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The Situation Room

Susan Rice Under Continued Fire; Was Yasser Arafat Poisoned?

Aired November 27, 2012 - 18:00   ET

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

WOLF BLITZER, CNN ANCHOR: We're learning how Paula Broadwell reacted when the former CIA director revealed their affair to the entire world.

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

The hot spotlight on Susan Rice on Capitol Hill today to meet with some of her sharpest Republican critics. They accuse the U.S. ambassador to the United Nations of misleading Americans about the deadly attack on the U.S. Consulate in Benghazi, Libya, and some have threatened to block her possible nomination as secretary of state.

But if Rice was hoping to placate her critics, the meetings clearly had the opposite effect.

Our senior congressional correspondent, Dana Bash, is up on Capitol Hill. She was watching every second of this unfold.

Dana, what are her critics saying after their big meeting with Ambassador Rice?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, it's interesting.

Those three senators who you're talking about who had vowed to block her nomination if she is nominated to be secretary of state really did soften their rhetoric against her in the days leading up to today's meeting. The reason, I'm told, is they because wanted to do it as a courtesy, because they knew they were going to have a face-to- face meeting, let her answer the questions.

But the answer to your question, Wolf, is they came out with even harsher and harder rhetoric against Rice.

(BEGIN VIDEOTAPE)

BASH (voice-over): The way these grim-faced GOP senators tell it, Susan Rice's attempt to calm their criticism backfired.

SEN. JOHN MCCAIN (R), ARIZONA: We are significantly troubled by many of the answers that we got and some that we didn't get.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: I'm more disturbed now than I was before.

BASH: Rice requested to meet with her chief Republican critics in order to explain why five days after the September Benghazi attack that killed four Americans she went on Sunday talk shows suggesting it was sparked by a spontaneous protest.

SEN. KELLY AYOTTE (R), NEW HAMPSHIRE: The information given to the American people was wrong. In fact, Ambassador Rice said today absolutely it was wrong.

BASH: Accompanied by Acting CIA Director Michael Morrell, Rice explained she was using these unclassified talking points which were stripped of references to al Qaeda, still classified by the intelligence community. So Rice used the word extremist.

SUSAN RICE, UNITED STATES AMBASSADOR TO THE UNITED NATIONS: Extremist elements came to the consulate as this was unfolding.

BASH: A source inside the meeting tells CNN Rice admitted to GOP senators she was aware of classified information suggesting al Qaeda was behind the attack. And yet GOP senators point out she still said this publicly.

RICE: We have decimated al Qaeda.

BASH: CNN is also told Rice tried to clarify to GOP senators that what she meant was al Qaeda's core leadership had been decimated. But GOP senators argue it's proof Rice was putting pre-election spin before national security.

GRAHAM: It was unjustified to give the scenario as presented by Ambassador Rice and President Obama three weeks before an election.

BASH: Rice did not answer our question. She did release a statement admitting her talking points -- quote -- "were incorrect in a key respect. There was no protest or demonstration in Benghazi. While we certainly wish we had had perfect information just days after the terrorist attack, as is often the case, the intelligence assessment has evolved. We stress that neither I nor anyone else in the administration intended to mislead the American people at any stage in this process."

And the White House had this to say.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: The focus on, some might say obsession on comments made on Sunday shows seems to me and to many to be misplaced.

BASH: GOP senators also complained Rice neglected to ask key questions before telling the public what turned out to be wrong information.

AYOTTE: That's troubling to me as well why she wouldn't have asked. I'm the person that doesn't know anything about this. I'm going on every single show.

(END VIDEOTAPE)

BASH: And, Wolf, just moments ago, Senate Majority Leader Harry Reid released a statement, very, very direct and pretty critical of those Republican senators who were critical of Susan Rice, really defending Susan Rice, and he was talking about the Republican senators, saying: "The election is over. It's time to drop these partisan political games and focus on the real challenges facing the nation." He said that these attacks on Susan Rice are unfounded and they don't jibe with reality.

And I can tell you that Senator Joe Lieberman, who is the chairman of the Homeland Security Committee, came out of a separate meeting with Susan Rice and said that he finds her answers satisfactory, and he said that if it were up to him, he would vote for her for secretary of state if she's nominated, big if. Of course he doesn't have a vote because he's retiring at the end of the year.

