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Intelligence Agencies Out of Control?; Disaster in the Gulf Day 91

Aired July 19, 2010 - 20:00   ET



We begin with an explosive new "Washington Post" report into America's top-secret intelligence world. Nearly a decade after 9/11, our country's security and intelligence agencies have grown so bloated, so costly, and so disconnected from one another that no one seems to have a handle on just who is doing what. So, are we just throwing billions of dollars away? And, more importantly, are we any safer now because of it?

Plus, another story of broken government: prison inmates cheating taxpayers out of millions from behind bars. But when the IRS was tipped off by cops, the feds did nothing about it for years, and it's still happening. We're going to investigate.

And, in the Gulf, the containment cap is still holding, but for how much longer? And what's with that mystery seepage from the Gulf floor? We have the latest developments on day 91 of the disaster as well.

But we're going to start with our number-one story tonight, an incredible must-read piece in today's "Washington Post," a nearly two- year investigation into America's homeland security, with a stunning conclusion: widespread confusion and secrecy, even among those at the highest levels of power, a Byzantine federal system so wrapped up in bureaucracy and politics that it may be paralyzing the country's fight against terror.


NARRATOR: You think you know America, but you don't know top- secret America. We're all aware that there are three branches of government in the United States. But, in response to 9/11, a fourth branch has emerged. It is protected from public scrutiny by extraordinary secrecy, top-secret America.

WOLF BLITZER, CNN ANCHOR: What shocked you the most after this two-year investigation?

DANA PRIEST, "THE WASHINGTON POST": Just the sheer size.

UNIDENTIFIED MALE: There are now 3,200 government organizations and private firms working on homeland security, counterterrorism and intelligence -- 854,000 people hold top-secret security clearances. And analysts publish 50,000 intelligence reports every year. WILLIAM ARKIN, "THE WASHINGTON POST": The evidence shows that no one really is in a position of confidence to say that we are safer today than we were 10 years ago.


BROWN: Even President Obama's nominee to become the next director of national intelligence tells "The Post" there is only one entity in the universe that can see all of those programs, and that would be God.

You heard the numbers. Well, now look at all the places that "The Post" identified, government agencies and private contractors spread out across the country as part of the fight against terror.

The fear is that all of this is not providing extra layers of protection, but just clogging the arteries of our nation's safety, and at the end of the day, frankly doing nothing to actually stop an attack.

Here right now, Pentagon correspondent Barbara Starr.


BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): When passengers stopped Farouk Abdulmutallab from blowing up Northwest Airlines Flight 253 on Christmas Day, where was the warning from the U.S. intelligence community about a possible attack?

That's the challenge for James Clapper at Tuesday's confirmation hearings to be the president's next director of national intelligence: convincing Congress he is the man who can help avert the next attempted attack on the U.S.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: In an interconnected world where dangers can emerge suddenly, we have to protect ourselves against the full range of threats.

JAMES CLAPPER, NATIONAL INTELLIGENCE DIRECTOR NOMINEE: We are the largest, most capable intelligence enterprise on the planet, and it is a solemn, sacred trust for the DNI to make that enterprise work.

STARR: A new two-year investigation by "The Washington Post" concluded the $50 billion-plus intelligence community has overlap, waste and many people doing the same work, trying to analyze vast amounts of information.

REP. MAC THORNBERRY (R), TEXAS: We do not want any room for error in this business, because so many human lives are at stake. So, I think that's part of the reason that there are redundancies, that it has grown a lot, because there's so much information and so much expected out of the folks who do this work.

STARR: "The Post" found more than 3,000 government agencies and private companies now make up the intelligence community. Some 850,000 people have top-secret clearances. ARKIN: Well, I think that the unfortunate answer is that the evidence shows that we really have the same problems that we faced before, a lot more information, a lot more people looking at that information, but whether the dots are effectively being connected is still to be determined.

STARR: And the top Democratic senator on the Intelligence Committee questions whether Obama's choice, a military man, is the right one.

SEN. DIANNE FEINSTEIN (D), CALIFORNIA: We still have problems within our 16 intelligence agencies. And my concern has been defense controls so much, 85 percent of it, That the overall head, I have always felt, should be a civilian. But that civilian has to know how to temper sharp elbows and how to really move the entire community. And that's the trick.

STARR (on camera): Administration officials are pushing back against some of the criticisms raised by The "Washington Post" article. They say you bet there's redundancy and overlap, that that's a critical way to make sure they don't miss a piece of intelligence that could prevent the next attempted attack.

Barbara Starr, CNN, the Pentagon.


BROWN: And earlier I spoke with Fran Townsend, CNN's national security contributor and homeland security adviser under President Bush, along with our senior political analyst David Gergen.


