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Video Shows U.S. Weapons in ISIS Hands; Pentagon: Mosul Mission Set For Spring; Bill O'Reilly Fires Back at Mother Jones Magazine; Right Wing Extremists, Homegrown Jihadists Biggest Domestic Threat; Government Debt Collectors Are Breed Apart; Some Republicans Say Giuliani's Remarks on Obama Went Too Far

Aired February 21, 2015 - 17:00   ET

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


DREW GRIFFIN, CNN SENIOR INVESTIGATIVE CORRESPONDENT: Suzanne, Service King, the auto body chain that supposedly fixed that car, says they fixed it to exact standards of what the insurance company told them to do and that their work is lifetime guaranteed. They also said they had no idea anything was wrong with that car, even though it was eventually totaled. As for Senator Blumenthal, he is renewing his request with the Department of Justice to open up a federal investigation to find out if this steering and the use of used auto parts is widespread enough to warrant a federal investigation -- Suzanne.

SUZANNE MALVEAUX, CNN ANCHOR: All right. Thank you, Drew.

Next hour, CNN NEWSROOM starts right now.

You're in the CNN NEWSROOM. I'm Suzanne Malveaux in for Poppy Harlow. Looks like ISIS has some military weapons, American weapons, not just a few scattered ones but we're talking about a lot now. This Humvee American, a tracked armored personnel carry for American. These automatic weapons rows and rows of them American. This video was released by ISIS in the past 24 hours. We don't know when it was shot. Looks like Iraq. But that has not been confirmed yet by the U.S. military. Now, ISIS fighters, they overran an Iraqi military outpost earlier this month where Iraqi troops were supplied with U.S. weapons and vehicles. Well, there's between 1,000 and 2,000 ISIS fighters right now in the Iraqi City of Mosul.

Biggest city in Iraq after Baghdad. U.S. military officials this week revealed details of a plan to retake the city from ISIS. That mission would be Iraqi-led and U.S. supported. Those words from the brand-new U.S. Defense Secretary Ash Carter not even a week into the position. Well Carter is in Afghanistan today. He's meeting Afghan leaders and U.S. troops, but he is talking Iraq and ISIS. And sources at the Pentagon did reveal a soft timeline for that mission aimed to take back Mosul.

Our CNN's Ben Wedeman, he is in Iraq this weekend.

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Pentagon officials say, the United States is now planning for some sort of Iraqi-led offensive in late April or May to drive ISIS out of Mosul. But if video posted on Facebook showing one battle about 100 kilometers northwest of Baghdad indicates that the Iraqi army is still on the back foot when it comes to fighting ISIS. In this video you see ISIS fighters having overrun this Iraqi base in the desert. They clearly got their hands on dozens of American-made M-16s, a mountain of AK-47's. Mortars, ammunition, ammunition clips, armored personnel carriers, and Humvees. And this has really been the case going back months as far as the situation in Anbar Province goes. Time and time again ISIS is overrun these bases and gotten their hands on more and more American-made equipment.

And the worry is, of course, that if the Iraqi army is going to be given the task of driving is out of Mosul, are they up to it? The United States has conducted a crash training course. There are currently about 3200 Iraqi soldiers undergoing that course. Two thousand have already graduated. But going into Mosul, a city of almost two million people, some of the inhabitants who were hostile to the Iraqi army before it was driven out is going to be difficult. And Kurdish commanders we've spoken to, for instance, have said even in small villages where they've managed to drive ISIS out, ISIS has left behind dozens and in some towns hundreds of IEDs that's made it almost impossible for the original inhabitants to move out. So when you're talking about driving ISIS out of a city like Mosul, it's going to be a gargantuan task. Ben Wedeman, CNN, Erbil.

MALVEAUX: And challenges are mounting for Iraqi and coalition forces as they attempt to stamp out ISIS.

Our CNN's Tim Lister, he is taking a close look at where the fight against ISIS is raging and why those regions are strategically important.

