updated 10/21/2005 10:17:42 AM ET 2005-10-21T14:17:42

Guest: John Solomon, Jim Vandehei, Matthew Cooper, Norah O'Donnell, Bill

Press, Ed Rollins, John Fund, Katrina Vanden Heuvel, Dana Milbank

CHRIS MATTHEWS, HOST:  Tonight, HARDBALL in the West Wing.  Karl Rove tells the grand jury that Vice President Cheney's chief of staff, Scooter Libby, may have been the one who told him that Joseph Wilson's wife worked at the CIA.

So who, Rove or Libby, will testify against the other?  Let's play

HARDBALL.

MATTHEWS:  Good evening.  I'm Chris Matthews. 

A major development in the CIA leak investigation:  the Associated Press reports that Karl Rove, the top adviser to President Bush and Scooter Libby, Vice President Cheney's chief of staff, were talking to each other about Ambassador Joseph Wilson's wife and her job at the CIA and how they were talking to reporters about it before columnist Bob Novak outed her in his July 14, 2003 column. 

If the report by the Associated Press stands up, the alleged grand jury testimony would show two things we didn't know before.  One, that Rove and Libby were sharing information about press contacts before the undercover identity of Mrs. Wilson broke publicly. 

Two, this is the first word we have gotten that either Rove or Libby has pointed a finger at the other at the initial source of what became the infamous leak of an undercover CIA operative's identity. 

Let's go now to HARDBALL correspondent, David Shuster. 

David? 

(BEGIN VIDEOTAPE)

SHUSTER (voice over):  It is evidence that could help prosecutor Patrick Fitzgerald prove a conspiracy.  A source familiar with Karl Rove's testimony says the presidential adviser told the grand jury he and Vice President Cheney's chief of staff, Scooter Libby, may have discussed administration critic Joe Wilson and his wife before Valerie Plame's CIA status was revealed by reporters. 

Rove's account, for the first time binds together the two central figures in this case.  The issue is whether Rove, Libby and any others in the White House came up with a strategy which then contributed to the release of classified information. 

SOL WISENBERG, FMR. DEP. INDEPENDENT COUNSEL:  Under something called the Pinkerton doctrine, you're guilty of conspiracy because you should have thought about that at the very beginning that that might happen. 

The conspiracy law is a favorite tool of prosecutors.  It's incredibly broad. 

SHUSTER:  And with a broad focus on the office of Vice President Cheney, legal experts say the timeline is crucial. 

On July 6, 2003, Joe Wilson first publicly undercut White House claims about Iraq seeking uranium from Africa. 

The next day, with the president and his top aides flying on Air Force one, grand jury witnesses say, a State Department memo was brought on board that identified Wilson's wife was a CIA officer and described her status as Secret. 

Former Secretary of State Colin Powell, who was on this flight, has testified about the memo, although it's unclear who he spoke with about the contents, either on the flight or afterward. 

Days later, the president's top adviser and the vice president's chief of staff talked about Wilson.  And then columnist Robert Novak wrote that Valerie Plame was a CIA operative. 

Early in the investigation, Prosecutor Fitzgerald subpoenaed the documents and phone records of the White House Iraq group, a group of senior officials brought together by Chief of Staff Andy Card in 2002.

The group's mission was to sell the Iraq war to Congress and the American people.  And within weeks...

VICE PRESIDENT RICHARD CHENEY:  We now know that Saddam has resumed his efforts to acquire nuclear weapons. 

SHUSTER:  A month after that...

PRESIDENT GEORGE W. BUSH:  We cannot wait for the final proof, the smoking gun, that could come in the form of a mushroom cloud. 

SHUSTER:  Earlier in the year, Vice President Cheney had asked the CIA to look into a report that Iraq was seeking uranium from Africa.  Shortly thereafter, the agency sent Joe Wilson to Niger.

He came back and told the CIA there was no evidence Iraq had been seeking nuclear materials. 

And yet, in the president's 2003 state of the union speech...

BUSH:  The British government has learned that Saddam Hussein recently sought significant quantities of uranium from Africa. 

SHUSTER:  Six months later, with the war under way and no evidence that Iraq had weapons of mass destruction of any kind, Joe Wilson publicly spoke out, criticizing the president's speech and prompting the White house retraction. 

But to the White House Iraq group, Wilson was more than just an irritation.  His wife had recommended Wilson for the trip, a detail too juicy to hold back from reporters at a time when the vice president and the Iraq group were under fire. 

All of this is under review by the prosecutor and his grand jury.  And with the now daily drumbeat of revelations, including Karl Rove's testimony about Scooter Libby, lawyers in the case are convinced that something is coming.  The question is:  How big? 

I'm David Shuster for HARDBALL, in Washington. 

MATTHEWS:  Thank you, David Shuster. 

John Solomon of the Associated Press broke that story about Karl Rove and Scooter Libby.  And Jim Van? is also reporting on the case extensively for the Washington Post.

Gentlemen, it's late on a Thursday night.  We're looking at the possibility of indictments.  What do you know now that you didn't know when the day began, John? 

JOHN SOLOMON, AP INVESTIGATIVE REPORTER:  Well, I think the most important thing that we now know is that, if there is going to be a conspiracy here, you had to have people connected. 

And for most of the last two years, we had all these little isolated pieces of information about what one person knew, what another person --  now, we have two central figures and they're somehow connected. 

Now, they've talked.  They were working together; they shared information in some way before the leak occurred. 

MATTHEWS:  The way you report it - and it's a hell of a piece—is that they were sharing information about contacts with reporters.  That's a very sterile way of describing something. 

I understand why, as a reporter, you have to say it that way because it may be all you know, but could it be they were conspiring on how to leak it? 