BROWN: David, so as we heard, the "Post" report is claiming there are over 3,000 government programs or private companies that work on counterterrorism, that over 850,000 Americans possess top- secret clearance.

Bottom-line this. Has the intelligence structure gotten just too unwieldy to effectively protect us?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: I think that that's very clear from the first of these articles.

And, by the way, Dana Priest, who is a co-author, is regarded as one of the best investigative reporters in America. Clearly, we have got the makings of a Pulitzer Prize here in the next few days. But I do think that Fran would agree we have had now in the left few years -- since the national intelligence director has been set up, we have had three different people who have churned through that job as national intelligence director in just five years.

And I think we just don't have a handle on this mammoth undertaking that the government has got under way.

BROWN: Fran, you were homeland security adviser to President Bush. How was the intelligence bureaucracy allowed to mushroom to this extent?

FRANCES TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: Well, you know, Campbell, this goes back to the after the Cold War there was a peace dividend and there were resources cut during the Clinton administration to the intelligence community.

And so 9/11 happens. You have this dire need for additional capability. And what do you do? You don't have it in the government, so you contract it. We then add to that the establishment of the director of national intelligence.

Now, in 2006, the intelligence community undertook a review of the contractors, looking and setting rules, like you can't conduct essential government functions with a contractor. Clearly, more needs to be done to get this sort of under control.

BROWN: So, I guess, did the Bush administration or the Obama administration, for that matter, underestimate, I guess, the difficulty of making sure that all these different groups, all these different agencies talk to each other and communicate effectively?

TOWNSEND: You know, for me, I will tell you, Campbell, this is an everyday job making sure that they are sharing information. And I think we struggled in the Bush administration and we have seen the Obama administration also struggle with this job.

It's important that when tomorrow Jim Clapper goes for his confirmation hearings, they talk about, what are the authorities he needs to get this job done and run the intelligence community as a single, integrated enterprise?

BROWN: So, David, how do you turn it around at this point? What do you do?

GERGEN: Well, you have to ask when Mr. Clapper goes up tomorrow, where in the heck has Congress been in overseeing this over the last several years, for this mammoth growth?

But I do think a couple of things have to be said in defense of people working in intelligence. And that is, after 9/11, this country declared that it was engaged in a war on terror. And it's only -- you know, it follows from that that we were going to make a mammoth effort, as we should have, to better understand the nature of the threats that we're facing.

We also live in a much more highly complex, technological world. And the number that was eye-popping for me, Campbell -- and I would be interested in Fran's on this -- how many e-mails and telephone calls and other communications the National Security Agency every day, every single day, how many does it intercept and store in computers?

The number was in "The Washington Post" 1.7 billion e-mails and telephone calls and other communications are intercepted by the United States government every day for intelligence purposes. That's unbelievable to me. BROWN: And, Fran, the -- they are pretty striking examples of lapses, intelligence lapses that this article cites, I mean, the fact that the underwear bomber, Umar Farouk Abdulmutallab, was stopped not with intelligence, but because, as we all recall, with that quick- acting passenger who was on his flight.

And it also points out that, despite the intelligence gained with respect to the Fort Hood shooter, an overtaxed system sort of allowed that information to go unprocessed. So, how do you deal with that? How do we get to the point where we can make sure that these kind of lapses don't continue?

TOWNSEND: No. Well, and to David's point, Campbell, it's not a matter -- it's not a matter of collecting more dots. We collect more intelligence than we can look at and fully understand and turn into real, useful knowledge.

And so what we need to do is understand what the focus and priorities are, so that we're able to look at the information that's most critical to stopping the next threat.

I'll tell you, and to David's point, this is an intelligence -- this is a community, the intelligence community, that has performed awfully well since September the 11th. And while we hear an awful lot about their vulnerabilities or their shortcomings, there have been many thwarted attacks. They have done extraordinarily well most of the time. And this is a work in progress. The DNI hasn't functioned as it should. And so this is an opportunity for us to get that better.

BROWN: And a fair point there. We don't talk about the successes. They aren't publicized and we don't sit and debate them on cable news.

GERGEN: That's right.

And, Campbell, the information-sharing -- I think Fran would attest to this -- is much better today than it was. And we have been able to stop large conspiracies. We're having trouble with the loners. You know, the oddball who doesn't communicate, that is very, very hard for intelligence to pick up.

But I think the intelligence services overall are doing a much better job at picking up the conspiracies and breaking them up very, very early. And that's as a result of this mammoth effort.

Now, the mammoth effort needs to be pruned. It need to be brought under better control. I think DNI, the national intelligence director, I think that person needs far more budgetary authority. If you are really going to ask somebody to be in command, you have really got to give them authority. And we haven't done that.

