updated 10/5/2009 11:04:05 AM ET 2009-10-05T15:04:05

Guests: Jonathan Alter, Peter Alexander, Sen. Maria Cantwell, Clarence Page, Stephen Q. Kelly, Steven Battaglio

(BEGIN VIDEOTAPE)

LAWRENCE O‘DONNELL, GUEST HOST (voice-over):  Which of these stories will you be talking about tomorrow?

The fight for health care reform about to enter a new phase: the Senate Finance Committee almost done.  Did the health care industry lobby get what it paid for?  Where does it all go from here?  Tonight, we‘re joined by Finance Committee Democratic Senator Maria Cantwell.

The Copenhagen surprise.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Rio de Janeiro.

(CHEERING)

(END VIDEO CLIP)

O‘DONNELL:  Chicago loses the 2016 Olympics in the first round of voting.  President Obama says he‘s proud of everyone‘s efforts.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  You can play a great game and still not win.

(END VIDEO CLIP)

O‘DONNELL:  But for the right-wing: America‘s loss is reason to celebrate.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST:  The worst day of Obama‘s presidency, folks, the ego has landed.

(END VIDEO CLIP)

O‘DONNELL:  Why do you hate America, Rush?

And the “Late Show” shocker: David Letterman reveals a blackmail plot against him.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, TV TALK SHOW HOST:  He was asking $2 million.

(END VIDEO CLIP)

O‘DONNELL:  The reason for the stiff price tag: Pay up to keep Letterman‘s love life secret.  So Letterman comes clean on his show.

(BEGIN VIDEO CLIP)

LETTERMAN:  I have had sex with women who work for me on this show.

(END VIDEO CLIP)

O‘DONNELL:  A CBS News producer is charged today with grand larceny and enters a plea of not guilty.

Tonight, a look at the Letterman‘s stunning admission, the legal problems for the accused, and any possible legal issues for Letterman himself, and how this bizarre turn of events could impact the career of the “Late Night King.”

All that and more—now on COUNTDOWN.

(BEGIN VIDEO CLIP)

LETTERMAN:  It‘s been a very bizarre experience.

(END VIDEO CLIP)

(END VIDEOTAPE)

O‘DONNELL:  Good evening from New York.  I‘m Lawrence O‘Donnell, in for Keith Olbermann.

On Capitol Hill, there are six registered health care lobbyists for every member of Congress, working on behalf of an industry that has spent $380 million in recent months to influence health care reform.

Our fifth story on the COUNTDOWN: The Senate Finance  Committee has completed it‘s markup of a health care reform bill that would deliver millions of new paying customers subsidized by the federal government to the private insurance industry—with no public option.  The finance committee finished its work at 2:00 a.m. this morning—a final vote on the measure has been delayed until next week so budget officials can certify the bill does not add to the deficit.

In a statement, President Obama today said the committee‘s work represents a milestone, adding, quote, “We are now closer than ever before to finally passing reform.”

Under the bill, Medicaid would be expanded and the Children‘s Health Insurance Program would be phased out, as kids on the program are transitioned to Medicaid and state exchanges offering subsidized private health insurance.  Senator Jay Rockefeller, the chairman of the health subcommittee, sponsored an amendment to keep the Children‘s Health Insurance Program just as it is.

With the committee working past midnight, Senator Rockefeller grew emotional as he recalled his first year in West Virginia as a VISTA volunteer many decades ago when he tried to help a young man named Eddie by getting him a job interview at Union Carbide.  That job interview went awry when Eddie, who had never before been in a town with traffic lights, could not close the blinds in the office.  Venetian blinds being something else Eddie had never seen before.

(BEGIN VIDEO CLIP)

SEN. JAY ROCKEFELLER (D), FINANCE COMMITTEE:  So then he sat down and we proceeded with the interview.  But he couldn‘t give his name.  He‘d been stripped of all self-worth. What I‘d done to him was substantially damaging to him.  And a year later, he was gone from Emmons and I have no idea where he is today.

But he had Medicaid.  He had me by his side and it didn‘t work.  He had Medicaid by his side and it did work.  So I like to keep poor people where they have health care benefits.  I don‘t wish to see them handed over to the tender mercies of a private exchange or whatever.

(END VIDEO CLIP)

O‘DONNELL:  One Republican endorsement of the health reform bill today from former Senate Republican Leader Bill Frist.  Dr. Frist telling “Time” magazine that he would vote for the legislation if he were still in the Senate, but he didn‘t give a ringing endorsement.

For one thing, Senator Frist predicts the bill, as written, will only extend coverage to another 20 million Americans or so, far short of the universal health care reform that would cover 45 million more Americans.  For another, he believes it does not do enough to contain costs.  Quoting him, “There is really nothing to bend the cost curve.”

