This is a rush transcript from "On the Record," May 28, 2010. This copy may not be in its final form and may be updated.

JAMIE COLBY, FOX NEWS GUEST HOST: Tonight, a twist we did not expect! I'm Jamie Colby, in for Greta Van Susteren. Questions have been brewing for months, and today the White House admitting it did offer Congressman Sestak a high-ranking non-paying position if he dropped out of the Democratic Senate primary in Pennsylvania, making way for challenger (SIC) Arlen Specter. And here's the twist. It was President Clinton who delivered that offer to Sestak!

Today, Congressman Sestak gave his side of the story to a media swarm on the steps of the U.S. Capitol.

(BEGIN VIDEO CLIP)

REP. JOE SESTAK, D-PENN., SENATE CANDIDATE: President Clinton had called me last summer, and I just didn't feel it was right for me to talk about that conversation with him.

(CROSSTALK)

QUESTION: Can you describe what your reaction was to him? And was it just one phone call that got from him or that -- and that was it?

SESTAK: Well, he's called several times to...

QUESTION: About this (INAUDIBLE)

SESTAK: No, this is the only time. He called last summer. And during the conversation, he talked about how tough this Democratic primary might be if I got in. And he also said, you know, You've done well in the House, and with your military background, can really make a mark there, and then brought up that during a conversation, Rahm Emanuel had brought up about a presidential board of something, you know, if I were to stay in the House.

And I almost interrupted the president and said, Mr. President, I am going to decide to get in this or not only depending upon what's good for Pennsylvania's working families, not an offer.

QUESTION: But it was...

SESTAK: And he said, I knew you'd say that.

QUESTION: Congressman, were you aware that this -- that this could have been very much (INAUDIBLE) a misdemeanor, or perhaps even a felony?

SESTAK: Oh, if I ever thought anything had been wrong about this, I would have reported it.

(CROSSTALK)

QUESTION: You've consistently said that nothing inappropriate happened. Is it your contention that what President Clinton said, offering -- you know, bringing up a job in relation to your Senate race, would you say that's not inappropriate -- that's inappropriate or no?

SESTAK: Well, I was very conscious that the Democratic establishment did not want me not race. And I merely looked at this as just another effort by the Democratic establishment in Washington, D.C., not to have me in the race.

QUESTION: So was it inappropriate or was it...

SESTAK: No. President Clinton -- there was nothing wrong that was done.

(END VIDEO CLIP)

COLBY: Well, then, why has the White House -- they've been tap dancing on this story for a very long time!

(BEGIN VIDEO CLIP)

QUESTION: Last Monday, you were asked twice about the claims of Congressman Sestak that he had been offered a high-ranking administration position and...

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I have not -- I have not made any progress on that.

QUESTION: You told us a couple of times you'd check back on that.

GIBBS: Yes, and I...

QUESTION: (INAUDIBLE) update, number one. And number two...

GIBBS: I don't have the update with me, but let me check and see if I do have it.

QUESTION: (INAUDIBLE) because last Tuesday, you told us, I don't have the update with me on Sestak.

GIBBS: Yes, I...

QUESTION: (INAUDIBLE) happened since there.

GIBBS: Yes, I don't have any...

QUESTION: (INAUDIBLE) to the White House counsel...

GIBBS: I don't have anything additional on that

QUESTION: Are you ever going to have anything additional on that?

GIBBS: I don't have it today.

QUESTION: And the other thing -- you haven't answered yet on Mr. Sestak's charge.

GIBBS: I don't have anything -- I don't have any more information on that.

QUESTION: Congressman Darrell Issa has accused you, Robert Gibbs, of being part of a cover-up because you will not say whether the White House offered Joe Sestak a job for not running against Arlen Specter.

GIBBS: I'm told that whatever conversations have been had are not problematic.

(END VIDEO CLIP)

COLBY: So now we have some answers and a lot of questions! Were any laws broken, or was this just politics as usual? Will any heads roll? We have it all covered.

First, Republican congressman Darrell Issa. He's the ranking member on the House Committee on Oversight and Government Reform, and he says this hearkens back to the Nixon era and Watergate. He wants a special prosecutor appointed now! And a short time ago, I spoke to Congressman Issa.

(BEGIN VIDEOTAPE)

COLBY: Congressman, your reaction today to a whole day of developments, in particular the White House statement?

REP. DARRELL ISSA, R-CALIF.: Well, I think the White House issuing a statement after 10 weeks of denial that they did anything wrong and then still denying they did something wrong while admitting they did what is on the face of it wrong -- it's very clear that the White House orchestrated, through a clandestine network of the chief of staff and then the president -- President Clinton, an offer to Congressman Sestak that would violate the criminal code.

COLBY: The White House says that any allegations of wrongdoing are based on factual errors. Do you believe, at this point, we have all the facts? And if not, what's missing?