BROWN: David Gergen, Fran Townsend, to both of you, really appreciate your time on this tonight. Thank you.

GERGEN: Thank you. BROWN: And coming up: President Obama accuses Republicans of holding America's unemployed hostage. But is it all just political posturing in the run-up to midterms? We are going to have the best political team on television here to break it down coming up next.


BROWN: With -- well, we will start with our number-one political story tonight: President Obama blasting Republicans for repeatedly blocking the extension of unemployment benefits through November.

GOP leaders say it should be paid for with cuts in spending, not by adding $33 billion to the deficit. But the president thinks there is another motive here.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Over the past few weeks, a majority of senators have tried, not once, not twice, but three times to extend emergency relief on a temporary basis. Each time a partisan minority in the Senate has used parliamentary maneuvers to block a vote, denying millions of people who are out of work much-needed relief.

These leaders in the Senate who are advancing a misguided notion that emergency relief somehow discourages people from looking for a job should talk to these folks.

That attitude, I think, reflects a lack of faith in the American people.

It's time to stop holding workers laid off in this recession hostage to Washington politics. It's time to do what's right, not for the next election, but for the middle class.


BROWN: Now, tomorrow, the Senate takes the bill up once again. Democrats are hoping the newly seated replacement for the late Robert Byrd will give them the votes to break the gridlock.

And with the unemployment rate still hovering near double digits, you can bet jobs will be a key factor in the midterms, maybe the key factor. And both sides are not wasting a minute pointing fingers as campaigns ramp up.

And joining me now to talk about all of this is CNN political analyst Roland Martin, along with senior political analyst Gloria Borger and Ed Rollins.

Roland, let me start with you. The president made it pretty clear he thinks this is pure positioning, election-year politics on both sides. Possibly, but are there real honest-to-goodness principles involved here as well?

ROLAND MARTIN, CNN CONTRIBUTOR: I am not necessarily buying it. I mean, look, at the end of the day, the Republicans, they have owned this narrative really for the last 12 to 14 months. And that is returning to this notion of fiscal conservativism. It is no doubt helping them when you look at the polling data.

And, so, Democrats certainly should be seizing on frankly some of these crazy and outlandish comments you hear from Republicans basically saying folks are lazy and they should get back to work. It's sort of offensive to the average voter, but it's surprising how Democrats have not really created a communications mode that resonates with the average person on these issues.

BROWN: Well, it is.

Well, what do you think about the rhetoric, first of all, Ed, because it hasn't seemed to help Republicans? But to Roland's point, maybe Democrats haven't made enough of it.

ED ROLLINS, CNN SENIOR POLITICAL CONTRIBUTOR: Well, they haven't done it well. They are off-message and they have been off-message for a long time.

And part of this is, there's such an animosity between this White House and the Republicans. What amazes me is that in three or four months here, this president has to sit down with these same people, and there's going to be a lot more of them in the room on the other side.

If he can barely put this together, if he thinks all of a sudden it's going to be love and forgiveness and let's go for the next two years and get some big programs through, he's crazy. He's got to take a high tone. He's got to make his case. He can make his case any way he wants to.

But, at the end of the day, he's not going to elect any of these challenged Democrats by saying Republicans basically are holding them hostage because they want to offset the spending.

BROWN: Gloria, the total cost I think is about $33 billion to extend the benefits. Put that in the context of what that means in terms of Washington spending more generally.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, you know, the Democrats make the argument, OK, Republicans, you want to pay billions of dollars for -- to extend tax cuts for the wealthy, but you don't want to do this for people who are unemployed?

And so that's their political argument. But it's interesting to me. The Republican political argument is making one very important calculation, Campbell. And that is that the American public is so scared of big deficits and big government that even the American public will, at a certain point, say, you know what? We can't afford this anymore.

This is extending unemployment benefits to 99 weeks. And I think at a certain point, Republicans are going to say, OK, you want to do it, we have to find a way to pay for it. They are saying...


MARTIN: But, Campbell, the...

BORGER: Go ahead.

BROWN: Jump in, Roland. Go ahead.


MARTIN: No, Gloria, go ahead.

BORGER: No, no.

I mean, Republicans are saying, let's use the unused stimulus money to pay for it. I think that's disingenuous, too. Nobody is paying attention to the really big problem out there, the deficit. They are talking about a commission, right?

BROWN: Roland, go ahead.

MARTIN: But, Campbell, the people who don't give a flip about the deficit are the people who are broke and out of work.

Republicans understand that their voters are more enthusiastic and so they are targeting those folks. And they're assuming that, you know what? They're going to come out and vote. They're going to put us in office.

BORGER: Right.