TIM LISTER, CNN SUPERVISING PRODUCER: Mosul, Anbar, Fallujah, Raqqa, these are names we hear every day as the world focuses on the battle against ISIS. The key cities, the key battlefields. But just why are they the key battlefields? Why do they matter so much? Let's start with Mosul. The jewel in ISIS' crown in Northern Iraq. A symbolically important city and one that is now the second largest in Iraq. Last July, ISIS leader Abu Bakr al-Baghdadi appeared at the city's grand mosque to declare his caliphate. And ISIS has begun building fortifications around the city. The big question is when an offensive to retake Mosul might begin. Kurdish Peshmerga Forces have sealed off but the southern exits. And the Iraqi prime ministers promises that there will be an operation to retake Mosul.

But just when. It seems according to most analysts in this region still months away. To the west in Iraq's Anbar Province, ISIS appears to be in better shape. And it's the Iraqi Security Forces who have lost ground. The cities of Ramadi and Fallujah both under ISIS control are key battle grounds if the Iraqi government is to relieve the pressure on the capital and persuade the Sunni tribes in this area that it will come to their aid. The Syrian battlefield is much more complex.

And there are signs that ISIS is trying to reassess its priorities in the face of intensive coalition air strikes. ISIS name prize in Northern Syria, Raqqa is being pummeled from the air almost daily but doesn't seem in imminent danger of falling. Elsewhere in Syria, ISIS appears to be pulling out of certain areas of the northwest and northeast where it's under pressure. And it may well be reprioritizing in Damascus, where there's every chance that a complex battlefield will emerge in the coming months pitting different rebel groups against each other and against the regime.

MALVEAUX: I want to bring in my guest. Former FBI Assistant Director Tom Fuentes and a retired Lieutenant Colonel Rick Francona, to talk a little bit more about this. So, Tom, first to you because we see that ISIS is spreading part of its theology if you will that they need to take territory and institute Sharia law. Where does it concern you the most? Where is it most frightening that the land, and the people that the communities that they are taking over?

TOM FUENTES, FORMER FBI ASSISTANT DIRECTOR: Well, I think, Suzanne, you know, the idea that they've moved so close to Baghdad itself is concerning. And the issue with the retaking of Mosul is a huge issue. You know, yes, we have telegraphed that we're coming or helping the Iraqis to return there and hopefully evict ISIS out of Mosul. And I think that we probably announced it that for the purpose of bolstering the guerilla fighters there that yes, we're coming hang in there. But if the Iraqis army isn't up to it, if they don't push them out and win in Mosul, that's going to be an enormous difficult catastrophe to overcome, I think.

MALVEAUX: Colonel, do you agree with Tom here that the U.S., you know, revealing these detailed plans would actually bolster the Iraqi forces, say, look, you know, you're not going to be alone in this. We're going to hang there with you but here's our timetable and ISIS fighters and militias, they know when we're coming?

LT. COL. RICK FRANCONA (RET.), CNN MILITARY ANALYST: Yes. Generally I'm against revealing actual timetables. But I don't think it's a big secret that Mosul has to be one of the key objectives of the new Iraqi army, the reconstituted Iraqi army and the American support. Mosul is the second largest city. It's one of the most important cities. Not only strategically but symbiotically as well. They have got to retake this territory. They have got to eject ISIS from the territory of Iraq. They might as well start with Mosul. They need to do this. There are so many problems doing this, though. So, I don't think telling them that we're going to do this comes as a surprise. I was a little surprised we were actually giving like we expect this to happen in the month of March or the month of April and it's going to take six weeks. Five brigades is the right force structure to do this. But six weeks might be pretty aggressive for the Iraqi army to do this. The people I'm talking to do not have the confidence that the Iraqi army is really up to this. They do believe that there are some units that are affiliated with the Iraqi army. These would be the Shia militias.

MALVEAUX: Right.

FRANCONA: That are outside of the structure. They're very effective.

MALVEAUX: That's right.

FRANCONA: So they might have the right force structure to do this. But I think that -- and Tom is right here. If they go into Mosul and don't win, that's a tremendous setback for the new government.

MALVEAUX: And Tom, I want to talk about this point here. Because if this video is correct here, and we're seeing ISIS flaunting American- made weaponry, right, that they claim that they've gotten from the Iraqis that the U.S. has supplied, I mean, how much of a psychological blow can that be to the Iraqi forces who are not only seeing the weapons in ISIS' hands now through this video but also potentially Iraqi bodies that they're showing on the video as well? I mean, that's got to weigh pretty heavily on those forces there who are look at this kind of enemy.

