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Menendez Blames Prostitution Allegations on Cuban Spies; Tough Weeks for Clinton Book Tour; U.S. Accused of Buying German Intelligence Secrets; Warren Harding's Steamier Side

Aired July 8, 2014 - 13:30   ET

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


(COMMERCIAL BREAK)

WOLF BLITZER, CNN ANCHOR: Welcome back. I'm Wolf Blitzer, reporting from Washington.

A powerful typhoon is bearing down on mainland Japan right now, after side-swiping the island of Okinawa. Check out this amazing shot of the storm system from space. The storm has lost some strength. It's now the equivalent of a category 3 hurricane. More than 600,000 people were told to evacuate as the storm approached Okinawa. Very few did. A U.S. military base, as you know, is in the region, in Okinawa. Massive waves and rising waters are some of the biggest concerns right now from the storm.

A storm of a very different sort is brewing in Washington. It stretches all the way to Cuba. Senator Robert Menendez of New Jersey's already the focus of an investigation by the FBI and the Justice Department. Now, a year and a half after salacious allegations about the Senator and underaged prostitutes surfaced, his attorney is adding Cuban spies to the mix.

Our Dana Bash is following the story.

You got an exclusive Senator with him. He's obviously the chairman of the foreign relations committee. Why would Cuban spies, as the allegation goes, be directly involved in trying to smear him with these allegations of underaged prostitutes?

DANA BASH, CNN CHIEF CONGRESSIONAL CORRESPONDENT: He thinks it's possible exactly because of his powerful position. He's been very critical for more than two decades of the Cuban government. And now he is pointing to a story that originated in "The Washington Post" with government sources saying that there is a CIA report that this all could have started with the Cuban government, that it was a conspiracy, a plot, really, by the intelligence community of that government to try to take Menendez down.

Listen to our conversation.

(BEGIN VIDEOTAPE)

SEN. ROBERT MENENDEZ, (D), NEW JERSEY: It should be pretty appalling that a foreign government would be engaged in trying to effect an election or a United States Senator. If that can happen, I think there's real consequences for our democracy. I hope that the authorities will investigate and come to the bottom of who was engaged.

BASH: Is that what you think happened, that you are somebody of Cuban descent, you have not ever made it a secret your opposition to the Cuban government, you're about to become the chair of the Foreign Relations Committee is that what it is?

MENENDEZ: For 22 years, between the House and Senate, I have had a firm position in opposition to the Cuban regime that violates the human rights, the democracy of the people of Cuba. I have been outspoken in that regard. And I wouldn't be surprised if the regime would do anything it can to stop me from being in a position that ultimately would impede their hopes of being able to get a different relationship with the United States based upon their interests but not the interests of the Cuban people.

BASH: You're not at liberty to talk about the letter your lawyer wrote to the FBI. You're in the proof business. If you're probing anybody in a hearing, you would want proof. Do you have proof? Solid proof of this?

MENENDEZ: Look, you know, it seems to me that based upon what the "post" sources are, that it's the government that has the proof. And it seems to me that the government should ultimately, internally, review what its sources are, from whence it got this information, and what have they done about it.

BASH: The government has, but do you all have as well?

MENENDEZ: The government is the one in possession according to "The Post" articles. As far as I'm concerned, it's the government that should produce the information that they supposedly have within their own agencies.

BASH: Let me play the devil's advocate here. That is, that perhaps your legal team made this information public as a diversion, as a way to sort of muck up the federal investigation of you.

MENENDEZ: Well, first of all, I think that you have to have -- I think a credible entity like "The Washington Post" would have to have their own sources. And they would have to verify their sources. So I think that's pretty farfetched idea.

(END VIDEOTAPE)

BASH: Wolf there are two important layers here. One is, just the idea of the Cuban government may have actually started this scheme to try to take Menendez down. That is something that, as you heard, he wants an investigation of.

But then the whole reason why this is even an issue is because of an ongoing probe of him for a couple of things, but mostly, it's related to the idea that one of his donors is under investigation for potential Medicare fraud. And so the whole concept here is whether or not, if the Cuban government was involved in this, then that could taint the whole probe of him that's been going on for a couple of years.

BLITZER: I'm glad you caught up with the Senator.

Dana, thanks very much for the hustle, good work.

A lot more on this story coming up later today in "The Situation Room."

