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U.S. Weighs Sending Diplomats to Iran; Gunshot Disrupts Sarkozy Send-Off; L.A.'s Hidden Oil Bonanza

Aired June 24, 2008 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: And think the U.S. needs to drill for more oil?
How about under the streets of Los Angeles?

There may be billions, yes, billions of barrels out there.

But can they get it out of the ground?

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

Is President Bush suddenly ready to follow Barack Obama's lead when it comes to talking to Iran?

Iran is a key pillar of the president's axis of evil and he's even made veiled threats of military action. But now there's talk of re-establishing a U.S. diplomatic presence directly in the capital of Tehran. The last time the U.S. had a diplomatic presence there, Americans were taken hostage, held for 444 days of captivity.

Let's go live to our White House Correspondent, Elaine Quijano.

She's working this story for us -- Elaine, what's going on here?

What's the administration attempting to do?

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, first of all, Wolf, the White House insists that this is only an idea right now and that no decision on any kind of diplomatic outpost in Iran has been made.

Now the concept, officials say, would be to allow for more interaction with the Iranian people, not the Iranian government.


QUIJANO (voice-over): Even as the White House ratchets up the diplomatic pressure on Iran, trying to curb its nuclear ambitions, the administration is also considering a proposal to open a diplomatic outpost in that country, according to two senior State Department officials.

White House aides don't deny the possibility is under consideration.

DANA PERINO, WHITE HOUSE PRESS SECRETARY: There might be some ideas floating out there, but there's nothing concrete at the moment.

QUIJANO: The idea, say officials, would be to establish a so- called interest section in Tehran similar to the one in Havana, Cuba -- a de facto embassy that would allow the United States to keep direct communication with the government to a minimum while still enabling the U.S. to deal with students, dissidents and others.

PERINO: Our concern is not with the Iranian people. We respect them. It's their regime that is continuing to isolate them from the international community.

QUIJANO: The United States has not had a diplomatic presence in Iran since the 1979 takeover of the American embassy in Tehran, while in Washington, Iran maintains its own interest section at the embassy of Pakistan.


QUIJANO: Now, officials say the U.S. has not yet approached the Iranian government about a possible diplomatic outpost and they say that any decision to do so, Wolf, is nowhere near imminent -- Wolf.

BLITZER: Well, let's see if there are U.S. diplomats walking around the streets of Tehran and Iranian diplomats walking around the streets of Washington.

Elaine, we'll check back with you.

That would be a significant development.

The U.S. military says there's an Iranian connection to a bold and bloody bombing in Baghdad's Sadr City. Among the dead, four Americans, two soldiers and two civilians, one each from the State Department and the Defense Department. The blast struck a district advisory council meeting in a Shiite neighborhood and a deputy council head was one of the six Iraqis killed. A U.S. military spokesman is blaming so-called special groups -- militants trained by Iran. The attack comes just a day after the Pentagon reported a sharp decrease in violence in Iraq.

So far this month, by the way, there have been 22 troop deaths in Iraq for the Americans. Two hundred American service members have died this year in Iraq -- 4,106 have died in Iraq since the war began.

Two presidents and a prime minister at an airport departure ceremony when suddenly a gunshot rings out. That was the alarming scene as the French president, Nicolas Sarkozy, and his wife, were leaving Israel today.

Our State Department correspondent, Zain Verjee, is watching this story for us -- Zain, what happened?

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, it was a dramatic farewell, but it wasn't one the French president was expecting.


VERJEE (voice-over): The French president didn't hear the gunshots over the band playing at an airport ceremony in Israel. Nicolas Sarkozy was about to board his plane when a dramatic incident happened at Ben-Gurion Airport. A policeman shot and killed himself several hundred yards from the ceremony. The gunshot sparked fears of an assassination attempt.

Security forces interrupted the handshakes and went into emergency mode, scrambling world leaders in different directions. They whisked Sarkozy up the plane, as his wife, Carla Bruni, sprinted up the stairs ahead of him. President Shimon Perez and Prime Minister Ehud Olmert were rushed to their cars. It was all over in minutes.

After the all clear, Israeli leaders went into their guest's plane to explain.


VERJEE: Sarkozy, Wolf, was wrapping up a three day visit in the region, meeting with both Israeli and Palestinian leaders -- Wolf.

BLITZER: What are Israeli police officers saying about all of this, Zain?

VERJEE: Well, they say that they're investigating. They say that they're looking into whether or not this shooting was, in fact, a suicide or whether that police officer accidentally discharged his weapon. They're also denying reports that this was an assassination attempt and they're saying that none of those leaders there on the tarmac were ever in any danger -- Wolf.

BLITZER: All right. Zain is over at the State Department watching.

If you get some more information, Zain, we'll check back. You'll inform us. We'll check back with you soon.

Let's check in with Jack once again right now for "The Cafferty File."

