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Supreme Court Upholding Hobby Lobby's Refusal to Cover Some Contraception for Its Employees; Bob McDonald Appointed Head of VA; New V.A. Chief; ISIS Declares State

Aired June 30, 2014 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JIM SCIUTTO, CNN ANCHOR: Right now, the Supreme Court strikes a blow to Obamacare ruling that some companies don't have to pay for contraception for their employees. Does this pave the way for more challenges to the health care law? Also right now, President Obama is getting ready to announce his choice to fix the VA. Is the man behind Duracell batteries and Tide detergent the right person for the job? And right now, North Korea announces it will prosecute two American tourists, saying they committed, quote, "hostile acts," raising new questions about what North Korea hopes to gain from detaining American citizens.

Hello, I'm Jim Sciutto, reporting from Washington. Wolf Blitzer is off today.

The U.S. Supreme Court sides with a private company in a battle involving Obamacare, contraceptive coverage and religious freedom. In a highly anticipated ruling today, the court said that Hobby Lobby does not have to cover some forms of contraception for its employees. An attorney representing Hobby Lobby says it's a victory for religious freedom.

(BEGIN VIDEO CLIP)

HANNAH SMITH, THE BECKET FUND FOR RELIGIOUS LIBERTY: This was an astounding opinion. A great decision by Justice Alito joined by the Chief Scalia, Kennedy and Thomas, upholding the rights of family-owned businesses under the Religious Freedom Restoration Act.

(END VIDEO CLIP)

SCIUTTO: The ruling is a setback for part of President Obama's health care reform law. Here's what White House Press Secretary Josh Earnest said just a few moments ago.

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: President Obama believes that women should make personal health care decisions for themselves rather than their bosses deciding for them. Today's decision jeopardizes the health of women who are employed by these companies.

(END VIDEO CLIP)

SCIUTTO: We want to take a closer look now at what this ruling says and what it means for companies and for Obamacare. Our justice correspondent Pamela Brown is at the Supreme Court. We also have our senior legal analyst Jeffrey Toobin and chief political analyst Gloria Borger here in the studio. I want to begin with Pamela down at the Supreme Court. So the court said its ruling applies only to closely held companies. I was looking at the definition here. "Companies with more than 50 percent of their value held by five employees." How does that distinction work?

PAMELA BROWN, CNN CORRESPONDENT: Yes, absolutely, Jim. So think family owned companies. Closely held, for profit, family owned companies. Not a big publicly traded companies like FedEx. And that's what the justices said in the ruling today. That the ruling applies to these closely held companies. It doesn't necessarily mean that they have to be small. Important distinction, because you look at Hobby Lobby, it's an arts and crafts chain with more than 13,000 employees nationwide and more than 500 stores nationwide. But today the majority, the five conservatives, saying essentially that these closely held for profit companies should be afforded the same religious liberty rights as individuals under this 20-year-old federal law called the Religious Freedom Restoration Act. So because of that, companies like Hobby Lobby cannot be required by the government to cover certain types of contraception to its employees. In this case, Hobby Lobby objected to four types of contraception. That the owners of the company acoined (ph) to abortion and said it was a violation of their faith to provide that to its employees. So, this is a big win for Hobby Lobby and a setback for Obamacare because you have to remember this was a key provision in the Affordable Care Act. This contraception mandate. So now not only religious nonprofits and churches are exempt, now you have these closely held for profit companies exempt as well. Jim.

SCIUTTO: Right. You make a good point. Because there's a lot of very large privately held companies. Coke industry is one of them. There was a strong dissent as you would expect in the five four decision from Justice Ginsburg. What was her argument?

BROWN: Absolutely. And remember, Justice Ginsburg has been a big supporter of women's rights. And she did have a strongly worded dissent. She basically said the ruling today imposes the religious beliefs of the owners of these companies on the third party, in this case the female employees. And she also talked about how the ruling can open up a can of worms. In her dissent, she says, "The court, I fear, has ventured into a minefield by its immoderate reading of RFRA. I would confine religious exemptions under that act to organizations formed for religious purpose engaged primarily in carrying out that religious purpose. And not engaged substantially in the exchange of goods or services for money beyond nominal amounts. So basically she's bringing up the point that this could perhaps pave the way for even these publicly traded companies to file lawsuits to this contraception mandate. And obviously, as she said, perhaps open up a can of worms for other closely held companies to -- that have objections to, say, offering health insurance for same-sex couples or offering insurance for medical marijuana or vaccinations, that they will now have more leeway to file lawsuits and that just sets a dangerous precedence according to Justice Ginsburg. Jim?