Coming up here, new allegations of spying leveled against the U.S. after a suspected double agent was arrested in Germany. Should we be surprised by this kind of alleged friendly espionage?

Also, what have we learned from Hillary Clinton's book tour, the good and the bad? Maggie Haberman, she's standing by next.

(COMMERCIAL BREAK)

BLITZER: The Republican National Committee site selection team has picked Cleveland for their 2016 convention. Cleveland beat out Dallas in the final vote. Ohio, as all of you know, is an important battleground state for the Republicans and Democrats. In 2012, Republican presidential candidate Mitt Romney narrowly lost in Ohio by just three points. In Cuyahoga County, that's where Cleveland is located, Romney lost by 40 points. The full NRC needs to sign off on the choice in August.

Speaking of conventions, the former Republican vice presidential candidate, Sarah Palin, has some kind words for Hillary Clinton. In a new interview, Palin saying she appreciates Clinton's boldness. Palin was referring to Clinton's refusal to attack her in the 2000 campaign. Clinton's refusal to follow the Obama campaign's lead is mentioned in her book entitled "Hard Choices."

The "Hard Choices" book tour has kept Secretary Clinton in the spotlight. Sometimes it's been good. Sometime also not so good.

Joining us now from New York, our political analyst, Maggie Haberman.

Maggie, you wrote a fascinating piece in "Politico." It's been a rough few weeks for the secretary on the book tour. Why is that happening?

MAGGIE HABERMAN, CNN POLITICAL ANALYST: Well, her interviews are the main reason that happened. Generally speaking, this book tour has had some strengths for her and weaknesses for her. The interviews have really been where she's tripped up. There's also been the question of how well the book is selling. She gave a statement that she later called inartful about her wealth that was problematic. She went on and, you know, she cleaned it up but not totally effectively.

BLITZER: What has been the major positive element of the tour?

HABERMAN: The major positive is she can now point to having done what her aides tally is about 25 hours worth of interviews which no other potential candidate for 2016 has done. No one has gone through the meat grinder the way she's gone. They did, in their minds, achieve one of their objectives, Kevlar test her record at state. They feel critics have not laid a glove on the book. Critics argue that because the book is kind of mushy in term, of her record.

BLITZER: What does all this tell us about a possible Hillary Clinton 2016 presidential run?

HABERMAN: Candidly, I think it tells us very little, other than at this point, I left this tour thinking she is running for president. This has been a big question obviously. Nothing has happened that has changed that opinion for me and I think a lot of people. She's not pushing a message yet. She's not decided at this point what the why of a Clinton candidacy would be. Because she wasn't pushing a message, these interviews ended up being largely about her as opposed to voters.

BLITZER: What do you make of these reports, a front page story yesterday in "The Wall Street Journal," she's trying, slowly but surely, to distance herself from some critically important policy issues from the president?

HABERMAN: She was pretty clear in the book where she disagreed with him on foreign policy. She actually has not deviated from him on economic policy. When she talked about economic policy at the aspen ideas festival last week, she was largely cleaning up her own mess-ups on the issue of wealth and on her paid speeches. Another comment in addition to the dead broke comment, which is where she talked about they had earned their money through hard work and people don't see them as part of the problem. We pay ordinary income tax, unlike some people who are, quote, "truly well off," unquote. As you know, that was a big issue for her. If the economy looks like it's humming in about a year, I would be very surprised if she does.

BLITZER: About 200,000 jobs a month are still being created. I suspect you will be absolutely right. What it did show me, this entire book tour, it is grueling, a lot of interviews, speeches. She's been moving from city to city to city. It showed she's pretty healthy right now. The suggestion, she may be weak because of a blood clot from a couple years ago. She seemed pretty fit to me.

HABERMAN: That was another objective you hit on. Thank you for reminding me. When Karl Rove did that bit about how her health was a big issue, she had had a traumatic brain injury, and he said it in an off the record speech that was reported and then he spent several days talking about that. Some Republicans talked about it. Part of their goal was demonstrating this is not a concern. So she went on a tour that anyone would find grueling. She went and signed books for several hours at a stretch. Critics will say that's not much of a problem. It is not actually really an easy thing to do. It's also not the same intensity level as the presidential campaign. In terms of the pregame, it's impressive.

BLITZER: Certainly is.

Maggie, thanks very much. Maggie Haberman, our political analyst.