FUENTES: Yes, I would think so. We're supplying weaponry to the Iraqis, then they lose it. We're trying to train them and get them ready for combat and they lose the battles and lose their lives. And I think it's pretty disheartening. And, you know, when you look back at all these years that we've been training military commanders, we practically have trained more commanders in Iraq than we have at west point. And yet this has been, you know, something where they've not been able to overcome ISIS in a big way. Now yes, we've deterred them from taking more land recently. Primarily the air strikes keep them off the highways to get from one city to the other. But, you know, this is a huge problem. And it's going to continue to be until they're ready to fight and start fighting successfully.

MALVEAUX: All right. We're going to take a quick break. We'll going to bring you guys back. We have a lot to discuss. A lot more to discuss about this.

Four Minnesota men caught in custody, caught trying to leave the country to join ISIS. Meanwhile, police in London raising the alert over three teenage girls who may be headed for Syria. We're going to examine the rise of western jihadists. That is next.

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MALVEAUX: In the U.K. police desperately searching for three teenagers they say are headed to Syria. One girl's family released this plea today saying, you don't have to put yourself in danger. Please come home to us. This comes just days after a Minnesota teenager was arrested on suspicion of trying to travel to Syria to join ISIS.

I want to bring back our former FBI Assistant Director Tom Fuentes, retired Lieutenant Colonel Rick Francona. And, you know, Rick, I don't understand it. I don't claim to understand it. But we're hearing these new cases that happen every week about young people who are being recruited and making their way over to join in this battle. I mean, well, how do we explain this?

FRANCONA: It's baffling to me. And especially in light of what we've seen over the past couple of weeks. After the burning of the Jordanian pilot and the reported burning of these 45 Iraqi security officials in Anbar Province, you would think that that would revile so many people that it would hurt recruiting efforts. Yet we're seeing the exact opposite. We're seeing people flock to this organization. And it must be the draw that these people feel that this is the pure Islam and this is what I want to be a part of. But to me it's just counter intuitive. I can't explain it.

MALVEAUX: Tom, in light of the fact that you've got this recruitment that is happening here, a lot of propaganda particularly online here, this would seem to me and if it's working, seems to be working here particularly for the young folks -- an opportunity as someone who's been in intelligence, an opportunity for infiltration, for the United States or somebody from the west to infiltrate this organization and pretend like they're going to be a part of this and work from the inside to destroy them.

FUENTES: Well, the problem with that is that, you know, many of these are kids that are going there, they're 17, 18, 19 years old. And I think that ISIS is smart enough to realize that they're not going to be selected by the FBI or the CIA or another intelligence service from the west to go over there and fight a war and possibly get killed. And I think oftentimes when they do arrive, even when there is suspicion of their background of whether they are agents of the United States, the simple test is put them in battle. And if they get killed, fine. And if they don't get killed maybe they're loyal after all. So I think that it's really, you know, they're smart enough to realize that we're not going to send over kids on our behalf and have them get killed.

MALVEAUX: But could, I mean, not literally these teenagers, but could the U.S. or some other western force send in intelligence, send in spies, send in people to infiltrate ISIS, old are individuals who are just simply posing as somebody who wants to join since there is such a recruitment effort that's under way?

FUENTES: Well, it's possible. I'd rather not go into too much detail about how they could possibly pull it off. But, you know, the thought of it I'm sure is something that's been going on for decades of how do you infiltrate whether it's the mafia or whether it's ISIS or main al Qaeda, you the Saudis have been very successful with penetrating al Qaeda and the Arabian Peninsula. You know, they have the shipping document numbers of the printer bombs that were mailed or shipped in 2010. So it's possible. But it's going to be very difficult for the U.S. to actually do it. It would be much easier for someone born in the region, an Iraqi, a Syrian, a Jordanian, to be selected to do something like that.

MALVEAUX: And Colonel, talk about the propaganda effort here. I mean, what can be done? We heard from the White House this week talking about this very small office that they're simply going to beef up and they're going to kind of look and use all the different departments from Homeland Security and CIA and all of that to really bolster this propaganda effort against and away from recruiting from ISIS. Do you think that that is going to be something that's effective? Because we have seen ISIS use the internet like no other organization, tweeting thousands and thousands of time per hour.

