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ANDERSON COOPER 360 DEGREES

Chicago, Illinois the Nation's Deadliest City; White House on Raising Taxes for Wealthy; The Battle Inside Aleppo; Custody Fight For Baby Veronica; Train Derailment Spills Toxic Chemicals; Attack Leaves Three Dead At Wyoming College

Aired November 30, 2012 - 20:00   ET

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


ASHLEIGH BANFIELD, CNN HOST: Erin, thanks.

And we begin tonight as Anderson always does, "Keeping Them Honest." Not taking sides or playing favorites season, you can get that other places. We're interested in the facts. They do exist and our goal is to bring them to you. So tonight, a "Keeping Them Honest "investigation about a city that is among the nation's deadliest, Chicago, Illinois.

This week alone, six people have been killed there, including a 15-year-old girl who was just standing in her backyard with her friends. Those deaths bring the total number of murders there this year to 476. If you're wondering, that is more than coalition troops serving in Afghanistan during the same period so think of that. Chicago is in a very real sense, a war zone.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Patients keep coming and they come and they come, like machine gunfire. You can expect this to happen every single night.

(END VIDEO CLIP)

BANFIELD: For the past several years, "360" has been covering the growing epidemic of gun violence on Chicago's south side.

(BEGIN VIDEO CLIP)

ANDERSON COOPER, CNN CORRESPONDENT: Good evening. From the south side of Chicago, a tough neighborhood with strong people reeling from a killing spree that cannot be ignored. There are no easy answers but the problems are too important to ignore.

We're in Chicago tonight, a city in crisis. Kids are dying, shot, beaten, murdered in these streets. The videotape beating of Derrion Albert (ph), an honor student, brought Washington bigwigs here today but is anyone paying enough attention to what's happening to our kids?

We have gone to Chicago a number of times over the last several years to report on this violence. If this violence was happening in other parts of the United States, many critics say it would be getting a lot more attention.

(END VIDEO CLIP)

BANFIELD: Part of our ongoing coverage of Chicago's gun violence has been to look at what's being done to stop it which brings us to tonight's report. With killings on the rise, Illinois's governor, Pat Quinn, launched an ambitious anti-violence program two years ago called the neighborhood recovery initiative. And on paper it sounded like a great idea and it really did catch our eye. And then we investigated. And the CNN investigation found some pretty serious questions about whether this was crime prevention or good old- fashioned politics.

Here's investigative correspondent Drew Griffin.

(BEGIN VIDEOTAPE)

DREW GRIFFIN, CNN INVESTIGATIVE CORRESPONDENT: Hello? Hello? Anybody here?

This is one of the community organizing groups hired to help reduce violence in Chicago. Part of a $54.5 million initiative, governor Pat Quinn's neighborhood recovery initiative or NRI, rolled out just before his contentious 2010 election. This group, called the Woodlawn organization, got $1.2 million.

So this is all that's left of the Woodlawn organization. We walked through a front door that was wide open. You can see the equipment is here. This was defunded by the program because they couldn't figure out what they had done with the money.

It was one of about 160 community, church and civic groups that got the NRI money from the state. Now most of the money has run out. Homicides are up and questions are being raised about just what the NRI was really for. To cut crime or save an election?

What we do know is the money was spread out on Chicago's south and southwest sides. The idea, get communities involved to stop the violence.

How? On this chilly afternoon, teenagers across Chicago's south side are paid to hand out flyers --

UNIDENTIFIED FEMALE: You have a nice day, sir.

GRIFFIN: -- and spread a message of nonviolence. The NRI is credited with creating about 3500 temporary jobs, mentoring youth and parents, providing re-entry services and counseling in schools. But our four-month investigation found those jobs included handing out flyers, attending yoga class, taking museum field trips, even marching with the governor in a parade. The jobs are now gone.

CNN has taken an extensive look at where the money went, what it did, and most importantly, the timing of how the program was rolled out. The neighborhood recovery initiative began sending money to tough neighborhoods in the city of Chicago right before Chicago voters went to the polls. According to these minutes from a state meeting, a member of the governor's staff promised quote, "allocating some of the funds for this initiative immediately, the rest after the election."

UNIDENTIFIED MALE: I'm happy to say that I'm always honest.

GRIFFIN: In October 2010, then lieutenant governor Pat Quinn was struggling to be elected to the job he assumed after the former governor, Rod Blagojevich, was removed from office for misconduct. Quinn, a democrat, needed a huge turnout in Chicago's heavily Democratic districts on the south side. That's where critics say the NRI money ended up. The governor won that election by less than one percentage point, but the results on reducing crime? So far there's been 476 murders this year, up nearly 20 percent from 2011.