MARTIN: And so what I don't understand from the White House, why they aren't flooding the zone. You don't see the commerce secretary. You don't see the labor secretary. You only see the president carrying the ball.

I don't understand why they aren't talking to the average person to say, we are helping you. We are touching you, and we need you to keep us in office in order to help the average person. So, we hear Republicans talking about tax cuts for the rich. How do you not counter that? I don't get it.

ROLLINS: Well, they haven't used their Cabinet for the last year-and-a-half. When is the last time anybody saw Gary Locke, the commerce secretary?

MARTIN: Absolutely.

ROLLINS: A former governor of the state of Washington, a guy...


ROLLINS: He's not in any meetings. He's not in any business meetings.


BROWN: But hasn't the belief always been that you have this extraordinary salesmen in Barack Obama? So, why would you parcel that out to members of the Cabinet?


ROLLINS: I have said this on this show for a year-and-a-half. This guy is overused. He's not made the sale.

MARTIN: You nailed it.

ROLLINS: He's not made the sale. A majority of Americans...

MARTIN: He's right.

ROLLINS: ... don't believe in his health care program.


BORGER: And they don't believe he's focusing on anything.


BORGER: If he's doing so much -- remember, Bill Clinton, focus like a laser on the economy. That's what the people would actually want.

But they see that he's done health care reform. They see that he's trying to do immigration policy, now energy policy. And they want him to focus. When they see him everywhere, they don't get that sense.

BROWN: So, do they realize, Gloria, that there is a problem? Is there an awareness at the White House that this is an issue?


BORGER: Well, the White House believes, as Ed was saying, that Barack Obama is their best spokesman on everything.


BORGER: And they may be right. And so, they're going to use Barack Obama whenever they can.

And don't forget, his personal popularity, Campbell, remains just fine. People like him a lot more than they like their -- his policies, in fact. So, putting him out there is not a bad thing.

MARTIN: And, Campbell?

BROWN: Yes? Go ahead, Roland.

MARTIN: ... real quick, down in Louisiana, you had Labor Secretary Hilda Solis in a room with some of the fishermen there. And you know what? They know who she was. They just thought she was just some person from Washington.

This is a member of the president's Cabinet. That goes to show you that there's no name identification with this Cabinet. You have to flood the zone. And, so, if you are seeing the commerce secretary out, he's talking to small business. Labor secretary, she's talking to the average worker out there as well. You use all of your bodies. The president cannot say and do everything.

ROLLINS: There's a real danger that's coming about -- 41 was a well-liked man when he was defeated and had the lowest vote of any Republican in history because people didn't think he could do the job.

People like Barack Obama. They now basically don't like his policies and they aren't sure he's competent as president. That's a very tough place to overcome.

BORGER: Well, and that's what the oil spill has done, because you see that leak and people say, well, why can't you plug it?


BROWN: Certainly exacerbating it.

All right, Roland Martin, Gloria Borger, Ed Rollins, thanks to everybody. Appreciate it, guys.


BROWN: Coming up next: the green light for one more day of testing in the Gulf, as the feds and BP try to explain what's happening now with the ruptured well.

And Sarah Palin tweets about those plans to build the mosque near ground zero speaking in fluent Palinese -- coming up.


BROWN: Despite test results showing possible methane gas leaks and seepage and unusual pressure readings, the BP well in the Gulf will stay sealed another day. That is the latest word from the man in charge of the government's response, Thad Allen.

Thad called -- or Allen, rather, called the seepage minor four days after BP halted the leak with a new cap. Take a listen.


ADMIRAL THAD ALLEN (RET.), NATIONAL INCIDENT COMMANDER: The small seepages we are finding right now do not present, at least at this point, any indication that there is a threat to the wellbore. If we think that was going to happen, we would be taking immediate action.

Now, having said that, if there is any indication of a precipitous drop in pressure or any reason why we might need to do something about it, we would need to have to vent immediately to let -- relieve the pressure on the well and move to longer-term containment.


BROWN: And David Mattingly is joining us right now from New Orleans.

And, David, why does Admiral Allen think that the seepage, think that these pressure readings and the leaks are not a problem?

DAVID MATTINGLY, CNN CORRESPONDENT: Well, that primary area of seepage that they have been talking about is about two miles or so away from the well itself.

They don't believe it is actually a part of this well or part of the reservoir that this well is tapped into. But they are doing some tests. They are going to make sure, as they go along, and they are going to continue to watch it, just as they are watching everything else around in the area.

They are using specialized equipment that can sort of detect these sort of -- these methane gases that are in the water. They have encountered some anomalies, and they are watching that as well.

Again, they don't believe that there's any problem with this well yet. They have received no negative indication that this well has lost any of its integrity, is actually leaking or anything like that, because, as you heard Thad Allen say, that, if they did see this, they would open this well back up immediately and then make plans to capture that oil and send it up to the surface.