The Senate Finance Committee made major changes to its health care bill in its final hours of the debate, including an amendment narrowly passed that would allow states to provide coverage to individuals and families whose incomes fall just above the cutoff for Medicaid, but below the 200 percent federal poverty level.

Joining us is the author of that amendment, Democrat Maria Cantwell from the state of Washington.

Good evening, Senator.  Thank you very much for joining us tonight.

SEN. MARIA CANTWELL (D), FINANCE COMMITTEE:  Good evening, Lawrence.

O‘DONNELL:  I know you had a long night last night, but could you tell us what exactly would your amendment do?  It‘s not one that a lot of us had time to study before you introduced it.

CANTWELL:  Well, I want that ability to negotiate on behalf of the people of my state so that we can drive down the cost of insurance.  As you were pointing out, the insurance costs have skyrocketed and the insurance industry is here trying to protect that, and it‘s a question of whose side are we going to be on?  Are we going to be on the side of the people in giving them more negotiating power or are we going to let the status quo keep driving up insurance?

O‘DONNELL:  Now, Senator, your plan is option for all 50 states.  Your state already has a plan like this, but if I‘m a governor of one of the other 49 states, I would have some reluctance to start a plan like this because I‘d be worried about whether it has a dedicated funding stream in the future.  I mean, might this be subject to appropriations two or three years down the line after I started up in my state where federal government comes along, it says, “We‘re going to cut it by 50 percent”?

CANTWELL:  I don‘t like the bill as it is now when we are subsidizing expensive insurance by giving tax credits to buy that insurance.  It‘s not going to drive down the price.  But instead, if we allow, and I‘m more than happy to give this power to, you know, all the federal government, but right now what we can do is push Republicans on the notion, they like states rights, and then the state can decide whether it wants to opt in and negotiate on behalf of its citizens.  So, I‘d like Republican governors to tell me, no, they don‘t want to bargain and drive down insurance costs for their citizens.

O‘DONNELL:  Now, you got Chairman Baucus on this amendment, but you couldn‘t get Olympia Snowe and you didn‘t get Blanche Lincoln on your side.  What do you think it would take to move them closer to your position on this?

CANTWELL:  Well, I think the bill will come out of committee with this language on it, which means I think it will have a very good chance to stay in the bill.  And I think, as Republicans find out more about it and hear from their individual states, they‘re going to realize that this is a choice between whether they‘re going to stand with the insurance industry or whether they‘re going to stand with the people of their state.

And with premiums having gone up 120 percent, that means people are paying $7,000 or more for insurance now than the same benefits they just had a few years ago.  And so, if we don‘t stop that continued increase, then we‘re just going to continue to put more U.S. families into bankruptcy.  So, this is about governors and about us standing up for the people of our country.

O‘DONNELL:  Now, most of the Democrats in the finance committee, including you, are able to hold off the Republican amendments attacking the tax provisions in the bill.  When you get out on the Senate floor, where it‘s a much more free-wheeling environment and the chairman doesn‘t have complete control as he does in that finance committee room, don‘t you expect a lot more arguments over the tax provisions in the bill?

CANTWELL:  Well, you‘re going to hear a lot of things thrown at this and basically people say, “Well, let‘s not do anything.”  But I think that we know if we do nothing, those insurance rates are going to double again in the next 10 years.

And as Jay Rockefeller was saying, are we going to do something for people that gives them that safety net, that security?  Because if you‘re making $40,000 a year or less and you can‘t afford insurance because of its exorbitant rates, are we going to continue this foolish policy of sending people to the emergency rooms for their health care?  I don‘t think so.  And that‘s what we have to fight to make sure that we get the message out that this is the kind of bargaining power that we need to give to the American people.

O‘DONNELL:  Senator, your committee voted for a tax 35 percent or 40 percent tax on health insurance plans that are worth more than $8,000 from individual, $21,000 for a family, these so-called Cadillac plans.  Won‘t that tax automatically and virtually, instantaneously, drive up the premiums for those kinds of plans and/or provoke dramatic cuts in benefits for people in those plans?  And so, the Obama plan promise “If you like your plan you can keep it” starts to fall apart if that plan that I like and want to keep falls apart in my hands, doesn‘t?

CANTWELL:  Well, that‘s the vote we‘re going to have next Tuesday and this is about continuing to move a process forward.  But, personally I‘d like to drive more money out of reforms.  I want to control the cost of health care.  I want to drive down the cost of premiums.

If health insurance is raising about 8 percent a year and inflation is only 2 percent, that‘s where the issue is.  We need to keep health care more in line with the rate of inflation.  And so, we ought to be talking about what we‘re going to do to drive down the costs of those premiums.

