[Wolf Blitzer, Cnn Anchor:] To our viewers, you're in THE SITUATION ROOM, where new pictures and information are arriving all the time. Standing by, CNN reporters across the United States and around the world to bring you today's top stories. Happening now, the speaker of the House versus the FBI. Dennis Hastert accuses the Feds of trying to intimidate him. It's 4:00 p.m. here in Washington, where the reaction to a raid on a Congressman's office is boiling over, and now President Bush is getting directly involved. Also this hour, the Senate votes on immigration reform and sets the stage for a smackdown with the House of Representatives. What does today's vote tell us about the fight ahead and about the Republican divide? And will Vice President Dick Cheney take the stand against his former chief of staff? CIA leak prosecutor Patrick Fitzgerald offers some new clues about his case. I'm Wolf Blitzer and you're in
[The Situation Room. Blitzer:] Just a short while ago, President Bush stepped directly into the escalating battle between the executive branch and Congress. He ordered all materials seized in a raid on a Congressman's office, sealed for 45 days. The Justice Department and the Congress are at deep odds over the raid. It stems from the bribery investigation of Louisiana Democratic Congressman William Jefferson. Congressional leaders say the raid violates the constitutional separation of powers. The House speaker Dennis Hastert already was fighting mad about that raid, and now a disputed report linking him to a federal corruption probe has him downright livid. ABC News quoted unnamed law enforcement sources as saying Hastert is in the mix of a Justice Department investigation into influence peddling by the convicted Republican lobbyist Jack Abramoff. The Justice Department quickly denied the story, not once but twice. ABC News says it has double-checked its sources and is standing by its story. Hastert has demanded a full retraction, and now he's threatening to sue the network, ABC News executives and reporters, for libel and defamation. Our congressional correspondent Dana Bash is standing by. Let's go to the White House first. Lots of drama unfolding here in the nation's capital, Suzanne Malveaux.
[Suzanne Malveaux, Cnn White House Correspondent:] Absolutely, Wolf. And this really was not an easy move for this president to make. He often errs on the side of expanding executive powers. But clearly, President Bush right in the middle of this constitutional confrontation between members of Congress and the Justice Department. It was just moments ago, of course, that the president released a statement essentially ordering that those documents that were taken from Congressman Jefferson's office be sealed on a temporary basis. That statement saying, "I am directing the Department of Justice to seal all the materials recovered from Congressman Jefferson's office for the next 45 days, and not to allow access to anyone involved in the investigation." He goes on to say that "this period will provide both parties more time to resolve the issues in a way that ensures that materials relevant to the ongoing criminal investigation are made available to prosecutors in a manner that respects the interests of a co-equal branch of government." And, of course, Wolf, he also makes the point as well that he believes that if anybody violated the law, they should be held to account as simply saying that this investigation will go forward, justice will be served. And, Wolf, of course all of this coming as members of Congress have complained over the last couple of days and specifically hearing it directly from Speaker Hastert Wolf.
[Blitzer:] Suzanne, stand by. We're going to be bringing you back shortly. The prime minister of Britain expected momentarily to be arriving over at the White House. We'll come back to you for that. Let's go up to the Hill, though. Dana Bash has been watching all of this drama unfold. What's the latest, as far as the reaction to the president's decision to go ahead and have the Justice Department seal or freeze all those documents collected from Congressman Jefferson's office?
[Dana Bash, Cnn Congressional Correspondent:] Well, despite the fact that over at the Justice Department, they have been vigorously defending this raid over the last several days. We know and we have reported that Speaker Hastert went directly to President Bush with his concerns about this. And we, Wolf, just got in videotape of the speaker of the House reacting to this. Let's listen.
[Rep. Dennis Hastert , House Speaker:] I got the notice that the president has done that. That gives us some time to step back and try to negotiate with the Department of Justice to number one, make sure that you know, if a member does something wrong, that the criminal part of that can be pursued. Yet there's you know, in an office, there's members, letters and stuff to constituents. There might be income taxes. There might be veterans issues. Those are private things and they're confidential and you need to protect those. So to have a protocol that you can go into an office and make sure that you get what you want and not get into other issues that are protected, you know, by the Constitution. So I think we can do that, and hopefully that we can negotiate a protocol that we can move forward.