BROWN: So, David if they are going to continue with this test over another day or so, explain to us what exactly they are watching for. What's going to tell them for sure whether it's working, whether it's holding the way they want it to?

MATTINGLY: They have seismic equipment that is checking the seafloor. They are watching for any sort of anomalies down there. They are watching for perhaps the possibility that oil might seep out of the well and displace some of the water that might be down there around the well down below.

They are watching things like that. They are also watching with specialized sound equipment, acoustic equipment, that they are watching for those clouds of potential methane gas popping up in the water itself. So, it's a very intense technical operation that they have going out there just to make sure that there's nothing that they can't see with the naked eye that is going on down there.

BROWN: All right, David Mattingly with the very latest for us tonight -- David, thank you.

Coming up: a CNN exclusive -- from fishermen to heroes. Anderson Cooper talks to the first people to respond to the desperate calls for help from the Deepwater Horizon. We will have their story coming up next.


BROWN: It was April 20, and three friends were fishing in the Gulf of Mexico. Suddenly, they received a mayday call from the Deepwater Horizon oil rig.

In just -- in a matter of seconds, those fishermen turned into first-responders.

Anderson Cooper spoke with them in this exclusive interview. Listen to how they describe that moment that they got that frantic call for help.



BRADLEY SHIVERS, FISHERMAN: Oh, yes. Certainly, yes. We started hearing the mayday calls from the Deepwater Horizon.

UNIDENTIFIED MALE: It went from the fireball and it seemed like forever, but it was seconds. Fireball, mayday. The sound --

SCOTT RUSSELL, FISHERMAN: The sonic boom. I mean, when it boomed it was just sonic boom.

MARK MEAD, FISHERMAN: It hit your chest.

RUSSELL: Yes, it was not like --it's very hard to explain. It was almost like --

MEAD: It was muffled, but you could feel it.

RUSSELL: It's like a plane flying real low, really fast. And it shook the boat. We knew it was bad, you know.

COOPER: What did the mayday call said? What did they say to you?

SHIVERS: It said -- we heard, this is Deepwater Horizon, Deepwater Horizon. Mayday, mayday. We're abandoning the rig. We're abandoning the rig.

COOPER: When you heard they were abandoning the rig, what did you think?


RUSSELL: Get there and go help. I mean, go.

SHIVERS: We were actually -- we were on (INAUDIBLE). You know, we started driving that way in the boat. I started going and like Mark was saying, at that point, they started securing everything in the boat. Getting the lifejackets out. That and, you know, I was like, hi, guys, you know, we've got to go do this. They were like, absolutely. You know, we have to go see what's going on here and go lend a hand to do whatever we can at that point. And, you know, it's 18 miles away. You are 10:30 -- 10:00 at night. It's pitch black dark.

COOPER: So you guys go full board toward it. What do you see when you get there?

RUSSELL: Fire. I mean, it's the biggest -- I mean, just my perspective of it coming up on it. You know, I remember Bradley's driving. I was over there trying to help him a little bit with the radio. You know, he was up on the bow. Whatever, we were all doing different things. But I mean, the rig is exploding. I mean, it's like an inferno.


BROWN: And Anderson is joining us right now from New Orleans. And, Anderson, this is quite a dramatic story. What happened next when they got up to this huge inferno? I mean, what could they really do?

COOPER: Well, a lot of the people had gotten off the rig in the lifeboats. They were already on the one ship that was there that had been in the area when the rig blew. They said some people were still hanging off the life rafts. Basically, they said they gave over what medical supplies they had. And then people on -- in some of the lifeboats were saying that there were people in the water. So they basically went toward the rig to get closer to search for the next couple of hours to see if anybody was in fact in the water that they could find.

BROWN: And anything they could recall from what the workers on that oil rig told them about what actually happened?

COOPER: Not really. I mean, I think they describe a scene of just complete chaos. I mean, people screaming, people yelling. Some people crying. They can obviously see some people were injured on the boat. So they didn't seem like there was a lot of communication. It was kind of people yelling and then they started taking instructions from the Coast Guard in terms of the search and rescue. And that's what's really haunting to them. Those are the memories that they say they will not forget. Searching the water by the glow of the fire, looking for anybody who might still be alive in the water.

BROWN: Wow. Anderson Cooper for us tonight. Anderson, thank you so much. And of course, be sure to tune in tonight at 10:00 p.m. Eastern for more of Anderson's exclusive interview with the first responders to the Deepwater Horizon disaster. That is "AC 360" tonight right here on CNN.

When we come back, Sarah Palin weighs in on the emotional debate over whether to build an Islamic center near Ground Zero. Why her message may be getting lost in translation. That is ahead.


