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U.S. Troops Heading to Australia; Gingrich Under Fire

Aired November 16, 2011 - 18:00   ET


JOHN KING, CNN ANCHOR: Good evening, everyone.

Tonight, President Obama addresses Australia's Parliament this hour and makes a new military investment in the South Pacific that isn't sitting well in China.

Plus, Newt Gingrich doesn't seem to think much of Fannie Mae and Freddie Mac.


NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: The two biggest debtors in the American system and the most dangerous companies for imploding.


KING: So would it surprise you to learn that same Newt Gingrich was paid more than $1.5 million to help Freddie Mac make friends?


GINGRICH: I was glad to offer strategic advice. And we did it for a number of companies. And the Gingrich Group was very successful.


KING: Gingrich sees no conflict. His critics see hypocrisy.

But we begin first tonight with breaking news. A new judge will preside over the case against the former Penn State football coach Jerry Sandusky, this change prompted by complaints the first judge had ties to Sandusky's charity, Second Mile. Plus, new questions tonight about whether the changing story of a key witness jeopardizes the criminal case against Sandusky who is accused of raping at least eight young boys.

Also the mother of one of Sandusky's alleged victims says she's sickened he's free on bail and sickened that he's free to conduct a nationally broadcast interview in which he proclaims he did nothing wrong.

(BEGIN VIDEO CLIP) UNIDENTIFIED FEMALE: It makes me really mad that my son can't go out and have a normal life. He can't go out and hang out at the mall, because he might run into Jerry.

He gets to go to the mall and shop and do whatever he wants to do. That aggravates me. He should be in jail.


KING: We begin with our coverage tonight with CNN contributor Sara Ganim, a reporter for "The Patriot-News" in Harrisburg.

And, Sara, you had a chance today to look at a very important document, a police report involving a key witness in this case, Mike McQueary. Tell us about it.

SARA GANIM, CNN CONTRIBUTOR: Well, I did review this document. It's about two pages. It does say that Mike McQueary, it does say a lot of what Mike McQueary told the grand jury in his testimony.

However, it does not say anything about him talking to police or about him stopping the assault which he says he saw in progress. That's different from an e-mail that we saw yesterday where Mike McQueary is telling people that he did do something to make sure the assault stopped, and that he did talk to police as well as university officials.

This document outlines what he saw, what happened that night. He says that it all went down in just about a minute. So it wasn't very long at all. Like I said, it doesn't say anything about police in the document at all.

KING: More on that in just a minute, that conflicting story. The conflict in that story could be important as this case proceeds towards trial.

Sara, another important development today, the new judge. The first judge of course freed Sandusky on bail. That was a big deal. Prosecutors objected to that. Why the new judge and what do we know about that?

GANIM: We know that Robert E. Scott, a senior judge from Westmoreland County, Pennsylvania, is going to be hearing the preliminary hearing on December 7.

The administrative office for Pennsylvania courts, which oversees judges, says this comes because he doesn't have any known ties to Penn State or to The Second Mile, which is the charity that Jerry Sandusky founded and where grand jurors say he found his victims.

You could be pretty hard-pressed to find people in this town here in Centre County, Pennsylvania, that don't have ties to Penn State or to The Second Mile. The Second Mile is a pretty big charity here. Penn State obviously is a big part of this town. That was an issue. It's something we have been talking about all week, is that people tend to have some connection in some way to one or two of those organizations.

So this judge was brought in from out of town so that that doesn't become an issue.

KING: Sara, one more quick one. In firing essentially Joe Paterno, and bringing in Tom Bradley as the interim coach, Penn State trying to turn the page. But you have also learned some important information that Bradley himself does have at least a modest role in this investigation.

GANIM: Yes, he did testify. We did learn that tonight, John. We don't know what he testified to. It was over the summer. Nothing about his testimony is mentioned in that 23-page grand jury indictment. So we don't know exactly what he testified to or if it was important to the investigation. We just know that he was a witness.

KING: Sara Ganim for us on the campus again tonight with important reporting, Sara, thank you.

Coach Sandusky is accused of sexually molesting boys over a 15- year period, including the late 1980s, when our next guest was a graduate assistant with the Penn State football program.

Matt Paknis not only worked with Sandusky and the legendary Penn State head coach Joe Paterno, he brings unique perspective to this story because he was sexually abused as a child.

Matt, I want to thank you for sharing your time and your story with us tonight.

Let me just start with your time at Penn State and your knowledge, your relationship with Jerry Sandusky. When you were there at the time, any red flags, any suspicions?

MATT PAKNIS, FORMER PENN STATE GRADUATE ASSISTANT: I really didn't think there was anything going on. I know he was surrounded all the time by little boys. It was part of his Second Mile foundation.

