This is a rush transcript of "Special Report With Brit Hume" from November 9, 2007. This copy may not be in its final form and may be updated.

BERNARD KERIK, FORMER NYC POLICE COMMISSIONER: I'm disappointed that the government has brought forward this case. It's an extremely difficult time for me and my family.

RUDY GIULIANI, (R) PRESIDENTIAL CANDIDATE: I think he should have been checked out more carefully. I have said that, I have apologized for it. But the reality is we brought down crime by record proportions, we brought down vi olence and the prisons record proportions.

BRET BAIER, GUEST HOST: There you saw former New York Mayor Rudy Giuliani earlier this week talking about Bernard Kerik, who today pleaded not guilty to 16 counts of federal corruption charges.

So how does this play for the Giuliani campaign now? Some analytical observations from Fred Barnes, Executive Editor of The Weekly Standard, Mort Kondrake, Executive Editor of Roll Call, and the syndicated columnist Charles Krauthammer, Fox News contributors all.

Sixteen counts, including conspiracy, mail fraud, wire fraud, lying to the IRS. He says he will fight them all in court, Kerik does. Fred, the Giuliani campaign has seen this coming. But today, obviously, can't be good for them.

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: No, it can't be good. This hurts. It is not fatal, but it certainly hurts. Kerik has been extremely close to Rudy Giuliani.

And I think the worst thing about it is when he recommended Kerik to President Bush to be the Secretary for Homeland Security, and he had never really checked out Kerik as much as he should have. I think he admits that now. And John McCain said, it's a question of bad judgment. This was bad judgment.

But, look, when you think of other politicians—you had Fred Thompson, a guy with a drug background that he just had to drop from his campaign. Think of all the people with problems who were pals of Bill Clinton. Remember the McDougals?

Generally, I think voters forgiving for what friends of politicians, or even relatives of politicians, do. Now, if somehow Giuliani were linked to any of this alleged wrongdoing, that's a different another story.

Mort, Carl Cameron brought up an interesting point earlier. He said this trial potentially is going to happen right in the middle of the general election. And if Giuliani is the nominee, he could very well be called.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: Well, no question it's embarrassing. Obviously Kerik is — I was going to say guilty until proven innocent. But you know what I mean.

But Giuliani says I made this mistake, but generally speaking, my judgment in personnel is great.

But "The Wall Street Journal" has a little story today on some of his other judgments, like he has this monsignor who is one of his partners, who was caught up in a Roman Catholic sex abuse scandal—alleged.

He's got—there's a grand jury report involved. And there is a lawyer accused, alleged, only accused, of defrauding a client. There is somebody who went to jail for, who was one of Giuliani's commissioners, who went to jail for embezzling the Housing Authority, and so on, and so on, and so on.

And so it does raise questions about whether this guy has sound judgment in the people that he's loyal to.

BAIER: Charles, how do you think Rudy Giuliani has dealt with this? Has he dealt with it effectively? He has said I made a mistake because I didn't vet him. But as far as the follow-up questions, they don't elicit a lot of answers other than that

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: His only defense is to say he was a friend, I trusted him, and he did a good job, and I didn't suspect there was anything serious here.

I think the fact that he recommended him for Homeland Security is in some way exonerating. The man is not an idiot. If he had actually thought there was real criminality here, as we see in the indictment, you don't recommend a guy for a post like that if you assume he really is linked with the mafia and has been involved in corruption.

He was a friend, and he overlooked rumors or stories he had heard, even a briefing or two. But in the end, Rudy's image is the sheriff who rode into town and cleaned it up. So he has a deputy who has got a shady past who might have been involved in bad stuff. I don't think it rubs off. He says I admitted it. I made a mistake.

Now, if it comes out that he was either aware or enabled or involved in any way in this corruption, he's finished. But I can't imagine he did precisely because he acted as if the guy was above the board and recommended him to the president.

BAIER: The New York Times had a big, long story last Saturday indicating that the now deceased Investigations Commissioner of New York City told Giuliani and told aides of Giuliani that Kerik was involved in this construction company that had mob ties. And that the Investigative Commissioner did not say that that ruled him out, and Giuliani decided to overlook the allegation and had to appoint him anyway.

But by the time he recommended him for Homeland Security Commissioner, he darn knew well that the guy was connected to this company.

BAIER: Fred, do you think that other campaigns are going to be able to use this effectively against Rudy Giuliani?

You mentioned McCain today coming out pretty strong, his campaign manager, but are campaigns going to be able to use this?

BARNES: They're going to try. And the Democrats have already jumped on it as well. I don't think they can make that much headway. I mean, it's Kerik. It's not Giuliani.