MATT MURPHY (R), ILLINOIS STATE SENATE: On its face, it appears to be a waste.

GRIFFIN: Illinois Republican state senator Matt Murphy.

MURPHY: About a month before the election, at a time when reports everywhere were showing a diminished interest in the election in the governor's base and lo and behold, here he comes with a new state program and millions of dollars to get people interested.

GOV. PAT QUINN (D), ILLINOIS: It is a lot of baloney. They know that. Matter of fact, people make those charges were running against me. You know, it's all politics.

GRIFFIN: In an early November interview, governor Quinn insisted to CNN the murder rate was so high in the summer of 2010, he had to do something.

QUINN: The city of Chicago is the third largest city in America. I live in Chicago. I live on the west side. I live in a violent neighborhood. And I know firsthand that you better have government do something about the violence because that's what the people want.

MURPHY: But the murder rate is up 25 percent. Are you saying that the murder rate would be up 30 percent, 35 percent without this program?

QUINN: You take it one year at a time and you try and evaluate the programs and find out what is working, what isn't working so well, and you focus on the things that work well. But, you don't just say we're not going to do anything.

GRIFFIN: Even a member of Quinn's own party though, Democratic state representative Thaddeus Jones, has questions, asking where are the audits, administration costs and oversight of the many organizations.

We can show you what the neighborhood recovery initiative did that is proof, say organizers, the money was well spent. Teaching teens to change behaviors. And for $8.75 an hour, this is how the teens worked to reduce Chicago's murder rate.

UNIDENTIFIED MALE: This week we're talking about seeking inner peace.

UNIDENTIFIED FEMALE: How do you deal with stress.

UNIDENTIFIED FEMALE: My topic of this month is about being healthy.

UNIDENTIFIED FEMALE: Governor Quinn does not miss this parade.

GRIFFIN: And yes, the state confirmed, part of promoting positive messages included paying teens to march with the governor in the annual parade.

Is this the type of thing that you think leads to long-term employment or long-term reduction in violence?

UNIDENTIFIED MALE: It's another way of providing welfare.

GRIFFIN: The director of one of the agencies that received more than $2 million concedes NRI was rushed out without much of a plan.

MICHAEL SHAVER, COO, CHILDREN'S HOME AND AID: Actually, there was a fast and furious nature to it. There was certainly from the time that the governor, who was running for re-election, announced it to the time frame to actually put the money in the community.

GRIFFIN: Mike Shaver says the program, modeled in part after a now defunct Philadelphia initiative, did hand out a lot of money but spent little time determining if it was effective.

SHAVER: I have not seen anything that's been produced by the Illinois violence prevention authority that would make a compelling case that this array of programs based upon the model in Philadelphia worked.

GRIFFIN: As we began asking questions of agencies who got the money, we have been getting more and more "no comments." You can't talk? Remember the Woodlawn organization which received $1.2 million? Anybody here? Hello?

The leader of that group isn't talking, either. An audit by the state agency that ran the program could explain the silence. The state found questionable expenses, a lack of clear accounting, a $10,700 check written to a part-time staff member supposedly to pay a utility bill that they didn't prove was paid.

The state shut down all funding for the organization. The group's attorney tells CNN all documents will be provided to show it did nothing wrong.

I just want to get back to the point of did this program work, governor? As well-intentioned as it was, did it work?

QUINN: Yes, it did. It did work. If it saves one life, it worked.

GRIFFIN: Chicago remains on track to approach 500 murders this year.

(END VIDEOTAPE)

BANFIELD: And Drew Griffin joins me now.

Drew, that last stat -- the police superintendent in that city says that just recently things are getting better, that it's actually going down, that the rate is dropping. Has something changed?

GRIFFIN: Well, something has changed, but it wasn't a change of handing out more flyers or going to more yoga classes. According to the police superintendent, the murder rate which actually was incredibly 66 percent higher earlier this year, has been steadily dropping because the Chicago police department has focused on the bad guys. They're arresting more gang members. They're tearing down abandoned buildings. They're putting more and more cops on the streets. That has reduced the pace. But as we reported, Chicago is on pace for a 20 percent higher murder rate this year than last year.

BANFIELD: And what does that mean for this program, the neighborhood recovery program? Is it kaput?