O‘DONNELL:  Senator Maria Cantwell of Washington, many thanks for your time tonight.

CANTWELL:  Thank you.

O‘DONNELL:  For more on what happens next, let‘s bring in Clarence Page, “Chicago Tribune” editorial board member and a Pulitzer Prize-winning syndicated columnist.

Good evening, Clarence.  Thanks for joining us.

CLARENCE PAGE, CHICAGO TRIBUNE:  Good evening, Lawrence.  Thank you. 

Happy to be here.

O‘DONNELL:  Clarence, the Senate Finance Committee has completed its work.  It was a messy process.  They finally got something out.  The CBO is going to take a look at it over the weekend, do some cost estimates on it, and tell us exactly how it affects the deficit.  President Obama praised this bill, saying it was a milestone.

And since it is the only bill—the only bill—that the committee has delivered that meets President Obama‘s requirements, isn‘t the Baucus bill now really the Obama bill?

PAGE:  Well, that‘s a good question, I guess.  Yes, I think though that it would not necessarily mean that it‘s going to be the bill that gets to President Obama‘s desk.  Senator Rockefeller and Senator Schumer are still pushing for a public option.  We don‘t have it.

Senator Cantwell is offering sort of a quasi-public option that would be a state-based option.  Somewhat like the one in her home state in Washington, but, the cost controls are a question.  She raises a very good point about that, but if it goes to the Web site for her state, a program they‘re in Washington right now, you‘ll see that there‘s a notice that if you want to apply, your name will go on a waiting list because they‘re having trouble staying within their budget constraints.

I‘m sure questions are going to rise when this bill—whatever bill, Baucus bill gets to the Senate floor, questions are going to rise about cost containment which is still a very real issue.

O‘DONNELL:  Clarence, the president likes to say we have 80 percent agreement on this legislation.  But, of course, there‘s absolutely no agreement among the Democrats, especially between the Senate and the House on how to pay for the bill, which is 50 percent of the bill.  And do you see any movement from Speaker Pelosi‘s side that they‘re moving closer to the Baucus formula of taxing health insurance plans and cutting Medicaid by $500 million and not doing this new top tax rate that Charlie Rangel has proposed on the House side?

PAGE:  Well, Speaker Pelosi is being very open.  She‘s listening to everybody.  I mean, a parade of people through which she is listening very carefully to all the factions here, but whether or not there‘s actual movement in that direction right now, it‘s hard to tell, because there‘s really—so much wrangling still going on.

But I think she is going to try to put some kind of cost containment in there before it gets to the conference phase.  Exactly how they‘re going to do it, though, still isn‘t very clear.

O‘DONNELL:  Now, Clarence, doesn‘t senator—former Senator Bill Frist suddenly sound very reasonable now that he‘s not longer the Republican majority leader and talking about this legislation today saying, you know, he would vote for it if he was still there?  But if he was actually still there, even if he wasn‘t the majority leader, wouldn‘t he be feeling all that party pressure that they‘re bringing to bear on everyone in the Republican Party and line up against it, just like everyone except Olympia Snowe, it seems at this point?

PAGE:  Well, he himself express dissatisfaction with the cost containment, that it doesn‘t have enough and that it would only cover—as he says -- 20 million more people, not the 42 that you‘re looking for if you want to have something approaching universal coverage.  So Bill Frist, it sounds like he‘s debating with Bill Frist.

But if you‘re satisfied with the bill as it is, then I‘m sure the insurance industry would be happy, but folks who are pushing for a public option—and let‘s remember, the Senate floor is more liberal than the Senate Finance Committee.  This is what Senators Rockefeller and Schumer are talking about when they say that they‘re still going to try to push for something that offers some competition to the insurance industry and offers some choice on the part of the public so that they will be able to—as President Obama says—keep the private insurers honest, and have the kind of competition that can try to bring cost down.

O‘DONNELL:  Well, we‘re a couple of weeks away of finding out just liberal the Senate floor is.  Clarence Page, Pulitzer Prize-winning columnist for the “Chicago Tribune”—thanks for your time tonight.

A quick correction on something from last night‘s COUNTDOWN: We reported that Senator Jeff Bingaman of New Mexico voted against the public option.  That was incorrect, he voted for both the Rockefeller and the Schumer amendments in the finance committee, which would have included the public option in that bill.  We regret that error.

Coming up on COUNTDOWN: Rio de Janeiro wins the 2016 Summer Olympic, dashing the hopes of Americans that Chicago would host the games.  President Obama praises everyone‘s efforts in Chicago‘s bid, but the right-wing shows its true colors and celebrates the fact that the president wasn‘t able to tip the scales in favor of the USA at the last minute.