They were around the program a lot. And I would notice that on the camps in the summer when we had a lot of kids come up, he'd be a little more touchy-feely or poking at them more readily than I thought was appropriate. But outside of that, I never saw him conduct himself in any way that would have been sexual misconduct or considered sexual misconduct.

KING: And so when this case hit the front pages in the national news broadcasts, what went through your mind?

PAKNIS: I was shocked.

One of my friends from Pennsylvania who I played football next to in college called me and he made reference to Sandusky, and it sounded bad. So I went home that night and I put on the Internet. And I read through a lot of different documents, and then I read through the grand jury's report.

And I was just mortified. I'm pretty well-grounded. I have worked on myself for a long time. But I was just taken aback. And I said someone has got to start standing up and saying something for the survivors and saying, they can make it, they can make it through. And I'm tired of seeing these people create these fiefdoms where bad things happen and it's sort of all brushed under a rug.

KING: Let's talk some about that if you don't mind, and I appreciate your courage coming forward, in the sense that coach Sandusky is accused of taking advantage of underprivileged kids who came to his charity, Second Mile, to get help, to get mentoring, to get tutoring. He's accused of violating just about everything, every code of decency and morality.

In your case, your mother was sick and a neighbor, to console you, at the time seemingly to help you, then turned into an abusive relationship. What happened?

PAKNIS: Yes, I was young.

My mom I think was diagnosed when I was 8 for melanoma. She went in for some very radical surgeries. My father was obviously distracted and very stressed. And so at the time, we all ran around. And we were outside all the time. And a neighbor feigned interest in me and concern and pretty much it was exactly what happened with how Jerry sort of groomed his folks.

Fortunately, I grew early and I was able to stop it. And my mom got me counseling for some concentration problems. And in that counseling I was able to share that I was being abused. And I had stopped it before that time, but when I shared that, the weight just lifted of my shoulder.

And so I'm trying to encourage people that have had that horrific experience to get out there and get some counseling with licensed people. And it could happen to anyone. We had a good family. There was crisis in my family, that's for sure. And that's one of the earmarks and one of the types of families that are often targeted, in addition to underprivileged kids that don't have a dad around and don't have the means to have that support.

So I'm just -- I really feel for these survivors. But I want to tell them they can make it.

KING: And I thank you for making that statement here.

I want you to listen some because I want to get your perspective. And perhaps you can -- perhaps some of coach Sandusky's victims are watching, perhaps other people who are afraid to speak up, afraid to share their own stories with their family are watching.

I want you to listen to some of the conversation Bob Costas had with Sandusky the other night where he's denying he has committed any crimes, but he does acknowledge some beyond bizarre, beyond reprehensible behavior. (BEGIN VIDEO CLIP)

BOB COSTAS, NBC NEWS: Are you a pedophile?


COSTAS: Are you sexually attracted to young boys, to underage boys?

SANDUSKY: Am I sexually attracted to underage boys?


SANDUSKY: Sexually attracted -- you know, I enjoy young people. I love to be around them. I -- I -- but no, I'm not sexually attracted to young boys.


KING: Matt, he went on in that interview to talk about horseplay in the showers and maybe inappropriate touching, but denying he did anything inappropriate of a sexual nature.

Given your experience, when you hear somebody like that talking, what goes through your mind?

PAKNIS: Well, I would like to make a clarification first.

What Jerry did was not -- had nothing to do with sex. It's all about power and control. It's like rape. It's attacking a very inferior or subordinate, submissive person that can't defend themselves physically or emotionally. And it has nothing to do with sex. The drive of a pedophile is to control another person.

And the hesitation that he had in there and the delay, I think he was trying to figure out what to say. He didn't come out and just say, no, absolutely not. And it's just disgusting.

And the second part, if -- John, if you could refresh my memory, the second question that you had for that?

KING: Just the sense, when you hear -- when that goes through your mind.

We can move on because I want to -- you understand the culture. You worked as a graduate assistant at Penn State. Joe Paterno is the legendary coach, he is an icon on campus, he is a God on that campus. Jerry Sandusky was his right-hand man, the heir apparent, the defensive coordinator at linebacker university.

I want you do listen to more, to Sandusky the other night, when Bob Costas is asking him, even after, even after the graduate assistant brought it to Joe Paterno's assistant that he saw a rape in the shower, Bob Costas asked, did coach Paterno ever confront you to Jerry Sandusky. Let's listen.


COSTAS: Did Joe Paterno have any information regarding objectionable activities on your part prior to that report in 2002?

SANDUSKY: My -- I -- I can't totally answer that question. My answer would be no.

COSTAS: Did Joe Paterno, at any time, ever speak to you directly about your behavior?


COSTAS: Never?


COSTAS: He never asked you about what you might have done?


COSTAS: He never asked you if you needed help, if you needed counseling...


COSTAS: He never expressed disapproval of any kind?