FRANCONA: You know, I spent a lot of time on social media monitoring the is-al Qaeda, all these different networks. These people are matters of propaganda. They put out a very well-crafted message. And it seems to resonate with the people they're going after. I'm not sure that our government effort is going to be that effective in countering this. So I think we're probably going to have to accept the fact that we're probably not going to win that battle. But we still have to try. These guys are masters of propaganda. And, you know, Tom says something earlier about all these messages, these videos that they put out. This is a psychological operation. They're very effective at it. And when they show those tapes, those videos of all these weapons being captured, the troops being killed, this has a real impact on the psyche of the Iraqi soldiers. So they're very good at manipulating social media. And it will continue.

MALVEAUX: All right. Thank you so much, Colonel Tom Fuentes, we appreciate your insights as always certainly trying to figure out something that makes sense here for those who are trying to stop the brutality that we are seeing in the Middle East now and what ISIS is capable of doing. Tom, Colonel, thank you so much.

And still ahead, Bill O'Reilly pulling no punches as he's defending his reporting records on the Falklands War. The details, next.

But first here is this week's one to watch.

(BEGIN VIDEO CLIP)

KATIE SMYTHE, NEW BALLET ENSEMBLE: First day I saw Charles Laubach (ph) in the studio. I saw this man that was more fluid than anything I've never seen a ballerina do. And I got -- anarchy that I just said that that puts -- or Pavlova (ph) didn't have the same fluidity in their arms as Charles. But literally they didn't. It was uncanny what I saw. He improvised to his own music that he brought in. So, let me show you this. I thought he was brilliant. And then I changed the music and put classical music on. It changed him. It changed the fluidity of his movement. It slowed him down.

UNIDENTIFIED FEMALE: I told them I didn't want to wear tights because I want going for that stuff in ballet. It was a majority of girls on point, you really see guys on point. And I was like, that's interesting because they're junking like we always on point.

SMYTHE: When we started this and I started explaining it to potential donors, literally someone called my father and said, doesn't she know that hip-hop is the downfall of civilization as we know it? No, I don't know that because they're wrong. So my idea was, how do I change this generation, this mindset so that they can see the beauty? Because this is folk dance. And I think Charles is removing the fear.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

MALVEAUX: All right. Got to love these live pictures here. This is out of Washington, D.C., of course. There's the White House and just a few miles north there in Maryland we're also taking a look at this. This is just a mess. Interstate 95 south of Baltimore, people going nowhere in the heavy snow. It's tough going at that time. It will take some time to clear up. So a lot of snow happening in my neck of the woods. Still got to travel or at least try to. All right. Good luck to them. Conservative FOX News pundit Bill O'Reilly is on the defensive over

his reporting career. He devoted most of ten minutes to the top of his program last night defending his record as a journalist. O'Reilly fired back after left-leaning magazine Mother Jones claimed he exaggerated stories about his time as a CBS reporter covering the Falklands War in Argentina.

Our Brian Stelter is our senior media correspondent. And so, give us a sense. You know, some people are saying or making some comparisons with NBC's Brian Williams. Is that a fair comparison to make?

BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT: Mother Jones called this the Brian Williams problem for Bill O'Reilly. That's the magazine, the left-leaning magazine that first wrote about these allegations on Thursday. And there is some real substance to them. I mean, over the years O'Reilly talked about being in a combat situation and being in a war zone in Argentina. He sometimes talked about being at the Falkland Island when in fact he was 1,000 miles away in Argentina. Very few reporters were actually able to get to those islands during that war in 1982. So there is some substance to this. But Bill O'Reilly is on the offense responding to it. Here's some of what he said last night.

(BEGIN VIDEO CLIP)

BILL O'REILLY, FOX NEWS HOST: Here's the truth. Everything I've said about my reportorial career, everything, is true. Thirty three years ago in June, Argentina surrendered to Great Britain ending the Falklands War. I was covering the conflict from Argentina and Uruguay for CBS News. After learning of the surrender, angry mobs in Buenos Aires stormed the presidential palace, the Casa Rosada, trying to overthrow the government of General Leopoldo. I was there in the street with my camera crews. The violence was horrific. As Argentine soldiers fired into the crowd responding with violent acts of their own. My video of the combat led the CBS evening news with Dan Rather that evening. Later on I filed a report that ran nationwide. That's what happened.