That's pretty alarming pictures. You see those Secret Service guys rushing up those stairs of that plane to get the French president and his wife on board.

JACK CAFFERTY, CNN ANCHOR: Well, Israeli security is, arguably, the best in the world, perhaps, because of the many years of necessity of them being that way. And to suddenly have a gunshot ring out while you've got, you know, the French president standing there in plain sight, I imagine there were some -- some nervous heartbeats in that -- in that Israeli security unit.

When former Federal Reserve Chairman Alan Greenspan speaks, people still listen carefully. He says the United States is now on the brink of a recession. There's more. Greenspan warns the chances of a recession happening are now more than 50 percent and he says a quick recovery is unlikely. Greenspan says there are still very considerable structural problems in our financial system and that it's going to be "very difficult."

Americans seem to be on the same page as Greenspan. The Conference Board, which is a private business research group, reported today that consumer confidence has dropped to an all-time low -- 50.4 in June, a significant decline from the previous month. It's because -- well, there's a lot of reasons. People dealing with tough situations -- everything from falling home values to tight credit to rising prices for everything from food to energy, especially gas prices. Throw in rising unemployment, inflation, a loss of jobs, the decline in the value of the dollar. You get the idea.

The national average for a gallon of gasoline is still above four bucks. There probably won't be much relief anytime soon there.

Energy experts say that despite all the squawking from lawmakers, don't expect them to make any decisions that will cut gas prices because Congress can't do much about the price of oil. The price of oil is rising, in large part, because of worldwide demand increases in places like China and India. Nevertheless, the candidates continue to babble on about gas prices because polls show that energy, including gas prices, is now tied with the economy as the top issue on voters' minds.

So here's our question: Do you agree with Alan Greenspan that the U.S. is on the brink of a recession or are we already there?

Go to You can post a comment on my blog -- Wolf.

BLITZER: See you in a few moments, Jack.

Osama bin Laden -- is he entitled to any rights if and when he's captured?


MADELEINE ALBRIGHT, FORMER SECRETARY OF STATE, PRINCIPAL, THE ALBRIGHT GROUP: I think we have to see under what circumstances he's captured. There's a pretty good case against him.


BLITZER: We're going to talk about terror, the race for the White House and much more with the former secretary of state, Madeleine Albright, right here in THE SITUATION ROOM.

Also, her former boss, the former president, Bill Clinton, is finally speaking out about Barack Obama for the first time since he clinched the nomination.

Plus, the wedding -- the wedding where things weren't at all what they appeared to be. You're going to find out why it could now lead to dramatic charges and changes.

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


BLITZER: A massive oil reserve hidden in plain sight under the country's second largest city, Los Angeles. But getting at it is the hard part.

Let's go to Ted Rowlands.

He's joining us now for this story. This story involving Los Angeles and oil.

What's going on -- Ted?

TED ROWLANDS, CNN CORRESPONDENT: Yes, Wolf, you don't think about it, but we're in the heart of Los Angeles now and the pumps are pumping away here in the shadow of gridlock on the freeways and in urban area, houses off in the distance. There is an incredible amount of oil in this state and companies are going to incredible lengths to try to bring it to the surface.


ROWLANDS (voice-over): Driving along Pico Boulevard in Los Angeles, you wouldn't notice, but inside that building with the tower, there's a working oil drill helping to produce more than 900 barrels of oil a day. Take a look at this building from the street. Now look at it from above.

Across Los Angeles, oil production blends into urban life -- some of it hidden, some of it out in the open. It's in neighborhoods, near baseball fields. Even Beverly Hills High School has oil pumping on campus, disguised as a work of heart.

IRAJ ERSHAGHI, UNIVERSITY OF SOUTHERN CALIFORNIA: More than two- thirds of the state is underground.

ROWLANDS: Dr. Iraj Ershaghi is the director of petroleum engineering at USC. He estimates there's more than nine billion barrels of oil still to be had in the Los Angeles Basin -- a real opportunity to reduce imports, which he says should not be lost.

ERSHAGHI: It took millions of years to cook that stuff underground and you can't just walk away from it.

ROWLANDS: Maps show a significant part of the Los Angeles Basin is rich in oil. But with so many people living here, getting to it without disrupting lives or the environment requires facilities like the one on Pico. Here, an electric, not diesel drill, does the work. It's capable of going thousands of feet down and up to a mile in any direction.

GREG BROWN, BREITBURN ENERGY PARTNERS: The technology is here to do this sort of a facility in ways that are environmentally very sensitive.

ROWLANDS: While many people are worried about more drilling, it's coming. More than 4,000 applications have been filed already this year for new wells or opening old ones. That's up from a total of 3,000 last year. Oil companies say with more wells, imports go down, tax revenues and jobs go up. And the companies promise not to disturb the neighborhood.