KING: Again, you understood the culture, you were there, you know the relationship between these two men. You know coach Paterno.

A graduate assistant comes to him and tells him he saw his right- hand man raping a young boy in the shower and Joe Paterno never says anything? Is that possible?

PAKNIS: It's -- I just -- the whole thing just seems to have bizarre connotations.

Number one, coach knows everything that goes on down there, meaning coach Paterno, and he has his thumb on the pulse of everything. And so I know there was a strained relationship between Jerry and coach. Jerry used to come up to me and say, man, I hate that guy.

I never really wanted to get engaged with that. I just sort of minded my own business. But, you know, I don't know why. I can't figure out why he wouldn't go -- the whole thing, I would like to say, if I was -- I was four years younger than Mike was when he was a graduate assistant.

The power dynamic there is exceptional. Coach not only has the most power on the campus, but probably in the state of Pennsylvania, at least when I was there. He was a reigning sportsman of the year in "Sports Illustrated." They were national champs.

And I think Mike did what he thought he should have done, and that's gone to his superior, maybe not fast enough. Certainly, if I had been in that same situation and based on my background, I think I would have -- the hardest thing I would have had to have done would have been not to have really totally incapacitated Jerry.

But my major concern would have been to protect the child, as should be anyone out there. If they have seen a child or if they're aware of a child or they suspect a child is being hurt, they need to go and get -- alert the authorities. And they need to make noise. They need to make this stop.

This is just total deviation. My high school coach -- I never lost a high school game, and it was like a "Hoosiers" experience for me. And that's why I got into coaching. I wanted to help kids the way my coach helped me.

And he had a saying. We're only as good as our worst player. So, if you are that person, you better work your butt off. But, more importantly, if you know that person, you better do everything in your power to help that person get better.

And I think that's what we need to do. We need to help these kids, these kids that are so left out there on an island. And what we have to do is let the authorities take care of the rest. I don't want to say who should have done what or why they should have done what. It's a tragedy all the way around. Clearly, the well-being of a little boy was second nature to everyone involved there. And that's the travesty there.

KING: And so let me close by asking you this. And amen to everything you just said about trying to help these kids and putting them first.

Because of your experience with Jerry Sandusky, with the Penn State program and the personal pain and the search you have had to get to where you are now, to have the courage to come out and talk about it, if you had five minutes from Jerry Sandusky, what would you say?

PAKNIS: He's a real pitiful man at this point.

I might try to ask him to ask for forgiveness and try to go out and just admit -- you know, self-awareness and self criticism is probably one of the hallmarks of a decent person. And we know -- in "People of the Lie" -- it was a book written by M. Scott Peck -- he really explores evil. And he says evil is constituted by narcissism, lying and selfish behavior.

So, you know, I think this whole thing, there's been a perception projected by Penn State for years. And I think maybe he just got so caught up in it, he can't distinguish the reality from what's really evil there.

And I don't know if I could really talk to him, but I would try to get him to realize that he's got to repent. He's got to do something to just make those kids feel better. He's got to do something to make the situation better. It's horrific.

But I will tell you this. If I ever see a kid -- and I will let those kids out there know, you got at least one big guy in your corner.

KING: Matt Paknis, I appreciate your bravery, your courage, and your insights tonight, both from your experience at Penn State and your own personal journey. I can't thank you enough for coming on and sharing with us tonight. Very much appreciate it.

PAKNIS: My pleasure, John.

KING: Thank you, sir.

And still to come here, President Obama tackles the China challenge.

And the Penn State coach we just talked about who says he witnessed Jerry Sandusky raping a boy is telling friends he stopped the rape. But the grand jury report says he didn't. The potentially blockbuster impact of that next.


KING: The strength of the prosecution's case against accused child rapist Jerry Sandusky could boil down to this question, did he or didn't he, as in did then Penn State graduate assistant Mike McQueary notify police after claiming to see Sandusky raping a boy in the showers at the university athletic complex?

The grand jury detailing the 40 counts against Sandusky says McQueary -- quote -- "saw a naked boy, victim two, whose age he estimated to be 10 years old with his hands up against the wall being subjected to intercourse by a naked Sandusky. The graduate assistant was shocked, but noticed that both victim two and Sandusky saw him. The graduate assistant left immediately, distraught."

That report goes on to say McQueary called his father, then met the next day with head coach Joe Paterno, no mention of calling police. But the "Morning Call" newspaper obtained an e-mail with McQueary. He sent it last week to former classmates insisting he did -- quote -- "have discussions with police and with the university official in charge of police."

"I did stop it, not physically, but made sure it was stopped when I left the locker room. No one can imagine my thoughts or wants to be in my shoes for those 30 to 45 seconds, trust me."

Now, McQueary is clearly trying to rebut criticism he didn't do enough to stop Sandusky and to alert authorities. But in doing so, could he be undermining the prosecution's case?