SOLOMON:  That's the question that the prosecutor really has to ask and answer.  And, when you establish the communication, then the question is:  Well is the story that they've given us accurate or is it just a cover story?  Those are the questions.

MATTHEWS:  Were they talking about conversations that they had in fact had with reporters or they contemplated happened? 

SOLOMON:  No, the testimony that I learned about is basically that Karl Rove says, at one point:  I believe Libby told me.  I talked to a reporter.

And then he saw testimony from Libby saying, Rove later told me about a reporter. 

MATTHEWS:  Were these conversations—can you report again or clarify that they occurred before the leak got into the press in the Novak column on sixth of July, 2003. 

SOLOMON:  Absolutely.  It's definitely before—the weekend before the week. 

MATTHEWS:  Fourteenth of July—it was before that.  So, they were caballing, if you will, about how to handle the matter before it was leaked? 

SOLOMON:  Well, that's the question.  Or, in the famous, crazy environment of the White House, people are always trading rumors.  So, that's something the prosecutor has to decide.

Were they trading rumors, were they engaging in a conspiracy?

MATTHEWS:  Well, let me ask you:  If they put out stories—even if they passed on stories that involved the use of undercover information or classified information, it's still against the law.

SOLOMON:  That would be the argument and that's the thing that defense lawyers are worried about.

MATTHEWS:  OK, I've got to get to—did the White House come back at you and did Scott McClellan try to challenge your story today?

SOLOMON:  Nothing, no.

MATTHEWS:  So, as far as it stands right now, these two guys were talking about how to deal with the press, how they were dealing with the press before the story got leaked? 

SOLOMON:  That's correct. 

MATTHEWS:  And let me ask you:  Did you find out, through, the testimony, how Libby got the name? 

SOLOMON:  That's one of the great unanswered questions and...

MATTHEWS:  These people—lawyers have to talk like this—didn't use her name, didn't mention her undercover status—who first said the guy's wife works at the agency and got him this job, on the trip? 

SOLOMON:  That's really, again, the question.

We think that, from Libby's testimony, that he he told Rove that I heard it from Tim Russert.

Now, Tim Russert says, I didn't even know about it when I talked to Libby. 

MATTHEWS:  Well, NBC News said Tim didn't pass on any information. 

SOLOMON:  That's right.

MATTHEWS:  And that's a clearcut statement from NBC News.

Let me go right now to Jim Vandehei?

Jim, you had the story at the top of your page today.

Was that the same story—was that a reconstructed story of the AP story or do you have something else? 

JIM VANDEHEI:  Right.  The top was basically what John had reported and confirmed and we also got into this idea about John Hannah, another aide in the vice president's office who is somebody who has been telling U.S. officials that he too is worried that he might be implicated in the entire problem. 

And Hannah, your viewers probably aren't familiar with because he's sort of a new name and he sort of captures the idea that this net has been cast so wide, we don't know who is going to be caught up in it. 

You know, some three dozen people have been before this grand jury or talked to Fitzgerald or talked to FBI agents and Hannah is one of those guys who is saying, I'm worried.  And his role in the vice president's office was dealing with weapons of mass destruction.  His expertise is in Iran and Iraq.

So, clearly, he is operating in this sort of jungle of weapons and trading of secrets.  So, he may have known about Plame; he may have known Judith Miller.

You know, it's unclear whether he was talking to reporters and what exactly he's worried about.  But clearly he is. 

MATTHEWS:  Just to focus on probably the most famous person here who is being talked about—that's Karl Rove, the president's political ramrod, who basically brought him all the way from a baseball team owner all the way through two elections as governor of Texas, two elections as president of the United States. 

We don't know if he's ever—now, everybody wrack your brain, Jim and John—has anybody testified that we know of that he was the original source to any reporter about the identity of Mrs. Wilson? 

VANDEHEI:  Not that I'm aware of.  The great thing about John's story that he had on the wire last night is this is the first time where we even know where he may have heard about it.  And remember, they're just saying possibly heard about it from Libby. 

He says his other source was well, you know, I sort of heard it casually off campus at some point beforehand. 

We still don't know where anybody is hearing the information.  Judith Miller writes in her notebook:  Valerie Flame...

MATTHEWS:  I'm just talking about guilt here, either guy who has been nailed in the grand jury as to actually leaking it to the press. 

Going over, I'm going to have Matt Cooper on a little later, and he knows firsthand and I'm going to ask him directly.  But going on the record, so far, it's always Rove saying, Yes, I heard the same thing or yes, you heard it too.

There's always that sort-of—it could be called a confirmation but it's always a secondhand, yes, sure, I heard that too.  He is never pointed out as the clear leak here, is he, Jim?

VANDEHEI:  Not that I have heard.  But we don't know.

MATTHEWS:  So, maybe he is in a good position to cooperate with the prosecutor and say, look, I didn't do anything wrong.  Why should I tell anything that isn't true?  If I didn't break the law, why shouldn't I be completely clean in my testimony?

That makes, perhaps, some people think that Rove is going to be the start witness here.  Jim?

VANDEHEI:  Well, I have no idea if he's the star witnesses.  There's a lot of if's and but's in this case and we don't know where Rove is at.  We obviously know that there's been a lot of focus on him and clearly, he doesn't want to be indicted in this probe.

I think his biggest problem, at least, that we know of from the testimony...

I think his biggest problem that at least we know of from the testimony is that early on, he testified he was not aware or he didn't remember having the conversation with Cooper.  And then this e-mail magically appears that he had actually talked to him and then sent something to Stephen Hadley who worked for the National Security Council saying, you know, I had this conversation with him.