Steamy love letters from the president to his mistress. We have startling revelation, about a man most historians have written off as rather boring.

But up next, the German Chancellor Angela Merkel is unsure if she can trust the United States after another alleged spying controversy has blown wide open.

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BLITZER: On "This Day in History," July 8th, 1889, "The Wall Street Journal" was first published. "The Journal" was created by Edward Jones and Charles Burtstressor and was four pages long, cost 2 cents, published as an afternoon newspaper. Today, it is 40 pages long, cost $2.

Thousands of unknowing Americans were caught in the NSA surveillance network. "The Washington Post" reports the NSA scooped up things like baby pictures, medical records, resumes. Documents from Edward Snowden show that 90 percent of the people included in the NSA surveillance program were not federal targets.

The United States is now accused of buying German intelligence secrets. Reuters, other media outlets reporting that secrets came from an agent inside the German intelligence agency.

Here's the reaction from the German chancellor, Angela Merkel.

(BEGIN VIDEO CLIP)

ANGELA MERKEL, GERMAN CHANCELLOR (through translation): If the reports are correct, it would be a serious case. If the allegations are true, it would be, for me, a clear contradiction to what I consider to be a trustful cooperation between agencies and partners.

(END VIDEO CLIP)

BLITZER: That's the latest breakdown in relations with Germany over spying and espionage. Last year, it was revealed the NSA had, indeed, been monitoring Merkel's cell phone.

Joining us now from Memphis, the former CIA counterterrorism expert, Philip Mudd.

Philip, thanks very much for joining us.

How surprised are you about these allegations that the U.S. was supposedly, the CIA, if you believe Reuters, was running an agent inside German intelligence?

PHILIP MUDD, FORMER CIA COUNTERTERRORISM ANALYST: Well, Wolf, there's something here I don't understand. This, to me, is surprising. Here's the story. I feel like we're on summer vacation and we just did the borders of the puzzle Ander's saying what's in the middle of the puzzle. We've seen the borders of this story but it's not clear to me we have anything like what happened here to its fullest. If you're in the midst of the scandal we're in the midst of with the Snowden revelations and the rupture with the Germans over those revelations, why do you run a source into the German intelligence ministry, especially if he's acquiring stuff that's not critical to America's national security interest? I don't understand why this would have been done. That's

BLITZER: If he's supposedly a walk-in, let's say, some German intelligence officer, he approaches an American. Let's say some CIA operative, officer who may be working inside Germany and says, I have information that is of critical importance to the U.S. national security, what does a CIA officer do in a situation like that?

MUDD: Well, first, you have to talk to the guy and figure out what he's got, who he is. But I think when that information goes to CIA headquarters -- and believe me, after 25 years at CIA, I can guarantee you that immediately someone at the embassy in Germany sent that information back to Washington. Everything is captured in what we call cable traffic between the field and headquarters. Somebody's got to do a quick risk analysis. That is, this information might be interesting, but that's not the right question. The right question is, A, how interesting is it? And is it worth potentially damaging relations with the Germans? And, B, who is the person providing the information? How stable is this person? We found out later this person was trying to peddle information to others, including the Russians.

BLITZER: At what point does the CIA go to German intelligence and say, hey, there's this guy who has come to us, and he works for you guys? At what point does the U.S. actually inform German intelligence of what's going on?

MUDD: Boy, it looks like from the surface that should have hap happened early on in this case. There's one additional question beyond why the United States might be doing this that I might have. You might be able to talk to this person with legitimacy if you thought the person was offering information about the security of the United States that the German sources weren't providing, but if it was just what I saw in the press in the last few days, I think you would go to the German government and say, hey, we have been allies for decades. We're in the midst of a spy scandal. Let's give you a heads-up about a guy of yours making a mistake.

BLITZER: What is fascinating, very intriguing, now there are reports -- you have seen them -- that Germany now says they're going to start surveillance on American and British intelligence operations. They say they haven't done that since the end of World War II. If, in fact, Germany decides to start spying on the United States, recruiting agents, assets in the United States, what does that say to you?

MUDD: To me, this is potentially a short-term ripple effect. We might see some, not necessarily spying on the United States, but, for example, if I were the Germans, I might be putting people outside the embassy to say, hey, we're watching you. If you don't knock this off, things will get painful here in Germany for your spies because I'm sure the Germans are aware of most or all of the CIA agents who are residing in Germany today.

