This is a rush transcript from "Hannity," July 7, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: New shocking details in the scandal that threatens to bring down top Obama administration officials. Called "Project Gun Runner" also known as "Operation Fast and Furious" was a botched international gun selling program that has been linked to the deaths of at least two Americans.

Now earlier this week acting ATF Director Ken Melson, he secretly testified before congressional investigators revealing incriminating new information about the controversial program.

Now afterwards, the chairman of the House Oversight and Government Reform Committee, Darrell Issa and also Senator Chuck Grassley, they fired off a very angry letter to the Attorney General Eric Holder.

Writing of Melson's testimony, quote, "It was not until after the public controversy that he personally reviewed hundreds of documents relating to the case. By his account, he was sick to his stomach when he obtained those documents and learned the full story.

Now if his account is accurate then ATF leadership appears to have been effectively muscled while the DOJ sent over false denials and buried its head in the sand. That approach distorted the truth and obstructed our investigation."

Now late yesterday an assistant attorney general responded to their letter in a written statement arguing, quote, "While we do not question the committee's right to conduct appropriate oversight, we reject entirely any suggestion that our extraordinary efforts have been designed to limit rather than facilitate the committee's access to information."

Now Issa has already publicly suggested the Holder knew of the scandal much earlier than he admitted to in sworn testimony.

Joining me now is California Congressman Darrell Issa. Congressman, welcome back, sir.

REP. DARRELL ISSA, R-CALIF.: Thanks for having me, Sean, and covering it. I think your prelim says it very well. It is almost impossible to believe that everyone, including CBS News and many newspapers and Fox had reported on "Fast and Furious." Yet Eric Holder still didn't know anything about it.

HANNITY: Why, for the benefit of our audience -- this was an idea I think very ill-conceived from the beginning. That they were going to follow the guns from the lower level people involved in the cartels, in the hope that this would bring them to the kingpins, the leaders of these large cartels. Tell us about the operation and why you think it was ill-conceived?

ISSA: Well, it was ill-conceived because if you are going to follow the guns, you put tracing devices on them, you monitor them. You have teams including probably predator aircraft making sure you know where they are.

Here we had over 2,000 weapons, dozens and dozens and dozens of separate sales in which ATF agents either did no following or followed to the first house or in one case until the car was 40 miles north and heading away from the Mexican border, then they were ordered to turn around.

So what you really have is two points. You have the point where it was sold and you have the point where you have a dead Border Patrol agent. And in between, you have no idea where that weapon was.

That is not a program that anyone would say makes sense when you understand it the way we now do.

HANNITY: All right, explain now the interim director of the ATF, the Bureau of Alcohol, Tobacco and Firearms, when he reads this information for the first time.

First of all, it's a little shocking to me that he didn't know about this. He says he's sick to his stomach. You've come to the conclusion that you believe that there's a possibility that Eric Holder may have lied under oath. Can you explain that to our audience?

ISSA: Well, what we've know is that Eric Holder should have known much sooner. We know that the public knew sooner. We know that Lanny Brewer was actively involved in approving a program that he believes in. That he thinks was just poorly executed, but the program was good.

We also know that this career professional, Melson, was transferred in in '09, you know, he's a senior normally nonpolitical person. He'd been an assistant U.S. attorney. He gets transferred in to run this 1,800 member unit. He's not looking at individual investigations for obvious reasons.

He's not even briefed by the other agencies that justice had involved in this task force. He's not briefed on what they knew. So by the time he reads these documents, including the wiretap requests he's after the fact finding out that much of what he was told they were looking for, they already knew, but hadn't told ATF.

HANNITY: He also suggested that there was an attempt, because in many ways I think he's being the honest whistle-blower in this case. From what I understand, when he appeared before your committee, he didn't go with government lawyers, as would normally probably be the process. He went with his own lawyer. And there's a fear there was an attempt to silence him here.

ISSA: Well, very clearly, the Justice Department wanted him in there with justice lawyers. He had the right and was never informed he had the right to come in just with his own lawyer.

Our own people in contact through an intermediary let him know that he almost immediately not only agreed to come in, but came in on the 4th of July, so there'd be no question that he was coming in on his own time, his own volition. And his attorney -- I wasn't in the interview for appropriate reasons -- his attorney never, never, never, asked him to stop or have extensive consultation. He simply answered the question with his counsel present.

That's opposite of what we've had in the previous interviews, the few in which had their attorneys. Essentially, they are trying to limit our discovery. They're trying to counsel their people to give only certain things. It is one of the reasons that we find it refreshing when we get a career professional coming in answering our questions fully and completely and then letting us go where the trail leads us.

HANNITY: What you seem to be describing, Congressman, is an obstruction of a congressional investigation, am I --

ISSA: I think you are close to accurate. There's a standard that we would have to meet to call it that. But it is very clear that people were being discouraged from speaking to us, slow rolled and justice was negotiating while in fact, all the discoveries we were getting was from whistle-blowers, people handing us documents, people coming forward around justice. And even today the discovery we've gotten, if it wasn't already available on the Internet, it generally is an all black page of redaction to where it is of no value.

HANNITY: If -- and it's interesting because you have the documents, you think that, you know, they would just come clean and tell the truth. If you discover that Eric Holder knew a lot more than what he indicated, that would mean that he ostensibly lied to Congress, would it not?

ISSA: If Eric Holder knew any significant time before he said he knew, which was just a couple weeks before he testified, before the Judiciary Committee then he's in very serious trouble.

But I think he's in serious trouble in a different way. He should have known about this, not just this past February, but a year earlier. This was a program that let thousands of weapons go into a foreign country, and in some cases, stay in America, that were being deliberately allowed to be sold to straw purchasers who undoubtedly want to sell to criminals. That's the opposite of what the Bush administration did. The Bush administration even fired U.S. attorneys for not enforcing gun laws. Here we have the opposite happening at all levels.

HANNITY: Yes, well, the frightening thing is too, if the attorney general --will you have access to his e-mails and subpoena them?

ISSA: We will be going through these e-mails. So far we are not getting the level of cooperation that would cause us to believe we are going to get them easily. But our responsibility, Sean, is to go where the facts lead us for as long as it takes.

HANNITY: All right, Congressman, we'll stay on the story. Appreciate you being with us.

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