SCIUTTO: Yeah, no question, that's one of the key questions here, because there was already this exemption for religious organizations, now it's private companies that have religious beliefs. Thanks very much, Pamela Brown at the Supreme Court. I want to bring in our experts. You know a heck a lot more about this than I do. Jeffrey and Gloria, Jeffrey, if I could bring - begin with you on that point, specifies these closely held companies, the definition right here, has more than 50 percent of the value of its outstanding stock owned by five or fewer individuals. Trouble is, that's a lot of companies, and a lot of big companies, that now can claim the same right that religious organizations have to say no to contraceptive coverage.

JEFFREY TOOBIN, CNN LEGAL ANALYST: Right. The phrase "closely held companies" makes us think of like a mom and pop store ...

SCIUTTO: Right.

TOOBIN: That maybe have a little religious shrine in the back - in the backroom. We're not talking about that. We are talking about thousands of employees at some of these companies, including, of course, Hobby Lobby. And the questions now become how religious do you have to be as a company in order to claim a religious exemption from one of the requirements of Obamacare. This was a very good case for the plaintiffs because the Green family which owns Hobby Lobby, there's no question they are religious. They play religious music in stores. They're closed on Sunday. But what about other companies that have religious beliefs that maybe their employees didn't even know about?

SCIUTTO: Yeah.

TOOBIN: And do they get to get out of restrictions of the law? And is it limited just to contraceptions? What about the religions that don't like immunizations or transfusions?

SCIUTTO: Yeah, I want to come back to it, because there's another question about how broadly this can apply. But I want to ask you first, Gloria, Obamacare was on a good run after a bad start, you know, getting enrollment up, et cetera. How big of a blow is this for the law?

GLORIA BORGER, CNN ANALYST: You know, like most large and unwieldy pieces of legislation, it's going to get picked apart and put back together again. If you look at the polling, over half the American public says just fix what's wrong with it and then get on with it and keep it. This is a blow to them. What's curious to me is sort of how this plays out, what comes next. You know, the White House press secretary has said that, you know, we want to fix this. There are a couple of ways to go. You can do it potentially through regulation. You can also do it - Senate Democrats are clearly going to want to propose something on the floor. They'll be blocked by Republicans. I would argue this is a political fight the Democrats would like to have. Remember the old war on women? I think it's going to get revived again.

SCIUTTO: Bring out the vote, in effect, it's about women's rights.

BORGER: That's right.

SCIUTTO: Energize 2014?

BORGER: Exactly. What was so interesting to me, though, about Justice Alito, a conservative justice, he sort of suggested, okay, the government can now pick up the cost of providing for these four contraceptives. And Justice Ginsburg said, wait a minute, a liberal justice said, wait a minute, why suddenly are we having the government pay for everything? So, the conservative court may tell the federal government, OK, you pick up the tab.

SCIUTTO: Imagine that. Well, let's talk about broader applications. Let's say your company has religious beliefs. That, you know, disapprove of gay marriage. Right, I mean - this kind of thing, does this set a precedent where you can use that excuse to choose which laws you're going to follow and not follow.

TOOBIN: It certainly has - it has that potential. You know, the premise of your question was, you know, your company has religious beliefs. How do you even evaluate whether a company has religious beliefs? Yes, the Green family in Hobby Lobby was pretty easy. It's often not going to be that easy. And when - and when are religious beliefs strongly held enough? What if some owners of the company feel one way, some owners feel differently? It does create lots of complexity. But it certainly opens the door to claims that companies, which previously had not really been thought of it at all of having religious views, get to have religious views and have to have the government accommodate them.

SCIUTTO: Now the court has also decided companies are big ...

BORGER: People.

SCIUTTO: People with free speech, Citizens United ...

BORGER: So, if you regard corporations as people to a degree, then corporations can have religious views.

TOOBIN: Yeah. Imagine that. Corporations are people too.

BORGER: Yes.

TOOBIN: This in the campaign.

BORGER: Who was it, I think he lost --

(CROSSTALK)

SCIUTTO: This is great, thanks very much. Jeffrey Toobin, Gloria Borger, as always.

Still ahead to come, congressman representing the district where Hobby Lobby is based reacts to the Supreme Court ruling.

And later, the president has a new pick to clean up the mess at the VA. We'll talk about whether he's the right man for the job.

(COMMERCIAL BREAK) SCIUTTO: The troubled VA is getting a new boss. In just a few hours, we're expecting an official announcement from President Obama. He's expected to nominate Bob McDonald to clean up the troubled department of Veterans Affairs. The one-time Procter & Gamble CEO has a military background. He's a West Point graduate and a former military officer. If confirmed, he'll succeed Eric Shinseki who stepped down one month ago in the wake of the growing scandal over alleged treatment delays for veterans and cover-ups that may have followed.