MATTHEWS:  The one thing about Karl Rove that most of us know who have been following politics for 20 years—he is smart. 

SOLOMON:  He is, and he's charming.

MATTHEWS:  He is smart and you don't lie to a prosecutor.  That's not had a question of mortality or ethics, it is brains. 

SOLOMON:  Yes, I think that is right.  You know, what is interesting about Karl rove—and you can talk to any defense lawyer in town.  To have four appearances before a grand jury is enormously unusual. 

MATTHEWS:  And that suggests that they are not out to get him because he they gave him this pre-time to defend himself? 

SOLOMON:  it could be, or that, as this case has gone on, Rove has learned more information that he wanted to divulge. 

MATTHEWS:  You know what this reminds me of?  Two kids in the interrogation booth, and Sipowicz has got saying the other guy shot, I didn't shoot in the hold up.  Anyway, thank you.  It's not that bad, maybe it's worse.  Anyway, thank you John Solomon.  Congratulations, big piece in AP, not yet challenged by the White House.  We'll wait and see when they start challenging.  Jim Vandehei, otherwise it was great reporting always. 

VANDEHEI:  Thank you.

MATTHEWS:  Coming up, “Time” magazine's Matt Cooper, one of the journalists at the center of this investigation.  He's coming here, right after this.  Much more on the relationship between Karl Rove and Scooter Libby.  What a nickname.  Are indictments on the way?  You are watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  “Time” magazine reporter, Matt Cooper, is one of the journalists in the middle of the investigation into who outed covert CIA operative Valerie Wilson.  In July, Cooper testified before the grand jury that Karl Rove told him that Joe Wilson's wife worked at the CIA on WMD issues, and that she was responsible for sending her husband to Niger.  Well, I want you to correct what I said, because right before we went to break, I thought that Karl was your second source.  He was your first source? 

MATTHEW COOPER, “TIME”:  He was the first Chris.  You know, I didn't know Joe Wilson had a wife before I talked to Karl Rove.  And he, you know, said that Joe Wilson had a wife who worked at the agency and was involved in dispatching him to Africa. 

MATTHEWS:  What he was pushing? 

COOPER:  Well, he was—as I recounted in “Time” magazine after I did my grand jury testimony, he was trying to get me not to lionize Wilson.  You know, there was a lot of Lionizing of Wilson going on that week and his aim in the conversation was to kind of wave me off.  He said don't get too far out on Wilson.  So I'm not sure he was so much planting as deterring. 

MATTHEWS:  Was this a big fight going on between the CIA and the vice president's office? 

COOPER:  Yes.  Well, I think—and more between the entire White House.  You know, I think just as the background, as you know, Chris, to Watergate was the FBI versus the White House.  The background to this war I think is really the CIA verses the White House.  But the CIA in its trenches had a lot of doubters about this whole question of going to war in Iraq and WMD, and the White House is pushing it and that is kind of your backdrop against which all this plays out. 

MATTHEWS:  When you watch this, because you had the advantage of having direct conversations with Karl Rove about this, and because of way that he finally gave you a release of your confidentiality, you put it in print.  You've talked about it on the air.  Where is this going?  You must have a clear sense of what the next ...

(CROSSTALK)

COOPER:  You know, I don't.  I'm like the blind man with the elephant. 

I mean, I feel the tremor ...

MATTHEWS:  Are you surprised at this AP report we just reported on, we just had on the air with John Solomon, pointing out that Karl Rove is saying that he heard about it from Scooter Libby? 

COOPER:  I can't say I'm shocked.  There have been all kinds of different reports.  First there were reports Karl Rove was saying that he'd heard about it from reporters, and then I've seen other kinds of reports.  So it wouldn't surprise me at all that, you know, those two guys would be talking during that week.  I mean, that makes sense. 

MATTHEWS:  Did you get the sense, or can you report more directly when you talked to Karl Rove that when he dished the story to you about Joe Wilson going on the trip, did he said Joe Wilson was sent on the trip by his wife?  He got the gig?

COOPER:  Well, that was—yes, that was suggested, yes. 

MATTHEWS:  And did you get a sense that that was part of a campaign by the White House to try to denigrate Wilson's credibility? 

COOPER:  Yes.  I mean, you know, you've got to remember.  This week, the White House—back in July '03, the White House did something it never does, Chris.  It admitted a mistake.  It said those words shouldn't have been in the speech. 

MATTHEWS:  That was Ari Fleischer and also Steve Hadley took the hit. 

COOPER:  Yes, and by the end of the week Tenet took the hit and said it shouldn't have been in the State of the Union speech.  So the White House on the one hand—and this is what fascinated me at the time.  I was new to the Bush White House beat.  On one hand, they were acknowledging Wilson's central claim that this stuff shouldn't have been in the State of the Union.  At the same time, they were kind of quietly dissing him and that's what fascinated me that week. 

MATTHEWS:  What did you learn from Judy's piece in the “New York Times”? 

COOPER:  I thought it was fascinating.  I guess like a lot of people, I found it a little confusing, both the main piece and Judy's piece in terms of the circumstances of the waiver and then some of the meetings and I hope the “Times” will offer some elaboration. 

MATTHEWS:  Let me ask you about what was going on at the time.  So that everybody understands, almost like Chinese boxers.  We went to war with Iraq.  There was a case made for the war with Iraq, and most people said OK, I guess we have to fight them in the end because of the threat of nuclear because that's the bomb.  That's the mushroom cloud.

COOPER:  That was the strongest argument. 

MATTHEWS:  That was the best deal maker they had, right? 

COOPER:  Right.

MATTHEWS:  Then, of course, we got in there.  We found none of the weapons.