GRIFFIN: It's still hanging on. It has a much smaller budget, $15 million. It's under a whole new state agency to monitor it. There is a big state audit going on right now to figure out where all of this money went. And get this. According to this new scaled-down program, we are told that quote, "any new jobs would be more traditional employment situations." So it survives a little bit, but not by much.

BANFIELD: And overall, just a very distressing story.

Drew, thank you. Appreciate that.

Want to let us know what you think. Follow us on twitter @AC360.

And then tonight, a familiar Washington drama, the return of the towering fiscal cliff. Good news is, Democrats have put forward a deal. Thank you. Bad news is Republicans hate it. And both sides seem to be digging in even deeper.

So is either side going to budge any time? Raw politics ahead.

(COMMERCIAL BREAK)

BANFIELD: In raw politics, with the country one day closer to the fiscal cliff, President Obama took his case to the public today. He used an event in Pennsylvania to ratchet up the pressure on Republicans to freeze taxes for the middle class while allowing the tax rates on the wealthy to go up.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If Congress does nothing, every family in America will see their income taxes automatically go up on January 1st. That's sort of like the lump of coal you get for Christmas. That's a scrooge Christmas.

(END VIDEO CLIP)

BANFIELD: So, in other words, the day after the White House puts its opening bid on the table, the president comes out swinging. That opening bid didn't have a whole lot of concessions in it to the Republicans, and the Republicans reacted as many would have predicted. They were mad. Basically saying that offer was an insult. Today, house speaker John Boehner doubled down.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: It was not a serious proposal. And so right now, we're almost nowhere.

(END VIDEO CLIP)

BANFIELD: That doesn't sound good. Republican congressman Lee Terry of Nebraska was just as succinct but how shall I say this? More colorful. He told "the Omaha World Herald" we're screwed either way. We really have no leverage in these discussions. Representative Terry has said he is open to a deal that includes some new tax revenues. He's also said President Obama has an incentive to allow the country to just go on over the fiscal cliff. And then blame the Republicans for it.

And just before we went on air tonight, senator Max Baucus, who chairs the powerful Senate finance committee, a Democrat, indicated that best scenario isn't out of the realm of possibility. Listen to how he put it.

(BEGIN VIDEO CLIP)

SE. MAX BAUCUS (D), CHAIRMAN, SENATE FINANCE COMMITTEE: If the other side is completely intransigent that the president has probably no choice but to say OK, we're going to go over the cliff. That would not be my first preference.

(END VIDEO CLIP)

BANFIELD: Yes. The senator pretty serious about that. Bottom line though, tonight both sides say that talks are stalled and the Democrats are turning up the pressure on Republicans.

In a moment, our political panel will have some fun with this one, certainly about the president's opening offer. But first, congressman Lee Terry joins me live now.

I know there's a bit of a delay so I will ask the question, we can wait a moment and I will get your answer.

I love it when politicians talk from the hip, especially using colorful language like "we're screwed either way." But I don't understand what you mean, because as I see it, there's still this extraordinarily powerful tool called the debt ceiling and y'all have to be on board for that. So how do you not see that as a good tactic for negotiating?

REP. LEE TERRY (R), NEBRASKA: Well, that is probably the only level of leverage we have. But what many of us fear, we come back from the election, we want to get the fiscal cliff resolved, but yet we aren't seeing anything from the White House. We see some disingenuous moves like the one that was done today. Last week it was oh, you guys go first, we're not going to put anything on the table until you vote for a tax increase.

So, many of us fear that the president's real plan here was to let us go over the cliff and blame the Republicans, and that's what we look like we're being set up to do. And then if you go over the cliff, then two months later, a month later, the president can come back with a bill and say hey, we're going to now, since the Republicans let everyone's taxes go up, I'm going to ride in here now, be the knight in shining armor and lower the taxes on the lower two brackets and of course, the Republicans who one of our main values is lower taxes, would support something like that.

BANFIELD: But Congressman Terry, that doesn't make any sense to me because while that sounds like logic, there's that other side of the fiscal cliff, all those horrible cuts that could plunge us into a depression and all the rest that no Democrats want either.

So are you serious, you really -- are you really saying what I think you're saying, that is that it might be a strategy that the president really wants? Wants us all to go over the cliff? And then just blame you?

TERRY: Yes. That I think that's to his political advantage to do that, because then he gets to blame us, set up the 2014 elections by us being the bad guys. But look at this. A lot of my colleagues on the other side of the aisle like the $600 billion hit to the defense department and they'll absorb the two percent of cuts to the other programs out there. And remember, none of the cuts that are in the sequestration have to do with the big three on the entitlement programs. And most of us would love to see an Erskine-Bowles type of solution put on the table here.