ROWLANDS: Currently, California oil reserves provide about 60 percent of the oil used in the state. The push now is for that workload to increase, pull out more reserves here and rely less on foreign imports in the State of California. And, of course, with the price per barrel, oil companies are 100 percent behind that idea -- Wolf.

BLITZER: Like a lot of people, I've driven on Pico. I've seen that building. And it's amazing what is going on in parts of L.A. Ted.

Good work.


BLITZER: Excellent story, with new information seen here in THE SITUATION ROOM.

By the way, there are also vast oil reserves off the Southern California coast, as a lot of you know. John McCain wants to end the ban on new offshore drilling -- a move opposed by Governor Arnold Schwarzenegger, who himself happens to be a McCain supporter.

But another big oil state governor is with McCain when it comes to offshore drilling. I talked about that and more with the Texas governor, Rick Perry, and had him answer I-Report questions from our viewers.


BLITZER: Here's a question from Ali Maynard (ph). Turn around, you can see her, in -- from Connecticut. She describes herself as politically Independent, but leaning toward Obama.

Here's her question.

ALI MAYNARD, I-REPORTER: If Congress does not lift the moratorium, what alternative realistic solutions are you proposing for struggling Americans and your constituents in the great state of Texas?

BLITZER: The moratorium on offshore oil drilling.


BLITZER: What do you think? PERRY: Well, obviously, we believe in drilling offshore in the State of Texas. We think the best thing we can do for the consuming public is to drive down the cost of gasoline.

BLITZER: But if Congress doesn't authorize it and lift the moratorium, what do you do?

PERRY: We still have the ability to drill offshore in Texas and we do. We drill in...

BLITZER: So it doesn't make any difference what Washington does.

PERRY: Well, it matters a great deal what Washington does. I think it's wise for us to use the technology that we have today to explore in places that have historically been off -- out of bounds, if you will. I think we ought to be drilling a substantial number of places, exploring in a lot of places in America.

BLITZER: Because the governor of California totally disagrees with you...

PERRY: I understand.

BLITZER: Governor Schwarzenegger hates this idea. He's worried about those beaches along California's coast.

PERRY: Right. Well, we've got some beautiful beaches -- about 600 miles of beach in the State of Texas. And the bottom line is we're able to do both -- both explore offshore and keep those beaches in pretty pristine shape so.

BLITZER: So you think he's wrong?

PERRY: I do. I think he -- from the standpoint of the consuming public, the people of California, that we can drill and we can drill sensibly and environmentally appropriately on all of our shores, whether it's California or whether it's the Eastern Seaboard or whether it's Florida.

BLITZER: Here's another question from Dan Evans (ph) of Pittsburgh. He describes himself as politically Independent, but an Obama volunteer.

DAN EVANS, I-REPORTER: Governor Perry, would you still be in favor of offshore drilling if the revenues from such an endeavor were nationalized, meaning that they became the property of the United States of America, rather than one or another oil company?

BLITZER: What do you think?

PERRY: Well, I think we have a system that works pretty well today. As a matter of fact, this issue isn't about an oil company making profits, this is about having a supply of energy for America where we are as independent as we can be from foreign ownership of oil. That's what the real issue is here. And I think trying to make it be an issue of whether an oil company is controlling the profits or whether they're even making a profit or not is dodging the real question of independence.

BLITZER: Because, as you know, there's a lot of anger that Exxon Mobil and Chevron, they're making these huge record profits.

PERRY: You know where the anger ought to be, Wolf...

BLITZER: And Senator Obama would like a windfall profits tax on some of those profits.

PERRY: And destroy the oil and gas industry in America.

BLITZER: Well, they couldn't survive...

PERRY: There's not a better thing...

BLITZER: They're making $20 billion...

PERRY: do for the foreign ownership of oil than to put a windfall profits tax on. If you want to be the best friend that the Middle East has, put a windfall profits tax on our companies in America, because it will destroy those individuals that are out there risking their capital so that we can be independent of the foreign ownership of oil.

BLITZER: But if Exxon Mobil, for example, in the last quarter -- I don't remember all the numbers. But let's say instead of making $20 billion, they made $15 billion.

That would destroy Exxon Mobil?

PERRY: No. I think the point is that we need to use every alternative energy source that we can. We need to be exploring for oil. We need to be giving incentives for people to come up with new and innovative ways, whether it's biofuels, whether it's solar, whether it's wind energy -- which Texas leads the nation in -- whether it's clean burning coal, you name it.

BLITZER: What about ethanol?

PERRY: Cellulosic ethanol we support. Corn-based ethanol is a real problem.


PERRY: Because of the cost that it's driving into the food supply chain, not just in America, but all around the world. Using a food source as a type of energy is just bad public policy.

BLITZER: You were George W. Bush's lieutenant governor in Texas, as a lot of us remember. He's been president. Now he's in his eighth year, his final year as president. His job approval numbers are really, really low, as you know.