Wendy Murphy is a former child abuse and sex crimes prosecutor and Trent Copeland is a prominent California defense attorney.

Trent, I want to start with you. If you are Jerry Sandusky's lawyer tonight and Mike McQueary appears to be telling a conflicting account, how do you use that to help the defense?

TRENT COPELAND, DEFENSE ATTORNEY: Well, first of all, we're going to want to establish whether this is confirmed, because, John, look, remember, if, in fact, Mike McQueary saw this and he went to the police, that really changes the game. This could be an effective game-changer for everybody involved in this case, because, look, if he saw this, he intervened, he then went to police, you would expect that that would be contained in the grand jury report, because remember the grand jury report is where evidence is taken, you're under oath, you have to tell the truth.

If you didn't say it there, then why is he saying it now? If we take him at his word, and that is that he did intervene, he did then go to the police, then the question becomes why didn't the police then investigate? Are the police now covering up the fact that they didn't investigate? And are they also on the take?

I don't want to sound the alarm of the conspiracy theory in every corner, but this case continues to get stranger and stranger. So, look, this is a setback for the prosecution. If Mike McQueary is saying, look, I told the police this, and it's not contained in that grand jury report, somebody is lying.

KING: Wendy, if you're the prosecutor in this case, number one, you don't want your witnesses talking in public anyway I assume in any case, especially a case that is so sensitive. But when you have a grand jury report that says one thing and then e-mails from the only eyewitness, alleged eyewitness we know of that say other things, I assume that has to worry you because it makes the credibility of a very, very important witness in question.

WENDY MURPHY, FORMER PROSECUTOR: He is a very important witness, there's no doubt about it.

And the prosecution may well be glad that he's at least generating some sympathy for himself, because we don't want all the potential jurors thinking he's a monster who let a child be raped. They may be secretly glad that he said a little bit about this.

I don't agree with Trent that the grand jury report is the final document. It's a 23-page summary of thousands of pages of testimony. So if you read it with regard to what McQueary did, it says he saw a situation, he was upset and then he told his father, told Paterno and so on.

It's silent as to whether he did other things, which doesn't mean he's inconsistent when he says he also told police because really the key I think in terms of the 23-page grand jury report, which is a summary, the key there is to describe the ways in which these institutions engaged in a cover-up, if you ask me, and to put out the bare-bones facts about the crimes that happened to these children.

I'm not sure it's an inconsistency. I think it does help generate some sympathy for him. Look, maybe he told the university cops what he saw, but that's not necessarily going to get you anywhere if you're trying to get outside law enforcement to get involved.

Remember, so many people at Penn State all the way up the ladder to the president knew about this anal rape and either are under indictment for perjury for lying about what they knew or have lost their jobs. The fact that he may have told a university cop that there was also this anal rape in the shower and that cop wouldn't do anything wouldn't change much of the story, if you ask me.

KING: And, Trent, I assume the inconsistencies, inconsistency, or apparent inconsistency, seems to be about whether or not Mike McQueary went to law enforcement authorities or whether he just called his dad and met with Joe Paterno the next day.

He hasn't changed his story on the most important point, what he saw, which I assume that if you're the defense lawyer, that's what you're worried about most.

COPELAND: That's what you're worried about most because when he says -- that is the operative fact.

But, look, I couldn't agree more with Wendy when she says that isn't an important omission. Look, this is a key element in this case. What did Penn State do? What did those officials do? What did the police do to stop this? Because not only -- if Penn State knew about this and local law enforcement knew about it, not only is there a cover-up of massive proportions, but these people are also similarly potentially responsible from a civil standpoint in terms of what Sandusky did after they were aware of this information.

Look, it's critical. It's important. And it's not just a small omission. It's not just a minor misstatement. It is a fundamental, positively important, critical detail. If you intervened, that's important. If you then went to the police, whether it's the campus police, whether it's local enforcement, whether it's law enforcement in the town, whether you went to someone and you told them that information is also key and fundamental in this case in terms of who knew what, what they did when they got that information and why this was allowed to continue to go on.

So, look, I think it's an important piece of information. I think the fact that it isn't there is fundamentally key to this case.

KING: Well...

MURPHY: I think an interesting question is, when he says that after he walked away he did put a stop to it, what does that mean? How do you put a stop to a rape after you walk away?

COPELAND: You're right.

MURPHY: It suggests to me that there's more to the story.

And I guarantee you the prosecutors know everything he said, everything he did. The fact that it's not in this grand jury report tells us nothing at all about the integrity of his testimony or his credibility as a witness, again, on the key question, what did he see, what did he do about it?

I don't think this man's credibility has been undermined at all. And maybe we like him a little bit more because he did do something and we just haven't known about it until now.