BANFIELD: So what if there were --

TERRY: The Simpson-Bowles, sorry.

BANFIELD: Simpson-Bowles, I understood what you mean. There is an Erskine-Bowles as well. So, it a little bit complex.

So, what about congressman Tom Cole, your Republican colleague, and his overture that you would be ready right now to get moving and actually make this overture saying I'm fine. I'm fine with this $250,000 a year family not getting a tax cut and letting that expire, that tax cut for those wealthier 2 percent to expire. There are a couple people who have come out with that. Mary Bono Mack has said that doesn't sound too bad. There is also Robert Dold who said that as well. What about you?

TERRY: Yes. No, I don't support that. And Tom is a great political strategist and what he was saying is hey, look, we know there will be a revenue increase, if we can get that big deal. And so let's just go ahead and take it off the table, you know, let's take that leverage away from the president there.

But the reality is, as a Republican who my very core principles are, you know, lower taxes, limited government, to just take a solo tax -- or vote on a tax increase with not having everything else there to kind of, you know, give us the sugar to make the medicine go down.

That's just not going to fly. Most of us aren't going to support that. But I could certainly understand tom's political strategy of trying to take it off the table, then the president may get serious about dealing with all of the other financial problems we have.

BANFIELD: I hope y'all can come to some consensus because you're costing me money as I sit here and everybody else watching us. And I think a lot of people are pretty frustrated with the people we're electing to do something big and bold. Come on. Negotiate.

TERRY: Well, yes, I want, you know, but when the president goes from, you know, hey, I want to increase taxes on those over $250,000 and Geithner comes and puts on $1.6 trillion of taxes, we're going in the wrong direction.

BANFIELD: Come back with another proposal and then come back on the show and I'll interview you about your proposal but I'm out of time.

Congressman Terry, thanks for being with us. Appreciate it.

Joining me now, CNN political contributors Mary Matalin and Paul Begala.

Paul, let me begin with you. This feels by most reporting to be a bit of an unfair offer given the wholesale rejection and even Mitch McConnell's purview, the comedy of it. Is this a wise decision to come at the Republicans with something that is so unacceptable right off the bat?

PAUL BEGALA, CNN POLITICAL CONTRIBUTOR: It's certainly acceptable to the majority of the American people. We just had an election, the president ran on this and keep in mind, this is his opening bid. For once, finally, the Democrats are not negotiating against themselves. The president has this crazy notion that he ran around the country, he got 51 percent of the vote and carried the majority of states and vast majority of electoral votes on this agenda.

BANFIELD: Partially -- partially. But this is not just one small piece. This is a lot of pieces that seem very partisan and Americans also like independence and they like people to get along. So in that respect, doesn't this seem just a little too bold and certainly not like the Obama of the last term.

BEGALA: Well, that's music to my ears because I think John Boehner got the better of the president frankly, speaker Boehner, in the last negotiations that they had in 2011. And it suggests that the president, he does, he has the wind at his back.

The piece that's sticking right now should be the easiest, which is locking in 98 percent of the Bush tax cuts. This was something Mary worked hard on, people like me opposed them, Democrats hated those Bush tax cuts. Now, the president is willing to enshrine 98 percent of those tax cuts and the Republicans can't take yes for an answer because they are not really fighting for lower taxes, they're fighting for the upper two percent of income earners and that's a losing proposition. Seventy percent of Americans think those of us who are blessed and are upper income Americans ought to pay a little bit more.

BANFIELD: So, Mary, why doesn't that make sense? Shouldn't the winner come in as Paul said with the wind at his back, he does have a mandate.

MARY MATALIN, CNN POLITICAL CONTRIBUTOR: He does not have a mandate. People did not vote to increase taxes. The reason the president's jamming this through now is because while people don't want to raise taxes in this horrific Obama recovery, sure if he wants to say it's a fairness thing, people don't think that's fair. They want debt entitlement -- debt and entitlement restructuring, that's what they voted for and the reason he's doing it now is because none of the Democratic senators that were elected, and they did a great job, they really kicked our butts with these senators, none of them, not a one of them ran on increasing taxes on anybody in this kind of recovery. That top two percent are the job creators. They're small businesses.

BANFIELD: He also wants Congress to give up that leverage over the debt ceiling because that is also presenting itself as another ugly battle. And you know what, Paul Begala, it is being said that that is one heck of a piece of Boehner leverage.