BLITZER: He's retiring. The new Senate will do it.

All right, thanks very much, Dana Bash.

Also looming on Capitol Hill, the looming battle over the so- called fiscal cliff.

Our Kate Bolduan is here to pick up this. We have got a lot of battles going on.

(CROSSTALK)

KATE BOLDUAN, CNN ANCHOR: There's a lot of battles going on, a lot specifically on Capitol Hill, that's for sure.

Lawmakers have just 35 days to reach a debt reduction deal. Otherwise, huge spending cuts and steep tax hikes will automatically take effect and affect almost every American. Ahead of that battle, some lawmakers are rethinking long-held stances but others are standing firm.

Most of the focus has been on taxes which still is a key element, and do not forget that. But another part of the fiscal cliff deal will likely be entitlements. That could mean some trouble for the president with his own party.

(BEGIN VIDEOTAPE)

BOLDUAN (voice-over): Not now, that's the message from the number two Democrat in the Senate on entitlement reform. Illinois Senator Dick Durbin now arguing talk of cuts to massive programs like Medicare and Medicaid should not be part of a plan to avert the fiscal cliff, a position that appears as odds with other Democratic leaders, most notably, President Obama.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I believe that we have to continue to take a serious look at how we reform our entitlements because health care costs continue to be the biggest driver of our deficits.

BOLDUAN: His spokesman reiterated that stance Tuesday. JAY CARNEY, WHITE HOUSE PRESS SECRETARY: When we're talking about a broad, balanced approach to dealing with our fiscal challenges, that includes dealing with entitlements.

BOLDUAN: An aide to Durbin said the senator does not believe his position conflicts with the president's. Rather, Durbin is making a clearer distinction between the short-term challenge of the fiscal cliff and the long-term problem of reducing the deficit, but any fiscal cliff offer without entitlement reform is widely seen as a nonstarter with Republicans.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: The reason we're having these negotiations is because Washington Democrats have spent money without any care for the cost or the future and refuse to do anything to protect long-term spending programs like Medicare, a failure that is among the biggest single drivers of our debt.

BOLDUAN: Entitlement programs have long been champions by Democratic lawmakers and any changes will likely face a fight from liberal members of the president's party.

REP. XAVIER BECERRA (D), CALIFORNIA: The moment that Republicans want to talk about privatizing Social Security or voucherizing Medicare, that's the moment that they will find not just resistance, but a real fight from Democrats.

BOLDUAN: So we asked Senate Majority Leader Harry Reid about Durbin's comments.

(on camera): Should entitlements not be on the table?

SEN. HARRY REID (D-NV), MAJORITY LEADER: We hope that they can agree to the tax revenue that we're talking about, and that is rate increases, and then, as the president said on a number of occasions, we will be happy to deal with entitlements.

(END VIDEOTAPE)

BOLDUAN: A little coy in that answer. And still word on no progress on the staff level talks that have been going on now for more than a week and still no progress then with the principals who are the key negotiators here. Senator Reid did say today that he's disappointed with how negotiations have gone.

It sure seems like they're still waiting to get off the starting blocks still.

BLITZER: Yes. They don't have a lot of time.

But let's dig a little bit deeper. Gloria Borger, our chief political analyst, is here.

Is it at all realistic that there can be a deal without major entitlement cuts, or reforms, or whatever?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: No. I think they're all just going to have to blink at the same time and do the tax part of the deal and do the entitlement part of the deal.

You know, automatic entitlement spending is about 62 percent of the federal budget. How can you cut a big deficit reduction deal without looking at entitlement spending? When you go back to the grand bargain that didn't happen during the debt ceiling negotiations, they were almost at that finish line and the president at that point did sign on to entitlement changes in Medicare and Social Security.

So in talking to some Senate Republicans today, you know, they suggested a couple of things we all know are on the table, which is changing the way we compute Social Security benefits, which is a solution that was proposed back in the '80s, for example, also gradually raising the retirement age, for Medicare, very gradually, something that should be on the table that Republicans want to see. And again, you know, it's Alphonse/Gaston. Who goes first? That's the big question here. Yes.

(CROSSTALK)

BORGER: Going together.

(CROSSTALK)

BOLDUAN: Going together. I actually like that concept. Let's get them all in the room and make them blink at the same time.