And later, the David Letterman extortion plot—viewers of the late show got a big surprise last night.  We‘ll show you Letterman‘s admission, looking at the facts surrounding the allegations and discuss what we know about Robert “Joe” Halderman, the CBS News producer accused of trying to blackmail Letterman for $2 million—ahead on COUNTDOWN.

(COMMERCIAL BREAK)

O‘DONNELL:  Coming up: President and Mrs. Obama‘s last-minute push to convince the International Olympic Committee to award the 2016 Olympics to Chicago failed today.  It was a loss for the country, but the reaction from the right-wing is one of elation.  So much for “country first.”

And later: In-depth coverage of the plot to extort $2 million from “Late Night” host David Letterman.

That‘s next.  This is COUNTDOWN.

(COMMERCIAL BREAK)

O‘DONNELL:  After a week‘s worth of hysterics, after maligning, mocking and chastising, President Obama‘s appeals to bring the Olympics Games to an American city—in our fourth story on the COUNTDOWN: As Chicago is handed a stunning defeat, the right wing claims victory.

Following an 11th hour in-person pitch from President Obama in Copenhagen, the city of Chicago given a swift rejection from the International Olympic Committee, not out of the running to host the 2016 Olympics after the first round of voting.  The power of two Obamas and an Oprah didn‘t get the Windy City an edge over the competition.  After an impassioned plea from its president, all eyes were on Brazil.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Rio de Janeiro.

(CHEERING)

(END VIDEO CLIP)

O‘DONNELL:  President Obama returning from Copenhagen this afternoon, congratulating Brazil on their historic victory.  They will be the first South American city to host an Olympic Games—while adding he could not be prouder of his hometown.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  I believe it‘s always a worthwhile endeavor to promote and boost the United States of America.

(END VIDEO CLIP)

O‘DONNELL:  Those in disagreement: The conservative right—today perversely gleeful over America‘s defeat.

(BEGIN AUDIO CLIP)

GLENN BECK, RADIO AND TV HOST:  I mean, please, please, let me break this news to you.  Oh, it‘s so sweet.  Is it possible that this is the first head of state of any major country that has ever gone over and made the pitch in person and then failed?

(END AUDIO CLIP)

(BEGIN VIDEO CLIP)

LIMBAUGH:  Oh, man, oh, man, oh, man!  The worst day of Obama‘s presidency, folks, the ego has landed.

(END VIDEO CLIP)

O‘DONNELL:  The Drudge Report trumpeting the headline, “World Rejects Obama,” showing a picture of Rio‘s Christ the Redeemer statue being struck by lightning.

Meanwhile, the conservative group Americans for Prosperity actually applauded Chicago‘s defeat, demonstrating they are actually opposed to prosperity in Chicago.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE:  If anyone care, Chicago is out.

(CHEERING)

UNIDENTIFIED FEMALE:  The very first vote, they did not have any chance for negotiating.  They were out on the first vote.

(END VIDEO CLIP)

O‘DONNELL:  Joining me now is MSNBC political analyst and national affairs columnist for “Newsweek,” Jonathan Alter.

Good evening, Jonathan.

JONATHAN ALTER, MSNBC POLITICAL ANALYST:  Hi, Lawrence.

O‘DONNELL:  Jonathan, I was so, so wrong about this one.  I had your fellow Chicagoan, Clarence Page, on this program before the president went over there, saying, the fix is in, right?  The Chicago gang, Richie Daley, they wouldn‘t let him get on the plane without the fix being in.

What happened here?

ALTER:  Now, the fix was never—a couple of weeks ago when I was talking to folks about this, the White House really didn‘t want him to go, because they knew that because the Olympics had never been in South America before, that there was a very decent chance that Rio was going to get these games.  So, there was this big debate the Chicago people were pushing hard for him to go on the off chance that they could catch, you know, win at the tape.  And he finally decided that if he didn‘t go and they lost, he would then get blamed for it, so he might as well go and give it the big effort.

O‘DONNELL:  And this is a job creation program.  I mean if you bring the Olympics to Chicago, you‘re going to push an awful lot of jobs in that direction.  So, I mean, this seemed to me to be a perfectly reasonable use of presidential time, isn‘t it?

ALTER:  Sure.  And it wasn‘t very much time.  I mean, most of it was overnight, you know?  The complaints about this are kind of pathetic, really.  You know, sure, it‘s embarrassing for him, for a couple of days, but does it cause any lasting political damage?  Can you imagine somebody at the next election going, you know, an independent voter, I was going to be for President Obama, but then he wasted those 18 hours back in 2009 going across the ocean to Copenhagen, so I‘m not for him.