BEGALA: Well, it is. But I think it's outrageous. I think this brinksmanship about the budget and even the fiscal cliff is all just fine. I don't want to go over the cliff. I think it would be irresponsible.

BANFIELD: Does the president want to go over? We got to listen to all the Republicans and the conservative media today are saying President Obama wants to go over the fiscal cliff, because then taxes go up across the board. And then it's got to be done retroactively.

BEGALA: -- which is not what the president wants. But there's a big difference between this fiscal cliff and the full faith and credit of the United States. The American government has never defaulted on its debt.

And now there are some, not the majority of Republicans but some on the extreme of the Republican party and they seem to be in control, who seem to want to default on our debt. That's crazy. If they cannot be entrusted with the full faith and credit of the United States, they should not have that leverage.

BANFIELD: Paul, where were the overtures though? Where were the overtures with this deal that was presented? I mean, listen, you don't have to be Mensa to know delivering a deal like that was going to make Mitch McConnell laugh. Where were the overtures for the Democrats?

BEGALA: First of all, it is an overture, the deal itself. The proposal. It's not the deal, it's the proposal. The Republicans have not come with a counter proposal. Why? They seem to be intent on falling on their sword for the two percent of the wealthiest Americans, many of whom themselves are happy to pay a slightly higher rate the way we did when President Clinton was president.

BANFIELD: NO. Mary is shaking her head and I am, too. I know - listen. I traveled enough in the far east to know you bargain appropriately with respect. You don't come in knowing that something's laughable. Mary --

BEGALA: So wait. I don't travel in the far east. You think people should just give up on their principles and the things they campaigned for?

BANFIELD: No, but I think you do have to bargain from a position of respect. Mary, is this something that was so disrespectful that you can't even counter, the Republicans can't even counter bargain here?

MATALIN: Here's what -- I don't know why the Republicans are so surprised. I myself was offended and felt disrespected yesterday because the working framework, the intellectual working framework, Erskine from the Bowles-Simpson, from Domenici-Rivlin going all the way back was a basic framework of $3 of savings for $1 of revenues. We get it. It's the opening bid. But we thought the opening bid would at least be in the framework of this planet that we're dealing in.

BANFIELD: Well, I will recommend that maybe Raul Felder get into this and start bargaining away some kind of settlement because this is intransigent inflect I have never seen before.

Mary Matalin, Paul Begala, always a pleasure. Thank you both.

BEGALA: Thanks.

BANFIELD: It is the site of some of the most violent battles in Syria's civil war. Before the fighting millions of people called Aleppo home. But tonight, we are seeing many of the people return to this mess and it's not because the battle's over. It's for some other reason. You'll be surprised. But Arwa Damon is one of the few journalists who is actually in Syria reporting firsthand. We have her report coming up next on "ac 360."

(COMMERCIAL BREAK)

BANFIELD: A little girl taken away from the parents who had loved her since birth, then returned to a biological father who had never even met her. How can that be legal? And can the Supreme Court do anything to come to the parents' rescue? Baby Veronica is her name and her gut-wrenching story comes when "360" continues.

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BANFIELD: Tonight, new signs of life in Aleppo, the scene of some of the most brutal of Syria's civil war fighting. It was once home to millions of residents, but many of them fled as regime and opposition forces just started fighting block to block, one after the other.

In fierce gun battle while the government air strikes targeted the city's hospitals. Just this week though, we saw the rebels score a pretty direct hit. Look at this. It was against a military helicopter. They just virtually blew it out of the skies over Aleppo.

That video was posted online before most of the internet and telephone service was made to fade black right across Syria. But now we're seeing residents actually return to that city of Aleppo. There have been some real good advances by the rebels there that helped make that possible, but make no mistake. It is still far from safe there.

Arwa Damon joins me now. What are you seeing in terms of any kind of progress that this opposition might be making in light of what is essentially a black hole to the rest of the world.

ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: You know, it's been quite fascinating going through some of the neighborhoods in the city because it is such a clear indication of just how far these battle lines have shifted.

Now the rebel commanders are claiming that they control or rather the regime does not control around 65 percent of the city. We were in one neighborhood that the rebel fighters are telling us was the first neighborhood to fall to the Free Syrian Army, and some three weeks ago, residents actually began coming back.

Now, that's not to say that the neighborhood is entirely safe, but they felt confident enough to a certain degree to begin returning to their homes. That was part of the reason why they went back. The other part is quite simply because it's winter.

It is freezing cold, and it was deemed for them a better option to try to salvage what they could from the wreckage of their homes. We really saw widespread devastation than continue to try to tough it out crowded together at relatives' homes.