BROWN: Sarah Palin takes on a serious subject with a tweet gone viral in a way she may not like. And that story is coming up. But first, Joe Johns is here with some of the other stories we're following tonight -- Joe.

JOE JOHNS, CNN SENIOR CORRESPONDENT: Hey, Campbell. The BP oil spill and the Lockerbie bomber's release are the big topics on the table when President Obama welcomes British Prime Minister David Cameron to Washington. The two leaders are set to meet in the Oval Office tomorrow. The war in Afghanistan and the world economy are also expected to be on the agenda. The talks occur the day before President Obama is scheduled to sign sweeping financial reform legislation.

Secretary of State Clinton announced a major aid package for Pakistan today, pledging hundreds of millions of dollars. The money will help improve dams, improve power plants and renovate medical facilities. Anti-American sentiment is spreading in Pakistan, and the U.S. is hoping to build more trust between the two countries.

Today, the White House announced the National Guard forces will begin their deployment along the U.S./Mexican border on August 1st. Some 1,200 Army and Air National Guard troops will be stationed there for at least a year. Their mission is to help the border patrol capture people trying to get into the country illegally. The troops will also help crack down on drug smuggling.

And remember the soup Nazi from "Seinfeld"? Well, guess who's opening up shop in New York again? Al Yeganeh, the original soup man who was the inspiration for the comically cranky character who bellowed "no soup for you" is back again. Yeganeh is reopening his famed soup store in midtown Manhattan. So get in line and he means it. And you know, I got to say, I mean, I was not a big "Seinfeld" person, but I really remember that character.

BROWN: Who could forget him?

JOHNS: Absolutely.

BROWN: Joe Johns, thanks, Joe.

JOHNS: You bet.

BROWN: Coming up, Sarah Palin just says no to plans for building a mosque near Ground Zero and builds her own new word in the process. We're going to tell you what she came up with.

And some prisoners in Florida come up with an elaborate tax scam from inside their prison cells. Details of how they almost put one over on the IRS, coming up next.


BROWN: Our number one buzz item tonight. Sarah Palin tweeting about plans to build a mosque near Ground Zero and coining a new phrase in the process. Here's what she said in her tweet Sunday. Quote, "Ground Zero mosque supporters, doesn't it stab you in the heart as it does ours throughout the heartland? Peaceful Muslims, please refudiate." Refudiate with an "f"? You bet you. Here's CNN's Jeanne Moos. (BEGIN VIDEOTAPE)

JEANNE MOOS, CNN NATIONAL CORRESPONDENT (voice-over): Don't bother looking this one up in the dictionary.

SARAH PALIN (R), FORMER ALASKA GOVERNOR: They could refudiate what it is.

MOOS: Excuse me?

PALIN: Refudiate what it is.

MOOS: Not only did Sarah Palin say it, she tweeted it while discussing the proposed Islamic community center and mosque near Ground Zero. Peaceful Muslims, please refudiate.

(on camera): Now "refudiate" sounds suspiciously like an actual word that Sarah Palin probably meant to say.

UNIDENTIFIED MALE: Repudiate. Repudiate.

MOOS: But having said "refudiate," she wasn't about to repudiate it.

(voice-over): Instead, she raised the ante with this tweet. "Refudiate," misunderestimate, wee-wee'd up. English is a living language. Shakespeare liked to coin new words, too. Got to celebrate it.

PALIN: Refudiate --


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Everybody in Washington gets all wee-wee'd up.


BROWN: Plug "refudiate" into Google right now and you get more than 100,000 hits.

So we did want to talk about more about who is behind this controversial Islamic center that we have been talking so much about. And we've heard quite a bit about the mosque's religious leader and his alleged links to groups that support terror. But we haven't heard much from the real estate developer who is behind the project. CNN's Deb Feyerick caught up with him earlier.


DEBORAH FEYERICK, CNN CORRESPONDENT: This is where you sort of conceived of the idea?

SHARIF EL-GAMAL, SOHO PROPERTIES: Yes it is. FEYERICK (voice-over): Meet New York real estate developer, Sharif El-Gamal, the man at the center of a controversial plan a stone's throw from the World Trade Center site.

EL-GAMAL: This is a Muslim-led project. This is an Islamic community center that will cater to all of New York. Fitness gym and basketball courts.

FEYERICK: Plans include a performing arts center, swimming pool, child care facilities and, yes, a Muslim prayer space two blocks from the worst terror attack in U.S. history.

(on camera): Why not have a prayer space for Buddhists or Jews or Christians or why must it be Muslim? It can't just be a business decision.

EL-GAMAL: There are Jewish community centers all over the country.

FEYERICK: But the Jews didn't take down two towers.