COOPER:  Right.

MATTHEWS:  The next stage was this sort of battle in the papers everyday.  Usually “The Washington Post” for example, banging the vice president's office every day with new stories.  Walter Pincus had then, Dana Priest had them, Dana Novak (ph) had them, Mike Bowen (ph) -- banging the vice president's office and the whole case for war. 

COOPER:  Right. 

MATTHEWS:  Do you see the attempt to denigrate or smear Joe Wilson by outing his wife as a way of sort of backlash, back fighting from the president's office, the White House at the CIA for what it was doing? 

COOPER:  I think it was.  You know, you have been in politics, Chris.  You know.  I mean, you wake up in the morning, you see an op-ed or before that you hear whispers of a former ambassador dissing your guy and you wake up and you think who is this guy.

MATTHEWS:  And it's your job to defend him.

COOPER:  And it's your job to push back and, you know, that's part of politics.

MATTHEWS:  Did you have any sense when you were talking to Karl Rove or you were writing down notes from Karl Rove as he was telling you about this guy Joe Wilson's wife in Africa—did you have a sense he was breaking the law when he was talking to you? 

COOPER:  No. 

MATTHEWS:  Did you think he did?  He didn't surmise that.

COOPER:  I didn't at the time.  I had no sense at the time that what I

·         in fact I would not have fired off an e-mail to my colleagues which later got divulged talking about all this because I had no sense that anything criminal had happened.  I thought it was maybe a little, you know, sort of unseemly that they were dissing the guy but I didn't think there was anything illegal at the time.  Now, you know, the special prosecutor will have to sort out if there was. 

MATTHEWS:  I think you could be right, and that makes sense.  Why else would he dishing to you.  You're not his best friend.  Why would he be trusting you to keep his name secret?  Here is the thing.  When you mark that thing super-duper secret—whatever you—what did you call it?

COOPER:  Double super secret.

MATTHEWS:  Why did you go that far in telling your editors this was really to be kept secret within your level relationship with your editor?

COOPER:  Well, he used the phrase deep background and, you know, I think we were—you know, this was the end of the week at “Time” magazine where we put our stories together, and, you know, he had asked for that degree of confidence and so I was trying to COOPER:  Well, he used the phrase deep background and I think this is the end of week at “Time” magazine where we put our stories together and, you know, he would ask for that degree of confidence.  And so I was trying to accommodate him. 

MATTHEWS:  So, it wasn't the usual conversation we have in Washington for people who don't usually have conversation with the press.  You know, when I worked in politics I'd say, are we on background?  It wasn't that casual.  It was like he really said to you, this is really—you have got to keep this.

COOPER:  He use the phrase deep background. 

MATTHEWS:  Which means you can't identify with the White House or the..

COOPER:  Yeah.  That's how I took it to mean.

MATTHEWS:  Yeah.  Apparently, somebody didn't use that with Bob Novak because he said administration officials, that's not very deep.  I mean, he wanted to cite somebody in power when he wrote that piece and nail her. 

What do you make of that? 

COOPER:  Well, I don't—you know, Bob Novak and I wrote very different pieces at the time.  He was kind of a transmission belt for the leakers.  I wrote a piece that pushed back and said, “A War On Wilson?” was the name of my piece, That's what fascinated me that week.  But there seemed to be a quiet campaign going on to diss the guy. 

MATTHEWS:  That's the one parallel to Watergate, I think.  That whatever the degree of importance of this story, it's about how people reacted to an initial 300 degree break in, or whatever you call it.  Did they react in a way that was criminal by accident?  Did they get so angry, did they react with such violence that they could put themselves in deep jeopardy?

COOPER:  Yeah.  I know that Karl told me about Valerie Plame.  Now whether that breaks the law, I don't know. 

MATTHEWS:  Yeah.  Well, we'll find out won't we?

We'll be right back with “Time” magazine's Matt Cooper.  You are watching HARDBALL on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  I'm back with “Time” magazine's Matt Cooper.  You know, the reporting you did almost put you in jail for a long time.  And you got the confidentially agreement broken, because as Karl Rove said, go ahead, talk.  What is your sense of why he said that to you?  And why Libby was so slow in saying that to Judy Miller? 

COOPER:  I don't have a good sense of the Miller thing.  With Karl, I guess, you know, in part of his name was starting to get out there.  So that might have been part of it...

(CROSSTALK)

COOPER:  He may have nothing to fear.  He may have basically testified to the nature of our conversation. 

MATTHEWS:  In other words, he may have given away the wording, even, of his conversation with you before you did yourself? 

COOPER: Yes.  So I assumed he had a lot to fear...

MATTHEWS:  What do you make about that strange White House communication between Scooter Libby and Judy Miller?  The sort of about the Aspens turning and being clustered at their roots, and all this weird lingo. 

COOPER: Well, I thought it was very strange, and particularly in light of my other reaching out for these waivers, because I called Scooter Libby for a waiver.  And you know, when you do that, you are mindful of the prosecutor looking and seeing perhaps conspiracy where there is none.  So you are careful with your wording and you edit with your lawyers. 

And, you know, it's not an entree that you do casually.  So, I asked my lawyers, would you ever let me write a letter with poems and things like that?  And they say no.  They are very surprised that Libby's lawyer would allow him to write such a note. 

MATTHEWS:  Because everybody in jail is always vulnerable, or rather would have a motive for trying to get secret meetings, secret—because there they were sort of publicly negotiating her talking. 

COOPER:  Well, it may all be perfectly innocent, we don't know.  But just the fact that it was open to interpretation is itself sort of strange lawyering, I think. 

MATTHEWS:  Have you talked to Judy? 

