresswoman from Queens.

JACK CAFFERTY, CNN ANCHOR: A long time. I used to interview her on a local news program I did here in New York years ago.

BLITZER: We remember that, "Live At 5."

CAFFERTY: "Live At 5."

It appears that Florida's Democrats have hit a roadblock when it comes to finding a way to redo that primary election down there. Democratic members of Florida's Congressional delegation are saying they unanimously oppose holding a vote by mail, although they say they are committed to working with the DNC, the two candidates and other party leaders, they say they are against a mail-in campaign or any redo of any kind. That's a quote -- and it doesn't sound like it leaves a lot of wiggle room. At issue here, of course, is whether the voters in Florida, as well as Michigan, will get another chance to weigh in on the race between Hillary Clinton and Barack Obama. The party stripped both states of their delegates after they moved up their primaries in violation of the party rules.

Obama is also expressing concerns about a possible mail-in vote in terms of "making sure that whatever we do is fair and that votes are properly counted and make the logistics make sense." Clinton won those two primaries, but that was after all the candidates agreed not to campaign in the contests and Obama's name wasn't even on the ballot in Michigan.

So here's the question: Should the delegates from Florida and Michigan be seated at the convention without redoing the elections in those two states?

You can go to and post a comment on my blog there.

BLITZER: Jack, thanks very much.

Jack Cafferty will be back shortly.

We're going to have a lot more on the war of words between some high profile Democrats, including Geraldine Ferraro. She's leaving the Clinton campaign. You just heard Suzanne Malveaux break the story.

Plus, coming up, my one-on-one interview with Barack Obama -- what he thinks about the Florida primary, negative campaigning, whether the race is hurting the Democratic Party. And what about that dream ticket with Hillary Clinton?

And dozens of planes from one of the country's biggest airlines grounded. The decision coming after a CNN investigation by our own Drew Griffin about inspection problems at the airline. We're going to have an update.

Stick around. You're in THE SITUATION ROOM.


BLITZER: Let's turn to the presidential campaign once again. And we have a new delegate count in the Democratic race for the White House, updated with new numbers from the Mississippi primary and the Texas caucuses.

Barack Obama has more overall delegates -- 1,611 to Hillary Clinton's 1,480. Clinton is slightly ahead in the super-delegate count. She has 237 to Obama's 207. That gap, though, has been narrowing. The magic number to clinch the nomination, 2,025 -- a number unlikely either candidate will reach through primaries and caucuses alone simply by the pledged delegates. Either one is going to almost certainly need super-delegates to get over the magic number.

I spoke with Senator Obama about his contest with Hillary Clinton and whether the sometimes heated rhetoric could come back to haunt Democrats.


BLITZER: Are you worried, Senator, that this race between you and Hillary Clinton is getting too nasty and whoever gets the nomination could have problems down the road unifying the party going into the convention and going beyond to the general election against John McCain?

OBAMA: Well, look, Wolf, I think if you watch out we've conducted our campaign, we've been very measured in terms of how we talk about Senator Clinton. Obviously, I think I would be the better nominee and I've been very clear about why I think I could be somebody who brings about change by bringing people together and overcoming the special interests.

But I've been careful to say that I think Senator Clinton is a capable person and that should she win the nomination, obviously, I would support her. You know, I'm not sure that we've been getting that same approach from the Clinton campaign, but I'm confident that once we decide on a nominee and we go through the convention that, in fact, the party is going to be unified because people recognize we've got to have a significant shift from the Bush policies of the last seven, eight years. And John McCain represents a continuation of George Bush's policies, that have wrecked the economy and have put our foreign policy on a very uneven footing.

BLITZER: You're ahead in the pledged delegates. You're ahead in the total delegate count right now, at least by our estimate -- I think by all the major news organizations' estimates. If that were to continue, would you consider her, Hillary Clinton, as a possible vice presidential running mate?

OBAMA: Well, as I've said, Wolf, I think it's really premature for any of us to be talking about V.P. nominations when we're in the midst of a really important contest. And what I think the voters are still looking for is who is going to be the best advocate for them.

Who is going to help them stay in their homes if they're threatened for foreclosure, who is going to help make college more affordable, who can overcome some of the toxic atmosphere that's existed in Washington over the last eight years. And that has been our continuous message.