KING: Wendy Murphy, Trent Copeland, appreciate your help with an important legal question as we watch this case go forward. We will check in again in the days ahead.

And ahead, tonight's "Truth" is about whether the Obama administration could have, should have protected you from more than a half-trillion -- half-billion-dollar -- excuse me -- bill.

And first he said he was hired as a historian. Now he concedes it was for political advice. Newt Gingrich and Freddie Mac, turns out he's fond of bashing an agency that put a lot of money in his bank account.

Take a look at this -- live pictures, the president of the United States, he is half the world away addressing the Parliament in Australia.


KING: Vice or virtue? You make the call.

Here's the issue. Former House Speaker Newt Gingrich was paid more than $1.6 million over a five-year period for consulting work to the mortgage giant Freddie Mac. You have heard of Freddie Mac, right? It gets a lot of the blame for the subprime lending mess and the housing bubble.

Don't take that from me. Listen here.


NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: They talk about financial reform, and they skip past Fannie Mae and Freddie Mac, which are the two biggest debtors in the American system and the most dangerous companies for imploding. I mean, the odds are very good that the next great crisis in finance is not going to be banks. It's going to be Fannie Mae and Freddie Mac who, by the way, are impervious to the politicians.


KING: Yes, same Newt Gingrich. Now his critics are having a field day here, suggesting maybe the reason Fannie and Freddie are, to borrow Speaker Gingrich's words, "impervious to the politicians," is because they paid big bucks for help from political insiders like former Speaker Gingrich.

Well, in Iowa today the speaker defended his work.


GINGRICH: I was approached to offer strategic advice. I was glad to offer strategic advice. And we did it for a number of companies. I mean, the Gingrich group was very successful.

UNIDENTIFIED MALE: Do you think you were just being bought to be -- to be...?

GINGRICH: No. I don't think that anymore than your institution is being bought when people advertise on it.


KING: And Gingrich, a rising force now in the presidential race, disputed the notion that a big-money consulting contract with an embattled Washington agency would undermine at all his "clean up Washington" focus out on the campaign trail.


GINGRICH: It reminds people that I know a great deal about Washington. And if you want to change Washington, we just tried four years of amateur ignorance, and it didn't work very well. So having someone who actually knows Washington will be a really good thing.


KING: Is it a really good thing or hypocrisy? For more we're joined now from New Orleans, CNN political contributor James Carville. With me here in Washington, CNN political contributor and editor of, Erick Erickson, and Republican strategist, former Newt Gingrich ally, Rich Galen.


KING: Employee. You want to put it that way, employee. Fine.

I just want to put little bit more of this on the record. Because here's a guy, and there's no suggestion he did anything wrong. He was a private citizen after leaving the Congress. He's hired by Freddie Mac as a consultant, and he makes a decent amount of money there, $1.6 million. I think a lot of people at home say, "Wow, that's a nice piece of money."

Here's something he said, though, to Bill O'Reilly on September 29, 2008, again in that time frame before and after he's getting consulting money from Freddie Mac. Here's what he says.

"One of the provisions that I wanted to put into any kind of financial package is that no company gets money from the treasury in this process, be allowed to hire a lobbyist. I mean, what you have today is the rich on Wall Street and the powerful at Fannie Mac [SIC] and Freddie Mac had so many politicians beholden to them, in fact, nobody was going to check them. And they got away with things that were absolute baloney, and it's a tragedy."

Rich, to you first, since you know Newt.

GALEN: I don't have any problem with that. In Washington, two things. One, everybody knows if you're a consultant -- James knows this better than all of us -- you are paid to give advice, not paid to make the client take it. So we don't know what advice Newt gave them, and if they didn't take it, they didn't take it. That's No. 1.

No. 2 is in Washington -- this is probably an inside-the-Beltway deal -- but there's a fairly narrow range of activities that we consider lobbying. And being -- giving strategic advice, even occasionally picking up the phone and calling a member of the House or Senate as a previous member, really doesn't constitute lobbying. You don't have to register for it. It's de minimus. So I take him at his word that he didn't lobby.

KING: I'll take him at his word he didn't lobby, which is -- there are special requirements for lobbying, James. I'll take him at his word he didn't lobby, but you know how this works. And a lot of people do it. Newt is not alone. You know, former majority leader George Mitchell. Former majority leader Bob Dole. This town, if you walk down K Street, you'll see 100 members of Congress in 20 minutes. Some of them don't directly lobby, but they get paid to arrange meetings or to say, you know, "I think Congressman X would be on your side. Avoid Congressman Y. He doesn't like you. " It's all legal.

But when you're out running for president saying, "Send me to Washington to fix it," it undermines your case a little bit, doesn't it?

JAMES CARVILLE, CNN POLITICAL CONTRIBUTOR: Looking at the House and the efforts of disclosure, as you will, and now that we possess tape of it, he taught my case at Tulane.