It's still very much a gamble for residents living in these particular areas that on the ground, yes, are under the control of rebel forces, but there is still always that constant threat from the sky.

BANFIELD: Arwa, the internet blackout must have been a heck of a blow to the opposition because so many of them actually use instead of military type communication, they use cell phones. But there are some kinds of more elite communications among the rebels, aren't there?

DAMON: That's right. There are and from the onset of this, they have managed to get in various ways to be able to continue to upload, you know, videos, images, communicate with the outside world, bearing in mind that the technology that they are bringing in to be able to do that is not widespread amongst all of the various activists who are out there.

So it most certainly does make it incredibly difficult for the majority of them to upload those YouTube videos that are not only such a critical window for the outside world to see what's happening inside Syria, but also, their only means of communication, their only means of getting their message out.

BANFIELD: Arwa, what does it feel like on the ground, when you talk to these rebels about the virtual isolation they're in from the rest of the world and effectively from the kind of help that could bring an end to this horror?

DAMON: There's a lot of anger. There's a lot of frustration. And people fail to understand why it is that the U.S. has chosen to take the role that it has taken. They say that since the United States and other nations have failed to help them in this battle, they are not going to accept any sort of meddling in the future.

So that could potentially make it very tricky if and when the Assad regime falls to forge relationships with the potentially new Syrian government that is going to be formed. But as one person was saying to me, how many people need to die, what is that number of Syrians that need to die for countries like the U.S. to actually take action and that's really a question that we can't answer for them.

BANFIELD: Well, Arwa Damon, stay safe, OK? Thank you.

Coming up, a custody battle over a little girl named Veronica could be heading to the Supreme Court. It's because she was taken away from the only parents she ever knew and she was returned to her biological father, though she had never met him.

It was all under a little-known law that's designed to keep native American children in native American homes, but is it the right thing to do? We will update you on baby Veronica's story, next.

(COMMERCIAL BREAK)

BANFIELD: A train derailment in New Jersey causes a highly toxic chemical leak into a river. So what caused this disaster? That's ahead on 360.

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BANFIELD: A mom and dad in South Carolina are hoping that the Supreme Court will take up the case that has turned their lives upside down and left them without their 3-year-old daughter that they raised since she was a newborn.

Her name is baby Veronica, but she was returned to her biological father under a federal law that's designed to keep Native American children in Native American homes. The only parents Veronica ever knew until she was taken away say that that law should not be applying in this case.

They filed a petition with the U.S. Supreme Court and the biological father's response to that petition was due today. We will dig deeper into the legal issues that surround this in just a moment but first, Randi Kaye has the story of baby Veronica.

(BEGIN VIDEOTAPE)

RANDI KAYE, CNN CORRESPONDENT (voice-over): This is video from the last time Matt and Melanie Capobiancos saw their little girl, Veronica, New Year's Eve, 2011. They had raised her for two years and were in the process of adopting her when a South Carolina Family Court ordered them to hand her over to the girl's biological father.

UNIDENTIFIED FEMALE: Do you think this is in her best interests?

UNIDENTIFIED MALE: I think so.

KAYE: A man Veronica had never even met.

MATT CAPOBIANCO, FIGHTING FOR CUSTODY OF VERONICA: For a little girl to be put in a car with strangers and driven to Oklahoma and having no recourse or control over it, I mean, you know, we're her parents. I'm her father, you know, supposed to be there to protect her.

UNIDENTIFIED FEMALE: You want to be an engineer when you grow up?

KAYE: Now 3, Veronica is caught in the middle of one of the strangest adoption cases we have ever heard. It all began in 2009 before she was born, when Veronica's biological mother put her up for adoption.

The Capobiancos were thrilled when an adoption attorney connected them with Veronica's biological mom. She told them the girl's father, Dustin Brown, had agreed to waive his parental rights.

When Veronica was born, it was Matt who cut the umbilical cord. Ever since, she lived with them in South Carolina.

MELANIE CAPOBIANCO, FIGHTING FOR CUSTODY OF VERONICA: I guess people think that we're not supposed to love her until the ink is dry. We're supposed to kind of care for her until, you know, everything is years down the line and she's adopted.

KAYE: The Capobiancos were heartbroken when just four months after they brought Veronica home, her biological father filed for paternity and custody, even though he had already signed a legal document saying he would not contest Veronica's adoption.

