RACHEL MADDOW:  KBR, the largest contractor in Iraq and a former subsidiary of Halliburton, has recently been under fire for their actions, more accurately for their inaction.  In 2003, shortly after the U.S. invasion of Iraq, 139 Indiana National guardsmen went to Iraq to provide security for KBR contractors who were working at a water treatment plant in Basra.

The workers and the soldiers were apparently exposed to an extremely carcinogenic powder called hexavalent chromium.  It's the chemical that was made infamous by the movie "Erin Brockovich."  At least one Indiana National Guardsman has already died from lung cancer, another is reportedly dying and others are suffering from tumors and rashes.

Sixteen Indiana National Guard soldiers have sued the Houston-based defense contractor, saying the company knowingly allowed them to be exposed to this toxic chemical in Iraq.  The suit claims the site was contaminated for six months and crucially alleges that KBR knew it was contaminated but they concealed the danger from civilian workers and from the soldiers.

As the human toll of this alleged negligence plays out, questions remain.  Who is ultimately going to be held liable here?  Who is going to pay for the advanced medical care for these troops?  And what's going to become of security contractors now that the Status of Forces Agreement puts them essentially under Iraqi jurisdiction.

Joining us now is Indiana's Democratic Senator Evan Bayh. Senator Bayh, thank you very much for coming on the show to talk about this tonight.

SENATOR EVAN BAYH:  Rachel, it's good to be back.

MADDOW:  Is it true that we are not even keeping track of the medical condition of troops exposed to chemicals like this in Iraq?

BAYH:  Well, up until now we have not been.  Fortunately, the army has made progress in this particular case.  But the relevant elements here, Rachel, are in the contract that KBR signed.  They had a requirement, as soon as they went into that site, to do a risk
assessment.

And apparently, there were piles of this stuff, big orange piles. It was equated with dust storms practically.  There was so much of it lying around.  And that report has either not been done in violation of their contract, or has not been shown to anybody, presumably because of what it contains.  That's really what we need to get our hands on so we could get to the bottom of what these troops were exposed to and make sure they get the kind of medical care they need going forward.

MADDOW:  Obviously, there needs to be some sort of policy solution to avoid something like this happening in the future.  But more immediately, these Indiana National Guardsmen and women are facing some very serious medical concerns, as serious as you can get. What are the immediate steps that are being taken right now to try to make sure that they are getting the care that they need and everybody who needs to get treated and looked at is getting treated and looked at?

BAYH:  Well, this exposure finally is being included in their medical files.  And by the way, there may be guardsmen and women from Oregon on the site exposed as well. What we need to get to the bottom of that.  But what we need to do going forward is very similar to what happened in Vietnam in the Agent Orange Case.  We need to create what is called a registry, Rachel, or the guardsmen and women who were exposed can be tested regularly for symptoms so they can get early treatment to cure, you know, cancer or other symptoms they might come down with.

We have testimony that as many as 60 percent of the KBR personnel who were on site came down with severe nosebleeds and other indicia of exposure to this chemical.  So what needs to happen here is that the burden of proof should not be on the soldier. Ordinarily, you've got to prove that it's a service-related disability.

But when you've been exposed to a known carcinogen like this, the burden should be on the government.  We have a moral responsibility to give these men and women the very best care possible.  That's what needs to be done.

MADDOW:  Do you believe that contracting and the processes around contracting have improved at all over the course of the war as we have relied so heavily on private contractors?  Could this happen again with the rules that we have in place now?

BAYH:  Well, regrettably it might.  And we have a commission that's now been established.  I co-sponsored the bill and Claire McCaskill from Missouri authored the bill.  It's sort of the Truman Commission of this war.  And the sole purpose, Rachel, is to answer that question, to look at these contractors, to see how they behave, to make sure there is better oversight going forward.

And I think you ask an important question in your lead-in.  You know, the government was at fault here at the beginning -- no armored vehicles, no body armor, insufficient personnel, so they went out and had to hire a bunch of these contractors.  And we do face this occasional dilemma of the profit motive running head onto the responsibility to provide the best care and protection for our troops.

We cannot allow that to happen.  That's what the commission should look into.  I'm going to call for them to investigate this incident.

MADDOW:  Senator Bayh, I would be remiss if I did not ask you about an issue of Senate business, not directly related to this, and that is the potential appointment of Leon Panetta as director of Central Intelligence.  Have you had any time to think about this
potential appointment and do you have a reaction to it?

BAYH:  Well, I have thought about it.  As you know, I'm on the committee.  Look, I think Leon Panetta is an outstanding public servant and I intend to support his nomination.

At the same time, I heard Andrea's reporting on Steve Kappes, and have a very high regard for him.  I've been in some extremely sensitive meetings involving matters of life and death, and have been impressed by his competency.

So perhaps the two of them -- Leon is the chief, perhaps they can convince Mr. Kappes to stay on.  But I think, look, we have a president.  We have to respect his judgment.  When it's someone of Leon Panetta's stature, I personally would support that.  And we've got to put issues of ego and those kinds of things aside and try to do what's right for our country.  So perhaps we can convince them both to remain there and do what's right for the country.

MADDOW:  Indiana Democratic Senator Evan Bayh, thank you so much for your time tonight, Sir.

BAYH:  Thank you, Rachel.