COOPER:  Well, I have not talked to her like she has been out.  Like you, I visited her in jail.  Now, I tell you, you must have had the experience I had going into that prison in Alexandria.  And everybody thinks, oh, it's a white collar crime, it's an upper middle class, you know, reporter.  She will be treated differently.  She'll have her own room. 

I'm telling you, when you go in there, you touch had the glass and she touches it like in one of those old romance things just to have some kind of contact with the person.  And she's skinny as a rail, wearing one of those death row matrons costumes.  And you know, she's eating whatever.  And she in the middle of a lot of tough people in there. 

COOPER:  Yeah.  No, this was not a minimum security facility with a campus and fresh air. 

MATTHEWS:  Yeah.  There was no tennis court. 

COOPER:  No.  This was really, really tough.

MATTHEWS:  Did you think when you saw that life? 

COOPER:  I thought it was very hurting.  And I thought she would find a way not to have to be in there much longer. 

MATTHEWS:  Well, she finally did. 

And let me ask you.  And the end of this whole thing, because you are a principle in this, are you going to write a book about this? 

COOPER:  You know, I have been approached.  We'll see.  Maybe. 

MATTHEWS:  Do you think this is a big story, a category 5 or category 2? 

COOPER:  I don't know, Chris?  You know, it's like the hurricane keeps changing.  One day, you turn on the TV, it's a one, then it's a five, then it's back to a two.  You know, who knows? 

MATTHEWS:  I think it's a five.  Have you had a chance to talk to Scooter Libby at all, since? 

COOPER:  I haven't talked to him.

MATTHEWS:  Have you talked to Karl Rove? 

COOPER:  I haven't talked to him lately. 

MATTHEWS:  Have you got feeling from your contacts at the White House that they recognize that you were telling the truth? 

COOPER:  Yes.  I think people know that, you know, I have no reason to dissemble on this.  And I've been as transparent as I can be throughout the process, sure. 

MATTHEWS:  Do you think they have a plan laying in waiting?  A plan B if there are indictments to blame the media? 

COOPER:  Well, you know.  I'm sure you go through different scenarios.

But, you know, I don't know. 

MATTHEWS:  We'll see.  Thank you, very much, Matt Cooper.  Good to have you around. 

COOPER:  Thank you. 

MATTHEWS:  Good to have you around. 

Up next, inside the relationship between Karl Rove and the vice president's chief of staff Scooter Libby.  That is the duo to watch.  They're like Dean Martin and Jerry Lewis.  Will the team break up?  Two key white house players, power players, who could be at the heart of this investigation.  They are already.

You're watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

(NEWS BREAK)

MATTHEWS:  Welcome back to HARDBALL.  The Associated Press is reporting that Karl Rove testified to the grand jury that he may have first heard that Valerie Wilson worked at the CIA from vice presidential chief of staff Scooter Libby.  MSNBC's chief Washington correspondent, Norah O'Donnell joins us now with more on the relationship between Rove and Libby -- Norah.

NORAH O'DONNELL, MSNBC CHIEF WASHINGTON CORRESPONDENT:  That's right, Chris, and today we learned that Karl Rove and Scooter Libby did in fact discuss Valerie Plame days before she was outed in a newspaper column.  That's the first time this nexus has been established between the two. 

Now, sources familiar with grand jury testimony indicate Rove and Libby, quote, “comparing notes” own what they were hearing from reporters before Plame's cover was exposed.  It is a key development but in some ways it's not a real surprise given that Rove and Libby have work like hand in glove on key issues like the selling of the Iraq war. 

(BEGIN VIDEOTAPE)

O'DONNELL (voice-over):  Today in the Rose Garden, the president vowed not to be distracted by the investigation. 

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  There is some background noise here, a lot of chatter, a lot of speculation and opining.  But the American people expect me to do my job and I'm going to. 

O'DONNELL:  But inside the West Wing, officials privately acknowledge deep concern that two of the most powerful men in the White House face possible indictments.  Karl Rove has been described as Bush's brain. 

BUSH:  The architect, Karl Rove. 

O'DONNELL:  And Lewis “Scooter” Libby is just as close to the man he serves, vice president Cheney.  In fact, former aides say they call Libby Cheney's Cheney. 

RON CHRISTIE, FMR. ROVE/LIBBY AIDE:  Both men like to operate behind the scenes.  They don't like stay out in front of the media or the camera's eye.  They like to operate and give their counsel to the presidents or to other key members of administration in private and in confidence. 

O'DONNELL:  In fact, Libby is known as the quiet insider, the most powerful advisor to one of the most powerful vice presidents in history.  Libby joined the White House with several titles.  He is not just the vice president's chief of staff, but also his national security advisor. 

Cheney called Libby his old friend.  They first started working together in 1989 when Cheney was secretary of defense.  Libby was the political protege of Paul Wolfowitz who had nurtured Libby's political philosophy as Libby's professor at Yale University. 

ROGER CRESSEY, NBC TERRORISM EXPERT:  There's was no doubt he was a neocon.  He is part of the small group of people that believe very strongly that going after Saddam Hussein was a key element to any Bush policy foreign agenda. 

O'DONNELL:  When President Clinton was in office, Libby was a high-powered Washington lawyer respecting fugitive billionaire Mark Rich who was later pardoned by President Clinton.  Now at the White House, officials say Libby is involved in everything the vice president does, from building the public case for the war in Iraq to overseeing his daily schedule. 

CHRISTIE:  Scooter Libby unquestionably was very much in the forefront of the Iraq policy development.  That's his job as the vice president's national security advisor. 

(END VIDEOTAPE)

O'DONNELL:  In fact, Scooter Libby and Karl Rove have been working together for the past five years as part of very tight inner circle in the White House.  They know each other well.