Where did he go wrong, because you know this man?

PERRY: Well, I'm not sure that the president has particularly gone wrong. I think there's a lot of things going on in the world out there. You know, I look at the positive things that have happened. America hasn't been attacked by a foreign force since he's been the -- since 9/11. I think the policies that he's put in place. And, frankly, I don't know why the numbers are what they are.

BLITZER: Because the job approval numbers are, you know, down there close to Richard Nixon, Jimmy Carter. They're pretty low.

PERRY: Even approaching Congress, so...

BLITZER: The Congress doesn't have very good numbers, either.


BLITZER: But is there anything -- any one thing that, mistake he made that resulted in these low job approval numbers?

PERRY: You know, I'll let the historians work on that. I think what's most important is for us to focus on the future and that's John McCain and Obama. And there's a real clear difference between those two candidates when it comes to the economy, when it comes to the defense of our country. I mean there is a distinct difference between what these two fellows believe in, where they want America to go.

BLITZER: Obama says he's going to come to Texas. He's going to be in all 50 states spending money and trying to get elected.

PERRY: I hope he comes to Texas and spends a lot of money. Our economy would be greatly appreciative.

BLITZER: Is there any way he can carry Texas?

PERRY: Not that I see. But I still hope he comes and spends a lot of money there.

BLITZER: I'm sure you do.

Governor, thanks for coming in.

PERRY: You're welcome, Wolf.

It's good to see you.

BLITZER: Thank you.

PERRY: Thank you.


BLITZER: An Iraq War veteran and a government study that went horribly wrong.


UNIDENTIFIED MALE: Hearing voices, you know, in my head. I, you know, situations like that, you know, auditory hallucinations, visual hallucinations and just general paranoia.


BLITZER: But that same study is still going on. Brian Todd is investigating. He's going to show us what's happening.

Also, the couple, who had fooled just about everyone with their wedding, which officials now say was illegal. You're going to find out what they did and how they got caught.

Plus, the woman at the center of the sex scandal that brought down the former New York governor, Eliot Spitzer, is now putting out a new message on the Internet.

Stay with us.



BLITZER: Let's go right to Carol Costello. She's monitoring some other important stories.

What do we know -- Carol?

CAROL COSTELLO, CNN CORRESPONDENT: Well, it's disturbing, Wolf.

We're just learning about three new cases of salmonella poisoning linked to tainted tomatoes. They're all in New Jersey and two of the people who got sick were children, a 2-year-old and a 7-year-old. Nationwide, more than 600 people in 34 states and the District of Columbia have been sickened by this outbreak. Government investigators are checking tomato farms in Florida and Mexico, as they search for the source they still don't know.

A huge step forward in a massive plan to restore Florida's Everglades. The state has reached a deal to buy 187,000 acres of land from U.S. Sugar for $1.7 billion. It will help restore water flow to the Everglades, which has been shrinking for decades because of development and flood control projects. Florida Governor Charlie Crist calls the deal a critical missing link.

And take a look at this fiery scene in Afghanistan. This was a military supply convoy. Afghan officials say it was attacked south of Kabul by presumed militants, who rode up alongside on motorcycles and fired on the vehicles with guns and rockets. The mayor of a nearby town says one person was killed. NATO would only confirm that there are casualties.

That's a look at the headlines right now -- Wolf.

BLITZER: Even as the situation, Carol, in Iraq seems to be getting somewhat better, in Afghanistan, it seems to be getting a whole lot worse.

COSTELLO: Yes, a lot of violence there recently. BLITZER: All right. We're going to watch this story for our viewers.

Thank you.

Don Imus caught up in a new racially charged controversy. He's now trying to explain himself.


DON IMUS: I think it was just -- you know, it's obvious that they've been picking on him. So -- so I asked Warner what color he was. Well, obviously, I already knew what color he was. I thought that the point was in order to make a sarcastic point.


BLITZER: You're going to find out what he said and whether the people he offended are buying his explanation.

Also, legal rights for terror suspects -- the U.S. Supreme Court says they're entitled to some.

But what about Osama bin Laden?

I'll ask the former Secretary of State, Madeleine Albright. She's here in THE SITUATION ROOM.

Plus, Bill Clinton finally speaking out about Barack Obama for the first time since Hillary Clinton dropped out of the race. You're about to find out what he's saying right here in THE SITUATION ROOM.


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

Happening now, another Mississippi River levee has failed, this one near St. Charles, Missouri. The only good news is that no homes are in the way, just a soccer field and a sod farm. So no evacuations have been ordered.

Allegations of a pregnancy pact at the high school in Gloucester, Massachusetts are being dismissed by a pregnant student. She says there was no pact and that the pregnancies of more than a dozen girls are just a coincidence.

I'm Wolf Blitzer.