But a lot of this is also a messaging war, if you will, and kind of how they're handling the public relations and their public statements and what they're telling their constituents.

(CROSSTALK)

BORGER: It's like we have moved from one campaign to another campaign. And there hasn't even been a minute.

What they're doing is they're gathering their constituencies and saying, you know what? we're still on your team. We're leading you. So the president meets with CEOs. Republicans meet with CEOs. The president meets with small businesses, Republicans meet with small businesses. President is going to go out on the trail on Friday. I guarantee you Republicans are going to be talking about this on the trail.

But it all comes down to this. Take a look at our CNN poll. We asked people what they want in their budget plan, and you see that 67 percent of the people want a mix, which makes an awful lot of sense, of spending cuts and tax increases. And that's the only mandate that I see in this deal coming out of this election, which is fix it, get it done, and make it fair and balanced.

BLITZER: If they don't, they go over the cliff.

BOLDUAN: Something is going to change regardless.

BORGER: Merry Christmas. We will be here.

BLITZER: Appreciate it very much, Gloria.

We're also learning new information about the two women at the center of the David Petraeus sex scandal, including why his former mistress Paula Broadwell is still in shock. You will find out what she didn't expect would happen.

Plus, a prominent journalist nearly assassinated for his coverage of this teenage girl shot by the Taliban, he shares his chilling story with us. That's coming up.

(COMMERCIAL BREAK)

BLITZER: This just coming into CNN right now, new information about one of the women in the scandal surrounding General David Petraeus.

BOLDUAN: Yes, absolutely.

Tampa socialite Jill Kelley triggered the investigation that blew the affair absolutely wide open.

CNN crime and justice correspondent Joe Johns has new information on Kelly, and our intelligence correspondent, Suzanne Kelly, has ha new information on Petraeus' former mistress, Paula Broadwell. So many people.

Joe, let's start with you? What are you hearing about Kelley?

JOE JOHNS, CNN CRIME AND JUSTICE CORRESPONDENT: You really sort of a need a flowchart to keep up with it. Right?

A source close to Jill Kelley indicates she and her legal team are launching a full-court press to defend her reputation, which they say has been severely damaged since the Petraeus scandal went public. We also have some new pictures of Jill Kelley tonight of her with her family, released by sources close to her to try to repair her image.

Jill Kelley's legal team is alleging that government sources are responsible for the leaks to the media about her personal life, starting with her name. A letter from Kelley's lawyer obtained by CNN tonight asked whether the Department of Justice is investigating these alleged leaks and what Kelley's attorney, Abbe Lowell, refers to as potential violations of the Privacy Act.

Lowell said in the letter he's researching the issues to determine what type of legal action to take, if any. By the way, we have reached out to the United States attorney's office in Tampa to try to get a response, haven't heard back from them, haven't heard back also from the Department of Justice here in Washington.

Other papers obtained by CNN tonight indicate Lowell and his colleagues are filing a complaint against a lawyer who once represented Kelley, claiming her attorney-client privilege may have been violated in this. And the Kelley legal team has also sent a third letter to a former business associate of Kelley warning that some of his public statements may constitute defamation. BOLDUAN: Clearly, that is much more information to come on all of this, then.

JOHNS: Right. Absolutely.

BLITZER: Let's bring in Suzanne Kelly.

You have new information about Paula Broadwell as well.

SUZANNE KELLY, CNN INTELLIGENCE CORRESPONDENT: Right, also some new images being seen for the first time here in THE SITUATION ROOM.

They're images that don't really fit what we have seen so far. Her friends and family are putting them out there in an effort to balance what they call a very negative and narrow portrayal of her since news of her affair broke just over two weeks ago.

Take a look. These are not images in the shorter dresses, tight- fitting, high heels, not the ones you have seen on the covers of magazines or headlining blogs. These are images her family wants out there that they say show who she really is. This one taken during a family vacation with her husband and her two sons. That's the takeaway they're hoping people will get, that she's more than Petraeus' mistress. She's a mother, a wife who made a mistake.

Very similar to what Petraeus has said about his own role in this. Friends of Broadwell said she's still somewhat in shock over the news of her affair being thrust into the public spotlight in the way it was and she's been spending time working on repairing the trust issues with her husband. That's according to her brother.

