This is a rush transcript from "The Journal Editorial Report," April 28, 2007.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," mad TV. How U.S. taxpayers are subsidizing terrorist propaganda on the Arab satellite network, al-Hurra.

Plus, the Republican presidential candidates hold their first debate but the man with the most buzz was nowhere to be seen. Will Fred Thompson get into the race and when?

Trial lawyers funneled millions of dollars into the Democrats' effort to retake Congress. Find out how they are being paid back right after these headlines.

(NEWSBREAK)

GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

When it launched in 2004, the U.S. taxpayer-funded al-Hurra satellite network was to be a voice of moderation in the Arab world.

Under new leadership, the channel, seen in 22 countries across the Middle East, has taken a decidedly radical turn, airing puff pieces on Holocaust deniers and speeches by known Islamic terrorists.

Journalist Joel Mowbray has led the pack on this story and he joins me now in the studio with more.

Joel Mowbray, welcome.

JOEL MOWBRAY, INVESTIGATIVE JOURNALIST: Thank you.

GIGOT: You say al-Hurra is not fulfilling its moderate mission in the Middle East. Give our audience examples of what it is broadcasting.

MOWBRAY: Well, it is not even so much a moderate mission as a truth and information mission. We are the ones that are supposed to be counteracting the propaganda that is rampant in the Arab world.

Instead, we are putting on things like interviews with al-Qaeda operatives, such as Muhammad Hanja (ph), who's in Bahrain, where on November 26 of last year, we interviewed him. And he said that 9-11 brought him great joy because it rubbed America's nose in the dust.

A week and a half later, they put on a speech by Hassan Nasrallah, the held of Hezbollah. By the five-minute mark in the speech, by the way, Nasrallah said to people firing guns in the air in celebration, "Don't fire your guns. Don't waste your bullets. Save them for where they belong, the chest of the enemy, the Israeli enemy."

GIGOT: Tell us about coverage by the network of the Holocaust denial conference in Tehran. They covered that?

MOWBRAY: Yes, they did. It was — it was astounding. I just got hold of the transcript a week ago.

We all remember Ahmadinejad hosting this conference in Tehran with all these famous Holocaust deniers, and Dave Duke. And al-Hurra was there to cover it, but shouldn't have covered it the way they did because they did basically a puff piece.

They went out and said, "Well here is what David Duke had to say about his praise for Ahmadinejad. And here is what the French historian says, that there is no evidence there were gas chambers used in the Holocaust."

There was to rebuttal. There's no independent debunking. These guys were put on almost like an infomercial.

GIGOT: But people would say, if you are supposed to cover the truth in the Middle East, these are authentic Middle East voices, why would you want to close them off from a network like this? What's your response to that?

MOWBRAY: Those are the guys who have every other network available to them. We are not trying to be another Arab network. We are trying to be the truth and information network. That's the reason I say, it is not even a moderate voice. It is controversial in America to deny the Holocaust. In the Arab world, it is controversial to suggest the Holocaust happened. OK, that's how different it is. We are there to combat that.

GIGOT: These broadcasts are in Arabic. Do you speak Arabic?

MOWBRAY: No.

GIGOT: How did you get the tapes and transcripts of these?

MOWBRAY: Through sources I was able to get DVDs of the broadcasts. And I had two different Arabic translators review the broadcasts and agree on a final transcription that I used for quoting in the piece.

GIGOT: Now, al-Hurra is governed by something called the Broadcasting Board of Governors, which is supervised by the state department, about ix or seven individuals.

MOWBRAY: Yes. Six individuals, plus Karen Hughes.

GIGOT: Plus Karen Hughes, who was the undersecretary of state who deals with these kinds of things.

MOWBRAY: Right.

GIGOT: Why are they — how are they supervising this and do they know this is happening?

MOWBRAY: The Broadcasting Board of Governors it is like six chiefs, no Indians. You have former titans of industry who are doing, in this congressionally created panel that is quasi independent — nobody is clear exactly of their status. They didn't know about Larry Register before — the long-time CNN guy who made all these changes when he was hired November of last year. They didn't know about any of this stuff...

