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I heard the conference and heard the part I posted. However, I read the transcript and see why the media is getting their angle. I still think it is slightly deceptive as they are presenting it as the dirty bomb plot was set aside when it appears it was still in play, but in fairness, here is the rest of the portion that does mention more skepticism (thanks for the nice words):

Transcript of news conference on Jose Padilla

Excerpt:

Zubaida's plan was to use Padilla and his accomplice for Zubaida's own operations in the future. But they were so eager, so intent on carrying out an operation in the United States, that in March of 2002 he sent them to see Khalid Shaikh Mohammed, even going so far as to write a reference letter to Khalid Sheik Mohammed about Padilla, giving Padilla and his accomplice money and urging them to seek out KSM about the dirty bomb plot.

Zubaida separately called Khalid Shaikh Mohammed, told him about the dirty bomb project and also told him he didn't think it was practical, but he wanted Khalid Shaikh Mohammed to check it out himself and to evaluate it.

He told Khalid Shaikh Mohammed that he was free to use Padilla in his operations in the United States if he wished. Mohammed did meet with Padilla and his accomplice and he was, as Zubaida was, skeptical about the dirty bomb plot.

Instead, he suggested to Padilla and his accomplice that they undertake the apartment building operation that had originally been conceived by the now-dead Mohammed Atef, the former military leader of al Qaeda.

KSM suggested that they enter the United States by way of Mexico or by way of Puerto Rico, and that once in the country, they locate high-rise apartment buildings that had natural gas supplied to all floors, that they rent two apartments in each building, seal those apartments, turn on the gas, and set timers to detonate and destroy the buildings simultaneously at a later time. This was precisely the mission that Padilla and Jafar had trained for, and now Padilla had a new accomplice.

Khalid Shaikh Mohammed gave Padilla full authority to conduct an operation if he and his partner succeeded in entering the United States.

I should note that Khalid Shaikh Mohammed was not himself sure which operation Padilla intended to carry out. By that I mean in Khalid Shaikh Mohammed's mind, it was still possible that Padilla was going to pursue the dirty bomb plot. What KSM knew for sure, however, was that he had authorized this explosives-trained al Qaeda operative to mount an attack in the United States.

Padilla, for his part, admits that he presented the dirty bomb plot to Khalid Shaikh Mohammed just as he admits he presented it to Abu Zubaida. Padilla says that Muhammad wanted him to hit apartment buildings in New York, although they also talked about Florida and Washington, D.C.

Padilla was given the discretion about choosing the apartment targets.

~snip~