If I'm the nominee, then I'm going to go through the process of figuring out what vice president would be most able to continue with those same themes if something happened to me, who could lead the country, who could serve as commander-in-chief. And, obviously, Senator Clinton is a very capable person. And as I've said before, she'd be on anybody's short list.

BLITZER: Florida and Michigan -- they're getting close, we're hearing, to getting some sort of arrangement to have a makeover, to redo their primary. I wonder what you want to -- what you would you want to see the Democrats in Florida and Michigan do. OBAMA: Well, I think all of us are interested in making sure that they are seated in some way that doesn't advantage one candidate or another too much. And what we've tried to do throughout the process is just follow the rules that the DNC gave us.

They said that Michigan and Florida wouldn't count. My name wasn't even on the ballot in Michigan and I didn't campaign at all in Florida. And so what we believe is that there should be some way of arriving at a fair settlement that respects the fact that there were rules in place, but also make sure that the Michigan and Florida voters are seated.

I'm not going to spend too much time designing what the solution is. I think that whatever the DNC decides, we will abide by.

BLITZER: Including what they're calling a mail-in primary in Florida, for example -- not a real typical primary, not caucuses, but voters out there would get the ballots in the mail and they would mail them back?

Would that be something that would be appropriate?

OBAMA: Well, I think there's some concerns in terms of making sure that whatever we do is fair and that votes are properly counted and the logistics make sense. So, you know, there are a bunch of conversations between the various campaigns and the Democratic National Committee. I'm sure it will get sorted out.


BLITZER: Barack Obama speaking with me.

Meanwhile, on Capitol Hill today, some hearings and meetings were interrupted. Just ahead, what happened that had Washington's most powerful getting ready to evacuate?

Plus, was he pushed out or did he quit? Tonight, the White House reacting to the resignation of the U.S. military commander for the Middle East, Admiral William Fallon. You're going to hear what the administration says happened.

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


BLITZER: Carol Costello is monitoring some other important stories incoming into THE SITUATION ROOM right now.

Carol, what's going on?

CAROL COSTELLO, CNN CORRESPONDENT: Well, Wolf, a 21-year-old Durham man is now charged in the death of a University of North Carolina senior. Demario James Atwater stood in court in shackles as he was charged with first degree murder.

Police say they're still searching for another suspect. Eve Carson was a biology and political science major and the student body president at UNC. Her body was found lying in a street a week ago. She had been shot to death.

A bit of a scare today as a private plane flew within six miles of the U.S. Capitol. Some buildings on Capitol Hill were evacuated, but officials say the Cessna posed no threat, even as it flew into restricted air space. F-16 jets and Coast Guard helicopters were scrambled as a precautionary measure.

Dallas police say it is a miracle -- and you might agree. A 27- year-old woman threw her young struggling sons from a freeway overpass and then she jumped into morning rush hour traffic. Police believe the woman and her eight-year-old son were hit by cars after the 22-foot fall. All three of them survived and are in area hospitals tonight. Police say the woman could face two counts of attempted capital murder.

And move over Flipper, there is a new dolphin hero out there. This is Moko, a frequent visitor Mahia Beach in New Zealand. Whale activists here struggled for an hour -- an hour-and-a-half to rescue a beached whale and her calf. They were ready to give up when Moko surfaced, the dolphin. The dolphin swam to the whales and somehow convinced them to glide back into the ocean and to safety.

So there you go -- Moko, the new dolphin hero -- Wolf.

BLITZER: All right. We've got to love those heroes. Thanks very much, Carol, for that.

The president of a meat company answering to Congress about videotapes that show sick cows being abused at its plant.

Listen to this.


UNIDENTIFIED MALE: The conduct appearing in the video that I saw is sickening. That is not the company I know. I agree with everyone who is shocked and horrified at the video.


BLITZER: The question the House committee wants to know, did the cattle make it into the American food supply? The answer and the tough talking around it -- that's still ahead.

And Hillary Clinton has some strong feelings about two states that have been counted out so far. You're going to find out what she's now saying about Florida and Michigan.

Lots of news happening today here in THE SITUATION ROOM.


BLITZER: To our viewers, you're in THE SITUATION ROOM. Happening now, get ready to pay even more at the gas pump. Crude oil rocketed to a record high today -- get this -- more than $110 a barrel, before settling in at $109.92. Analysts say oil is being hoarded against as a hedge against the weakening dollar and inflation.