She's also remaining out of the public eye for now while the FBI continues its investigation into her possession of classified materials and friends say they're fed up with the portrayals of her, that they want people to know she's a person who made a mistake.

She's also hired a D.C.-based public relations firm to help her on that end. She's hired them to help handle the media. They're interested also in people knowing she's a mother, wife, sister, friend, that the label mistress isn't of course all-encompassing. Difficult though in a situation like this where people don't really know anything about you until they find out something like the affair.

BLITZER: I think they have all hired lawyers and P.R. firms. General Petraeus, and Paula Broadwell, Jill Kelley. They're all doing that trying to fix some of their images.

KELLY: Exactly.

BOLDUAN: And that investigation is still under way. Thank you both very much.

Still ahead, we have seen it a million times, the president getting on his helicopter, Marine One. Now this picture you're looking at, it could all change.

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: Here's a question. Was Yasser Arafat poisoned? If so, did Israel have anything to do with it? The body of the late Palestinian leader has been exhumed today. We're going to talk about with the Israeli government spokesman, Mark Regev. He's in Jerusalem.

(COMMERCIAL BREAK)

BLITZER: We're following all of the latest developments in the Middle East, including Egypt where protesters once again filled Cairo's Tahrir Square. There were clashes with police as demonstrators voiced outrage at President Mohammed Morsi and his decree that courts cannot overturn his decision.

BOLDUAN: In Syria, amateur video captured the aftermath of alleged government shelling in the city of Homs. CNN can't independently verify its authenticity. Opposition groups say at least 82 people died today in civil war violence.

BLITZER: We're also following the situation in Gaza and Israel where a six-day-old cease-fire largely ended more than a week of deadly fighting. And the world is watching to see if it will last.

Joining us now from Jerusalem, a spokesman for Prime Minister Benjamin Netanyahu, Mark Regev.

Mark, thanks very much for joining us.

We have got a lot of issues to go through. But let's start with that cease-fire between Israel and Hamas. Is it holding?

MARK REGEV, ISRAELI GOVERNMENT SPOKESPERSON: Well, we have had one or two unfortunate incidents, but the good news is, as a whole, the quiet is holding. And that's good, first and foremost, for the people of Southern Israel, who don't have to live in fear of an incoming rocket from Gaza.

Live there in the south of my country has returned to normal, and that's what this is all about.

BLITZER: Looking back on the negotiations that led to the cease- fire, what was your assessment, the prime minister's assessment of the U.S. role, specifically the role that President Obama and Secretary of State Hillary Clinton played?

REGEV: We were full of praise for the American role. We thought the Americans were instrumental in working with Egypt and others to make sure that their cease-fire would come into place and that the cease-fire would have legs, that it would have longevity.

And, ultimately, the fact that Hamas promised Egypt to keep the quiet, that's an important promise. That, combined with Israeli deterrents, we hope will keep a long period of quiet for the people of Southern Israel, who deserve to live without fear of an incoming rocket.

BLITZER: You have heard these rumors that as part of the deal, maybe more U.S. troops would be dispatched to Sinai. Already, they have been there for, what, 30 years as part of a multinational force, about 700 U.S. troops. What can you tell us about that?

REGEV: I'm not aware specifically of that issue, and I apologize. I can say the following.

One of the major challenges to this cease-fire is the whole issue of rearming Hamas. And it's important that we prevent Iran, which of course will try to send more rockets to Hamas, and that's like -- you know, that's giving very dangerous material to Hamas. A rearmed Hamas is a more dangerous Hamas, a Hamas that is more likely to shoot rockets into Israel.

So it's important that we stop those Iranian rockets from reaching Hamas. And we think there should be a global effort to prevent that from happening. Not just in Sinai, but beyond. The distance from Iran to Gaza is long, and interception can happen all along that supply route.

BLITZER: There's about to be a vote in the United Nations General Assembly granting the Palestinians a little greater form of independent statehood, if you will. I want you to listen to what the Palestinian representative to the United Nations said.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I think that the great majority of nations will vote with us. We are doing it this way. It is not illegal, such as settlements. It is not unilateral, such as all the illegal things that Israel does as an occupying power against our people.

(END VIDEO CLIP)

BLITZER: Well, it looks like they're going to have a significant majority in the General Assembly. France now says it will support this Palestinian resolution, and other European countries will, as well. What will -- what practical impact will this have?