(END VIDEO CLIP)

STELTER: So, that some of it O'Reilly said last night. He went on to say that Mother Jones is trying to smear him, just out to get him in FOX News. And he was describing himself as the victim in this situation. But, you know, you hear him talking about the situation there. Sounds like it was a hairy protestor riot situation. But there are a number of people say it wasn't a war zone. For example another former CBS News correspondent Eric Engberg -- reliable sources tomorrow, he wrote on Facebook saying it wasn't a war zone, it was an expense account zone. Because all the reporters were hanging out in Buenos Aires waiting for this war to end and, you know, having delicious dinners in the meantime. So, there's sorts of discrepancies that have come up here and O'Reilly meanwhile is just dismissing all of it saying this is all personal attacks on him.

MALVEAUX: Yes. Certainly depends on where you were in covering that event. So, I notice something very remarkably different here. Which is, you've got O'Reilly very much talking about it. He's out there. He's defending himself. We have not seen Brian Williams since the whole debacle there. So there's a different strategy. Is there some sense that come out, defend yourself, that this is the way to go?

STELTER: Yes. I think the public is pretty smart these days about crisis communications. And that's what you're touching on this idea of how to respond when a crisis happens. It's the version of it's not the crime it's the cover-up. Sometime it's not the crime it's how you respond to the alleged crime, right? In this case you've seen O'Reilly come out right away and respond within about an hour of the Mother Jones story being published on Thursday. Then he went on the show Friday night and continued to respond that way. NBC and Brian Williams issued that apology when there were questions about the story he told about an Iraq war mission and then said almost nothing afterwards. And now, Brian Williams on the bench for six months. He's been off for two weeks, I mean, in spite of a half more months for Brian Williams and the suspension, there's questions about whether he'll come back or not.

On the other hand, FOX was the one setting up these interviews for O'Reilly where O'Reilly was on the offense punching back at Mother Jones. There's no indication that FOX is going to do anything disciplinary with Bill O'Reilly in this scenario. It also speaks to the differences between the networks and the differences between the people. Brian Williams is his entire career is about credibility, getting the facts right. Bill O'Reilly much more of an opinion journalist, much more on that side of point of view. So, there are big differences between these two cases. But the scrutiny on O'Reilly isn't over yet, I think it's only growing.

MALVEAUX: And do we know if Brian Williams, is there's something that some sort of agreement that he's not allowed to speak?

STELTER: That's right. He should make that clear. Even if he wants to, NBC's not letting him speak right now. I think their strategy is to go away, stay quiet for a long time. Let people forget about some of the scandal. And then he can come back later and try to regain his credibility. But O'Reilly here. A very different strategy, attack the messenger. To scorched earth strategy. And maybe both of these will be taught in crisis communications classes someday.

MALVEAUX: No question about that crisis end of it. All right. Brian, thank you so much.

STELTER: Thanks.

MALVEAUX: Good to see you.

One terror attack carried out or foiled right here in the U.S. every 34 days. That is according to a new study on domestic terror. We're going to tell you about those details up next.

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MALVEAUX: ISIS gets most of the attention these days, but right wing extremists and homegrown jihadists could be the biggest domestic threat to law enforcement. A new report finds that, on average, an attack or foiled attack happened every 34 days between April 2009 to just this month.

CNN national reporter, Nick Valencia, reports this is prompting a new warning from intelligence officials.

(BEGIN VIDEOTAPE)

NICK VALENCIA, CNN NATIONAL CORRESPONDENT (voice-over): From California to Florida, all across the United States, sporadic attacks on law enforcement by Sovereign Citizen extremists. A new intelligence estimate circulated this month at the Department of Homeland Security puts a focus on domestic terror threats.

MICHAEL STEINBACH, FBI ASSISTANT DIRECTOR: Unfortunately, there's a number of those throughout the United States that we have to be concerned about.

(GUNFIRE)

VALENCIA: Deadly plots like this one last year in Cummings, Georgia. Armed with several explosives, smoke grenades and plenty of ammunition, police said Dennis Marks showed up ready to kill. Deputies eventually shot and killed Marks after he tried to drive his SUV inside the courthouse.

The FBI's assistant director tells CNN there may be thousands of others out there like Marks ready to attack.

STEINBACH: We've been talking about the international terrorism threat, but there's also domestic groups that are just as concerning that we worry about here in the United States.