GIGOT: Larry Register, the former CNN producer, who went to al-Hurra last November. And you're saying that's when — when he joined the network, that's when there was this turn in their reporting.

MOWBRAY: Yes, everything changed. Paul within his first months on the job you had the al-Qaeda interview and the Nasrallah speech. He also lifted the ban on terrorists.

And, by the way, in the meeting where he told his staff he was lifting the ban on terrorists, he said, "For example, you could interview somebody like my close personal contact, Mahmoud al Zahar," who is the number two guy in Hamas. The reason, by the way, he is no longer the leader of Hamas is he's too radical for Hamas. This is the guy close to Larry Register.

GIGOT: By the way, we should tell our audience that Mr. Register is welcome to come on the program any time to talk about this, so it is an open invitation.

But Karen Hughes, who is the president's friend and political appointee, does she know what is going on? What has been her response to your reporting?

MOWBRAY: She certainly knows now. She went before Congress on April 19 to a congressional hearing and she got a bipartisan earful. And she responded by saying, "I have heard nothing but rave reviews and high praise for Larry Register." And she makes a point of stressing he has friends in Israel who are quite priced with Larry Register.

Maybe that's true, but I have talked to a lot of people in Israel, Paul, and most of them remember his time with CNN when he was covering Israel, and they don't remember it fondly. So maybe he does have friend there and that's entirely possible. But that's beside the point. The record stands for itself. Within six months on the job, he has done a 180 on a network that used to — by the way, his Muslim predecessor did cover the Holocaust by doing things like interviewing Elie Wiesel, the Holocaust survivor and by covering, live, the 60th anniversary of the liberation of Auschwitz.

GIGOT: Have you asked Mr. Register for an interview? And has he granted it?

MOWBRAY: I have asked everybody involved in the story for an interview. Almost no one has talked. Larry Register — I got him on his cell phone. And he said he couldn't talk. I said, "I just need two minutes." He said, "I don't have two minutes at any time."

GIGOT: Congress is getting into this. Where is this going next?

MOWBRAY: Yes. Congress right now — there is a letter going around the House Foreign Affairs Committee signed — top signed by Robert Wechsler of Florida and Dan Burton of Indiana.

GIGOT: Democrat and Republican.

MOWBRAY: A Democrat and a Republican, right. And you are looking at probably at least 15, maybe even almost 20, at this point, people who have signed on to the letter. It is a letter going to Condoleezza Rice asking her for an investigation.

The thing the Board of Governors should have done the day after my story ran March 12, the first ones, the BBG met and voted five to one not to investigate. And instead to write a letter where they accused me of generalized deceptions without actually citing a specific deception or inaccuracy.

GIGOT: We ran their letter to the editor after your first piece. OK, so we're going to follow this story. And Joel Mowbray, thanks for being here.

MOWBRAY: Thank you.

GIGOT: When we come back, the Fred Thompson factor. He has yet to throw his hat into the presidential ring, but he's third among Republican candidates in some recent polls. Is he running? When will he announce?

(BEGIN VIDEO CLIP)

FRED THOMPSON, POTENTIAL PRESIDENTIAL CANDIDATE: I have a time frame in mind, but I need to have a little flexibility.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

GIGOT: Welcome back. As the Republican presidential candidates squared off in their first debate Thursday much of the focus remained on a handful of hopefuls who haven't even decided to run yet. One of those is actor and former Tennessee Senator, Fred Thompson, who told FOX News this week that he's taking his time making a decision, but senses a historic opportunity.

(BEGIN VIDEO CLIP)

THOMPSON: I am taking this time. I'm talking to some of the smartest people, I think, in the country about things that are very important to me. I am taking the time to communicate with the American people. I do sense that there is something different and special going on out in the country now. And I made be able to answer that call.

(END VIDEO CLIP)

GIGOT: Joining the panel Wall Street Journal columnist and editorial page deputy editor Dan Henninger, Opinionjournal.com Columnist John Fund and, in Washington, Columnist Kim Strassel.

John, you talked to the Thompson people fairly often. Is he going to run or not?