REGEV: This is a mistake by the Palestinians. I think this is political theater at the United Nations where they have an automatic majority there. They can get whatever they want through the United Nations General Assembly. They don't have a problem. They've got the numbers. The Arab votes, the Muslim countries are the countries that automatically support them.

But he bad news is this doesn't change anything whatsoever on the ground. It doesn't bring peace closer. It doesn't bring the eventual creation of a Palestinian state closer. It, in fact, serves to undermine the process of negotiation. It dissipates what little confidence is left.

What the Palestinians should be doing, instead of going to the U.N. And playing political theater, they should be negotiating. That's the only way to solve the difficult issues that separate Israelis from Palestinians.

We call for direct negotiations. There are very difficult issues on the table. And you know that it won't be easy to solve the problems. But the only way to do so is through talking through dialogue. And I've asked the Palestinian leaders, "You say you want peace. Who do you expect to make peace with if you refuse to talk to Israel? Who do you expect to make peace with if you're boycotting the negotiating table?"

We've been calling consistently for the resumption of peace talks without any preconditions. Unfortunately, instead of picking up the ball, the Palestinian leadership is playing political theater at the United Nations, and nothing is going to come from this except for maybe a piece of paper which won't change anything on the ground and a bit of political theater.

BLITZER: You saw the report today that the body of Yasser Arafat was exhumed. They're investigating whether or not he was poisoned, murdered. What can you say as a spokesman for the government of Israel. Did Israel have anything to do with the death of Yasser Arafat?

REGEV: Unequivocally no. Those charges are ludicrous, and it's, you know, conspiracy theories, which as you know, sometimes have legs of their own, but there's no truth in it whatsoever.

BLITZER: None whatsoever, is that what you're saying?

REGEV: Correct.

BLITZER: Are you cooperating with this investigation?

REGEV: We haven't been asked to cooperate. This is an internal Palestinian issue, nothing to do with us. You know, all the medical documents, that's all on the Palestinian side. And once again, we had nothing to do with it.

BLITZER: Did -- did the prime minister release a public reaction to the sudden decision by the defense minister, Ehud Barak, to retire from politics in January?

REGEV: Yes, he did. He spoke about it yesterday. Prime Minister Netanyahu and Defense Minister Barak go back a long way. You know, they were both in the special forces together there, an elite commando unit together. My prime minister said he spent more time with Barak in combat fatigues than in suits and ties as politicians. They really go back decades.

My prime minister praised Barak's contribution over the years to Israel's security, to Israel's defense. And he's been a good defense minister, and the prime minister's enjoyed having him by his side.

BLITZER: Mark Regev is the spokesman for the prime minister of Israel, Benjamin Netanyahu. Mark, thanks very much for joining us.

REGEV: My pleasure. BLITZER: A prominent journalist narrowly escapes an assassination attempt by the Taliban. He tells me about his very close call. That's next.

(COMMERCIAL BREAK)

BLITZER: Her story has been reported around the world: Malala Yousafzai, the teenager shot by the Taliban for advocating education for girls. But for one Pakistani journalist, the story almost cost him his life. The Taliban tried to assassinate him with a car bomb.

(BEGIN VIDEOTAPE)

BLITZER: Joining us now from Islamabad, Hamid Mir. He's one of Pakistan's most prominent journalists. He's the executive editor of Geo TV.

Hamid, thanks very much for coming in. I'm really glad to see you. I'm glad you survived this assassination attempt. How did you discover this bomb that was under your car?

HAMID MIR, EXECUTIVE EDITOR, GEO TV: That was only good luck, because the driver of my neighbors, he saw this bomb, which was installed under my car with a magnet. And he warned my driver that there is something under your car, please check it. And my driver checked it, and he was suspicious because it was a bag.

Then he informed me. I was preparing myself to go to office, and I was already informed by the home department and some security groups and also from the police that I am under threat and I should be careful. So that's why I immediately informed the bomb disposal squad. They came, and after 30, 35 minutes, they defused the bomb.

BLITZER: Thank God for that. The Taliban, as you know, has claimed responsibility for wanting for kill you because of your coverage of that young Pakistani schoolgirl, Malala, who was burned badly, flown to Britain for treatment. In a statement, a Taliban spokesman said on the BBC in Urdu, he said, "We have advised journalists to be moderate. If they don't understand our advice, we send our explosives or suicide bombers."