Bill Clinton was very critical of Barack Obama out on the campaign trail. But he's been quiet ever since his wife pulled out of the race.

Now there's word the former president is ready to climb aboard the Barack Obama bandwagon. CNN's Mary Snow is working this story for us -- Mary, what's the latest word we're getting?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, you know, this is the first word we've heard from the former president on support for Barack Obama since the primary process ended two weeks ago.

Now, a spokesman for Bill Clinton released a one sentence statement saying: "President Clinton is obviously committed to doing whatever he can and is asked to do to ensure Senator Obama is the next president of the United States."

Now, Bill Clinton's silence, as you noted, on Obama was noticed over the weekend when he avoided a reporter's question asking him whether he'd endorse Obama. The former president, as you also noted, was an outspoken critic of Obama and Republicans have wasted no time in trying to seize on it. The Republican National Committee is now circulating some of Clinton's past criticisms of Obama, suggesting that electing him would be a risk. But the question, how can Bill Clinton help Obama, the Democratic strategists suggest, the former president could help him on economic issues, particularly with blue- collar workers -- Wolf?

BLITZER: What is he going to be doing specifically? Do we have any indication what he might be doing on the campaign trail for Senator Obama?

SNOW: You know, we don't have the exact specifics in just yet. But Senator Obama this afternoon was asked about this. He said his campaign will be working closely with the Clintons to put together a plan. He said the Clintons are going to be -- want to campaign actively on behalf of the Democratic ticket, and in his words, he said, I'm going to need them. He also called Bill Clinton one of the -- and I'm quoting -- one of the most intelligent, charismatic political leaders in a generation.

An aide says that Obama spoke with Senator Clinton Sunday night and one of the things they discussed was Obama and President Clinton connecting. But the former president will not be on hand Friday in New Hampshire when Obama and Hillary Clinton campaign together for the first time. The spokesman said the former president will be traveling -- Wolf?

BLITZER: And the man from hope won't be in Unity, New Hampshire. That's where that Democratic unity meeting will be taking place. Mary Snow, working the story for us.

Barack Obama has added another top gun to his foreign policy team. Just in time to help fend off some sharp new criticism of his own world view.

And joining us now, the former secretary of state during the Clinton administration, Madeleine Albright. Madam secretary, thanks for coming in.


BLITZER: You were supporting Hillary Clinton. But now you're on board for Barack Obama. Was it a problem for you to make that adjustment?

ALBRIGHT: Well, I did support Hillary Clinton and I thought she was a terrific candidate. But I think Senator Obama is a great candidate and I want to us win in November. I think it's absolutely essential to have a different foreign policy from the Bush administration.

BLITZER: Our CNN contributor, Bill Bennett, has written a piece in "The National Review" in which he really goes after Barack Obama on foreign policy issues among other things saying, "Barack Obama's foreign policy is dangerous, naive and portrays a profound misreading of history." Does he have --

ALBRIGHT: Is he talking about President Bush?

BLITZER: No, he's talking about Barack Obama. And he's saying that the guy really is not qualified to be commander in chief.

ALBRIGHT: I totally disagree. I think that Barack Obama is somebody that has a real vision for the United States. He understands America's role in the world. And he understands the necessity of change. We have been involved for eight years in one of the most disastrous foreign policy periods, and we need a totally different approach in terms of America's role. And I think Barack Obama's going to be a very, very good president, who carries out a different approach.

BLITZER: He says this, Bennett -- he says, "Obama's simply out of step with how terrorists should be handled. He would turn back the clock on how we fight terrorism using the failed strategy of the 1990s as opposed to the post-9/11 strategy that has kept us safe."

ALBRIGHT: Well, I think that that is a completely unfair allegation because Senator Obama understands the terrorist threat. He has talked about a variety of ways to deal with terrorists. And the bottom line, Wolf, is that they have been chasing Osama Bin Laden for the last eight years, and even former Secretary of Defense Rumsfeld said that more terrorists have been created and have actually been gotten rid of. So, I think that a president Obama will have a very robust approach in terms of dealing with terrorism, and also looking at what the sources of terrorists actions are.

BLITZER: But would he go back in your administration in the '90s and see the terrorist attacks as a law enforcement issue as opposed to an all-out war on terror?

ALBRIGHT: I disagree with the words war on terror, because it enhances the people who are basically murders who came on 9/11. They are not warriors. They are murders. And Senator Obama has talked about using force when necessary, but also we have to use all tools. I have said many, many times that we have to use all the tools we have, law enforcement is one of them, but also in getting rid of the terrorists --

BLITZER: If the U.S. tomorrow captured Osama Bin Laden, what right, if any, would you grant him?

ALBRIGHT: Well, I'm not a lawyer, you know. I think I'd take in very careful consideration what the Supreme Court has just said and that we have to live up to our legal system. But the chances, frankly, in discussions that I have heard, the chances of how he would be captured and whether he'd be alive, I think that that's something that we have to use all the tools we have. But I think the Supreme Court made some very, very important statements about habeas corpus and the fact that the U.S. has to remember that what we stand for.