VALENCIA: A recent survey of state and local law enforcement officers listed Sovereign Citizen terrorists ahead of foreign Islamic terror groups like ISIS and domestic militia groups as the top domestic threat.

Mark Potok, from the Southern Poverty Law Center, says by some estimates there are 300,000 Sovereign Citizens in the United States today.

MARK POTOK, SOUTHERN POVERTY LAW CENTER: Their beliefs go back about 20, 25 years or even further, and essentially they believe that the federal government has no jurisdiction over them.

VALENCIA: The latest DHS report counted 24 violent Sovereign Citizen- related attacks since 2010 with law enforcement officers as the primary target.

POTOK: They have no basis in reality. They often basically are telling people they can get something for nothing. They don't have to pay their taxes. They don't have to pay their credit card debt. So there's that kind of teaching going on all around the country and that's what's really driving this movement. VALENCIA (voice-over): It's not just violence authorities are worried

about, according to Mark Potok, with the Southern Poverty Law Center. It's also so-called paper terrorism, which is the process of burying court officials with nonsensical filings. Many of these officials are required by a matter of law to file those documents and track them even though they may have no idea what they're looking at.

Nick Valencia, CNN, Atlanta.

(END VIDEOTAPE)

MALVEAUX: A Minneapolis police officer is recovering after being shot. And his police chief says it was no accident. The wounded officer responded to a reported burglary just before 5:00 a.m. this morning. Police believe that the wounded officer was not targeted personally, but was shot because he is a cop.

(BEGIN VIDEO CLIP)

MATT CLARK, ASSISTANT CHIEF, MINNEAPOLIS POLICE DEPARTMENT: The officer was not in his squad car when this happened. He was outside the squad car. It's clear to us that the officer was shot in relation to his response to the call. It didn't seem at all to us related to the information that we have at this time that there would be any reason to shoot this officer other than him being targeted for doing his job.

(END VIDEO CLIP)

MALVEAUX: The officer remains in stable condition.

And this time of year, a lot of people are losing sleep over the IRS. But you don't want to get on the bad side of the people who go after unpaid taxes and fines, even tolls. That story up next.

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MALVEAUX: Can you believe it? We're talking about more snow. Right outside Columbus Circle there in New York. It's very pretty and still snowing, accumulating. Also take a look at the capitol. That's right, Washington, D.C. You can see it's still under the scaffolding, a little bit of a makeover there. Beautiful and wintery. And Baltimore, yep, they're getting hit pretty hard as well. You can barely see down there. But it's flight delays. Causing some serious flight delays, some cancellations. You can see the graph there. Ground stops throughout all of the major cities. Many of them on the east coast as we deal with more snow, more snow this winter. It's been an unbelievable winter. OK.

Anybody who's ever got a letter, or worse, a phone call from a debt collector is probably never going to forget it, right? There are debt collectors and then there are debt collectors. The ones who work for government agencies, as opposed to private lenders, they are a breed apart.

My colleagues at "CNN Money" spent months investigating one firm in particular that collects $1 billion a year for more than 2,000 state and local governments. Sometimes the original debts, very trivial or were never owed in the first place, or were owed but the debtors didn't even know it. I want you to watch this.

(BEGIN VIDEO CLIP)

NARRATOR: This is a true story on a man named Harry Menmen. Harry's married. He has two kids and one grandson. He lives in Houston. He's an instructor for the ROTC. He teaches kids what it means to be a good citizen.

One day, in 2009, Harry ran a toll booth. He didn't remember doing it so he didn't think to pay the bill. For three years, he didn't hear a peep. That makes sense, because he didn't know he did it. Then one day, there was a bill in the mail. It came from the firm, Linebarger, Goggan, Blair and Sampson. They're a company that makes money on collecting government debt. They collect $1 billion each year. They have clients in 21 states. And they work for more than 2300 government authorities collecting everything from water bills to speeding tickets. Over the years, they've collected so much debt that they've become known as one of the biggest government debt collectors in the entire country.

But let's get back to Harry. He's the one stuck with the bill. Remember that $1.25 toll he missed? That turned into a $286 tab. Where did that money go? Technically, to the Harris County Toll Road Authority in Houston, Texas, but not without Linebarger, Goggan, Blair and Sampson taking a big cut.