So what's your response to that statement from that Taliban spokesman?

MIR: Wolf, look, that Taliban spokesperson, Azanala Hassan (ph), he sent me a six-page letter two weeks back. And he warned me that I should not support Malala. And after receiving his letter, I wrote a column, and I also spoke on my TV show that I will not accept your decision, and I will continue my support for Malala Yousafzai.

And then he sent me a message through one of my colleagues in Peshawar that we will send some suicide bombers. Today, the same colleague of mine, he was contacted again by the Taliban spokesperson, and he told me the same message, that "This time you survived, but next time, you will not survive." And they want me to -- they warned me that I should not support Malala Yousafzai. I should not say that attacking Malala was a bad thing.

So I cannot surrender to the Taliban. They warn that I should not speak against them. If I will stop, it's a surrender to Taliban. So I cannot surrender to Taliban. I will keep supporting Malala Yousafzai.

The little girl called me from the hospital last night and spoke to me for more than ten minutes, and she was giving me a lot of strength. So if she can stand against the Taliban and she's a little girl, 14-, 15-year-old girl, so I should also stand against Taliban. The people of Pakistan give me so much respect and popularity.

So this is a testing time for me, and I should stand by the people of Pakistan who face terrorist attacks every day, and most of my colleagues in the Khyber Pakhtunkhwa province and Balochistan (ph) and travel areas, they're more vulnerable than me. They are getting more threats than me from Taliban and also from the security forces (ph).

I am sitting in the capital, yes. I am also vulnerable, but I should not surrender to the Taliban, and I will not. And today, just a few hours back, I spoke on my show and I responded back to the Taliban spokesperson that you think that you can terrorize me, I will not stop. And I will keep opposing you.

BLITZER: Are you suggesting, Hamid, that Pakistani security services, in addition to the Taliban, may also have played a role in this assassination attempt against you?

MIR: Wolf, it's a very complicated situation. If nine months ago, the committee to protect journalists in New York and some other media outfits. They issued a statement and I also endorsed the statement that I was facing threats from some security officials.

And at that time, the government established a special committee to investigate those threats, but no result was released. They never came out with complete results. There was no -- no result of their investigation.

I cannot make a judgment right now, and I will leave it to the investigation authorities. Yes, Taliban have threatened me in the recent past, and the (UNINTELLIGIBLE), they also threatened me a few months back. I am scared of both of them, and -- but I will not leave Pakistan. I will not stop speaking the truth.

BLITZER: Well, Hamid Mir, good luck to you. Be careful over there. We know the important work that you're doing, and we wish you only the best. We, of course, wish only the best for all Pakistanis in the process. Thank you so much for what you're doing.

MIR: Thank you very much.

(END VIDEOTAPE)

BLITZER: Really a good journalist.

BOLDUAN: Yes.

BLITZER: I met him when I was in Islamabad back in 1999, for the first time he was on my show. He's been on my show several times over the years. And whenever a journalist is threatened around the world, it hits home to all of us who are, obviously, professional journalists. I'm on the advisory board of the Reporters' Committee for Freedom of the Press, which tries desperately to protect journalists all over the world. So it's an important subject for those of us, especially for those of us who work in this business.

BOLDUAN: And for everyone watching the story. I mean, Malala's story is a story that has caught on all across the world and the country. All she's trying to do is to promote and advocate education for kids. He's covering that story, and they're threatening to kill him.

All right. All right. Great story, Wolf. So glad you did that interview.

Still ahead, hundreds of thousands of homes were torn apart by Superstorm Sandy. As people start to rebuild, are insurance companies trying to help or just help themselves?

(COMMERCIAL BREAK)

BLITZER: Insurance companies are being inundated with claims in the wake of the Superstorm Sandy.

BOLDUAN: But a surprising number of the claims are being denied. In some cases, wrongfully leaving homeowners shocked and angry. CNN's Deborah Feyerick takes us in depth.

(BEGIN VIDEOTAPE)

PEGGY TAYLOR, STORM VICTIM: I had all new furniture.