JOHN FUND, WSJ OPINIONJOURNAL.COM COLUMNIST: I think the odds are over 90 percent. If he runs it will be a different campaign. He will do a lot of personal campaigning but probably, in large events, like Hillary Clinton has had in Iowa that attracted thousands of people. He will also harness the Internet, video technology and a lot of other things, like direct e-mail broadcast capability.

GIGOT: Fascinating. Usually when a candidate gets in late to a campaign, feels they have a chance to get in it is because he is filling some void in the rest of the field, whether it be on a big issue that's not being addressed or some charisma factor or something like that.

What is it Fred Thompson has that is having him do so well in the polls?

FUND: I think there is a vacuum. Only about 35 percent of Republicans have a firm opinion of it. But they sense there is not a consistent conservative in the race, someone who reminds them, let's say, of Reagan, although and obviously not being Reagan. And, I think, because of that void, Thompson and other candidates, like Newt Gingrich, are trying to fill it.

KIM STRASSEL, WSJ COLUMNIST: That was something that came clear too in this debate this week, which was just all of these candidates struggled in their own way to come across. They were trying so hard to present themselves as a Ronald Reagan.

But you have McCain. He has issues with global warn with global warming, with McCain-Feingold.

You have both Romney and Giuliani with issues on abortion and there are social issues. And the Republican base is not happy with the choices.

DAN HENNINGER, WSJ COLUMNIST & DEPUTY EDITORIAL PAGE EDITOR: I think partly what's going on here has a lot to do with George Bush. I think George Bush has blurred the idea of what it means to be a conservative.

GIGOT: You do?

HENNINGER: Oh, absolutely.

GIGOT: The criticism from the left is he's too conservative.

HENNINGER: Yes. But you know and I know that Republicans are upset with hill about his big government initiatives, right? Drugs, No Child Left Behind.

GIGOT: Prescription drugs.

HENNINGER: Yes, prescription drugs. Yet, the war on terror has, to some extent, trumped all of that.

I think Republican voters are trying to reboot. They are trying to decide what do I stand for and they're pressing that template against these candidates to try to figure out what it means to be a conservative Republican.

FUND: Picking up on what Dan said, in the Republican debate, only Duncan Hunter said I, too, like George Bush, am a compassionate conservative. Not a lot of people joined that call.

GIGOT: Kim Strassel, you said that John McCain had some problems with McCain-Feingold, which is the campaign finance reform passed. Fred Thompson supported that. Is he really a genuine conservative?

STRASSEL: Look, one reason why Fred Thompson is doing so well in the polls is because people know him as Arthur Branch, the prosecutor on "Law and Order," who is a very tough guy. But most Americans don't know much about his positions.

He was a big supporter of McCain-Feingold. He can probably back away from that. I would imagine he probably will.

But it will be a much bigger question when he does come out about what his positions are and how he presents himself, because America is still yet to learn about this guy.

FUND: By the way, disclosure — I have been friendly with Thompson for years. There is a rap on him, which he really does have to overcome. He didn't light the Senate on fire but, of course, the Senate doesn't operate on fire. It operates on molasses. And he had a reputation for being a little lazy.

Now, I think his life changed since then so I think people will be looking at the old Thompson. But he has to directly address the question, "Do you have a fire in the belly? Are you willing to got out and mingle with voters? Are you willing to do what it takes to run for president for a year and a half?"

STRASSEL: But, John, do you think that makes that big of a — people kind of liked Reagan in this way because he looked more laid back. He didn't come across as a shiny polished politician. Maybe that's one of Fred Thompson's appeals.

GIGOT: He did run the campaign finance scandal hearings in the Senate when he was there during the Clinton administration.

A lot of people think he got his clock cleaned by the Clintons on that one, Dan. I mean, is that going to be held against him?

HENNINGER: I don't think it will be held against him at all. I think what Fred Thompson has going for him is a large amount of charisma.

When he ran for the Senate in 1994, he started out with 17 percent. He beat his opponent, Jim Cooper, 60 to 34.

You know, charisma is just part of public life. If you have it, you are very lucky. If he can join that to conservative ideas, I think he will be formidable.

GIGOT: John?

FUND: Apparently, there is a red pickup truck he used in the race that Dan mentioned. I think we will see the red pick up return in Iowa and Hew Hampshire.