I have heard some reports that there have been tension between the two in the past, but they worked most closely together as members of White House Iraq group that was formed to sell the war this Iraq before the invasion—Chris. 

MATTHEWS:  Thank you.  Hold on there, Norah O'Donnell.  Joining this conversation or joining us right now is Bill Press to talk about the relationship between these two.  And of course Ed Rollins is up in New York.  Thank you, gentlemen, for joining us. 

When you picked up the papers this morning and that's what we all did and read in the “The Washington Post” a reconstructed piece of A.P. story.  Then we got to see the A.P. story which said that there's now evidence, according to the A.P. and it stood up all through today, that these two figures in this case were talking about how they were dealing with the press on the issue of Valerie Plame, Joseph Wilson's wife, the CIA undercover operative, before the story leaked.  What does that tell you, Bill Press? 

BILL PRESS, RADIO TALK SHOW HOST:  It tells me, first of all, as Norah says, that for the first time we can connect the dots.  I think it is very significant that they were both involved with conversations about Valerie Plame before it became public. 

I think it's clear they were both involved in talking to each other, talking to reporters, clear that they were involved somehow in revealing her identity.  I think the only questions, Chris, was crime committed?  how many others were involved in it, and how high up does it go? 

MATTHEWS:  Well, Ed Rollins, you know, I guess I have thought a lot about crime movies and politics being similar.  If there's two people in the room and they're the only ones there, then one has to say the other did it.  It is like the two kids picked up in a hold up, who shot?  You know, who did the shooting? 

ED ROLLINS, FMR. REAGAN WHITE HOUSE ADVISOR:  Well, the bottom line in this, is this was a very stupid thing.  You know, Wilson would have had a one-day story and moved on.  You know, they had already done a very successful job of selling the war on whatever the facts may have been. 

But at this point—I mean, at this point in time, what do we know for sure?  We know for sure that a couple of very high ranking White House guys talked to some reporters and basically tried to go out and diminish someone who was criticizing them. 

I mean, that goes on every single day in the White House.  Whether it is a crime or not, obviously, will be something, an obstruction of justice or cover up, which I certainly don't have any evidence of or know any more details of. 

MATTHEWS:  What about the conspiracy charge we keep hearing about, Ed? 

ROLLINS:  Well, I mean, if they are going to nail them for conspiracy for sitting there and talking about it with reporters, you can nail everybody who has ever been in the White House in history.  We all sit around talking about what's going on what do you know and it is a two-way street.  You have been a reporter, you understand what the game is about and ...

MATTHEWS:  Yes, but I have never met this guy Fitzgerald, and have I a sense that Fitzgerald, the way she going after the Daley organization in Chicago, the Mayor's office, how he's going after Conrad Black's press empire, that this guy doesn't care with the way things have been done for 50 years or 100 years.  He doesn't care what the usual politics are.  He sees people in an official capacity he looks at the law and says did these guys break law?  That's all he cares about.

ROLLINS:  I don't dispute that.  And I don't whether they violated the law, but it seems to me it's a big stretch get to where these guys committed a criminal conspiracy. 

PRESS:  I haven't been around this town, Chris, that long but I have never seen an investigate yet spend so much time and so many resources and come up with nothing.  I think it is pretty clear the he's talked to dozens of aides.  He's talked to this Iraq strategy group.  He brought Karl Rove back for a fourth time.   I think it's clear that he feels he is on to something, that crimes were committed. 

Again, who did it?  I also think it is significant to see, as Norah indicated, you know, Libby and Rove are very, very, very close, but there's nothing like a pending indictment or a possibility of going to prison to make you forget about teamwork and turn on your pal.  And it looks like that ...

MATTHEWS:  Norah, you are shaking your head.  Go ahead. 

O'DONNELL:  Well, I think that's a key question, whether—who is turning on who if anyone inside the White House.  And as you know, there has been a suggestion that there is a snitch inside the White House or someone who's turned.  No reporter can yet nail that down as being true. 

But there is some indication that Fitzgerald may be getting some information from someone inside the White House that suggests something else is true.  What is interesting about Fitzgerald as we talk about the man at the center of this, the special prosecutor—because I have done a great deal of reporting about him and his biography, Chris—is someone who has been interviewed by him in this investigation described Fitzgerald to me as pious. 

In other words, it may be that—yes.

(CROSSTALK)

O'DONNELL:  Yeah.  It may be that, as you point out, Ed, that this of course happens all the time in Washington.  What's the big deal that two people in the White House that work together are talking about a specific case and a reporter, and who they had conversations with?  That's good communications inside the White House, whatever.  But some have said that Fitzgerald sees something bigger than this, that that's in his DNA, if you will, to perhaps move beyond that. 

MATTHEWS:  Well, the question I have, whoever lies, dies, whoever tells the truth walks.  could that be the situation here, Ed?

ROLLINS:  You need to tell the truth.  I mean, how stupid can you be?  I mean, I think the whole thing was stupid on Carl and Scooter's part to be involved in this thing, but you don't go to jail for stupidity. 

The critical thing here is ever since Watergate, we have example after example in every single administration of when these special prosecutors get going, your lawyers say to you, you walk in the grand jury, you tell the truth.  And I think anything that is less than the truth, that's when you get in trouble, and that's clearly what I—I think...

MATTHEWS:  That's what Bill Clinton discovered.  Anyway, thank you, gentlemen.  Thank you, Norah O'Donnell.  Norah O'Donnell, Ed Rollins and Bill Press, a great group.  Who's the author of “How The Republicans Stole Christmas?”  Up next—that was Bill Press—much more on the CIA leak case, plus is the nomination of Harriet Miers to the Supreme Court now in trouble.  We will get the latest on that.  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  This week, Senate Judiciary Committee Chairman Arlen Specter of Pennsylvania expressed concern about the confirmation process of Supreme Court nominee Harriet Miers. 