DEBORAH FEYERICK, CNN CORRESPONDENT (voice-over): When Superstorm Sandy hit Garrison Beach, Brooklyn, Peggy Taylor thought she was ready. She'd paid decades worth of insurance premiums to be covered for catastrophe.

(on camera) So this is a letter basically denying...

TAYLOR: I went to the office and this is what they gave me.

FEYERICK (voice-over): She says her claim was denied. Her deluxe homeowners policy covered hurricane and wind, not floods.

TAYLOR: She said you're not entitled to anything. You don't have flood insurance.

TOM SULLIVAN, STORM VICTIM: See what I'm not covered for.

FEYERICK: Down the block, Tom Sullivan was having a similar problem with a different insurance company.

SULLIVAN: The water was coming out of the tubs, out of the toilet.

FEYERICK: After initially being told he would get $10,000 for sewer backup, he was then told no, because his damage was caused by the storm surge.

(on camera) When you agreed to this policy was it your understanding that, if I pay you and my home suffers damages, you will make it right and cover?

SULLIVAN: That would be the understanding with anyone. I mean, otherwise, why pay?

FEYERICK (voice-over): More than a dozen people we spoke with in hard-hit storm areas, not just here were equally upset.

(on camera) How many of you are less than happy with the experience of your insurance company?

UNIDENTIFIED FEMALE: All of us.

FEYERICK (voice-over): Insurance critics call the push-back delay, deny, defend.

AMY BACH: The worst is to say we're not going to pay for this when, in fact, it's covered or low balling, saying, "We're only going to give you 50 cents on the dollar."

FEYERICK (on camera): What we're saying is, is that a number of these insurance companies are finding ways to say no before they're finding ways to say yes.

ROBERT HARTWIG: I would disagree. There are a small number of disputes that do occur when you do have as many as a million claims, yes they do.

FEYERICK (voice-over): Robert Hartwig speaks for the insurance industry. He could not talk about the denied claims. Instead, saying payment of Sandy-related claims is going very well.

HARTWIG: People are paid the amount of money that they are entitled to under the terms and conditions of the policy. Yes.

FEYERICK: And that may be a big part of the problem. Many people don't understand the terms and conditions of their policies until after they need them.

(on camera) What does this mean? We may not limit our liability to pay damages for which we become legally liable to pay?

SULLIVAN: I don't know. I don't know.

FEYERICK: Because some people will say, "Look, it's your responsibility to understand this.

SULLIVAN: But what does that mean? FEYERICK (voice-over): Arguably some insurance companies may count on exactly that. The state's chief insurance regulator, Benjamin Lawsky, is tracking insurance companies who fail to do the right thing.

BENJAMIN LAWSKY, SUPERINTENDENT OF FINANCIAL SERVICES: If it ends up that there's a pattern where particular companies are not paying what they promise to pay, they are going to have a huge problem doing business in this state.

FEYERICK: So what happened? Both Peggy Taylor and Tom Sullivan got intervention.

Peggy from New York state's financial services which called her insurance company. After surveying the damage, an adjuster gave her a check for $7,500, a partial payout for hurricane and wind damage, though, not floods.

As for Tom Sullivan, after we called his insurance company, they reviewed his claim and promised him a check for $10,000. They then contacted us to find out whether Sullivan's story would be included now that the matter was resolved.

Deborah Feyerick, CNN, Garrison Beach, New York.

(END VIDEOTAPE)

BOLDUAN: Neither Taylor nor Sullivan had flood insurance because they both live in an area that was never expected to flood, and many others in the disaster zone are in the very same situation.

BLITZER: Let's get back to one of our big stories tonight. The fiscal cliff negotiations. Erin Burnett is going "OUTFRONT" on this story with one of the key senators in the talks.

Erin, what's going on?

ERIN BURNETT, CNN ANCHOR: Senator Mark Warner of Virginia, one of the wealthiest men in Congress and a Democrat, of course, Wolf, he's been working on this for years, and he's frustrated tonight. As you heard from many in Congress, Harry Reid spoke today, said he's frustrated a deal isn't close. The market fell. The implications here are very serious. Senator Warner comes "OUTFRONT" to talk about what he's really willing to do on tax rates, and he has a pretty interesting answer on that.