The United States attorney general, Michael Mukasey, plans to go before the U.S. Supreme Court himself. He wants to argue for the reinstatement of an Al Qaeda operative's prison sentence. An appeals court threw out a 22-year sentence given to the man convicted of the millennium plot to bomb Los Angeles International Airport.

And President Bush is stepping up efforts to win Congressional support for a free trade pact with Colombia. Mr. Bush says it would help to halt the influence of Venezuela's anti-U.S. president, Hugo Chavez.

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

Just about everyone wants to solve the standoff over the Florida and Michigan Democratic primaries. But there's a big to-do over a possible do-over, with the candidates themselves somewhat at odds.

Let's walk over to Deborah Feyerick. She's watching this story for us.

What's going on -- Deb?

DEBORAH FEYERICK, CNN CORRESPONDENT: Well, Wolf, some very strong language coming from Hillary Rodham Clinton on fixing the so- called Florida and Michigan primary problem.


SEN. HILLARY RODHAM CLINTON (D), PRESIDENTIAL CANDIDATE: The nearly two-and-a-half million Americans in those two states who participated in the primary election are in danger of being excluded from our democratic process and I think that's wrong.

FEYERICK (voice-over): The two states broke national Democratic Party rules by moving up their primaries to January. The contests took place, but none of the major candidates campaigned in Florida and Michigan. And the state's delegations are banned from the party's convention this summer.

CLINTON: The results of those primaries were fair and should be honored.

FEYERICK: Clinton won those primaries, but the idea of counting the January results doesn't fly with the Obama campaign.

OBAMA: My name wasn't even on the ballot in Michigan and I didn't campaign at all in Florida.

FEYERICK: With the battle for the Democratic nomination so close and with November victories in both states crucial for the Democrats to retake the White House, there's a drive for Florida and Michigan to vote again.

OBAMA: There should be some way of arriving at a fair settlement that respects the fact that there were rules in place but also makes sure that the Michigan and Florida voters are seated.

FEYERICK: But getting the states, the national party and the campaigns to agree on what kind of contests to hold won't be easy. The Obama campaign says it will follow the national party's lead. But Camp Clinton wants the two campaigns to try to figure it out.

CLINTON: And I hope that Senator Obama's campaign will join me in working to make that happen.


FEYERICK: And there's another big question -- who foots the bill? Holding a do-over could cost as much as $30 million. Some top Florida Democrats are pushing for a mail-in primary and that certainly would be a lot cheaper. But the plan is not flying with other key Florida residents.

As for the Obama campaign, it also has problems with mail-in ballots, citing security concerns -- Wolf.

BLITZER: Thanks Deb, very much. Deb Feyerick reporting.

Let's get to two top strategists to talk about this and more. Our CNN political contributor, Paul Begala, is a Clinton supporter. Jamal Simmons is backing Barack Obama.

Paul, how is this going to be resolved?

PAUL BEGALA, CNN POLITICAL CONTRIBUTOR, CLINTON SUPPORTER: Well you know I think Hillary did a tactical thing but I think she kind of wins the day today because she looks like a leader.

I thought your interview with Barack was a good interview but he seemed very passive. Well, I'll do whatever Howard Dean says. Well, I respect Governor Dean. He's my party's chairman but the two candidates ought to find a way to work this out. The way to work it out is a revote.

I did notice last night when you interviewed him, Senator Obama said there are concerns with security, with mail-in ballots. I thought that seems reasonable. The Clinton campaign then e-mailed me though, and said in fact, Senator Obama is the co-sponsor of legislation to expand mail-in ballots. They say it's senate bill 979. So they're kind of getting into the details here.

The problem is they got to have a revote. It would be good for the Democrats. I don't think they just should just seat them because Hillary won. They shouldn't exclude them because that favors Barack. They should have a revote. It's nothing but good for the Democrats. It will create more voters, more volunteers, more contributors, more energy, more excitement.

BLITZER: What about it, Jamal?

JAMAL SIMMONS, DEMOCRATIC STRATEGIST, OBAMA SUPPORTER: I actually disagree Paul on this front and you know I haven't talked to the Obama campaign much about this. They do say it will be, they want to follow whatever the DNC wants.

I actually think it's a bad idea to seat them or to have a revote. It's a good idea to seat them, 50/50 so it doesn't matter, or maybe seat Michigan 50/50 and Florida, 51/49 since both candidates were on the ballot in Florida but Barack Obama wasn't on in Michigan.