EL-GAMAL: There are YMCAs all over the country.

FEYERICK: But the Christians didn't take down the towers.

EL-GAMAL: And this is a need that exists.

FEYERICK: For those who are so still sensitive and so raw to this, their question, their overriding question is why here? Why so close? It's two blocks. But it was close enough that landing gear ended up on the roof. Why?

EL-GAMAL: There is a need. It's supply and demand. The community wants it. The politicians are supporting it.

FEYERICK (voice-over): Maybe. But many who attended a town hall meeting recently were dead set against it.

UNIDENTIFIED MALE: Have we forgotten what happened at 9/11?

EL-GAMAL: What happened that day is not Islam. What happened that day is terrorism.

FEYERICK (on camera): Coming out of that hearing, somebody said, the Japanese would never have dared to build on Pearl Harbor. What makes this different?

EL-GAMAL: If you were at that hearing the way that I was at that hearing, you come out understanding that there is a great need for dialogue now.

FEYERICK (voice-over): El-Gamal says many people don't understand Islam. But does that make it Islamophobia?

EL-GAMAL: A hundred percent.

FEYERICK (on camera): Why?

EL-GAMAL: Because the moderate voice of Islam is not coming out.

FEYERICK: Can you guarantee that this center will root out extremism or completely reject any extremists that taught hatred?

EL-GAMAL: A hundred percent. We will not tolerate extremism. We will not tolerate extremism.

FEYERICK (voice-over): And yet critics say the religious leader Imam Faisal Abdul Rauf (ph) has links to groups that support terror.

EL-GAMAL: Imam Faisal is one of the most moderate Muslims that exist in this country today.

FEYERICK (on camera): Will you reject any money that comes either directly or indirectly from any person, any country, any organization, any corporation that has any links to terrorism? Will you be doing due diligence?

EL-GAMAL: We are going to be doing extreme due diligence, and we are going to hire the best security experts in the country to help us walk through the process. And we plan on being very transparent throughout the whole process.

FEYERICK: For those who would say this is not an olive branch to greater understanding, this is more an act of defiance, how would you answer those people?

EL-GAMAL: This is an olive branch.


BROWN: Deborah Feyerick is joining us right now. And, Deb, just to be clear here. Landmark status may be pending, but this thing is getting built no matter what. It doesn't really matter, right?

FEYERICK: It's exactly right. It's a done deal. The developer owns the land, he owns the building. The question is if he gets the approval, he can tear down the existing facility. If he doesn't get the approval, then he just builds the Islamic cultural center and that mosque space within the existing building.

BROWN: So why does El-Gamal feel so very strongly about this? Because clearly he does.

FEYERICK: You know, it's so interesting because the difference is the mainstream moderate Muslims compared to the extremists. And he says that he wants a place for his two daughters so they can go there. They can feel connected both culturally and religiously to an institution. And he hopes that people will come and learn and share what moderate mainstream Muslim is -- Islam is all about.

BROWN: Did he look at any other buildings?

FEYERICK: He did. That was the big question. All the buildings he looked at. You know, this is New York City, he says. This is the reality of real estate. He says it's a coincidence that it happens to be two blocks from Ground Zero.

BROWN: All right. Well, we'll see how this all plays out. I don't think it's over yet regardless.

FEYERICK: Absolutely now.

BROWN: Deborah Feyerick, really appreciate it. Deb, thanks.

FEYERICK: Of course.

BROWN: "LARRY KING LIVE" starts in just a few minutes. Larry, what do you tonight?

LARRY KING, HOST, "LARRY KING LIVE": T. Boone Pickens is back with us on another day of developments in the gulf. The well cap appears to be holding out. Apparently, they're not out of the woods just yet. The legendary oil man is going to tell us what he knows. And then we're going to talk with some Washington observers about problems in the tea party movement and the economy. And America's security. It's all ahead on "LARRY KING LIVE," Campbell.

BROWN: All right, Larry, we'll see you in a few minutes.

Coming up, fraud behind bars. How some inmates are ripping off the government while they are doing time.


BROWN: Anybody who has committed tax fraud can certainly land in jail. But what happens when you get caught in a tax scheme when you are already in jail. Here is the story of the ultimate inside job. CNN's John Zarrella reports.


JOHN ZARRELLA, CNN CORRESPONDENT (voice-over): Just a routine search of a jail cell. Officer Mark Lindback didn't expect to find much.

SGT. MARK LINDBACK, MONROE CO. DETENTION CENTER: After the inmates had exit the cell, went over, basically pulled up the mattress. He had some of the items under his mattress. He had additional items underneath the bunk.