GIGOT: John, if he gets in, who of the other candidates who are already in, does he take votes away from?

FUND: The polls show he hurts Giuliani. He was the frontrunner who has enormous name I.D., so some of that support is soft. He really damages Mitt Romney, who was making some traction in trying to appear as the ultimate Reagan conservative.

GIGOT: How long does he have to get in? How long can he wait?

FUND: Sometime this summer he has to enter. I think his speech in Orange County this weekend signaled he is getting ready to do it.

GIGOT: All right, John. Thanks very much.

When we come back, paying off the trial bar. How Democrats are saying "thank you" to the lawyers who bank rolled there big win last November.

(COMMERCIAL BREAK)

GIGOT: First it was big labor, now it is big law. Democrats are saying thanks to trial lawyers who helped bankroll their comeback in last November's midterm elections.

Kim Strassel, you have been following this story. How are they doing it? How are the Democrats doing it?

STRASSEL: Well, the Dems have a little bit more trouble with trial lawyers because, unlike the unions, who they are not embarrassed to go out and just pass blatant legislation on behalf of, the trial lawyers, it is a little harder because Americans don't like trial lawyers. And they have — they know the trial lawyers have really been a problem for this country and the legal system.

You will see them helping in subtle ways. One very good example of that is hearings. And we got a great example a couple of weeks ago when Barney Frank held a hearing on subprime mortgages.

The trial bar has been trying very hard to gin up some lawsuits against investment banks, people up the chain, the real deep pockets behind subprime mortgages. They hadn't made it far.

Mr. Frank's hearing was designed, in one way, to legitimize this idea, to paint some of these guys as bad guys that helps the trial lawyers and courts. You will probably see future hearings to in which they subpoena documents from some of these banks and then those documents are leaked to the press. They then can become part of the trial that is ongoing.

There are all kinds of ways they can help underground by using their power and their attention power in Washington.

GIGOT: Kim, you are saying this won't be part of one big bill that will be debated in the trial lawyer influence, be debated? It will be things that are slipped in quietly into language into different parts — different legislation, difficult bills. Is that how it's going to happen?

STRASSEL: That's right. Exactly. They won't have something that says okay we are going to roll back class-action reforms or anything like that, because they are not so stupid as to do that.

But you will have is any little bit of regulation, any new built of law on any one subject, they will have little lines in there that make it easier for the trial bar to sue in this way or that. And that is how they will give their help.

GIGOT: John?

FUND: We have legal loopholes in the tax law. I think we will have legal earmarks now for the trial bar. Things slipped in at midnight that nobody pays attention to.

President Bush may try to veto some of them but, if they are part of larger legislation, as you know, without line-item veto, he may have to swallow them.

GIGOT: Because they will attach them to bills that he feels he must pass.

FUND: Must pass bills.

GIGOT: Whether it be an Iraq spending bill, which is where some have already been attached, at least that bill was vetoed but for other reasons.

Yes, Dan?

HENNINGER: Well, specifically, what these things are called is a cause of action. It is a foot in the court house.

GIGOT: Cause of legal action.

HENNINGER: Cause of legal action. It's a foot in the courthouse door. It is a pretty good racket because industries that get targeted — in her column on this, Kim mentioned that they wanted to go after pharmaceuticals and oil for years. That's where the money is.

In turn, the targeted industries start giving campaign contributions to the Democrats as kind of protection money. Lay off us. They get them coming and going.

GIGOT: Kim, one thing that puzzles me is Chuck Schumer, the Democratic Senator from New York, Elliot Spitzer, the governor, joined Mike Bloomberg recently in saying that legal problems are doing great harm to America's competitiveness in the financial industry, driving initial public offerings and financial business to London and to Shanghai and Hong Kong. Is Chuck Schumer doing anything about this, this Congress?

STRASSEL: No, no, he is not. But you have hit on a really important point here, which is as the trial bar's influence grows and as they attack more and more industry, you are having more Democrats who, in the past, who have been friendly to the trial bar, realizing that they are doing great damages to the industries that drive their own state engines, economic engines.