He was able to do so thanks to a little-known federal law from 1978 called the Indian Child Welfare Act. You see, Brown is part Cherokee and a member of the Cherokee Nation, which means Veronica is part Cherokee, too. Congress passed the law after finding 30 percent of Indian children were being removed from their homes and almost all of them were being placed with non-Indian families. The law is designed to keep Indian children with Indian family members, and protect the interests of those children.

MELANIE CAPOBIANCO: I don't know how tearing a child away from the only family she's ever known without any transition period and no visitation is in her best interest.

KAYE: The attorney general for the Cherokee Nation thinks the law is working.

TODD HEMBREE, CHEROKEE NATION ATTORNEY GENERAL: It's not anyone's ever intent to rip a child away from a loving home, but we want to make sure those loving homes have the opportunity to be Indian homes first.

KAYE: After the family court ruled in Dustin Brown's favor, the Capobiancos petitioned the South Carolina Supreme Court, hoping the higher court would overturn the ruling.

(on camera): In July, after more than three months of waiting, the Capobiancos got more bad news. The Supreme Court here in South Carolina ruled in favor of Veronica's biological father. It wasn't an easy decision for the court, though. The justices were split 3-2. In the majority opinion, they wrote they are upholding the Family Court's ruling with a heavy heart.

(voice-over): The majority opinion concluded the biological father and his family have created a safe, loving and appropriate home for her. Those in the dissenting opinion argued federal law shouldn't trump state law, finding father knowingly abandoned his parental responsibilities in every respect.

Lawyers for Dustin Brown say quote, "He is a good parent and Veronica is happy, healthy and thriving." Since she went to live with her biological father, the Capobiancos say they have only been allowed to speak with her once.

MATT CAPOBIANCO: We told her we loved her. She said I love you, too. That was it. That was it.

KAYE: But Matt and Melanie haven't given up. They are taking their case to the United States Supreme Court.

MATT CAPOBIANCO: You don't ever stop fighting for your child, ever.

KAYE (on camera): The United States Supreme Court according to our legal experts doesn't take that many cases. They get 7,000 cases a year and they take about 80. Why do you think they should take this one?

MATT CAPOBIANCO: So many families have been hurt by the misuse of this law, and you know, we've said before, too, we don't think it's necessarily a bad law, it was bad-intentioned, but it's definitely being misused. It doesn't apply. She wasn't removed from an existing Indian home. She was never in an Indian home. She was with us from the very beginning.

KAYE (voice-over): And in some ways, Veronica is still with them. Her bedroom is still set up.

MELANIE CAPOBIANCO: I look around and I see her toys and her books and her little cook set. It makes it harder, but taking it away is the hardest.

MATT CAPOBIANCO: This is her home. It will always be her home. She's going to come home. She's going to play with this stuff again.

MELANIE CAPOBIANCO: It's a symbol of our hope that she's coming home.

KAYE: Randi Kaye, CNN, Charleston, South Carolina.

(END VIDEOTAPE)

BANFIELD: That is just heartbreaking. Joining me now live is CNN's senior legal analyst, Jeffrey Toobin. It's hard to even start an interview seeing the emotion like that.

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: It is really as bad a case as I have ever encountered. The thing you have to keep in mind, at least in the background, is the Indian Child Welfare Act was based on addressing a real problem.

You know, Indian families had been broken up unjustly for decades, just kids ripped away from their parents so Congress passed this law. The problem is it certainly does not seem to apply in this circumstance especially when you have a father who signed away his parental rights.

BANFIELD: That's what interpretation of the law is for. Look, I'm no judge, but isn't that what the judge is supposed to do? He's supposed to look at that law and interpret -- there was a lot of room, wiggle room for interpretation there, isn't there?

TOOBIN: That's why the court split 3-2. It's hard to know exactly how this law applies.

BANFIELD: Even at trial level, even at trial level.

TOOBIN: You know, more judges have ruled in favor of Brown, the birth father, than the Capobiancos so far. So it is not an easy legal question. Why I think the Supreme Court might really take this case is that it has a lot of the features that the Supreme Court looks for in the very few cases they have.

A very deeply divided South Carolina Supreme Court, a conflict between state and federal law, something the court tries to resolve, and also, varying interpretations around the country of the Indian Child Welfare Act. So I really do think even though the odds are always stacked against getting review in the Supreme Court, they really might get it here.

BANFIELD: What about this very technical aspect of Veronica's case? She went from being a newborn baby into the Capobiancos' home so she wasn't taken from an Indian home, which is the spirit of why this law was enacted.