It's a story that first broke here on CNN by our own Drew Griffin and Drew is here now to give us a sense of his reaction to McDonald's appointment. This is a difficult mountain to climb for whoever would fill this job. Do you think McDonald could be the right man to clean up the mess there?

DREW GRIFFIN, CNN CORRESPONDENT: He certainly has the business chops, Jim, to step in and take charge of what is essentially a huge service- related organization. The question is, and I'm seeing from both politicians and some of the service organizations like the American Legion is, will this guy, who obviously is being put to the test because of his business career, will he have the same kind of power that he had running Procter & Gamble in running the VA? Specifically, can he fire and hire whomever he wishes and make this a very, very quick turnaround at the VA to change what now just about everybody concedes is a systemic failure top to bottom?

SCIUTTO: It's interesting, it's a route that the president has gone before, appointing Jeffrey Zients to be the man to kind of rescue Obamacare when it was going through its own problems. But looking at that, I mean is there precedent for someone coming into a position like this and getting the powers you mentioned there, hire, fire? I mean VA, it's a huge sclerotic organization, bureaucracy. That seems a tall order.

GRIFFIN: Yeah, and like I said, we'll have to see what Bob McDonald has. What his plans are laid out. I mean this guy was obviously comfortable doing whatever he was doing. He's not in it for the money or the prestige or anything like that. He's in it, basically, I would guess, because he believes he can turn this around for President Obama.

But as I see it, the key is going to be whether or not he gets the support from both inside the administration and from Congress. He's got to roll heads, Jim, there's no other - there's no other way to do this. You know, Eric Shinseki, the general, resigned because he was being lied to by his subordinates. That's basically what he said in his speech the morning before he resigned. So now you've got this outside business guy coming in who is obviously going to be coming in trying to change this culture.

SCIUTTO: Well, I mean he has military experience as well, but so did Eric Shinseki, and apparently it wasn't enough. Thanks very much, Drew Griffin. He's been following this, breaking the news on this story for some time.

As I mentioned, we are expecting that announcement from the president around 4:30 Eastern Time this afternoon, two, three and a half hours from now. We'll bring you full coverage and analysis when that happens.

President Obama is expected to ask Congress for more than $2 billion today to deal with the surge of undocumented children crossing the border from Mexico. Officials estimate 60,000 to 80,000 kids will cross the border just this year. The White House is calling it an immediate humanitarian crisis. The money would go to shelter and basic needs for the kids, as well as better border security.

And one of those border crossings has taken a deadly turn. Authorities say the body of an 11-year-old Guatemalan boy was found in brush near the Mexico/U.S. border in La Joya, Texas. They say it appeared he had been with family members but strayed. Very sad ending to one of those thousands of crossings happening as we speak. A phone number found on the boy led investigators to family and friends in Chicago and in Guatemala, who confirmed his identity based on the clothes he was wearing. An autopsy has ruled out foul play.

Coming up next, a new empire named in Iraq and Syria, as the terror group ISIS announces they've got a new name. We'll be live from Baghdad.

(COMMERCIAL BREAK)

SCIUTTO: And this just in to CNN, some reporting I was - been able to confirm just in the last hour, and that is that the U.S. is considering new security measures at airports due to increased concern that terrorists from al Qaeda in the Arabian Peninsula, AQAP as its known, are developing explosives designed to avoid detection by current security screening. This comes from U.S. officials. These officials tell CNN, there is no imminent threat or plot. However, an additional vulnerability has been identified, which DHS is currently working to address.

We have this statement from a DHS official which came through a short time ago. It says, "DHS regularly monitors intelligence related to terrorist groups seeking to do us harm. DHS regularly re-evaluates our security apparatus, which include a number of measures both seen and unseen to fit an ever evolving threat environment." Again, this coming from a DHS official.

Now, in recent months, U.S. officials have warned about AQAP terrorists attempting to design new explosive devices to avoid detection. In February, the U.S. government warned airlines about possible shoe bombs. Officials told CNN at the time amid intelligence suggesting tactics tied to the AQAP master bomb maker Ibrahim al- Asiri. A law enforcement source said at the time as well, the U.S. periodically receives information on attempts by those believed to have been trained by Asiri to try to develop bombs that could defeat screening systems.

So, again, this just in to CNN, and that the U.S. is now considering new security measure at airports in response to an increased concern, a new vulnerability identified, regarding bombs that might be brought into the U.S. or on planes in Europe as well, designed to avoid detection.

I want to go to Iraq now and a declaration from the terror group ISIS, or ISIS. In an online posting, the group has declared itself the Islamic state and are calling on all Sunni Muslims around the world to join with them. Our Nima Elbagir is in Baghdad.

So, looking at this now, what does this mean, a caliphate, as this is called, an Islamic state is something Osama bin Laden himself was fight to declare. Never did. Now you have one declared in Iraq and Syria by ISIS. How important, how alarming is this?

