This is a rush transcript from "Hannity," October 1, 2010. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: Just over a month to go until the midterm elections, the Democratic smear campaign is in full force and now it has grown legs in California. The latest victim -- Republican gubernatorial candidate Meg Whitman. Now, she will be here to respond to the allegations against her in just a moment.

But first, let's take a look at the left's accusations. Now, the smear campaign is apparently being orchestrated by Attorney Gloria Allred. Let's take a look.


GLORIA ALLRED, NICKY DIAZ'S ATTORNEY: I represent Meg Whitman's former housekeeper, Nicky Diaz Santillan. Nicky, an undocumented worker, was employed by Miss Whitman for approximately nine years until she was fired by her in June 2009.

Yesterday, in a news conference, Nicky alleged that Miss Whitman knew by 2003 or before that date that she and her husband, Dr. Harsh, were employing an undocumented worker.

NICKY DIAZ SANTILLAN, MEG WHITMAN'S FORMER HOUSEKEEPER: I'm doing this because I know there are a lot of Megs out there, who are mistreating the Nicky's who work so hard for them.


HANNITY: Now, Allred alleges that a letter that Whitman received from the Social Security Administration alerted her that her housekeeper was using a bogus Social Security number, a clear indication that the housekeeper was an illegal immigrant.

Just one problem, the letter sent by the Social Security Administration did no such thing. In fact, it merely requested information about the housekeeper, including her Social Security number and explicitly stated that using a letter as an excuse to lay-off the employee in question was a potential violation of state or federal law.

Now, there's one other thing that Gloria forgot to mention, in the midst of her vicious attacks -- she is a partisan ally of Whitman's Democratic opponent Jerry Brown and has been for over three decades.

Now, earlier today, the Brown campaign confirmed that Allred served as a volunteer on Mr. Brown's campaign back in 1974, while working for the National Organization for Women, which was then backing Brown. She also donated $150 to Brown's 2006 campaign for attorney general. And in this 1994 video, you can see Allred and Brown sitting next to each other on C- SPAN on a panel that they appeared to together in June of that year. So I think all of that makes Allred's motivation pretty clear.

And joining me now with her response to all of this and was the target of these allegations, California Gubernatorial Candidate Meg Whitman is back on the program. Meg, welcome back. Thanks for being here.


HANNITY: All right. It -- it gets complicated. But I think this is really important, because you hired this woman back in 2000. You used an employment agency. Correct?

WHITMAN: Correct. We did use an employment agency and we asked specifically for someone that they knew was documented.

HANNITY: OK. You specifically -- and they provided you with documentation. They provided you --

WHITMAN: Correct.

HANNITY: -- with a Social Security number, right? And --

WHITMAN: We actually had a copy of the Social Security card, a copy of the driver's license and an I-9 form filled out by Nicky Diaz that says that the employee signed saying under the penalty of perjury I -- I assert that I am legal to work in this country.

HANNITY: Now, all right. So it seems to me you did complete and due diligence. All right.

So now with Gloria Allred moves forward and she -- she goes to this letter that I guess you and your husband received from the Social Security Administration, correct?

WHITMAN: Yes. Neither of us remembered receiving this. But, then it showed up. And you are exactly right in your intro it said nothing about immigration status. It said, you know, we're looking into W-2. And what it read like was a clerical form and we were worried that Nicky wasn't getting -- going to get credit for her Social Security contributions or a tax refund if she was due it.

HANNITY: Right (ph).

WHITMAN: So my husband scribbled a little note on the bottom and said, Nicky, please look into this. We had no reason to believe that anything was askew.

HANNITY: OK. And it actually said it is not a basis in and of itself for you to take any adverse action against the employee such as laying-off, suspending, firing or discriminating against the individual. Any employer that uses the information in this letter, the letter they sent you, it goes -- it goes on to say, to justify taking adverse action against any employee may violate state or federal law and you may be subject to legal consequence.

So, it's not like -- they were telling you just the opposite of what is being alleged here, it seems to me.

WHITMAN: That's exactly right. And we had no reason to believe that Nicky Diaz was here illegally. We've gotten all the documentation. None of it -- nothing like this had ever come up until June of 2009 when she called me and said I have to come and talk to you.

And on that Saturday in June, she came to us and said, I know -- I know you are running for governor. I have to tell you that I am here illegally. And my husband and I were stunned and saddened, really.