I mean, we‘re in such cloud cuckoo land here, Lawrence, in terms of what is of lasting political importance.  And I don‘t even think it scored have many short-term points for the right-wing because they just look churlish seeming to be exultant about the fact that the United States isn‘t going to get the Olympics.

O‘DONNELL:  Well, Jonathan, I hold in my hands a recent Zogby poll indicating that 84 percent of Americans supported Chicago hosting the 2016 Olympic Games.  How does the president go wrong doing what 84 percent of Americans want to do?

ALTER:  That‘s actually more than the percentage of Chicagoans.

(CROSSTALK)

ALTER:  There were a lot of Chicagoans who thought it wasn‘t such a great idea.

O‘DONNELL:  It can mess up your daily commute if the Olympics are in town.

ALTER:  Not just that, but the budget numbers were a little, you know, dicey there.  Yes, I don‘t think that either a governor going abroad to try to bring business to his or her state, or a president trying to bring a big business opportunity to the United States—that‘s part of what presidents are supposed to do, is represent the best interests of our country.  You know, if it doesn‘t consume a lot of time and it didn‘t, why not try?

And also the idea that he‘s supposed to succeed and the fix is supposed to be in all the time, or why bother, you know, that just means you do less if you‘re not willing to try and risk failure.  So, you know, we all should be getting ourselves—putting ourselves out on the line and not being afraid to fail.

O‘DONNELL:  And doesn‘t it demonstrate that for the Glenn Becks out there, that Barack Obama has just become this trip wire that they can‘t help tripping over no matter what the situation is.  They‘re out there today gleefully dancing on the idea that America has lost a big one.

ALTER:  Yes.  You know, there was a good column by David Brooks this morning on the “New York Times” arguing that Glenn Beck—and none of these guys really have any power.  It‘s all just entertainment.  None of them have actually moved any voters.  They do things to entertain their base, get their base all revved up.  But mostly, it‘s much ado about very little.

O‘DONNELL:  Jonathan Alter of “Newsweek,” and MSNBC—sorry about this loss for your hometown today, and thank you very much for your time tonight, gentleman.

ALTER:  Thank the Cubbies.

O‘DONNELL:  Right.

Coming up: The late-night bombshell on CBS: David Letterman reveals an extortion plot against him.  In talking about the blackmail efforts, he also admits he had sex with some of his employees.  We‘ll show you Letterman‘s admission and discuss the impact this will have on his career and whether he, too, could face possible legal troubles.

And the details about the suspect, Robert Halderman, a CBS News producer.  We‘ll examine the allegations against him, allegations he pled not guilty to today—ahead on COUNTDOWN.

(COMMERCIAL BREAK)

O‘DONNELL:  It is less than 24 hours since “Late Show” host David Letterman revealed he was being extorted for having sex with women on his staff.  Today, a bizarre picture is beginning to come into focus.  In our number three story, the facts as we know them. 

Letterman himself broke the shocking news last night with a riveting account of the extortion plot against him, including the embarrassing admission of sexual relationships with his staff.  Today, a CBS News producer arrested for the crime has been arraigned.  And we‘re learning more about a female “Late Show” producer caught up in this whole mess. 

Here now, Peter Alexander. 

(BEGIN VIDEOTAPE)

DAVID LETTERMAN, “THE LATE SHOW”:  Do you feel like a story? 

PETER ALEXANDER, NBC NEWS CORRESPONDENT (voice-over):  It was an extraordinary late-night confession, that many of Letterman‘s audience members at first mistook for a joke.  The comedian told viewers that last month he found a package in the back seat of his car. 

LETTERMAN:  And there is a letter in the package.  And it says that I know that you do some terrible, terrible things. 

ALEXANDER:  Letterman also made another startling admission. 

LETTERMAN:  I have had sex with women who work on this show. 

ALEXANDER:  And today, more details became public, as prosecutors charged 51-year-old Robert Joe Halderman, a veteran producer for CBS programs, including “48 Hours,” with attempted grand larceny, saying he wrote Letterman demanding a large chunk of money, threatening that Letterman‘s world is about to collapse around him. 

ROBERT MORGENTHAU, MANHATTAN DISTRICT ATTORNEY:  New York will not tolerate the coercion or extortion of anyone, be the victim rich or poor, famous or anonymous. 

ALEXANDER (on camera):  Prosecutors say last month Letterman‘s attorney met privately with Halderman three times at this Manhattan hotel, twice secretly recording their conversations, before giving Halderman a fake two million dollar check that the suspect tried to deposit yesterday. 

(voice over):  Amid a frenzy of cameras, Halderman was released on bail late this afternoon.  His attorney says he‘s not guilty. 

GERALD SHARGEL, ROBERT HALDERMAN‘S ATTORNEY:  There is another side to the story.  It‘s not the open and shut case that you just heard about. 