Wolf, one of the interesting stories here is the cooperation will continue between the services despite what you see at the diplomatic level. The reason is simple. In the post-9/11 era, if you're not an enemy, you're a friend. That is, around the world, everybody -- the Indonesians, the Philippinos, the Saudis, the Yemenis, the Somalis -- everyone sees terrorism as a threat. Even if you see diplomatic waves under the surface, under the surface, when you see that kind of threat, you're going to continue trans-Atlantic cooperation.

One more point. With the rise of ISIS in Iraq, the militants, and the number of Europeans in Iraq, there is no way if you're a security service in the United States or in Europe you want to break off intelligence ties. No way.

BLITZER: Phil Mudd, thanks very much.

I'll leave you with this thought. When Angela Merkel was here in Washington, met with the president, she sought assurance from him that the U.S. would not spy on Germany, just as the U.S. does not spy on Britain, Australia, several other countries. She did not get that assurance. The Germans were pretty upset about that at the time. We'll leave it on that note.

Phil Mudd, as usual, thanks for your perspective.

Coming up, the president, Warren G. Harding, considered by some to be barely a blip on the radar of American history. But guess what? We're learning more about him, a lot more about his softer, and shall we say, steamier side.

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BLITZER: We were asked to name one thing about former president, Warren Harding, you might have come up empty until now. Some steamy letters are revealing a side of the 29th president we have never seen before.

Here's CNN's Jake Tapper.

(BEGIN VIDEOTAPE)

JAKE TAPPER, HOST, THE LEAD (voice-over): We've heard all the rumors about JFK. We've read all about Clinton. We've seen more than enough of Anthony Weiner. But it turns out the steamiest and perhaps best documented of Washington's wanton lust comes from Warren G. Harding.

JAMES ROBENALT, AUTHOR: People think that 100 years ago, nobody had sex fantasies. And I keep telling people, if those people didn't have sex fantasies, we wouldn't be here today.

TAPPER: Don't let the top hat fool you. These letters are not proper. 1,000 pages of notes, not to Harding's wife, but to his mistress, will be released online by the Library of Congress at the end of this month. Their public display goes against every explicitly written desire of the nation's 29th president although they're not that tough to square with the historical consensus that he was one of America's worst presidents ever.

(on camera): The letters were written between 1910 and 1920 and shipped to his mistress in Ohio by a railway mail service on a train like this one. The letters precede his time as president, though they include all but one year of his time in the U.S. Senate. They have been under lock and key for 50 years under a court-ordered seal.

(voice-over): Page after page of Harding's handwriting describe in detail what he describe as his "eager, passionate, jealous, reverent wistful love" for his neighbor's wife, Carrie Philips.

January 2nd, he wrote, "I wonder if you realize, how faithfully, how gladly, how passionately -- yes, you do know the last, you must have felt the proof."

Proof, it turns out, was something she may have been very interested in. Some experts believe that she may have been a German spy.

ROBENALT: She was being followed by the bureau of investigate as someone who was a spy. And I think that this was kind of an insurance policy for her to keep these letters that people would not bother her if they knew she had them.

TAPPER: Just as modern-day Casanovas try in vain to delete e-mails and text messages, the married presidential hopeful pleaded with his lover to dispose of the evidence. "I think you should have a fire, chuck them," he wrote of the letters. "Do, you must. Having so many letters on hand, all my love-making is old to you. It is old, a darling old story which isn't to be made new."

ROBENALT: It really became urgent once he started running for president, and she asked for money, she blackmailed him. And that point, he said, look, I'll pay you $5,000 a year as long as I'm in office, but you have to give me the letters back. And she kept the letters.

TAPPER: Jim spent five years researching Harding's letters for his book, "The Harding Affairs," and discovered the lengths the couple went to hide their love, including code names such as "Sis" and "Ms. Powderson," and hidden code words.

ROBENALT: If he was writing a so-called public letter to her that anyone could see, he would write "constant," for example, and underline it, and it was code for "I love you more than all the world."

(END VIDEOTAPE)

BLITZER: Jake Tapper reporting.

That's it for me. Thanks very much for watching. I'll be back 5:00 p.m. Eastern in "THE SITUATION ROOM."

NEWSROOM with Brooke Baldwin starts right now.