And we had to make one of the most difficult decisions that I've had to make in my life, which is to let Nicky go. She'd become a part of our extended family. But it is illegal to hire illegals in California and we have to make that decision, so we let her go.

HANNITY: And you were paying her a pretty handsome salary, from what I read.

WHITMAN: We're paying her $23 an hour to work 15 hours a week. And she had tremendous flexibility. I was, you know, concerned about her.

She was a working mother, had three boys and she asked to work four days a week. We paid her 15 hours for those four days. And when her child was sick, she would bring her young son with her to work. Or if she had to go out for a parent-teacher conference or a pediatrician's appointment, we let her do that, and, of course continued to pay her. We had actually a great relationship with Nicky.

And I think what has happened here is this is smear tactics. This is dirty tricks in the worst tradition of Democratic politics. And --

HANNITY: Well, the timing is certainly suspect now isn't it? Beyond -- beyond anything else. And we've pointed out this political alliance over the years between Gloria and -- and Jerry Brown.

Now, there are - there are some legal issues, not against you, but against this woman that you had hired. She signed under the threat of perjury, this I-9 form. So she lied on that document. She had a --

WHITMAN: And she had forged documents. The Social Security card evidently was fake and who knows how she got the driver's license.

HANNITY: Well --

WHITMAN: She's in very serious trouble, Sean. You know, what Gloria Allred has done I believe in cahoots with the Brown campaign is they have sacrificed this Latina, who is a very nice woman on the alter of Jerry Brown's political ambitions.

HANNITY: And that, you know --

WHITMAN: No question that this was a -- a coordinated effort.

HANNITY: It does seem in that sense then that Gloria Allred has put her life in that sense or her ability to stay in the United States in jeopardy, at this point.

Now, based on --

WHITMAN: I think in enormous jeopardy.

HANNITY: All right. So based on that, what you know, what did you do with the information when you find out -- found out, besides firing her, what did you do with that information, anything?

WHITMAN: We didn't. We fulfilled our obligation as an employer to let her go. And -- but we decided not to make an example of her. You know, she had worked with us for many years. We made a decision that I thought was the right decision to comply with the law, but decided not to make an example of her.

HANNITY: And this was how long ago that you let her go?

WHITMAN: June of 2009. So, a little over a year ago.

HANNITY: Yes. It seems -- again, the timing five weeks before an election is interesting.

All right. So based on what we do know --

WHITMAN: Well, Sean, here's the other thing that you should know is tomorrow I have a debate against Jerry Brown hosted by Univision, you know, aimed at the Latino audience in California. So I think there was no accident to this timing.

The Brown campaign for two weeks has been flogging this story to the media. The Service Employees International Union, CU (ph) was involved. They have an ad, ready to go right after Gloria Allred's conference. So --

HANNITY: It raises an important question, though.

WHITMAN: -- I say this is dirty tricks.

HANNITY: Are we a nation of law? The laws on the books apply in California. In your opinion, and I know this is going to be a tough question, because you referred to her as family. Do you think based on what we now know that she needs to be deported?

WHITMAN: That's a very tough question. But we are a nation of law. And she has forged documents. And, you know, basically, you know, was illegal for nine years working for my family. I think it's a very tough situation. I'll leave it to the, you know, Immigration and Naturalization Service. But I don't think it looks good for her.

And, you know, what breaks my heart is Jerry Brown and Gloria Allred, what's going to happen to Nicky after November 2nd? Whether I win or lose this election, no one is going to care about Nicky Diaz and, you know, she's going to be deported. Her three children were born here. Her husband is here.

And I think they -- as I've said before, they have sacrificed her for Jerry Brown's political ambitions and Gloria Brown -- Gloria Allred's, you know, PR stunt.

HANNITY: You know, I think this is one of these issues that will boomerang. I -- I believe the fact that you had the documentation which -- and you showed such due diligence as a credit to you even going back to 2000. I -- I don't think it's going to be the political campaign issue they thought it was going to be. I think they're going to be on the defensive by the time this is over.

Meg Whitman, we will be following this all next week. Thank you for being with us tonight.

WHITMAN: Thank you very much, Sean. I appreciate it.

Content and Programming Copyright 2010 Fox News Network, Inc. Copyright 2010 Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.