[Bash:] So clearly not even close to the end of the story, as far as the speaker is concerned, as far as other lawmakers who are very upset about the constitutional breach that they saw with this read in Congressman Jefferson's office. But a time-out, clearly, that Speaker Hastert is welcoming. We know from a senior administration official that, as you can imagine, they did consult with members of Congress before the president made this move. One other interesting note. We do have reaction that our producer, Ted Barrett, got from the person at the heart of all this, Wolf, and that is, of course, Congressman Jefferson. He said that it's a step in the right direction, but, truly, he said, the way to correct this is that the documents should be totally returned to his office Wolf.
[Blitzer:] And Dana, the speaker is also involved in a nasty dispute right now with the ABC News and, in effect, the Justice Department itself and the FBI over this leaked report, this report that ABC News aired last night, suggesting that he was at the heart of another investigation involving the indicted and convicted Jack Abramoff, the lobbyist. What's the latest on that front from the speaker? Because he's fighting mad.
[Bash:] He is fighting mad, and, you know, when the president essentially talks about the need to cool things down, probably a big part of that is because things got very not only heated, but personal, today, with exactly what you were talking about. The speaker of the House essentially looking at that ABC report and saying earlier today that he thinks that perhaps it was because of the fact that somebody at the Justice Department was reacting to the fact that he was had a confrontation with them over the Jefferson raid. Essentially saying perhaps they're trying to intimidate him. Let's listen.
[Hastert:] That's not true. You know the Justice Department said there is no investigation. And, you know, this is one of the leaks that come out to try to, you know, intimidate people. And we're just not going to be intimidated on it.
[Bash:] Now that after not one, but two, flat-out denials from the Justice Department that they are actually investigating Speaker Hastert for anything that has to do with the Jack Abramoff scandal. But over at the White House, there was another denial. And that is exactly what you just heard from the speaker, a denial about the fact that anybody was trying to intimidate him.
[Tony Snow, White House Press Secretary:] Any official in a position of responsibility of the Department of Justice is just not true. And that they're not leaking that they're not leaking information to try to undermine the House speaker. Just false, false, false. I mean, I got pretty categorical denials.
[Bash:] And again, the speaker's problem is not just with whomever may have leaked, in his words, this story to ABC. It is with itself. He is still demanding a retraction from that network, which has so far has definitely stood by its story. And today there was a letter that went from the speaker's lawyer to ABC, saying, once again, that it should be retracted and saying that they accusing them of libel and defamation. Strongly suggesting, Wolf, that if they don't retract this, he will file suit.
[Blitzer:] Dana Bash. What a day here in Washington. Thank you. We'll be getting back with Dana shortly. New fall-out today in connection with the National Security Agency's domestic surveillance program, on top of everything else. CNN now confirms the FBI wants to interview top members of the House and Senate about the disclosure of the program to "The New York Times." Two sources with knowledge of the leak investigation say they don't know if any lawmakers have been questioned yet. Only a few House and Senate members were briefed on the NSA program before it became public. Watch this story to explode, as well. One of the other hot-button issues of this Congressional election year is coming to a head right now in the United States Senate. Members are voting on an immigration reform bill. Our national correspondent Bob Franken is following the vote for us, and he's got the latest. What is the latest, Bob?
[Bob Franken, Cnn National Correspondent:] Well, the latest is in the Senate there's still in the preliminaries, they're voting on amendments before they finally get to a vote that was scheduled a couple of hours ago. Of course, we're talking Senate time, voting on a changed immigration piece of legislation that is a much milder version than the one that the House of Representatives passed. It's interesting to look at them side by side. They both call for increased border security. However, the Senate version calls for a guest worker program, the House version does not have one. The Senate version and this is the most controversial part offers a path to citizenship, a three-level path to citizenship. In the House, the only thing that is a counterpart to that would make illegal immigration a felony. Talk about a hot-button issue. Now, the House of Representatives, Republicans, much more conservative than the Senate, much less conciliatory by nature, are digging in their heels. There should be a very, very, very tough conference committee action to try and reconcile the two versions. Many people are predicting that it won't happen. Not only that, but many in the Senate, particularly those who are facing tough reelection fights, are also against it, like Republican Rick Santorum.
[Sen. Rick Santorum , Pennsylvania:] This legislation I think is well outside of what I would consider responsible reform. It's misfocused. It puts the cart before the horse. The horse here that I've been hearing from, from my constituents, is we need a border security bill first, we need a program that makes sure that our country's borders are secure.