KING: I was there.

CARVILLE: ... Ph.D. So full disclosure.

Look, I agree with what Rich says. But the truth of the matter is, is people are watching this. And to use a sports metaphor, nobody recovers their own fumble in this Republican nominating process. Every fumble has cost these candidates dearly. I suspect this one is going to cost the speaker substantially. But I can't say he can't bounce back from it. But this is going to tie him up in a knot here pretty good.

KING: And so seven weeks to vote until Iowa, Erick Erickson. I want to show, if we can bring it up here, here's our nationality poll first. Romney, Gingrich, Cain. Newt Gingrich, on the basis of strong debate performances, rockets into a tie, essentially, nationally. That's meaningful.

More meaningful, how does he look in the key states? Iowa votes first. Here's the new Bloomberg poll: 20 percent for Herman Cain, 19 percent for Ron Paul, 18 percent Mitt Romney, 17 percent Newt Gingrich. So that's a horse race. He's in contention out in Iowa. A person who needs to do very, very, very, very -- I could keep going -- very well in Iowa is Congresswoman Michele Bachmann. And she today smells a little blood.


REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: Whether former Speaker Gingrich made $300,000 or whether he made $2 million, the point is that he took money to also influence senior Republicans to be favorable toward Fannie and Freddie.

While he was taking that money, I was fighting against Fannie and Freddie. I believe that Fannie and Freddie need to be shut down. I wasn't shilling for them. I was fighting for [SIC] them.


ERICKSON: I remember the conversation we had about, I think, three months ago about Michele Bachmann taking farm subsidies. Well, who gets farm subsidies.

KING: You know, what goes around comes around.

ERICKSON: Then and now. Exactly.

I talked to a very prominent conservative up in Washington who said this is the one allegation about Newt that it bothers him, because if you feel like there's an antipathy towards Washington, maybe against Barack Obama, Mitt Romney, Newt Gingrich. There's an issue there with Newt Gingrich having been up here for so long, having all these types, how do you run against Washington when you're a creature of Washington?

GALEN: Here -- real quick. Here's the mistake Newt made today, is that he said the Gingrich group did very well. Every reporter in town is going to be wondering what other contracts were there? And he's going to have to deal with this for weeks.

KING: To their credit, James, they did put out a statement. And I would say Herman Cain candidacy take note. When people ask questions about your campaign, you should at least try to answer them. And the Gingrich team did, and they say, you know, he welcomes scrutiny of his record in public office and as a small businessman. They make the point he never lobbied.

You're the Democrat in the room. But if you were advising him today, you say the question is can he put it behind him? What does he need to do?

CARVILLE: Well, you know, he's got to do things like put out his fact sheet. I think he's got to be very direct. In our deal in 1992 we went on "60 Minutes" right away.

It's not going to go away. It's going to cause him some damage. It's not -- it may not be fatal. He may come back. That I don't know. The question -- there were a lot of political types in Washington -- from Washington in New Orleans at a bipartisan summit, and everybody was saying, "Well, who does this help?" I mean, the consensus is maybe Perry, this might give him an opening to be -- to come back to being the alternative. That I do not know, but I'm confident that this is going to extract some toll on the former speaker.

ERICKSON: There's a similar lesson to be learned from 2008, Rudy Giuliani and his Giuliani group and who they did or didn't lobby for. And because they wouldn't release the list of all the clients, it dragged out. That question came up all the time. He may want to learn from what Giuliani didn't do.

KING: Transparency, transparency, transparency. James Carville, Rich Galen, Erick Erickson, appreciate it.

Next the House of Representatives takes an important vote on gun rights. And later President Obama says the notion that we should fear China is mistaken. Really? We'll put that question to the former CIA director, Michael Hayden.


KING: Welcome back. Here's the latest news you need to know right now.

State police in Pennsylvania today arrested the man wanted in connection with Friday night's shooting incident where one bullet struck a White House window.

Just now, the House of Representatives approved a bill allowing people to carry concealed firearms across state lines.

The Arab League is giving Syria three more days to end the violence against civilians but isn't saying what will happen if the Syrian government ignores that ultimatum.

A witness tells CNN protesters stormed Kuwait's parliament today, demanding the ouster of that country's prime minister.

Volkswagen's Passat, built in Chattanooga, Tennessee, won "Motor Trend" magazine's prestigious Car of the Year award today.

The oil prices back above $100 a barrel again. That news plus worries about Europe's debt crisis drove stocks sharply lower.

"ERIN BURNETT OUTFRONT" coming up at the top of the hour. Erin is here with a preview. And Erin, you're looking at a very important question. Could China overtake the United States as the global superpower?