NIMA ELBAGIR, CNN CORRESPONDENT: It's extraordinarily alarming, Jim, because they're telegraphing that they have managed to achieve what bin Laden himself couldn't. In fact, what they're saying is that they now believe they supersede al Qaeda itself in the hierarchy of international Jihadis. That they have done what none of them could do.

And the reality is, of course, it is propaganda, but it's propaganda that has teeth because they do have this territorial footprint and they have consolidated their presence through from the northeast of Syria all the way through Anbar province, which is the largest province in Iraq, to very close to the Iraqi capital itself, Baghdad. And they are essentially say -- the Iraqi/Syrian border doesn't exist and worryingly that they consider it not just one country, one caliphate, but also one battlefield. And for those 10,000 or so ISIS fighters that the U.S. estimates are out there somewhere, what they're saying is they now have freedom of movement and freedom of opportunity, Jim.

SCIUTTO: And you make a great point there because what they have now is territory and largely unchallenged territory. The U.S. considering steps now, including the possibility of air strikes. But in the meantime, you have other countries stepping in, including Russia, which has delivered fighter jets to Iraq over the weekend. How significant a development is that and what are the politics behind it?

ELBAGIR: Well, the Iraqis have said it's because they claim the process with the U.S. was just getting, as they put it, too long- winded. But I think that is also about a broader disappointment in the fact that they were hoping the U.S. would step up its military support much sooner in terms of air strikes, or at the very least air cover, for some of these ground operations. So by turning to Russia, they're kind of making a twofold point. One, we have friends and allies elsewhere. Allies and friends that the U.S. may not particularly want us to have, i.e. Iran, Syria, and now Russia. But they're also saying, if you won't help us, we will turn wherever we need to.

And the Russians have sent what the head of the Iraqi air force is calling a friendly contingent of advisers and they're promising even more help, Jim. And what Iraqis are saying is that they know that the only upper hand they currently have against these militants is in the sky and they will do anything they can and turn wherever they can to reinforce that upper hand and to finally try and get a toehold and some sort of momentum going in this conflict, Jim.

SCIUTTO: Yes, It's incredible to think of the number of countries that have forces on the ground, aircraft. You've got Iran, the U.S., Syria carrying out air strikes. An incredible group of people fighting ISIS at the same time. Thanks very much to our Nima Elbagir in Baghdad now.

Another terrorist story we've been following. Wednesday is the next hearing for accused Benghazi ringleader Ahmed Abu Khattalah. He entered a not guilty plea over the weekend here in court in D.C. Abu Khattalah is charged with one count of providing material support for terrorists, but more charges could follow. Republicans are skeptical though that the U.S. will get any useful intelligence now that Abu Khattalah is in the legal system.

(BEGIN VIDEO CLIP)

MIKE ROGERS (R), MICHIGAN: He's been compliant, but not cooperative. And so I doubt that changed once he was read his rights and he understood that he has the right not to talk at all.

(END VIDEO CLIP)

SCIUTTO: Rogers is just one of many Republicans who wanted Abu Khattalah sent to Guantanamo Bay in Cuba, which the Obama administration is attempting to close.

Up next, the Supreme Court sides with Hobby Lobby in a case involving Obamacare, birth control and religious rights. We'll hear from a congressman who stands with the company.

From 9/11 victims to the BP oil spill, Kenneth Feinberg is known for running victim compensation funds. Why he's now working with General Motors.

(COMMERCIAL BREAK)

SCIUTTO: Welcome back. I'm Jim Sciutto, reporting from Washington. Wolf Blitzer is off today.

Our top story, in a narrow 5-4 decision, the Supreme Court ruled that closely held companies cannot be required to pay to cover some types of contraceptions for their employees. This deals quite a blow to President Obama's health care reform law. George Washington University law professor Jonathan Turley joins me here now to gage how important a decision this is.

There's been some back and forth as to how narrow this decision is and how broadly it can be interpreted. Where do you stand on it?

JONATHAN TURLEY, PROFESSOR OF LAW, GEORGE WASHINGTON UNIV.: I have to agree with Justice Ginsburg, it's sweeping, and people get caught up in this closely held corporation thing.

SCIUTTO: Right.

TURLEY: That's a huge number of businesses in the United States.

SCIUTTO: I was going to say because some privately held companies, Coke Industries, this is a big company, thousands of employees. TURLEY: Exactly. Hobby Lobby's huge.

SCIUTTO: Yes.

TURLEY: But it also effects just millions of businesspeople who are sole owners or small business owners. These are people who are not just challenging Obamacare, they're also challenging discrimination laws and saying those laws are forcing us to violate.