(BEGIN VIDEO CLIP)

SEN. ARLEN SPECTER ®, PENNSYLVANIA:  We do not have much paperwork.  We do not have much of a record.  I think it has been a chaotic process, very candidly, as to what has happened.  Because of all of the conference calls and all of the discussions which are alleged in the back room. 

(END VIDEO CLIP)

MATTHEWS:  He is looking much healthier.  Ranking Democratic Senator Pat Leahy added that the written answers to the questions Miers has submitted to the committee thus far ranged from—boy, this is strong—

“incomplete to insulting.” 

John Fund is with “The Wall Street Journal's” Opinionjournal.com.  John broke some major news this week about the Miers nomination.  Katrina Vanden Heuvel is editor of “The Nation” magazine. 

John, just remind us, you broke the story about this phone call, this conference call about what commitments were made about her.

JOHN FUND, WALL STREET JOURNAL:  Thirteen leaders of religious conservative organizations had a conference call the day Harriet Miers was nominated, and on the call were two judges who were very close friends of Harriet Miers.  And when asked would she overturn Roe v. Wade, one said “absolutely,” and the other said, “I agree with that, I concur.” 

MATTHEWS:  Wow.  And what is the significance of that to you, in terms of the process?  Is that kosher to have that kind of a commitment made about a nominee's position on future verdicts? 

FUND:  I'm not a legal ethicist, but I'll tell you what the political perception is.  It's awful.  It makes it appear as if the president is engaged in a results-oriented nomination, because he has got people sent out there, you know, with a wink and a nod, saying she is going to go a certain way.  Even if they haven't even talked to her directly.  That's the perception that's created.  It's awful.

MATTHEWS:  In other words, he is winking and nodding, in fact committing, I shouldn't say winking and nodding, to his conservative base, this is a wolf in sheep's clothing, don't worry? 

FUND:  I think that Harriet Miers' nomination is approaching the end game.  Today, “National Review Online” has a piece in which people who are advisers to the White House say, we have got to stop sending her to visit senators.  She's losing more votes than she's gaining. 

MATTHEWS:  Katrina, that's pretty bad news, when you get to meet the person, and not only don't they charm you, they discharm you. 

KATRINA VANDEN HEUVEL, EDITOR, “THE NATION” MAGAZINE:  Well, Senator Specter is not a senator who is usually agitated, but when you look at him, here he's basically sending out signals, get rid of that nomination. 

And I think what we saw in that call John Fund reported on is the breakdown of an independent judiciary.  That is an assault on the independent judiciary in this country.  You have a current federal judge on a call?  Talk about a literal breakdown of the separation between church and state. 

MATTHEWS:  John and Katrina, who is lying here?  Chairman Specter, who says that she made a commitment to him about her belief in the judicial principle or the constitutional principle of privacy, as it was evoked in the Griswold case on birth control and later in the Roe decision, a woman's right to privacy in terms of her reproductive decisions, or decisions to have an abortion or not.  She says she never made such a statement to him. 

FUND:  Well, Chris, Senator Specter could be confused, or Harriet Miers could be confused.  But since Senator Specter is running the hearings, he doesn't think he was confused, and that's trouble for Harriet Miers.

VANDEN HEUVEL:  You know, the key thing, Chris, is Steve Giller (ph),

who is a major ethicist, a professor at NYU Law School, has an article in

“The Nation” this week.  The key thing is for the Senate to now stand up in

a way it didn't during Roberts.  This woman doesn't have a paper trail.  We

·         the administration must come forth with her advice to the White House on statutory and constitutional issues.  That's all we know.  Otherwise, it is a wink, wink and a nod.

And Bush has no political capital anymore.  He is not going to be able to push through a nomination on the basis of his say-so, my endorsement, my personal sponsorship.  So that is key, and it's key not just for the country, but for the Senate as a—for its constitutional integrity. 

MATTHEWS:  In other words, you can't get into law school with a

reference if you have got lousy law (INAUDIBLE) and grades. 

Let me go to—let me go to John.  Key question: You talk about Specter.  I think he is critical here.

Would he be doing President Bush—you're a conservative—would he be doing this conservative president a favor at this point to come down to the White House, sit with the president and say, on behalf of a couple of my colleagues, Mr. President, we don't think this candidate, this nominee for the court is passing muster.  We urge you to withdraw it.  Do you think he has the stuff to do that?  Could he be possibly encouraged to do that by people around the president? 

FUND:  I think next week a delegation of senators might do that.  They might go visit Karl Rove first, or then they might see the president.  But the message would be, please don't put us through this, because it will be a circus.  I don't think there is a single Republican member of the Judiciary Committee who wants these hearings in the spectacle they could become. 

MATTHEWS:  Katrina why—I know you disagree with the president on most policies, but why do you think he is politically becoming so—well, so—incompetent as to put it up there?  I'm not talking about the value situation, we can arguing about this as long as we live?  But why did he make the mistake here as putting her up as a nominee against a conservative movement which is determined to get a strong, heavy-weight candidate for the Supreme Court. 

VANDEN HEUVEL:  Because I think his policies are so out of step with this country, but he now has a base which is fractured, it is a failure of competence, a failure of leadership, a failure of management and a failure of imagination.  And he is just out of step in so many fundamental ways that he doesn't know which way to turn. 