BLITZER: And even though Osama Bin Laden should be granted those rights?

ALBRIGHT: No. I mean, I think we have to see under what circumstances he's captured. There's a pretty good case against him. And I think that I would certain -- I personally think that he will -- there will be a way to make very clear that he is the one behind all these terrorist attacks.

BLITZER: To those Americans out there who supported Hillary Clinton like you did who are still uncomfortable that he has the experience, the gravitas to be the commander in chief, what would you say?

ALBRIGHT: I would say the following thing. I think we need a 21st century leader and Senator McCain is going to be a third term of President Bush and a 20th century approach to this and I think that Senator Obama offers a whole host of different approaches.

I personally think that it is very important for all Democrats to unite. Senator Clinton and Senator Obama are going to be campaigning together later this week. And I have believed all along that the Democratic Party will unite, that we will elect a new president because we have just gone through a disastrous period of foreign policy.

BLITZER: And sitting down with the Iranian president, Ahmadinejad, without preconditions during the first year his administration, for a president to make that kind of commitment, is that -- is that smart?

ALBRIGHT: He has -- as I understand it, he said there would have to be some preparations for a meeting like that. I think it would be very interesting, for instance -- I wish that the United States had sent along an envoy with this delegation that just went from the European Union with Javier Solano. I think that there are ways to begin discussions at a lower level. The allegations that have to be stopped is to say that just talking to the Iranians is wrong. You have to talk to your enemies, not just your friends. And Senator Obama wants, in fact, to open up a way of dialogue with those countries that we consider major problems.

BLITZER: Madeleine Albright, the former Secretary of State, thanks for coming in.

ALBRIGHT: Good to be with you, Wolf.

BLITZER: He went from having hallucinations to an armed standoff with police. And now an Iraq war veteran is blaming his nightmare on a U.S. government study which he says went horribly wrong.

They got the license, and a local official performed the ceremony. It now turns out the bride was not a woman and may face charges.

And Nancy Pelosi says Hillary Clinton isn't the only powerful woman who's been subject to sexism. We'll hear from the secretary -- excuse me, from the speaker of the house, and more right here in THE SITUATION ROOM.


BLITZER: Right now government officials are taking heat for a controversial study combining an anti-smoking medication with treatment for a psychiatric disorder. One Iraq war veteran says he suffered an extraordinarily harrowing experience as a result.

CNN's Brian Todd has been working on this story now for several days.

Brian, what are you digging up?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, this veteran says he became so disoriented that he had a 20-minute confrontation with police that nearly killed him. He attributes to one medication that's become very controversial in the treatment of veterans.


TODD: James Elliott would rather light up than use the medication he says was given to him to stop smoking. The drug is called Chantix. Elliot, an Iraq war veteran, says he was prescribed it as part of a broad study on whether to treat posttraumatic stress disorder and smoking together. The study's overseen by the Department of Veterans' Affairs. Here's what Elliott said Chantix did to him.

JAMES ELLIOTT, IRAQ WAR VETERAN: Hearing voices, you know, in my head. I -- you know, situations like that, you know, auditory hallucinations, visual hallucinations and general paranoia.

TODD: He says he started taking the drug in early November of last year. A couple of weeks later, the Food and Drug Administration and the manufacturer, Pfizer, notified health care providers, including the VA, about possible side effects, including depressed mood and suicidal behavior. And they sent an even stronger warning on February 1st of this year. Saying, it appears increasingly likely that there's an association between Chantix and serious neuropsychiatric symptoms.

Did anybody at the VA or anywhere else tell you about the warnings of this about this particular drug?

ELLIOTT: No, not at all. Zero percent. Zero warnings about that.

TODD: On February 5th of this year Elliott says he snapped, confronted by his fiancee about his erratic behavior, he said he went to visit a friend walking down the street armed with a handgun.

ELLIOTT: Before I got there, the police arrived. And according to the police report -- I don't -- I don't remember this at all. But I had a 20-minute standoff with those guys.

TODD: The police tasered Elliott. He says they saved his life. Elliott said it wasn't until a couple of weeks after that standoff that the VA told him and others in the study about the possible side effects of Chantix. Elliott says he feels betrayed and the congressman that oversees the VA is investigating.

REP. BOB FILNER (D), VETERANS' AFFAIRS CHMN.: This is the life and death of our children. They should have moved immediately, called everybody up and suspend the study until we figure out what is going on.

TODD: But the study is still going on with more than 140 veterans being given Chantix. We asked the VA's top research official why.

DR. JOEL KUPERSMITH, DEPT. OF VETERANS AFFAIRS: Leave it to the mental health professionals who in our case are the world's leading authorities to determine whether this is the right treatment for the patient or not.