Plus, Wolf and Kate, we're going to talk about the definition of motherhood. We covered this story. A woman and her best friend decided to have a child together, his sperm and a donor egg. And then, after she gave birth to the child, he said, "I'm gay. I'm getting married to someone else. I'm the biological father. I want the child." What happened? A judge has just ruled on this. A pretty fascinating definition of what a mother really is. That story also at the top of the hour.

Back to you. BLITZER: Look forward to the show. Erin, thank you.

Up next here, Christmas carols with a touch tone twist. Jeanne Moos on the new way to sing holiday favorites.

(COMMERCIAL BREAK)

BOLDUAN: Here's a little something that might have helped with your Black Friday shopping. It's called the shopper chopper. A family-owned grocery store in Pennsylvania built it. The giant shopping cart runs on a Chevy engine and even has rear shocks. The basket is 112 cubic feet, big enough for 146 bags of groceries, if you're wondering, or some flatscreen TVs and maybe a few pairs of shoes. I would love to fill that with shoes.

BLITZER: Some people have way too much free time.

BOLDUAN: No.

BLITZER: Now that Thanksgiving has come and gone, although it isn't even December yet, your favorite radio station may already have switched over to some holiday music. Everybody certainly has a favorite, some new, some old, but CNN's Jeanne Moos has found a new take on a classic, and that's poised to go viral.

(BEGIN VIDEOTAPE)

MOOS (voice-over): It's one of those omnipresent Christmas songs you hear.

(MUSIC: "CAROL OF THE BELLS")

MOOS: Played on cellos, or performed by vocalists. But now the ding dong is coming out of the office phone.

(MUSIC: "CAROL OF THE BELLS")

UNIDENTIFIED FEMALE: The day of, there was over 250 takes.

(MUSIC: "CAROL OF THE BELLS")

MOOS (on camera): It wasn't like you dubbed over sounds.

UNIDENTIFIED FEMALE: No, no, all the sounds are real.

MOOS (voice-over): Produced at the warehouse where Alphabet Photography assembles their products in Niagara Falls, Canada. Owner Jennifer Blakely used a mix of her employees and local musicians to create a do-it-yourself version of "The Carol of the Bells."

UNIDENTIFIED FEMALE: The janitor was also -- he's also a local rapper.

MOOS: The guy manning the phone like some demonic elf...

JOEL VAN VIJET, MUSICIAN: Demonic? MOOS: ... is a singer/songwriter named Joel Van Vijet.

VAN VIJET: I got excited.

MOOS: Alphabet Photography is a small company, and unlike Wal- Mart...

(MUSIC: "CAROL OF THE BELLS")

MOOS: ... unlike the NBA...

(MUSIC: "CAROL OF THE BELLS")

MOOS: ... Jennifer can't afford a big ad budget, so this is a sort of viral Christmas commercial.

Two years ago she organized a Christmas flash mob in a mall food court. That video now has 39 million views.

The new video starts with dial tone.

(on camera) Imagine all those folks at home who are going to be dialing 9591.

(voice-over) Take it from the demonic dialer.

VAN VIJET: If people are trying to play it, know that not all telephones are in the same key.

MOOS: My producer found a better combo.

UNIDENTIFIED MALE (via phone): Pound, eight, pound, four.

Listen to this.

(MUSIC: "CAROL OF THE BELLS")

UNIDENTIFIED MALE (singing): Pound, eight, pound, four. Pound, eight, pound, four.

MOOS: It will either sweep you of your feet or leave you wishing for dial tone.

(PHONE BEING DIALED/DIAL TONE)

MOOS: Jeanne Moos, CNN.

(on camera) What's the Beethoven one?

(PHONE BEING DIALED)

UNIDENTIFIED MALE: Oh. Five, five, five, seven.

MOOS: ... New York.

(END VIDEOTAPE) BLITZER: Very cool.

BOLDUAN: That is very cool.

BLITZER: Can you sing that a little bit?

BOLDUAN: No, I'm not. That was the extent of my singing for you this evening.

BLITZER: I'll be back in one hour filling in for Anderson Cooper tonight on "AC 360." I'll see you then.

Remember, you can always follow what's going on here in THE SITUATION ROOM. Tweet me, @WolfBlitzer. Or...

BOLDUAN: Tweet me, @KateBolduan.

BLITZER: They'll tweet you; they'll tweet me. They'll tweet everybody. Up next, "ERIN BURNETT OUTFRONT." It starts right now.