ERIN BURNETT, CNN ANCHOR: That's right. And that's obviously, the president in just a few moments going to be addressing the Australian parliament. As you know, he's going to be putting more U.S. Marines in Australia. And I know they don't want to say the reason why. But the reason why is because the U.S. is trying to show China who's boss.

Well, you know what? When you look at who does all the business with Australia right now, it actually is China. So we're going to talk about that.

On a day the markets fell, as you mentioned, John, part of that was fear about Europe and fear about the super committee. South Dakota's Kristi Noem will come "OUTFRONT" tonight and talk about the super committee, whether tax increases are on the table, whether they have what it takes to get a deal done.

That plus the latest on Penn State. A man who just won $100 million in a sex abuse case against a priest in Miami.

Back to you.

KING: Looking forward to it. We'll see you in just a few minutes. Thanks, Erin.

BURNETT: All right.

KING: And like Erin, we're fascinated by the China challenge. When we come back, the former head of the CIA, General Michael Hayden, answers this question: China, friend or foe?


KING: You're watching live pictures of the president of the United States, Barack Obama. He's in Australia addressing the Australian parliament.

On the president's mind, a key relationship with Australia, but also a huge security challenge -- a huge security challenge in the South Pacific and throughout the China seas, which brings us to tonight's "Number": $91 billion. That is what the United States government projects China will spend on its military in 2011. Ninety- one billion.

Go back to 2000, about $50 billion. Look at that. Look at that steady growth in Chinese defense spending. There's a reason -- there's a reason the United States is a bit concerned about this. If you just look at this here, this area here, the red area, this is what China says are its territorial waters.

Well, the United States and others disagree. They say most of this -- you see the blue lines, that is international waters.

One thing the president of the United States is doing today while in Australia is announcing a new security commitment. About 2,500 United States Marines eventually will be stationed here in Darwin. That is a security commitment to the region. We all know about the economic relationship with China. It holds a lot of U.S. debt. That's complicated, the president says, but he also says not to worry.

(BEGIN VIDEO CLIP) BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I think the notion that we fear China is -- is mistaken. What we have said is the future of this region depends on robust trade and commerce, and the only way we're going to grow that trade is if we have a high standards trade agreement where everybody is playing by the same rules.


KING: The president says not to be feared. Let me put that question to our next guest, the former CIA director, Michael Hayden, retired general from the U.S. Air Force.

I always like to phrase the question this way. China, friend, foe, or don't know?

GEN. MICHAEL HAYDEN, FORMER CIA DIRECTOR: China is not an enemy of the United States. John, there are logical, non-heroic policy choices available to us and to the Chinese that keep this relationship within bounds.

Look, it is forever going to be competitive. There are times when it's going to be confrontational. It never has to get to the level of conflict.

All that said, when I give speeches about security concerns, China is always among my list of three, four or five areas that we have to keep an eye on. It doesn't have to be an enemy of the United States.

KING: You say it doesn't have to be. Even a very modest commitment, 2,500 U.S. Marines eventually -- it will take a long time to build that up -- in a country, Australia, that has been a U.S. ally for decades. If you look, the "People's Daily" crossfire," the editorial says today, "Australia surely cannot play China for a fool. It is impossible for China to remain detached, no Australia does to undermine its security. If Australia uses its military bases to help the U.S. harm Chinese interests, then Australia itself will be caught in the crossfire." That's tough language.

HAYDEN: It is pretty tough. It's not particularly useful either. And it really doesn't reflect the true understanding of China's interests.

Look, we have telegraphed for more than a year that we're shifting our weight, that we're moving our forces more in the direction of East Asia, moving our forces away from ground forces and more in the direction of forces that control access. Marines, naval forces, air forces.

Why are we doing that? We're trying to continue a balance in East Asia. And doing that in concert with our allies like Australia but not limited to Australia.

Look, John, the way I put it very starkly is this is not preparation for war with China; it's not threatening China. It's creating a balance that makes it much more difficult for anyone in China in five, ten or 15 years to do something both they and we would regret.

KING: Well, let me ask you to come over to the wall. Because you say creating a balance. If you're trying to create a balance, that means you're addressing what you consider to be an imbalance. So I want to close this one down. Just look at this compared to other countries in the region.

This is China's defense spending. Russia, Japan, Korea. Look at that. That's pretty astounding, the build-up in China. That's one thing.

And if you look again at the weapons modernization, if you look from 2000 -- 2008 to 2010, surface forces, submarine forces, air force, air defense forces. The Chinese are getting about this in a very busy way.

And I want to come back just to put up the South China Sea. A lot of it is about this. A lot of their new surface-to-air missiles can reach ships here. Yet, you say not to worry.

HAYDEN: No, I didn't say not to worry. I said it was an item of concern. I said China is not necessarily an enemy of the United States.