TODD: Dr. Joel Kupersmith says Chantix has proven effective against smoking. ABC News and "The Washington Times" who first reported the story quote one of the leaders of the VA as saying there's no proof that James Elliott's breakdown was caused by Chantix. Elliott believes there was no other cause. The VA says it sent all warnings immediately to doctors. We asked should it have told Elliott.

KUPERSMITH: We, you know, sent all these communications to providers. The providers communicate with their patients.

TODD: Dr. Kupersmith said he could not talk about James Elliott's specific case citing patient/doctor confidentiality. Elliott gave us the name of his provider. He called and e-mailed the doctor repeatedly but did not get a reply.


TODD: Officials with Pfizer, the manufacturers of Chantix, tell CNN they've been completely transparent about the possible side effects of Chantix. They stand behind the drug saying the benefits for smokers far outweigh the risks and say they are continuing to monitor the use of Chantix, Wolf.

BLITZER: How many people involved in taking Chantix actually wound up having problems while on this drug?

TODD: The VA says that of the 143 veterans who had PTSD and were taking Chantix, 25 experienced serious so-called adverse effects and three of them experienced thoughts of suicide, but the VA official we spoke to about this said they cannot necessarily attribute all of the effects directly to Chantix. In fact, veterans in the study not taking Chantix had a higher rate of suicidal ideation.

BLITZER: So what's the VA, Brian, going to do about all this now?

TODD: They say they are reviewing what happened. They're sending out letters to 3,200 veterans who've been prescribed Chantix, warning them of the side effects, but the study is going to continue.

BLITZER: Brian Todd, watching on this story for us. I know you'll stay on top of it Brian and update our viewers when we get more information. Very disturbing stuff though.

He's accused of making another racially insensitive remark. Last time he said he was sorry. This time the radio star Don Imus says there's nothing to be sorry about. What he said and what others are saying about it.

And the call girl in the Eliot Spitzer scandal is leaving a message. She's laying it all out online.

John McCain tries to harness some of Arnold Schwarzenegger power to light up his energy plan but the governor's got some different ideas about the energy problem.

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


BLITZER: Barack Obama has just spoken to one of our producers, Chris Welch about Bill and Hillary Clinton. What he has to say. Stand by for that. It's just coming in to THE SITUATION ROOM.

Meanwhile other news that we're following, Virginia officials now know there was much more to one reason wedding in the state than met the eye. It turns out the bride was no woman and the marriage itself may be a crime.

Carol Costello's working this story for us.

What is it all about?

COSTELLO: Kind of a strange story. But, Wolf, Virginia authorities are trying to figure out whether to charge two men with a misdemeanor for getting married in Norfolk. It's something they've struggled with before.


COSTELLO: We've come a long way, baby. Marriage isn't as simple as it once was. In California and Massachusetts, men marry men and women wed women. And if you tuned into "Oprah" recently, men who are once women are married and pregnant, scenarios leading to some confusing times in 48 states without same-sex marriage laws. Virginia is wrestling with a case of that now. Same-sex marriage violates Virginia's constitution, yet two men managed to get married in Norfolk. This woman told our affiliate, one of them was her brother.

UNIDENTIFIED MALE: Apparently he was dressed like a woman. Tell me about that.

UNIDENTIFIED FEMALE: I have nothing to say on that.

COSTELLO: This isn't the first time Virginia has wrestled with this problem. Norfolk's marriage commissioner, Reid Carawan.

REID CARAWAN, NORFOLK MARRIAGE COMMISSIONER: He looked like a female. Got a license. Then when the guy came back, found out he was a female.

COSTELLO: In the latest case, the bride, 18-year-old Justin McCain, dressed as a woman, then called himself Justine. It wasn't until he returned to court to legally change his name to something more feminine, that officials caught on. Now, Virginia authorities may press charges.

MARA KEISLING, NATIONAL CENTER TRANSGENDER EQUALITY: That's ridiculous, mean-spirited, and frankly if I were a resident of that county, I think I'd be embarrassed. Hopefully the prosecutor has much more important things to do than to pick on some poor 18-year-old who just wanted to get married.

COSTELLO: It's unclear if McCain is in the process of becoming a woman. He's in hiding. But Rex Davis, the clerk of Newport News Circuit Court told our affiliate, "I have spoken with him and told him same-sex marriages are not legal in Virginia. He told me he thought they were. I told him to bring me the marriage certificate and that would be a favorable step in the situation. He has yet to return it."

Virginia has taken steps to make sure there are no future misunderstandings and instead of couples listing their napes beside bride and groom on the marriage applications, they now will list their names beside female applicant and male applicant.


COSTELLO: And in case you're wondering, generally there are no laws specifically aimed at people who undergo a sex change. But most transgendered people go to court to legally change their sex on their birth certificate and their driver's licenses. And had Justin McCain done that, he likely would have had no problem.