The problem here is that you've got two states that violated the rules and now, not only will they be restored, but they would also then be rewarded at the end by being -- playing more of a role in who gets to be the nominee than they would have played otherwise.

I don't know. When I was growing up, I'd get on punishment, I didn't get an ice cream party at the end of my punishment when it was over when I made a mistake. So I think that's something for the DNC which has to be a rule-making body that can enforce those rules.

BLITZER: It would be ironic, Paul and I think you would agree, the two states that were punished for breaking the rules could wind up having the greatest influence potentially in who's going to be the Democratic presidential nominee.

BEGALA: You know it might but the bible says the first shall be last and the last shall be first. I think one of the problems with Jamal's position, I love him like a brother, but it's punishing voters.

OK -- there's a bunch of party big shots and a lot of Republicans in the legislature in Florida who pushed this stuff through and the voters are going to suffer and the nominee will suffer. See, the thing is, this is not about just who goes to convention which is interesting.

It's about who carries Michigan which John Kerry only won by three points. It's about who carries Florida, which Al Gore carried and then the Supreme Court stole from him. These are two of the most important states in the union and wherever these two candidates go, you know Hillary and Barack are remarkable. They're really gifted politicians. Wherever they go, they generate so much more activity, it helps put these states in play.

One of the points the Obama campaign makes is they run strong in places like Wyoming where Democrats never win. Maybe that moves those kinds of states into contested territory. Certainly he should be able to run strong in Michigan and Florida.

BLITZER: Jamal, what do you make of Geraldine Ferraro and her controversial comments and her decision today to step back from a formal fundraising position for the Clinton campaign?

SIMMONS: You know, Wolf, this is one of those things that's a little bit painful. You know my very first presidential campaign was walking door-to-door for Gerry Ferraro and Walter Mondale when I was 13-years-old and they were running for president and vice president. So I think fondly about them but I've got to tell you, both as an African American and as someone who sort of has an unusual first name, it's not necessarily an advantage when you get into a tough competition.

America is a country where everybody has an extraordinary amount of opportunity and both Barack Obama and Hillary Clinton are two people who are examples of how the doors of opportunity have been opened in our country. And any effort by anybody to marginalize not only the efforts of Barack Obama and Hillary Clinton but also to marginalize all the people who are looking beyond race and looking beyond Barack Obama's name and deciding they want to cast their vote for him in places like Wyoming and Idaho and places where there are no African Americans, I just think that it's sad that's where we are in this debate.

BLITZER: There are a few African Americans, but not many.

Paul, what do you think? Do you agree with Jamal?

BEGALA: Yes. Jamal said it far better than I could. It's always regrettable when somebody brings race into it and particularly heartbreaking when it's someone who herself has been such a historic path breaker for previously disadvantaged communities. It's really a shame.

You know, as if the viewers at home can't tell, I'm a white guy. I don't feel like my people have it harder, OK. We're down to 490 of the Fortune 500 CEOs, every single one of the 43 presidents that we've had, the overwhelming majority, House, Senate, Supreme Court.

I mean it's just a ridiculous notion, frankly, to say Senator Obama has had it easier being a black man in America. I'm not one, Jamal is, I will take him at his word but I've got to tell you, my people are not exactly oppressed in this country.

BLITZER: Well said by both of you guys. Thanks very much. We'll leave it on that agreement for once. We'll have you back soon. Thank you.

It's a story you first saw right here on CNN. There are now new developments in the serious questions that we have been asking about safety inspections at Southwest Airlines.

We are going to have details of drastic action the airline is taking right now. Our Drew Griffin, who broke this story, standing by.

Plus, the wife of a disgraced politician, we're going to have other details of the surprising role Silda Spitzer played behind the scenes in her husband's resignation drama.

Lots more coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK) BLITZER: There are now major new developments in a story that sent a chill through many airline passengers. Southwest Airlines is grounding dozens of planes. Drew Griffin of CNN Special Investigations Unit first broke the story right here.

Drew, what is going on? There are new and significant developments.

DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT: Yes, pretty serious stuff here, Wolf. We're learning that the top leadership of Southwest was meeting with the FAA's acting director today trying to get a handle on what seems to be a growing problem at Southwest. The company actually grounding 44 of its planes last night after finding they, too, have missed mandatory safety inspections.


GRIFFIN: It was done out of an abundance of caution, says the airline. Forty-four of its Boeing 737s pulled for inspections. While not all were scheduled to fly Wednesday, the airline says there were minor interruptions and a few cancellations of flights.