So this is a true story of a man named Harry, but also the story about how Linebarger, Goggan, Blair and Sampson built an empire by making people like Harry their bread and butter.

(END VIDEO CLIP)

MALVEAUX: I'm joined now by the journalist behind the investigation, "CNN Money's" Blake Ellis and Melanie Hicken.

You guys spent five months on this, extraordinary reporting and journalism. Congratulations to you both.

(CROSSTALK)

Start off with you, Melanie.

It's hard to understand and imagine you would have a government working with a firm and they would go through so much effort over what started as potentially a $1 toll. Why is this happening?

MELANIE HICKEN, CNN MONEY CORRESPONDENT: We thought it was really crazy, too. But a lot of these governments are really cash strapped and are looking for revenue. They see this as a no-brainer. It's a way to hire these firms. They don't have to pay anything most of the time. And they say this important money is going to help fund really important things, like teacher salaries, police force budgets. And they're pretty steep about like getting this money. They want it. MALVEAUX: These are local governments, state governments that is

we're talking about here?

HICKEN: Things like school boards or cities, towns, really everything from the city of New York to small school districts in Texas.

MALVEAUX: And, Blake, let's talk about the city of New York. Because there was one woman that you featured, Laverne Dobbinson, with a very interesting story. You tracked down.

BLAKE ELLIS, CNN MONEY CORRESPONDENT: Yes, this was one of the most shocking stories we heard in our investigation. This woman was actually billed more than $700 for the damage to the police car that killed her son. And it was just a terrible, terrible mistake. And in her case --

(CROSSTALK)

MALVEAUX: That is unbelievable.

ELLIS: Yes. It did end up being resolved. She got an apology when she went public with the situation.

But in a lot of cases, people do not get these issues resolved. That's one thing we kept finding is that people end up battling with this firm for months or even years to try to get them to leave them alone over debts that aren't theirs or that they no longer owe. A lot of times, they give up and pay because they're so worried about what could happen to them.

MALVEAUX: Let's hear her response. I believe we do have some sound from her.

(BEGIN VIDEO CLIP)

LAVERNE DOBBINSON, MOTHER BILLED FOR DAMAGED TO POLICE CAR THAT KILLED HER SON: It was about April 12 of 2012. My son was being ran down by the police because they said he allegedly stole cobble stones or something outside. So he was running from the police. And the police were in their police car. And they ran him over and killed him.

They sent me a letter stating that I have to pay for the car that hit my son. At first, I thought it was a scam. I could not believe that they actually sent me a bill.

(END VIDEO CLIP)

MALVEAUX: It makes you angry just to listen to her. I mean, the kind of emotion -- we're angry, but this woman who had to go through that, it's unbelievable.

ELLIS: She's still, years later, really, traumatized by the whole experience.

MALVEAUX: Melanie, we're talking about there was a six-figure debt on somebody's taxes and they didn't even owe it. Explain that story that you followed.

HICKEN: We met a man named Mike Knight in Oklahoma. He received a bill for more $110,000 for taxes he had already paid seven years earlier for a business he used to own. And it was a computer error on the part of the state of Oklahoma, which they ultimately acknowledged months later. But it took him months to get the proper proof. His bank had already disposed of the proof that he had paid. And so for him, it was just a really traumatizing experience like Laverne. He said he was worried he could even lose his home. He had no idea what would happen to him.

MALVEAUX: Let's listen to a little bit from that piece.

(BEGIN VIDEO CLIP)

MIKE KNIGHT, RECEIVED BILL FOR PAID TAXES: The first restaurant I opened, the sales taxes ended up being questioned nine years later. I knew I'd paid the taxes. I produced documents from the online process that were receipts of the payments. They kept telling me that they needed bank statements. I said I don't have bank statements. They're purged. The bank is on a seven-year purge system. So those documents were gone.

For approximately two months, I couldn't go to sleep at night. I didn't know if the Oklahoma Tax Commission could take everything I owned. I didn't know if they could put me in jail.

(END VIDEO CLIP)

MALVEAUX: All right. Blake, tell me very quickly, what kind of recourse do people have if they're under the situation? We've seen three different examples.

ELLIS: That's one of the biggest problems that we found during this investigation is that people really don't have a lot of recourse. If these were considered consumer debts, they could go to a lot of different agencies to get help. But because they're government debt, they fall under completely different rules. So there's not a lot that they can do. So a lot of the consumer advocates we talked to say that the loophole needs to be closed and government debts need to fall under the same consumer protections as other kinds of debts.