TOOBIN: That's the spirit of the law, but what the law says refers to the status of children who are Indian or Native American, and she certainly qualifies under that.

So the focus of the law is more on the status of the child than where the child lived. That's why South Carolina, the dissenters in South Carolina were so upset because South Carolina says no, look at the best interests of the child, look at where she's lived, and they said keep her with the Capobiancos.

BANFIELD: Really quickly here, last question and that is, OK, let's just say the Supreme Court is actually favoring the Capobiancos here and now they have to assess that this little child has had about a year plus of living with a new father in a more cognizant phase of her life.

TOOBIN: And if the Supreme Court grants review, maybe they will hear argument in march, maybe there will be a decision by June, so again, that will mean a year --

BANFIELD: And a half.

TOOBIN: -- plus with the Brown, even if they win, that will mean taking her back. It's just hard to think of a good resolution to the case like this.

BANFIELD: Exactly what I was going to say. No winners, really, in this case.

TOOBIN: It's a real sad story.

BANFIELD: Thank you. More on it of course, we will keep following it.

Also, a deadly attack on a college campus, a faculty member among those killed where the murder took place. The weapon believed to be used all coming back when 360 continues.

(COMMERCIAL BREAK)

BANFIELD: Let's get the latest on other stories that we're following tonight. Isha Sesay is back with a "360 Bulletin" -- Isha.

ISHA SESAY, CNN CORRESPONDENT: Ashley, a bridge failure caused the derailment of a train carrying toxic chemicals in New Jersey. Several cars toppled into the Delaware River including one that spilled vinyl chloride. There are no serious injuries reported, but 18 people were sent to the hospital with breathing problems.

A faculty member and one other person were killed at Casper College in Wyoming today before the attacker apparently committed suicide. Police say there were no firearms involved but that the attacker used some type of sharp-edged weapon.

Ashleigh, this surveillance video could show one of the two winners of the $587.5 million Powerball jackpot. Check this out. It's from a gas station in Maryland. Witnesses say he walked in to check the numbers and lo and behold, they matched.

He hasn't officially come forward as the winner and a family in Missouri has been confirmed as the owner of the other winning ticket. They spoke to the granddaughter, asked what she wanted for Christmas. She said a pony.

BANFIELD: She'll probably get it.

SESAY: Yes, probably.

BANFIELD: Isha, thank you.

We are just two days away from "CNN Heroes, An All-Star Tribute." It's our annual broadcast saluting the top ten heroes of the year. Here's what's great about it. The recognition that they get often helps them to do even more for other people.

So tonight we catch up with three past honorees who are joining forces to help hundreds of orphans in Malawi.

(BEGIN VIDEOTAPE)

ANDERSON COOPER, CNN ANCHOR (voice-over): Marie De Silva was a nanny in the U.S. when she started a school for orphans in her native Malawi. Honored as a Top Ten CNN Hero in 2008, she's now joined forces with two other honorees. Magnus Barrow was recognized in 2010 for his work feeding school children around the globe.

UNIDENTIFIED FEMALE: He started his organization in Malawi so I just asked him to consider us.

UNIDENTIFIED MALE: I was very struck by her. I felt we were people who could work together.

UNIDENTIFIED FEMALE: This is the stove.

COOPER: Today, Magnus' organization, Mary's meals, provides free porridge daily to all 400 of Marie's students.

UNIDENTIFIED FEMALE: His support means the children will always have something to eat. He is a saint to me.

COOPER: The 2010 honoree Evans Wodongo makes solar lanterns for rural African communities. Evans visited Marie's school and recently his team taught students to build their own lamps.

UNIDENTIFIED FEMALE: For the family, it cuts the costs and for the children, it's helping them to study. Evans really motivated our kids to be inventors. They have come up with their own little models. COOPER: Now, Marie's students plan to supply lamps to their community. With creativity and compassion, these CNN Heroes are helping each other to change even more lives.

UNIDENTIFIED FEMALE: CNN Heroes coming together to work together. It's a family. How sweet is that?

(END VIDEOTAPE)

BANFIELD: It's very sweet. Don't forget to tune in this Sunday night, 9:00 p.m. Eastern, for "CNN Heroes, An All-Star Tribute." It's hosted by Anderson Cooper. That's live from the legendary Shrine Auditorium in Los Angeles, better than the Oscars, trust me. Back after this.

(COMMERCIAL BREAK)

BANFIELD: That does it for this edition of "360." We'll see you again one hour from now at 10:00 p.m. Eastern. Thanks for watching, everyone.

PIERS MORGAN TONIGHT starts now.