The unexpected grounding comes as the airline is reviewing its maintenance inspections after being hit with the largest fine ever levied on an airline, $10.2 million.

Last week, a CNN SIU investigation revealed the airline had knowingly flown thousands of flights and hundreds of thousands of passengers on aircraft that missed mandatory inspections. The FAA also removed one of its supervisors after he permitted Southwest to miss the inspection deadlines.

SCOTT BLOCH, FEDERAL OFFICE OF SPECIAL COUNSEL: We believe there is a significant potential that the FAA is allowing these practices, this lax practice of not complying with air worthiness directives, to occur nationally.

GRIFFIN: In addition to the instant grounding of planes, Southwest released a statement saying it has placed three employees on administrative leave, hired an outside consultant to review Southwest maintenance and is cooperating with the FAA to investigate and address any deficiencies in its maintenance controls.


GRIFFIN: We have been talking to Southwest all afternoon. They say they hope to have these new inspections done by today.

Meanwhile though, the heat being ratcheted up on Capitol Hill. The chairman of the house transportation committee saying the fact that even more planes are being found out of compliance raises serious questions about whether the FAA adequately followed up on this same type of problems that were found at Southwest, Wolf, a year ago.

BLITZER: Excellent work, Drew. Thanks very much. The head of a slaughterhouse involved in the nation's largest meat recall today was forced to watch that truly shocking undercover video exposing abuse of sick cattle. It happened in Washington on Capitol Hill where a House panel demanded to know whether any meat from those cows actually ended up in the nation's food supply.

The story you're about to see has some very graphic video. Let's turn to CNN's Jeanne Meserve. She's watching this story for us.

Jeanne, give us the latest. What has happened specifically to that slaughterhouse operator?

JEANNE MESERVE, CNN CORRESPONDENT: Well, Wolf, the president of Westland/Hallmark Meat said he was shocked, horrified and sickened by the undercover humane society video showing cruel treatment of animals at his plant. He also said other things he probably wishes he had not.


UNIDENTIFIED MALE: The testimony you're about to give in this matter is the truth, the whole truth and nothing but the truth?


MESERVE: Under oath, Steven Mendell of Westland/Hallmark Meat said the downer cows seen in the videos, animals too sick or weak to stand on their own, were not put in the food supply and posed no health threat.

MENDELL: The cows shown in the video could not walk, were designated to be euthanized and were not put into commerce.

MESERVE: But Mendell had to eat his words when he was shown two videos of downed cattle being sent to slaughter.

UNIDENTIFIED MALE: Two workers are holding her from behind, twisting her tail, and they continue to shock her as they lead her to the kill box.

REP. BART STUPAK (D), MICHIGAN: So based upon what we saw, it would be logical to conclude then at least two downer cows went into the nation's food supply as we did not see a vet make a physical inspection before it was put in the kill box.

MENDELL: That would be logical, yes, sir.

STUPAK: They were illegally slaughtered underneath the rules and regulations of the United States.

MENDELL: Correct.


MESERVE: Mendell claimed he had not seen these pieces of video before, although they have been posted on the humane society website for weeks. Some committee members found that hard to believe, since the videos triggered the largest meat recall in U.S. history, and shut down Mendell's business.


MESERVE: Mendell testified his plant repeatedly passed Department of Agriculture and independent audits, raising broader questions about the safety of the U.S. food supply -- Wolf.

BLITZER: Jeanne Meserve, thanks for that; Jeanne Meserve reporting.

A top U.S. military commander stepping down. It's raising new questions, though, about whether the Bush administration is open to military advice that may not necessarily want to hear. You're going to find out what the white house is saying today.

Plus, we'll show you why she urged New York's disgraced governor not to resign. His wife's surprising role in the drama.

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


BLITZER: The sex scandal that's forcing New York's Governor Eliot Spitzer to resign is revealing surprising attitudes about prostitution. Some very prominent people are saying it's no big deal, an attitude many other people find very troubling.

Let's go to Carol Costello. She's watching this story for us.

What are you picking up, Carol?

COSTELLO: Well, Harvard law professor Alan Dershowitz just told you Wolf in the last hour to send someone to jail for buying a prostitute is preposterous. It makes you wonder if Eliot Spitzer had not touted himself as Mr. Straight Arrow, would he have resigned?