ANTHONY S. BARKOW, CENTER ON THE ADMIN. OF CRIMINAL LAW:  These cases happen with some frequency.  And typically when they happen, the defendant knows the victim, because otherwise they wouldn‘t be able to extort them or at least know something about them that puts them in close proximity. 

ALEXANDER:  Connecticut voter registration records from 2008 show Halderman was living with Stephanie Berkett (ph), one of Letterman‘s long time assistants.  Letterman did not name any of his co-workers when he addressed his relationships last night. 

LETTERMAN:  Would it be embarrassing if it were made public, perhaps it would.  Perhaps it would, especially for the women. 

ALEXANDER:  While the audience again laughed uncomfortably, some may not consider a laughing matter, especially for a comedian who has been accused of insensitivity towards women in the past.

Letterman was the center of controversy after he made a joke about one of former Vice Presidential Candidate Sarah Palin‘s teenage daughters and baseball star Alex Rodriguez.  So were these newly revealed relationships appropriate?  Letterman‘s production company, Worldwide Pants, issued a statement today saying, “Dave is not in violation of our policy.  And no one has ever raised a complaint against him.” 

Letterman was not at work today, with his show pretaped, and audiences still unsure how to react. 

Peter Alexander, NBC News, New York.

(END VIDEOTAPE)

O‘DONNELL:  The Ed Sullivan Theater seats 400 people.  Last night, no one in that audience had any clue that before the top ten list, Woody Harrelson and the Kardashian, they would get a ten-minute story filled with sordid details of a plot to blackmail David Letterman, and more than they ever expected to know about his sex life.  Judging from the audience reaction, either the theater was filled with French tourists or America, at least Dave Letterman‘s America, has become very sympathetic to men in the middle of what used to be call sex scandals. 

(BEGIN VIDEO CLIP)

LETTERMAN:  This started three weeks ago yesterday.  I got up—I get up early and I come to work early.  And I go out and I get into my car.  And in the back seat of my car is a package I don‘t recognize and have never seen before and don‘t usually receive packages at 6:00 in the morning in the back of my car. 

I guess you can.  I guess some people do.  So I get to looking through it, and there‘s a letter in the package.  And it says that I know that you do some terrible, terrible things.  And I can prove that you do these terrible things.  And sure enough, contained in the package was stuff to prove that I do terrible things. 

What this is a guy is going to write a screen play about me.  And, you know, that‘s good news for the anyone, isn‘t it really?  And he seems to—in this packet, there seems to be quite a lot of terrible stuff he knows about.  And he‘s going to put it into a movie, unless I give him some money. 

Yes.  So I call my attorney, and he takes a look at it.  And he says, well, let‘s schedule a meeting with the guy just to see what he has in mind.  So there‘s a meeting with the guy.  And it turns out, yes, in fact he wants a large sum of money or he‘s going to produce this screen play of all the terrible things that I do, embarrassing, terrible things. 

So then we call an operation called the Special Prosecution Bureau, which is a division of the Manhattan District Attorney‘s Office.  We called down there.  And we say can we run a couple of things by you guys?  And so we took the stuff down there and they said, whoa, hello, this is blackmail. 

If there‘s a light hearted moment in any of this—and I‘m not sure there really is—the third meeting is arranged whereby he‘s given the check.  Now I don‘t think I ever mentioned the amount up until now, but he was asking two million dollars. 

I had to go downtown to testify before the Grand Jury.  And I had to tell them how I was disturbed by this.  I was worried for myself.  I was worried for my family.  I felt menaced by this.  And I had to tell them all of the creepy things that I have done that were going to be—

Now why is that funny?  That‘s—I mean—so the idea is if they believe, in fact, a crime has been committed, then they issue a warrant and that‘s exactly what happened.  And a little bit after noon today, the guy was arrested. 

Now, of course, we get to what was it, what was all the creepy stuff that he was going to put into the screen play and the movie.  And the creepy stuff was that I have had sex with women who work for me on this show. 

Now my response to that is, yes, I have.  I have had sex with women who work on this show.  And would it be embarrassing if it were made public?  Perhaps it would.  Perhaps it would, especially for the women. 

It‘s been a very bizarre experience.  I feel like I need to protect these people.  I need to certainly protect my family.  I need to protect myself.  I hope to protect my job and the friends, everybody that has been very supportive through this.  And I don‘t plan to say much more about this on this particular topic.  So thank you for letting me bend your ear. 

(END VIDEO CLIP)

O‘DONNELL:  Portions of Letterman‘s stunning admission last night on “The Late Show.” 

Coming up, the legal ramifications of the case, the suspect arraigned in court today.  Where does the case go from here?  And is there any legal jeopardy ahead for Letterman or CBS, with these sexual relationships happening with Letterman‘s co-workers? 