[Franken:] Wolf, you talked a moment ago about this being one of the hottest issues in Washington. Well, it's about to get even hotter.
[Blitzer:] Well, let's talk about that, Bob. What are the prospects? Some say, this bill, if it passes the Senate as we fully expect in the coming moments, once it goes to the House of Representatives and these conferees meet, it's going to be dead on arrival in the House as far as a majority of the House Republicans are concerned. And, as you know, the speaker says unless the majority of the majority is on board, he's not going to even let it come up for a vote. What are you hearing about the confrontation that is brewing between the Senate and the House?
[Franken:] Well, of course, right now it looks impossible. But one of the reasons that there is legislative discussion is to try and make the impossible possible. And that is going to mean that Republican leaders in particular are going to have to be dancing a very, very careful dance.
[Sen. John Boehner , Majority Leader:] While we have differences of opinion, we have got to find a way to resolve them. And I believe that it is resolvable, and I'm hopeful that we'll be successful in putting an immigration bill illegal immigration bill on the president's desk.
[Franken:] Now, add to all this the fact that there's an off year election this year and there's a widespread belief that this could be a significant issue when the voters come out in November Wolf.
[Blitzer:] All right, Bob, thank you very much. Bob Franken reporting. On the West Coast today, the Mexican President Vicente Fox is touting many of the measures included in the Senate immigration bill, including a path for illegal immigrants to earn U.S. citizenship. Fox is wrapping up a visit to Washington state. His next stop with be California. Governor Arnold Schwarzenegger says he will tell Fox that the Mexican government needs to do more to secure its border with the United States. Schwarzenegger now says he's prepared to commit National Guard troops to California's southern border. At first he was hesitant to accept President Bush's troop deployment plan. We're going to have a full report from Sacramento. That's coming up in the next hour. Our Chris Lawrence is on the scene. Here in Washington, the prosecutor in the CIA leak case is dropping a very, very big name. That would be the name of Vice President Dick Cheney. In court documents, Patrick Fitzgerald suggests it would be logical for him to call Cheney as a witness against the vice president's former chief of staff, Lewis "Scooter" Libby. Our Brian Todd is in the news room. He's watching all of these dramatic developments unfold Brian.
[Brian Todd, Cnn Correspondent:] Wolf, Patrick Fitzgerald says Cheney's state of mind during a very crucial period is relevant to the perjury case against Scooter Libby.
[Todd:] They were close confidants. Now prosecutors in the CIA leak case may ask Vice President Cheney to testify against his former chief of staff Scooter Libby.
[Scott Fredericksen, Former Special Prosecutor:] He's what you would call a hostile witness. Given that, the government understand if they put him on the stand, he's not there to help the government. If he can, in all likelihood, he will do his best to help his former chief of staff.
[Todd:] What would Cheney talk about? Prosecutors point to this newspaper clipping containing Cheney's own handwriting over an op-ed written by a former ambassador Joe Wilson, husband of outed CIA operative Valerie Plame. Cheney took issue with the article in which Wilson contradicted the Bush administration's assertion that Saddam Hussein tried to buy uranium in Africa. You can see Cheney's reaction in ink at the top. Referring to Wilson, Cheney writes, quote, "did his wife send him on a junket"?
[Jeffrey Toobin, Cnn. Sr. Legal Analyst:] Cheney's note showed that he was deeply concerned about what Wilson was saying in this op- ed piece.
[Todd:] Concerned that Libby acknowledges in just released testimony. Question: "During that time, did the vice president indicate that he was upset that this article was out there which falsely, in his view, attacked his own credibility"? Libby's answer, "Yes, sir." Libby admitted the column was discussed several times a day, and said Cheney was anxious to get the facts out to refute Wilson. Libby has said he didn't see Cheney's notes above the op-ed immediately. Contacted by CNN, the vice president's office wouldn't comment on the possibility that he might be called to testify. So how did Scooter Libby learn about Valerie Plame's role at the CIA? He has given conflicting accounts to the grand jury. At first he said Cheney had told Wilson's wife worked for the CIA before Wilson's article came out. But minutes later, he testified that when he was told by a reporter about Plame a few days after the Wilson op- ed, quote, "it seemed to me as if I was learning it for the first time" Wolf.