COSTELLO: Most agree Eliot Spitzer, a man who touted himself as Mr. Law and Order, is guilty of hypocrisy but of possibly violating federal law to buy sex with a woman? Not so much.

ED KOCH (D), FORMER NYC MAYOR: I don't perceive prostitution to be a terrible crime. I don't think it should be a crime at all.

PROF. ALAN DERSHOWITZ, HARVARD LAW SCHOOL: This is the personification of a victimless crime. A 30 something-year-old prostitute making $5,000 an hour. That's not a victim.

JAMES CARVILLE, DEMOCRATIC STRATEGIST: If this is what this man did and it's all he did, then it's a shame, it's a tragedy for his family.

COSTELLO: A shame, but perhaps no big crime. For organizations that fight against prostitution, that is disturbing.

TAINA BIEN-AIME, EXEC. DIRECTOR EQUALITY NOW: Purchasing a human being should not be allowed in any society, particularly when you're talking about purchasing a woman. This is another form of gender apartheid.

COSTELLO: Ironically Bien-Aime says Eliot Spitzer at one time understood that, helping New York to pass one of the few laws in the country increasing the penalties for men who buy sex that he, like so many others, allegedly decided to break the very law he helped pass is painful.

Others say it's no surprise. Jody Gibson is a former madam. She's written a book and yes, politicians were among her best clients.

JODY GIBSON, AUTHOR: The politicians basically it's a convenience factor and sometimes they just want what they want when they want it, much like ordering a pizza.

COSTELLO: And it's like that until they get caught, like former Bill Clinton adviser Dick Morris, who resigned after a tabloid photographed him with a prostitute. And former Bush administration official Randall Tobias, who resigned after his phone number turned up on a D.C. madam's client list. Or Jerry Springer, who was caught buying sex while he served on Cincinnati's city council. He resigned but used his illicit liaison in an unsuccessful run for Ohio governor.

JERRY SPRINGER, TALK SHOW HOST: Nine years ago I spent time with a woman I shouldn't have. I paid her with a check.

COSTELLO: Many of these disgraced men, like Jerry Springer, have danced their ways to other successful careers. As Eliot Spitzer is hoping to do. Great says Bien-Aime, but if he's guilty of buying sex, he ought to pay.

BIEN-AIME: Should these allegations be true, he should be held fully accountable.


COSTELLO: Still, it is rare that Johns, so to speak, are prosecuted. It's usually the prostitute who pays and that has the madam I talked with, Jody Gibson, angry. She doesn't believe prostitution is wrong. She wishes it were made legal and she says there's nothing exploitive about it. Wolf?

BLITZER: Thanks very much for that.

Let's go back to Jack. He's got "The Cafferty File."

CAFFERTY: The question is should delegates from Florida and Michigan be seated without redoing the elections in those two states. The Democratic Congressional Delegation in Florida says it's opposed to any kind of redo.

We got this from Lee in Jacksonville: "How can anyone take the governors of Michigan and Florida seriously? Does anyone really believe that they would be leading the charge for a redo if it didn't further their agendas? This has nothing to do with the voters and everything to do with the Democratic establishment supporters of Hillary Clinton, that would be Michigan's Grenholm, combined with the Republican supporters of McCain, Florida's Governor Krist, who prefer McCain's chances in a presidential run against Hillary."

Roger in Dallas says: "In a year when the Democrats could literally have put up a tree stump and been assured of victory, their petty, misguided egocentric personalities are going to destroy any chance we Democrats have of reclaiming the presidency. Michigan and Florida should not count. Those were the rules set forth which both campaigns agreed to. End of story."

Charlie in Chicago: "Here we go again. I don't like the rules so let's change them to fit the needs of another Clinton. This is almost as good as what exactly is your definition of "is." The delegates should in no way be seated and for that matter, should not be discussed every night on CNN and the other stations. Cut the crap and get to the agenda, immigration, the economy and saving the middle class of America."

R.J. in Michigan: "The first vote should count. Delegates ought to be seated. The dumb, silly, ignorant, short-sighted internal politics of the Democratic Party should not negate my vote as a resident. Democrats need to remember every vote counts or else Michigan voters may choose not to vote for either candidate."

On the other hand, Melanie in Florida writes: "My family and a friend, that's four people, didn't bother to vote for Obama because we knew our votes wouldn't count. Imagine how many more are in that position. So either it's not counted or we get the right to vote."