ISSA: Well, Congressman Sestak seems to be morphing his story some. Certainly, he said he was offered by the White House -- he was actually offered by President Clinton, apparently, by his own statement. But other than that, we're still -- we still have the same situation in which it was an inducement of an appointment in order to get him out of a primary. That's right on the letter of the law of the U.S. Code, USC 600, that was written to prevent exactly what now is being admitted to.

COLBY: Your concerns, both legal and ethical -- do they change, and your feeling there should be some further investigation or maybe even a prosecution -- does it change because it was an unpaid advisory position?

ISSA: Not at all. Appointment is in the statute, separate from any kind of payment. An appointment doesn't have to be paid. But I think, more importantly, this hearkens back not only to the Nixon era of what the president says is legal is legal, but more importantly, if you remember the Clinton White House, when they were dealing with the dismissal of the Office for Travel, the White House investigated and said it was legal. They came out with opinions. Then the FBI investigated and found a great deal more. This admission by the White House calls for at least FBI investigation, preferably a special prosecutor.

COLBY: The use of former president Bill Clinton as an intermediary to approach Congressman Sestak and ask him not to proceed in his primary race -- does that change anything, in your mind? Does it raise questions that perhaps there were other races that were looked at and that the White House may have taken action similar to this and we just don't know?

ISSA: Well, the clandestine nature of how they chose to do it says they certainly didn't think it was something aboveboard that the president could just make a phone call and say, You know, Hey, Joe this is Barack, would you get out of the race if I appoint you to something that will keep you in the House? And yet they would have us believe after the fact that it was just that simple and just that legal, and yet they went through this charade in order to disguise what they were doing.

And you're absolutely right. There is and have been questions about other races that the White House may have tried to save money (ph) by committing this act.

COLBY: If, in fact, what happens does not rise to the level under the federal law as we've been discussing over the last couple of days, certainly, the Hatch Act says that the executive branch cannot take any action to try to influence an election. Do you feel that that may come into play here?

ISSA: It certainly could. And Henry Waxman has always been an advocate of strictly enforcing the Hatch Act, and yet we've had no investigation, no willingness by any of the Democratic majority here in the House to lift a hand to try to follow up on this investigation. Until Anthony Weiner stepped away from his party, there was complete silence in the House.

But I think, more importantly, Jamie, the thing that I hope everyone is realizing is this is now a White House says that everyone does it, therefore it's OK, which is a long way from, We're going to be the most ethical White House, we're going to go beyond the letter of the law, we're going to change the standard in Washington. It's very clear they're using business as usual, techniques as usual as their excuse for how they committed these acts.

COLBY: What disturbs you more, both in your position on Judiciary and also Government Oversight and Reform? Is it that we didn't have these details immediately when it arose, or is it we may not know enough yet, or is it the fact that it happened all together? Because this president did run on changing politics as usual and also absolute transparency.

ISSA: What worries me the most is the attempt at witness tampering. You know, this White House over the last 10 weeks has used a number of ways to contact Congressman Sestak to pre-agree to a statement, using his campaign manager, who happens to be his brother, going through and finding these other witnesses, conducting multiple internal investigations. This all taints the witness pool.

And more than anything else, if you are going to admit that you did something which we believe is wrong, you shouldn't have taken 10 weeks of dodging it again and again, and then have corrupted the witness pool, and then say this must settle it, when the only thing that's settled is that, quite frankly, more questions are going to be raised to President Clinton, to Joe Sestak and to the people in the White House who conducted, if you will, this cover-up.

COLBY: What's the potential fallout for this president over this? And how about for the Democratic Party?

ISSA: Well, lack of trust that is building up between those of us who do oversight and are asked to work with the administration, their IGs, the general Accountability Office, and so on -- this is real harm because under Republicans and Democrats, people on my committee and the House Oversight, we have to work with a great deal of trust. These IGs are supposed to be independent, but they're only independent if the White House doesn't pull their chain.

A lot of this makes us believe that it's going to be more business as we don't think should be usual. Certainly, the dismissal of the head of Mineral Management Service, a woman who was part of a revolving door that came back into government, pulls her further away from our being able to find out how she could be on the job for a year, but her second tour, and then have no changes in Mineral Management Service, even though she had watched our earlier investigations and knew the problems that existed in that organization.

COLBY: Congressman Issa, do you think the White House believes that the response they gave today, this statement, closes the door on the questions about what happened in this particular race with Congressman Sestak and with President Clinton's involvement? Or do you have plans? Is there a next step for to you pursue?

ISSA: Well, certainly, the next step is uncertain. Speaker Pelosi has no interest and no history for three-and-a-half years of investigating anything except Republican wrongdoing, and I don't expect to get much support there. But I do believe that the administration should expect that we can't let go of something where their letter itself openly admits to a crime.

COLBY: Congressman Issa, I want to thank you so much for being with us, very informative detail today on this developing story. Thank you.

ISSA: Thank you.

(END VIDEOTAPE)

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