And later, will Letterman pay a price for this scandal, professionally or personally.  The questions surrounding the impact on his viewing audience and Letterman‘s image. 

(COMMERCIAL BREAK)

O‘DONNELL:  Robert Halderman pled not guilty in a Manhattan courtroom this afternoon, before making his bail of 200,000 dollars.  In our number two story, the Emmy winning producer of the CBS true crime show “48 Hours” charged with blackmailing David Letterman.  It seems Robert Halderman has seen one too many “48 Hours.”

While all signs currently point to David Letterman being the victim here, there are potential legal implications associated with sleeping with people you employ. 

John Q. Kelly is a former assistant district attorney and currently a civil litigator criminal defense attorney.  He joins us tonight from MSNBC headquarters in New York.

Thanks for being with us, Attorney Kelly. 

JOHN Q. KELLY, FORMER PROSECUTOR:  Sure.  Good seeing you, Lawrence.

O‘DONNELL:  At a press conference today, Manhattan DA Robert Morgenthau referred to the screen play that Halderman was trying to sell to Letterman that detailed sexual encounters Letterman had had with women on the staff.  Morgenthau gave a wry smile when he referred to it as a one page screen play.  Is this screen play the thread of defense that this guy has, saying, in fact, this was a valid commercial exchange?  Letterman was paying me a going price for this screen play of mine? 

KELLY:  It looks like that‘s the way he initially intended to set it up.  Apparently, all the detail that is very fact specific to Letterman, the coercion part of it, the threatening part of it, is included in that screen play also.  So that, in effect, is the blackmail letter also. 

O‘DONNELL:  Now, it seems that the prosecutors who got involved in this, coaching Letterman and his lawyers along, suggested that they actually go through the process of giving him a check.  How much more does this add to the criminal case that they the gave him the two million dollar check and then he then tried to cash the two million dollar check? 

KELLY:  It‘s complete all the elements of the crime.  If they had ended the investigation when Letterman received the package and just verbally received the threat and demand, it would have been a conspiracy charge, conspiracy to commit grand larceny in the first-degree.  All you would have needed then is some talk and one overt act. 

But now you‘ve gone beyond that.  You have gone to forceful demand for property or a person, under the force of threat.  And not only did he make the threats, he took the money and he deposited the money.  So the intent was there to follow through from start to finish.  So it‘s a very strong case from start to finish. 

O‘DONNELL:  In a high-profile case like this, grand larceny, 200,000 dollars bail; what kind of sentencing is this guy facing if we ever get to the point of a conviction like this? 

KELLY:  It‘s a B non-violent felony.  It‘s an attempted grand larceny first degree.  You‘re looking at a minimum of one and a half to four and a half years, and a maximum of five to 15 years.  So it‘s really no laughing matter on anybody‘s part at this point.

O‘DONNELL:  Let‘s just consider what the issues might be for David Letterman, in terms of getting in trouble in the workplace like this.  Where are the lines in the workplace, in terms of sexual harassment and other possible civil issues that might come up in a situation like this? 

KELLY:  Well, first of all, let me point out, last night Letterman himself said he‘s worried about his job.  So he knows there are implications there.  Every human resource manual strictly prohibits, you know, consorting between the superiors and subordinates in the workplace.  And David clearly did that on a number of occasions. 

Everybody‘s coming to his defense, saying nobody‘s claimed it‘s been coercive; nobody‘s been claiming rape.  You know what?  It‘s just inherently coercive.  You have women who may step forward and say, I went along with it, but I was afraid not to because he was my boss, or I went along with it originally, and wanted to end it, but I was afraid to, because he‘s my boss, or other people would come forward and say, I knew he was having this relationship with this other women, and she was getting favorable treatment. 

So CBS will have an exhaustive in house investigation.  And, god forbid, the worst thing that could happen to David Letterman is one of these women is going to say, I really didn‘t like this; I went along with it; now that it‘s out there, my name‘s out there, I‘m going bring a sexual harassment suit.  And that‘s going to be Letterman‘s worst nightmare if that happens. 

O‘DONNELL:  I just want to clarify, nothing like that has happened yet.  In fact, the Letterman company put out a statement saying there were no complaints filed against him.  No sexual harassment laws were violated.  No complaints filed against him so far. 

John Q. Kelly, former prosecutor and now a civil attorney, thank you very much for joining us tonight. 

KELLY:  Thanks, Lawrence.

O‘DONNELL:  Beyond the legal ramifications of this case, what are the professional implications for Letterman?  After his controversy with Sarah Palin this past summer, will he weather this crisis just as smoothly?  Or will there be a backlash from his audience?  And what about any impact to his personal image?  We‘ll discuss those topics next on COUNTDOWN.