Now the problem is that you still have this block, in particular a sort of liberal northeast Senators, who get most there money from the trial bar, and are not willing to publicly buck them. And the party has not had the never yet — Chuck Schumer hasn't had the nerve yet to publicly start condemning any of this.

GIGOT: Chuck Schumer is also, Dan, running the Democratic senatorial campaign committee, this time as last, and, of course, the trial lawyer contributions help finance those Senate campaigns.

HENNINGER: Yes, he has to have the money for the campaigns. But McKenzie Associates did a study for him and Elliot Spitzer, which showed that litigation could be costing New York $15 billion to $30 billion a year, and driving these companies overseas. That's New York's tax base constitutes. It 15 percent of the taxes in New York. That's oxygen for politicians in New York. So Chuck Schumer is really in a tight spot.

GIGOT: John, are trial lawyers the strongest lobby in Washington? You have been around there a long time and watched it. Are they stronger than the NRA or stronger than the AFL-CIO?

FUND: I think now, absolutely. Because they are so much in the center of the Democratic fund-raising machine and, to some extent, a few Republicans.

Now, you I really do believe, if you look at their power, it is almost limitless. Fred Baron, the former head of the Trial Lawyers Association was once called by the "Wall Street Journal" someone who had undo influence in Washington. He said, "Thank you." He considered it a compliment.

GIGOT: That's right. All right, John.

We have to take one more break. When he come back our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Winners and losers, picks and pans, "Hits and Misses," it's our way of calling attention to the best and the worst of the week.

Item one, what do Iranian President Mahmoud Ahmadinejad and American actor Richard Gear have in common. Dan Henninger is here to tell us.

HENNINGER: They are shocking people. President Ahmadinejad was seen this week kissing a woman on the hand and embracing her shoulders. It happened that she was about 80 years old. She was wearing thick black gloves. She had a scarf on and was wearing a thick black coat.

Nonetheless, one of the newspapers in Iran said this was the most shocking violation of Sharia law since 1979.

Meanwhile in India, Richard Gere was seen embracing an Indian actress, bending over and kissing her, at which point, a judge issued an arrest warrant for Richard Gere for violating Hindu law.

Now, in India the judge was quickly exiled several hours away to a town in the countryside. But the paper in Iran is called Hezbollah. And my advice to President Ahmadinejad is lay off the old ladies.

GIGOT: All right.

Next, a hit, believe it or not, for the French, who's presidential run-off election is Sunday — John?

FUND: Well, we just had a Republican presidential debate, which I think was a mash pit. You had 10 candidates on stage. Questions that were ridiculous. Even if it had been two candidates, it wouldn't have gone well.

The French, believe it or not, did it right this week for their presidential election. They had a table. They had two candidates. They had two moderators, who barely intervened at all and the two candidates went at it. It was over two hours long. They went into overtime because they had more questions that they wanted to deal with. It really was focused, exciting and frankly gave voters a lot of information.

So the next time, I say, maybe we should have different moderators in our debates and perhaps a different format like the French.

GIGOT: Yes, journalists as potted plants, that was an effective strategy.

FUND: Amen.

GIGOT: All right, finally, the case of the $65 million pair of pants — Kim?

STRASSEL: You know, it happens to all of us. You go to the dry cleaners, they lose your item. But in the case of Washington, D.C., administrative law judge, Roy Pearson, his local dry cleaners, run by a family live of South Korean immigrants, lose one pair of pants and he sues them for $65 million.

Never mind they found the pants. Never mind they offered to settle. He thinks he deserves as much for his pain and suffering.

Now, this gives new meaning to the term being taken to the dry cleaners. On the upside, it actually might have a good benefit. Separately, a panel in D.C. is deciding whether or not to give Mr. Pearson a new ten-year term as judge. And there has been such a grass roots effort against this that he may not get it. Let all hope that's what happens.

GIGOT: All right, Kim.

That's it for this week's edition of the "Journal Editorial Report."

Send your e-mails to jer@foxnews.com. And visit us on the Web at www.foxnews.com/journal .

Thanks to Dan Henninger, John Fund and Kim Strassel.

I'm Paul Gigot. Thanks to all of you for watching. We hope to see you right here next week.

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