BLITZER: All right, Carol. Thanks very much, Carol Costello, reporting.

The call girl involved in the sex scandal with the former New York Governor, Eliot Spitzer, is now putting out a new message online through her MySpace page.

Let's go to our Internet reporter, Abbi Tatton. She's working this story for us.

What is she saying, Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, Ashley Dupre is telling all her fans and people that tracked her down online that she's thankful to them and she's posting a little smiley face to prove it. This is Ashley Dupre's MySpace page. It's had more than 11 million clicks since she emerged as the call girl in the Eliot Spitzer scandal in March.

More than 5 million people have listened to this song from the aspiring musicians on MySpace and now she's gone online to post a message to them for the first time. She's saying to her fans online that they've given her strength and inspiration. And she's even addressing the critics, saying, thanking them for, quote, "making me push myself." She apologizes that she's not had the time to be on MySpace that much, she says, but we know that since the scandal broke, Dupre has been suing the founder of "Girls Gone Wild" of a video of herself more than $10 million -- Wolf?

BLITZER: We'll see what happens to that case, Abbi. Abbi's watching it for us.

Let's go back to Jack for "The Cafferty File." -- Jack?

CAFFERTY: It's like "Entertainment Tonight" just took over the show right now.

BLITZER: A little bit. A little bit.

CAFFERTY: The question this hour: Is do you agree with Alan Greenspan, the U.S. is on the brink of a recession or are we already there?

Ann in Texas, "Let me count the ways. Gasoline prices through the roof, groceries higher every time we go to the store, the annual summer vacation trip is just wishful thinking now and we haven't had a cost of living increase in our pension since 2001. I can't speak for the country as a whole, but I'm sure as hell in a recession."

Bill in Albuquerque, New Mexico, "I think we're on the brink but not quite there. of course we can quibble all day about the exact definition but I don't get the feeling that things are sinking fast. On the contrary, maybe that stimulus package really will help to keep the economy from plunging into a true recession."

Molly in California, "Recession? Depends entirely on where you live, Jack. Here in Hollywood we're just beginning to feel the pinch. But I know a lot of people in Detroit, and there it's almost a depression."

Andrea, Fayetteville, Georgia, "We're already there. There is no job market unless you happen to speak Spanish. The job market has been dead for over a year and our gas prices $3.99 to $4.06 a gallon are making it impossible for us to pay our utilities and grocery bills. Very sad."

Kathy in Maryland writes, "If a recession means that money's tight and there's no end in sight, then I'm there."

Annie in Atlanta, "Just ask the millions of Americans on fixed incomes or those who have lost or are losing their homes or jabs and benefits what they think. Of course for all who have benefited from the lawlessness of this administration, life has never been better."

And Paul in Florida, "Jack, we are not in a recession. Those stimulus checks from China fixed everything."

If you didn't see your e-mail here, you can go to my blog at Look for your e-mail there among hundreds of others -- Wolf?

BLITZER: It's a fair question Paul raises whether the stimulus checks actually did much to try to improve the economy. I think it's worth doing some reporting on that. Maybe we should do that, what do you think?

CAFFERTY: I think we should get your investigative unit right on it.

BLITZER: Good idea.

CAFFERTY: Do we have an investigative unit?

BLITZER: We have Brian Todd.

CAFFERTY: Tell him to do something. Get him to work on it. Today. Have something for us tomorrow. Time's a-wasting.

BLITZER: I don't know about tomorrow but we'll do it. Jack, thank you.

New remarks from Barack Obama on Hillary Clinton's role now that she's out of the campaign. We have some new video of him speaking just in to THE SITUATION ROOM. You're going to see it here exclusively, what he just told our producer.

Plus, Hillary Clinton speaking out as she returns to work in the Senate.


BLITZER: Lou Dobbs standing by. He's got some word that China is trying to influence a Maryland state law that would leave thousands of people vulnerable to toxic chemicals.

What's going on, Lou?

LOU DOBBS, CNN ANCHOR: Well, can you believe communist China weighing in because a delegate, a state lawmaker by the name of James Hubbard in Maryland putting through legislation to stop the sale of products that contain lead in his state and endangering consumers and, of course, particularly children and believe it or not, the U.S. Commerce Department alerting communist China to that law. And they're -- they're jumping right in the middle of it, lobbying against it. It's just more -- it's just more absurdity coming to us, courtesy, your federal government, Wolf.

BLITZER: You're going to have much more coming up on this in an hour on your show, I take it, Lou?

DOBBS: Absolutely. And we'll be focusing as well on the communist Chinese hacking in to the computers of U.S. congressmen. We're going to have much more on that. And by the way, communist China is still that, you know, Wolf, communist.

BLITZER: I heard that. Yes, we'll see you in an hour.

DOBBS: You got it.

BLITZER: Lou, thank you.