(COMMERCIAL BREAK)

O‘DONNELL:  If you needed any indication of how David Letterman will behave going forward in the wake of this still-unfolding scandal, forget about the awkward ten minute confession in the middle of the show last night.  In our number one story, if you want to know how Letterman will carry on, the past, as they say, may be pro log. 

Go back to his NBC days, when his home was invaded to by a stalker and he turned it into a routine monologue joke.  Go back to the recent dust up with Sarah Palin, when Letterman apologized for any unintended interpretation of a joke he made about Palin‘s daughter, and then continued to flog Alaska‘s ex-governor in his monologue.  Go back to last night‘s monologue, minutes before the revelation of his own sexual escapades, when he delivered the following joke. 

(BEGIN VIDEO CLIP)

LETTERMAN:  President Obama and his lovely wife Michelle are in Copenhagen.  And they‘re making a pitch to bring the 2016 Olympics to Chicago.  Barack Obama is very—you think about it, he‘s an unusual Democrat.  I mean, here the guy is on a business trip with his wife.  I mean, what is that?  Isn‘t that odd? 

(END VIDEO CLIP)

O‘DONNELL:  Who knew the Appalachian Trail leads to the Ed Sullivan Theater?  Joining me now is Stephen Battaglio, business editor for “TV Guide.”

Thanks for joining us tonight, Stephen.

STEPHEN BATTAGLIO, “TV GUIDE”:  Good evening, Lawrence.

O‘DONNELL:  Now, the monologue clip from last night, is that a sign of how Letterman‘s going to be going forward with this, just continuing to find the jokes where they are? 

BATTAGLIO:  That clip was before he made the confession in the ten-minute monologue that you talked about.  I think that‘s one of the things we‘re going to be watching for going forward.  You know, late-night hosts, they‘re not just comedians.  They‘re really important social critics, and really guides through the whole national conversation of whatever people are talking about.

Does this event undercut David Letterman‘s ability to do that?  Are jokes about Bill Clinton going to get uncomfortable snickers, instead of laughter in the future?

O‘DONNELL:  How does Conan top this.  No, really, there‘s a ratings issue here.  Letterman‘s going to have a huge number Monday night, when he comes back on the air.  People are going to want to see what he‘s going to say next.  Isn‘t he?

BATTAGLIO:  There‘s certainly going to be some interest in the next few days.  I don‘t want to be a rude guest, but the best thing that‘s happening to David Letterman‘s ratings right now is the collapse of the NBC prime time lineup and the fact that it‘s not feeding very many viewers into “The Tonight Show.”  That‘s the reason why Dave has been doing better in the ratings.

O‘DONNELL:  All right, we‘ll have no more of that rudeness here, Steve.  Back to Letterman and his problems; I was really struck by an audience that when he says, yes, I did have sex with some of my workers here, he gets laughs that then morph into a very strong round of applause. 

BATTAGLIO:  This audience—Dave has been on television a long time.  It‘s a very intimate relationship that you have.  In late-night television, you are watching him.  You feel like you know him.  He has built up great equity with this audience.  No one could have a better platform to talk about their flaws and their problems than a late night talk show that you control.  You decide what‘s on it.  He really got ahead of this issue, presented it in the way he wanted to. 

And people who were sitting there expecting a funny show—sitting in the freezing cold, by the way—probably are not sure exactly how to react.  And they went with it. 

O‘DONNELL:  So he doesn‘t have a hypocrisy wall up in front of him on this, is what you‘re saying.  This is not Jerry Falwell.  This is not an Evangelical preacher being caught.  This is a guy who makes fun of himself all the time.

BATTAGLIO:  It‘s not just that.  It‘s also I think that people in America know that show biz is about power, money, and sex, and lots of sex.  And I don‘t think it comes as a great surprise to him that there are late night hosts chasing women in the office.  It probably has happened in the past.  And I‘ll bet it will happen in the future. 

O‘DONNELL:  Should he be worried about any of the sponsors of his show?  It‘s a late-night show. 

BATTAGLIO:  That‘s a very good question.  I think the sponsors are used to the type of notoriety that—controversy that can happen on late-night television.  So they have a pretty high threshold for that. 

O‘DONNELL:  Steve Battaglio of “TV Guide,” we‘re going to be hearing more from you on this.  Thanks for joining us tonight.   

BATTAGLIO:  Thanks for having me. 

O‘DONNELL:  That will have to do it for this Friday edition of COUNTDOWN.  I‘m Lawrence O‘Donnell, in for Keith Olbermann.  Our MSNBC coverage continues now with “THE RACHEL MADDOW SHOW.”  Good evening, Rachel.

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

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