There is a surprising disparity between the way the media has treated the Fred Thompson, with the guy who was, what, a cochairman of his campaign, or something, who had some drug arrests in the past, and Thompson was using his plane, and then he had to drop that guy and drop the plane, and the way they treated the Kerik thing with Giuliani, which has gotten much, much, more press.

Why is that? The reason is, well, Giuliani is the frontrunner. The media doesn't take Fred Thompson that seriously. And the media, particularly the New York media, dislikes Rudy Giuliani very strongly.

BAIER: That's the last word.

When we come back with our panel, Pakistan's opposition leader spent much of the day under house arrest. We'll talk about the ramifications for that country and our country next.



UNIDENTIFIED MALE: How could they do this day after day? They can't. How long can they keep these blockades? Tomorrow these barbed wires will be gone, and tomorrow we will come forth again, and we will come forth again, until our demands are met.


BAIER: That was former Pakistani Prime Minister Benazir Bhutto, opposition leader. She was under house arrest today, placed there by Pakistani President Pervez Musharraf, eventually let out in the evening.

However, the entire day, again, causing a major chaos on the streets of Islamabad, and a number of cities in Pakistan. This is another chapter in this continuing saga with this country.

We are back with our panel. Charles, house arrest for a chief opposition leader. They stopped this protest rally as this emergency rule continues. What's next here?

KRAUTHAMMER: Well, what's important to know is that nobody has died, and there have been no major injuries. It's a kind of a boxing match where blood hasn't been drawn and we want that.

Our objective here is a transition in power. Musharraf is done. He basically—we tried to engineer a quiet deal between him and Bhutto in arranging for her return, hoping there would be a quiet transition. He exploded all that by declaring martial law.

Now his time is up, and we know it. But what we want to engineer is not a precipitous decline or overthrow of his regime, because you could get a split in the army and a collapse of a state. You want a gradual one.

For that, you have got to have elections. The real key is not the state of emergency, it's elections. If they can hold elections in the next few months, Bhutto will win. She will inherit the power. Hopefully we can rely on her to carry on the war on terror.

And then you get a transition in the military in which there is a deputy to a Musharraf who we are told is non-political, pro-American, and would fight Al-Queda.

You want to get a transition away from Musharraf into Bhutto and the number two guy in the military. That's our objective. Hopefully it can be done in time over the next few months.

KONDRACKE: His name is AshFaq Kiani. He is the vice chief staff of the army, and he is the guy who will become the army chief of staff if Musharraf does take of his uniform. And I agree with Charles, that he would be the probable guy to take power, at least to run the army and fight terrorism.

But there's one danger, one major, major danger here, and that is now that Benazir Bhutto is being apparently allowed to leave her compound, if she want to go demonstrate—it's not quite true that no blood has been shed. I mean, 150 people got killed in a bombing on the day of her demonstrations.

I'm told that John Negroponte told Congress last week that his understanding is that the Musharraf government is adequately giving her security. I'm told by her people that that is not so, that she has had a very light security detail, that they don't have the kind of things that he would use against IEDs, for example.

And if something happens to her, that country could blow up. And that's a major danger, and the United States ought to be intervening with Musharraf to make sure that she has adequate protection.

BAIER: There was a lot made of the house arrest today. The Pakistani government said the reason they put her in house arrest was to protect her from intelligence that Al-Queda terrorists were going to attack her during this rally.

So how is the White House playing this—effectively, Fred?

BARNES: Look, one thing you have to realize, it's some Charles mentioned in his column this morning in the "the Washington Post," and that is the U.S. has limited power here.

This is a very unstable country. The U.S. can't decide. President Bush can't make a phone call to Musharraf and change everything.

They start out in this crisis, the Bush administration does, dealing with Musharraf as a friend and an ally. The problem is he hasn't done the things that he has promised to do.

Remember his deal with the tribal leaders in northern Pakistan 16 months ago, when they were going to kick the Taliban out and stop the crossings by terrorists in Afghanistan and killing Afghanis. Well that completely broke down.

And then Musharraf had the deal with Bhutto and she was going to come in. The hard part—and that broke down. The hard part is getting Musharraf to agree that his time is up and to find some lovely post for him with no power. Maybe that's to be the president, but it's getting him to agree to do. That's hard.

KRAUTHAMMER: The point about the lack of killing is that the government, Musharraf, has not had anybody shot. None of the demonstrators have been attacked by the government in a way that would actually cause injuries.

Of course Al-Queda is out there. As long as this remains a bloodless demonstration and repression, you might have a calm solution.

BAIER: That's the last word, but stay tuned to see the latest investigation into how airport security screeners are doing lately. Stay with us.

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