And he doesn't have any political Capitol.  That famous statement he made, take a look at what Colin Powell's right-hand man said today Chris, he talked about the Cheney-Rumsfeld cabal.  He lashed out at this administration for hijacking the national security of this country. 

And I think when you want to connect the dots, Chris, forget all the inside baseball, inside the Beltway stuff about Rove and Scoot Libby or Libby-Scooter, it is that you had a cabal misleading this nation into war.  And that is a cancer on this president, which we are seeing the roots of in the failure of this administration. 

(CROSSTALK)

FUND:  Recover his political Capitol.  He just has to move on from this mistake and have a better nominee. 

VANDEN HEUVEL: I'm not sure. 

MATTHEWS:  I think he can refrain his strength the way Ronald Reagan did after Iran-Contra with the right people around him and start listening to him.  And start working every day of the week.  You're right John Fund.

Thank you Katrina Vanden Heuvel.

When we return, “The Washington Post's” Dana Milbank on why a former State Department official says there is a decision-making Cabal in the decision, just what Katrina said. 

And a reminder, the political debate is ongoing on HARDBALL—or Hardblogger, our political blog Web site.  Follow all the punches and counterpunches on the hottest political stories each day.  And now you can download podcasts of the show.  Just go to our Web site Hardball.MSNBC.com.

(COMMERCIAL BREAK)

MATTHEWS:  We're back to HARDBALL.  Former State Department official Larry Wilkerson says there's a decision making cabal between Vice President Cheney and Secretary of Defense Donald Rumsfield.  So why is Collin Powell's former right-hand man speaking out against the administration now? 

“Washington Post” Dana Milbank was at that speech Wednesday and reported on it well.  Dana, thank you very much. 

Is this fissure over the leak opening up a fissure that's grander than that between those who thought the war wasn't justified because of the WMD argument and those who thought it was? 

DANA MILBANK, WASHINGTON POST:  You know, I don't think it's directly related to the leak.  But what's happening, the president's approval drops below 40 percent and everybody who has a beef feels freer to come out: conservatives, good Republicans, doesn't matter, you're freer to come out and say this. 

But for Collin Powell's chief of staff, closest adviser for sixteen years to come out and say of Karen Hughes' efforts to sell American policy abroad, it's hard to sell doo doo, only he didn't use that word, that's pretty serious. 

MATTHEWS:  I think it was merde (ph), or something like that.  A French word she used. 

Anyway, what do you think of this fact that Collin Powell who is always perceived in the public as opposed to the war and the way in which the we fought the war with Iraq, going at it, even though he ended up testifying to the U.N.  He always seemed as recalcitrant, hesitant, in fact adversarial to the hawks in the administration.  Is he still that way? 

MILBANK:  Well, Wilkinson has always been seen as sort of a proxy.  He's the guy who would speak in what's called Collin Powell's thought bubble.  So, if that is true, what he was saying yesterday is he did believe there was W.M.D. in Iraq.  And he says we have to stay in Iraq now.

So it wasn't really an ideological argument he was making.  He was just saying that it was handled so badly, because of this Cheney/Rumsfeld cabal that circumvented the ordinary policymaking apparatus.

So he wasn't really taking a position on the war, he was just saying that is why the policy got so screwed up.

MATTHEWS:  Does Dick Cheney—I don't want to lionize him beyond his potential.  He is a vice president. He has no executive power under the constitution.  He's simply just there if the president can't perform the duties of the office, or to preside over the Senate.  But this vice president, did he pick Rumsfeld as secretary of defense? 

MILBANK:  Well, look, they go all the way back to the Ford administration.  So clearly, it came on a very high recommendations there.  And they've been good friends for a long time. 

So that shouldn't be surprising at all.  And now, we have a guy who was there at the table saying these two guys were calling all the shots and shutting out everybody else. 

MATTHEWS:  Well, the everybody else includes the president. 

MILBANK:  Well, he was asked about that.  And he goes back and says, well OK, maybe he's on the cabal as well.  And he says, well OK, maybe Condi Rice is as well.  So, he doesn't exactly cut the president out of it. 

But he says this cabal is located in the Oval Office, whereas Collin Powell's down in Foggy Bottom.  Anybody else in the bureaucracy is not there in the room.  You come up with one decision in the policy making process, you go into the Oval Office and these two men could change the president's mind without any opposition. 

MATTHEWS:  If you think about it a little bit, the vice president serves roughly, I'll put this as an is interrogative to you, as the chief operating officer of the president? 

MILBANK:  You could argue that in this case.  Yes, I mean, we were saying even from the time the first inauguration that the president would operate something like in the capacity of the chairman, sort of stepping back and oversees the operation, whereas the vice president would be in the chief executive. 

MATTHEWS:  OK.  The vice president of the United States is chief operating officer, sometimes chief executive officer.  He basically runs the paper flow.  He controls a lot of the policy making apparatus.  He has a huge legislative staff, a huge foreign policy/national security staff.  He's the guy that basically influenced the selection of Rumsfeld as secretary of defense.  He has got Scooter Libby working for him who has close ties with Wolfowitz.  Could it be argued that we have a real change coming in regime here, a regime change if Cheney's office gets smeared or destroyed by this leak investigation?  In other words, his top staff guy goes out the White House, he's impeached in the sense that people wonder what his role was forever? 

MILBANK:  Well, that's why Washington is in a frenzy over these rumors, totally unfounded, as best we know, that Cheney is ready to step down because he is absolutely so important to everything that that White House does.  I don't that can be over done.

I mean, obviously Karl Rove's role can sometimes be exaggerated, but Dick Cheney not so much.

MATTHEWS:  Dana, thanks.  Please come back.

Right now it's time for “THE ABRAMS REPORT” with Dan.

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

END   

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