Now, there are aspects of Chinese behavior that are quite disturbing. This one in particular. That's 1.2 million square miles of what you and I would consider to be open ocean, and they want to treat it the way we treat Lake Erie. They call it a Chinese core interest, which is the same language they use to describe Taiwan and Tibet. We can't let that stand.

And what you've got is the neighborhood here welcoming an increased American presence to balance what they see as this potential danger coming from China. A potential danger.

KING: Now, the neighborhood welcomes the presence, not China. We can walk back over to the table.

How much does the economic dependence of the United States -- they hold a great deal of our debt; they're a critical trading partner at a time we want the United States economy to start growing again. How much does that complicate the security relationship? Can the president be as tough as he would like, for example, at a time when China, with just a few pulls of the lever, could mess with our economy?

HAYDEN: I actually think the president has more headroom, more freedom to maneuver on these security questions than much of the public commentary would suggest because of the economic relationship.

Remember we have some dependence upon China, but China also has great dependence on the United States. This is a symbiotic relationship. So I don't think we will unnaturally control or keep in check things we should, you know, legitimately be doing for our national security purposes. KING: You're formerly in the spy business. One of the ways during the Cold War eventually that we didn't have something go off the rails with the then Soviet Union is there were channels of communication as the relationship matured. Are there those levels of communication at the security level, at the defense and at the intelligence level now that, if somebody does misjudge somebody, we can quickly turn the volume down?

HAYDEN: Not nearly as robust as they need to be. There are some. But the Chinese use the military-to military relationships we have developed with them as a tool to punish us. They cut them off when we do something that they view to be offensive. That, frankly, is an example of Chinese behavior that I think is not in their interest and not in our interest either.

KING: General Hayden, appreciate your insights. This is the challenge of the next generation. Appreciate you, sir. Thank you, sir.

And next, the truth about a scandal that's costing taxpayers -- that means you -- a half billion dollars.


KING: The energy secretary, Steven Chu, will be on Capitol Hill tomorrow, and you have more than a half billion reasons to pay close attention. Secretary Chu was a key player in a big government loan guarantee to a clean-energy firm called Solyndra. That loan was approved despite warnings from some in the Obama administration the company wasn't worthy.

Then the deal was renegotiated in a way that makes it harder for taxpayers to recover any losses. And then -- yes, you guessed it -- the company went belly up, leaving taxpayers now liable for some $530 million.

Secretary Chu has declined repeated requests to come on this program. But he did talk to NPR yesterday, insisting there were no shenanigans involved in the Solyndra loan.


STEVEN CHU, ENERGY SECRETARY: We did not cut corners. We actually made it more thorough and diligent. But we can prove the process so it typically would take something on the order of one year to do all the due diligence.


KING: Well, here's tonight's "Truth": where there is smoke, there is not always fire. But there was a lot of smoke around the Solyndra loan, especially around questions of whether politics clouded policy judgments.

We know, for example, the approval back in September 2009 came despite warnings from some policy folks that, in the words of one, this just wasn't ready for prime time.


JOE BIDEN, VICE PRESIDENT OF THE UNITED STATES: It's so important we invest in Solyndra and invest in what Solyndra is doing, not just to get us through today, but to power our way to a much brighter tomorrow.


KING: Eight months later, in May 2010, this presidential visit -- you can see it here -- solidified Solyndra as the administration's clean energy poster child.

Just five months after that, though, October 2010 now, Solyndra's CEO wrote an e-mail to the Energy Department, saying word of the company's struggles was beginning to leak to reporters and investors, and it was necessary to lay off workers.

CEO Brian Harrison told the Energy Department, quote, "I would like to go forward with the internal communication on Thursday, October 28."

You think Solyndra was just another company, just another loan? Harrison's e-mail was forwarded like wildfire to top officials at DOE and also high up at EOP and OVP. What are those initials? Well, that's Washington shorthand for executive office of the president and office of the vice president.

You think the vice president's chief of staff was expecting an e- mail if they decide to lay you off or lay me off?

An e-mail two days later from Solyndra's top investor detailed the administration's response, saying DOE -- again, that's the Department of Energy -- "did push very hard for us to hold our announcement of the consolidation to employees and vendors to November 3." Oddly, they didn't give a reason for that date.

Here's the reason. November 3 was one day after the November 2010 election. The White House didn't want Solyndra's troubles front and center just before an election in which stimulus spending was already a big issue.

From day one, the Obama White House has said politics never trumped policy in how Solyndra was handled. And the White House now says Republicans are selectively cherry-picking e-mails about the lay- off's timelines.

Now, it's true some Republicans have made damning conclusions that are, at a minimum, well out ahead of the known facts. But this is also true and critical now that the secretary of energy is going to take questions. There's more than a little smoke here, way more. And the people on the hook for a half billion dollars deserve answers.

We'll watch the secretary tomorrow. We'll see you then, too. "ERIN BURNETT OUTFRONT" starts right now.