[Blitzer:] Brian, thank you very much. Brian Todd reporting. And thanks to Brian and Bob Franken, Suzanne Malveaux, Dana Bash, all part of the best political team on television. CNN, America's campaign headquarters. What Scooter Libby knew and when he knew it will be crucial to the prosecution's case. Let's bring in our Internet reporter Jacki Schechner. She has a closer look now at Scooter Libby in his own words Jacki.
[Jacki Schechner, Cnn Internet Reporter:] Well, Wolf, this is a filing that includes Scooter Libby's grand jury testimony, and it's really interesting reading. This is the part where he talks about he and the vice president having talked about Wilson's wife and her employment at the CIA in June. But by the time he heard it from reporters in July, he had just "forgotten it." Again, in this grand jury testimony he talks about how the vice president was keen to refute Wilson's op-ed saying "let's get everything out." Now the defense is arguing just because Dick Cheney wrote notes on the top of this op-ed doesn't mean he showed it to Scooter Libby. And Libby says they did talk a lot about those issues on the top of the op-ed. They talked about everything except the part about the wife. Fitzgerald is arguing that they talked about everything including Mr. Wilson's wife's employment at the CIA. Now, these filings will be online by the end of the day. We talked to the office of the special counsel and they say this is where you can find them at their Web site Wolf.
[Blitzer:] Thank you, Jacki, for that. And another developing story we're following, once high-flying executives, now convicted felons. Today another slide in the fall from grace of the former Enron CEO Jeffrey Skilling and Enron founder Ken Lay. Both men were found guilty of conspiracy and fraud in what was once the largest bankruptcy in United States history. Our own Ali Velshi is joining us. He's on the scene in Houston. Ali, what a day of a drama in Houston, not only here in Washington.
[Ali Velshi, Cnn Anchor:] We were quite sure I've got to tell you, when the verdict came out, Wolf, we were thinking about when we're getting our flights back, because we know that the jury is not deliberating tomorrow or wasn't going to deliberate tomorrow or Monday and all of a sudden this verdict came out. It was the sixth day of deliberations, really about four full days of deliberation. And this jury had not asked for a single piece of evidence from the trial to be read back, no clarifications. They asked for a couple of speakers to listen to some audio. And they came back with a conviction on all six counts for Ken Lay and 19 out of 28 counts for Jeff Skilling. One of those counts was insider trading. Now Ken Lay just spoke a few minutes ago on his way out. He's been released. Both gentlemen are released. They have to give up their passports and they will be sentenced on September 11, pending an appeal. But Ken Lay does say he's surprised and shocked, and he firmly believes that he is innocent. Jeff Skilling said the same thing. They maintain the innocence. But the charges that they have been convicted on, Wolf, together carry decades worth of jail time. And if an appeal doesn't work, that's exactly what is going to happen Wolf.
[Blitzer:] We're going to have a lot more on this story in the next hour here in THE SITUATION ROOM. Ali, thanks very much. Ali is on the scene in Houston for us. Jack Cafferty is on the scene for us in New York with "The Cafferty File" Jack.
[Jack Cafferty, Cnn Anchor:] It's too bad they don't allow cameras in the federal courtrooms. The ratings for Dick Cheney on the witness stand at Scooter Libby's trial would make "American Idol" look like reruns of "The View." You could call it "The Shooter and the Scooter" and it might happen. As much as Cheney enjoys answering questions in public, remember when he shot the guy in the face? Well, it could just be great. Here's the question for this hour. What kind of witness would vice president Cheney make in the trial of Scooter Libby? You can e- mail us at CaffertyFile@CNN.com, Wolf.
[Blitzer:] Who came up with that line, "The Shooter and the Scooter"?
[Cafferty:] I did.
[Blitzer:] Very good.
[Cafferty:] Thank you.
[Blitzer:] Jack will be back later. Up next, expect the war in Iraq and the Iranian nuclear crisis to top the agenda tonight when the British Prime Minister Tony Blair and the president of the United States, George W. Bush team up. We'll go live to the White House for a preview of this important meeting. Also, the Senate is voting on immigration reform right now. Some Republicans may be itching for a fight, though, over gay marriage. We'll explain in today's culture wars. Plus, much more on that immigration vote and the battle ahead between the House and the Senate over the controversial issues. Stay with us. You're in THE SITUATION ROOM.