Frank in Florida: "You kidding me? It can't be Florida in the news again regarding voting. The state simply cannot get it straight when it comes to voting. Remember the hanging Chads? See you again in four years."

BLITZER: Thanks, Jack. See you in a few moments.

$110 a barrel for oil. That's a new record high. How high will it go? Lou Dobbs standing by to talk about it.

Plus, sides of the Eliot Spitzer scandal you haven't seen, pop culture fallout and angry voter reaction. You got another hour coming up right here in THE SITUATION ROOM.


BLITZER: The abrupt resignation of the head of the U.S. military forces in the Middle East is prompting some serious criticism that the Bush administration simply won't tolerate dissent.

Let's go to our senior Pentagon correspondent Jamie McIntyre. He's watching this story and the fallout.

What is the latest over Admiral Fallon, Jamie?

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: That's really the question is will Admiral Fallon's less than voluntary retirement have a chilling effect on other military officers who might not agree with the president? The white house says it shouldn't.


MCINTYRE: Even as pentagon sources say Admiral Fox Fallon was encouraged to step aside for appearing out of step with President Bush, the white house denied it was quashing dissent from its senior military commanders.

DANA PERINO, WHITE HOUSE PRESS SECRETARY: President Bush has always fostered an environment of robust and healthy debate. He's had many people provide independent thoughts that may have dissented from his own views.

MCINTYRE: In fact, Admiral Fallon is far from the only senior adviser who counseled has war with Iran now would be folly. Count among reluctant warriors, Joint Chief's Chairman, Admiral Mike Mullen and their civilian boss, Defense Secretary Robert Gates. But Fallon's problem is he seemed to go one step too far, at times appearing to rule out the military option all together.

In his last television interview before his fall from grace, Fallon told CNN's Barbara Starr he would support the use of force against Iran if diplomacy failed but sounded less than enthusiastic.

ADM. WILLIAM FALLON, U.S. CENTRAL COMMANDER: U.S. policy will be what it is, the president will decide the hour of the day what he wants to do based on the advice he receives from chain of command.

MCINTYRE: Bush administration critics like former Pentagon Official Lawrence Korb, worried that the best military advice is being ignored.

LAWRENCE KORB, CENTER FOR AMERICAN PROGRESS: President Bush keeps saying I listen to my generals. What he's saying is I only listen to the generals that agree with me.

MCINTYRE: The white house says while private criticism is welcome, public dissent is not.

PERINO: When it comes to foreign policy, it's critical that an administration speak with one voice. If there's a perception that they are not speaking with one voice -


MCINTYRE: And Wolf, Admiral Fallon's departure is more than just about Iran. He's also sending President Bush advice about the speed of withdrawal of U.S. troops from Iraq which may be different from the advice of General David Petraeus, the ground commander.

The question is, will Admiral Fallon's views carry any weight after he's gone -- Wolf.

BLITZER: Jamie, thanks very much.

Let me ask that question to Lou Dobbs. He's got a show coming up in an hour.

What do you think about this whole fallout from Admiral Fallon's sudden resignation?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": I think it's unfortunate that one of the most highly respected and highly regarded senior officers in the U.S. military is going out this way.

This looks bad for the Bush administration. But my god, Wolf, we're talking about a war that has been going on five years, that has been conducted by just incompetently over the course of nearly all that period. The general staff of the Pentagon bears great responsibility. The civilian leadership and this president will have much to answer for in history.

BLITZER: You think General Petraeus has improved the situation?

DOBBS: I think there's no question empirically that that is the case. It's interesting that President Bush is reaching directly toward General Petraeus and going over a senior officer, in fact the chairman and the Joint Chiefs of Staff to reach down to General Petraeus. It's not very wise.

BLITZER: And all this happening in a region, the Persian Gulf. You know oil today a barrel $110 a barrel. Give me your quick reaction to that.

DOBBS: Quick reaction, $110 a barrel is a failure of leadership on the part of this country, the leadership in terms of environmental efforts, alterative energy efforts, a failure in terms of our energy policy, our foreign policy and an absolute laughable situation in which President Bush says with Vice President Cheney in the region perhaps he can get oil prices down.

It was OPEC that three days ago told President Bush to go to hell. They'll keep production levels where it is and presumably the prices at these outstandingly high levels.

BLITZER: It was $30 a barrel only a few years ago.

DOBBS: Exactly.

BLITZER: See you in one hour.