ZARRELLA: The items -- tax forms, an address book with social security numbers, birthdates and cheat sheets for filling out returns. That was December of 2006. What Lindback had stumbled upon was a lucrative income tax fraud scheme run by inmates at the Monroe County jail near Key West. Before they were busted, the inmates filed for more than $1 million in tax refunds involving half the jail population.

CAPT. PENNY PHELPS, MONROE CO. DETENTION CENTER: But what they would do is go to other inmates and suggest to an inmate, I can get you $4,500 in a tax return. It will cost you $500.

ZARRELLA: In some cases, with the help of friends and family, the prisoners would fill out the 1040EZ short form, then attach a 4852 form with the names of businesses that didn't exist, and income they never earned. The 4852 is a substitute used when an employer doesn't provide a W-2. The initial investigation was handled by county prosecutor, Jon Ellsworth. Phone calls were recorded.

RICK ROTH, FORMER MONROE CO. SHERIFF: One of the main guys at one point is telling one of his cohorts that he's not going to do white-collar -- street crime anymore because Uncle Sam's taking good care of him.

ZARRELLA: Before they were caught and the jail started intercepting incoming checks, the inmates collected, Ellsworth says, at least $100,000 from the IRS. One inmate had checks sent to his brother's house.

(on camera): Dozens of checks were going to one address and that didn't raise any red flags with the IRS?

ROTH: Apparently not.

ZARRELLA (voice-over): By 2007, Ellsworth turned over boxes of evidence to the IRS. Case closed, right? Not so fast.

UNIDENTIFIED MALE: And they said, well, we're working on it, we're investigating. We can't take your investigation and prosecute from your investigation. We have to do our own investigation.

ZARRELLA: Earlier this year, nearly 3 1/2 years after the scheme was busted, federal indictments were finally brought against a couple of the ring leaders and family members. Why so long? The IRS wouldn't say.

(on camera): Now don't think this inmate get-rich-quick scheme started here at the Monroe County Detention Center. Oh, no. Authorities tell us it's been going on for decades at state and federal prisons all across the country.

PHELPS: One of the inmates that I interviewed said that he had learned of it when he was in a federal prison.

ZARRELLA (voice-over): In a statement, the IRS told CNN that it has programs to combat this. But the IRS said, quote, "It is not a simple process, particularly considering the fact that some inmates are entitled to tax refunds and that the prison population is not static."

According to congressional testimony in 2004, more than 4,000 bogus refunds were issued to prisoners for almost $15 million, but the IRS blocked more than $53 million in false claims.

UNIDENTIFIED MALE: The system has a flaw that needs to be fixed. And it should be easy enough to fix by changing a form or changing the submissions. ZARRELLA: And while the IRS is now prosecuting the Monroe jail case, guess what some inmates are still doing? Filing fraudulent returns and still getting checks.

UNIDENTIFIED MALE: I think we have one here that came in that was for about $5,000.

ZARRELLA (on camera): Here it is.

UNIDENTIFIED MALE: It's about $5,000.

ZARRELLA: So this is an IRS check --


ZARRELLA: -- that was sent to that inmate --


ZARRELLA: -- for $5,920 that was intercepted.


ZARRELLA (voice-over): At least here the checks end up in the hands of the FBI.

John Zarrella, CNN, Key West, Florida.


BROWN: "LARRY KING LIVE" starts in just a few minutes. But up next, tonight's "Punch Line."


JAY LENO, HOST, "THE TONIGHT SHOW WITH JAY LENO": Today is a day of cautious optimism. The BP well has been capped. Lindsay Lohan is in rehab. We're not sure how long either one of those is going to hold. OK, but we can pray.


BROWN: It's Monday. So I'm sure we can all use a few laughs. Therefore, we bring you tonight's "Punch Line." Take a look.


DAVID LETTERMAN, HOST, "LATE SHOW WITH DAVID LETTERMAN": George Steinbrenner, an amazing man in the world of sports, transformed the Yankees from a $10 million franchise to a billion dollar franchise. A billion dollar franchise. You know what his secret was? The $9 hot dog.

JAY LENO, HOST, "THE TONIGHT SHOW WITH JAY LENO": Today, Apple reached out to their customers. They're now going to offer a free iPhone case for all iPhone users. It's not going to help reception, but it protects the iPhone after you throw it against a wall.

JIMMY FALLON, HOST, "LATE NIGHT WITH JIMMY FALLON": A lawmaker in Pennsylvania is raising new questions about work permits for Kate Gosselin's sextuplets since children under 7 are not allowed to work in TV. I didn't realize that was a law. Sorry, Eddie.

UNIDENTIFIED MALE: You got to be kidding me.


BROWN: That was good. That's going to do it for us. Have a great night, everybody. We'll see you tomorrow.

"LARRY KING LIVE" starts right now.