MALVEAUX: All right. Melanie, Blake, you guys are awesome. This is really great journalism.

And if you want more on this, please visit CNNmoney.com and click on "Above the Law." You'll see the full series. Really quite amazing.

Rudy Giuliani says he's getting death threats following his harsh criticism of President Obama. But the former New York mayor, standing by his belief that the president does not love America. More on that straight ahead.

But first, training well under way for the Fit Nation. But one participant has been somewhat of a hiccup in the training, knee surgery. Dr. Sanjay Gupta has got the update.

(BEGIN VIDEOTAPE)

(SHOUT)

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT (voice-over): Just last month, 67-year-old Linda Garrett started her journey with the Fit Nation team.

LINDA GARRETT, FIT NATION PARTICIPANT: It feels good.

GUPTA: Swimming, biking --

(SHOUTING)

GUPTA: -- running, all to get ready for the Nautica Malibu Triathlon in September.

But now, just a few short weeks later, the first major hurdle for Linda to overcome, an old knee injury flared up and she needs surgery.

DR. CHRISTOPHER CAREY, ORTHOPEDIC SURGEON: Mrs. Garrett had a tear of her medial meniscus, which is sort of the cushion pad on the inner side of the knee over there.

GUPTA: Dr. Carey was able to do arthroscopic surgery just a few days after he found the injury, and all went smoothly. But overall, he says Linda will be as good as new.

CAREY: She's do well. She had some arthritis but a good-looking knee overall.

GUPTA: As for Garrett herself, she says she's a little sore but also looking forward to getting back in the game.

GARRETT: I feel like I can catch up. Just a minor set back, a hiccup.

GUPTA: Dr. Sanjay Gupta, CNN, reporting.

(END VIDEOTAPE)

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MALVEAUX: The president has critics, but few would dare suggest the president doesn't love his country. But Rudy Giuliani earlier this week certainly did. Refuses to apologize. Even some Republicans say the former New York City mayor went too far.

Here's CNN's Will Ripley.

(BEGIN VIDEOTAPE)

WILL RIPLEY, CNN CORRESPONDENT (voice-over): New York's former mayor, Rudy Giuliani, is not backing down. He's standing by his charge that President Obama doesn't love his country, telling CNN's Jim Acosta in a phone interview he refuses to apologize.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT (voice-over): He said to me during this brief phone conversation, quote, "I don't regret making the statement. I believe it."

RIPLEY: Giuliani also addressed the firestorm following the comments.

ACOSTA: The former mayor said that his office has received some death threats. He said his secretary has gotten some death threats over the phone.

RIPLEY: While CNN can't verify the claim, Giuliani says the majority of messages were positive, including one from Bobby Jindal, whose office put out a statement refusing to condemn the former mayor, but adding he should have chosen different phraseology.

SEN. RAND PAUL, (R), KENTUCKY: I think it's a mistake to question people's motives. It is one thing to disagree on policy, and I try not to question the president's motives as being a good American or a bad American.

RIPLEY: Giuliani's recent behavior is no surprise to some who follow his political career.

DOUGLAS MUZZIO, PROFESSOR, BARUCH COLLEGE, CUNY: He's going to double down, triple down, and quadruple down.

RIPLEY: Professor Doug Muzzio, a long-time observer of New York politics, says the man hailed for his leadership during 9/11 is tarnishing that legacy, gaining a reputation for controversial, sometimes inflammatory rhetoric.

MUZZIO: He's enjoying this. This is an ego trip. Rudy's been out of the news and now he's on the news.

RIPLEY: Giuliani continues making front-page news this weekend, bringing up old claims about the president's past.

RUDY GIULIANI, (R), FORMER NEW YORK CITY MAYOR: We haven't even mentioned some of the other Communists and leftists who educated him as a young man.

RIPLEY: Former Obama senior adviser, David Axelrod, dismissed the familiar criticisms in an interview with CNN's Michael Smerconish.

DAVID AXELROD, FORMER SENIOR WHITE HOUSE ADVISOR: I can't climb into Rudy Giuliani's head and explain why he said what he said. What he said was despicable and completely inconsistent with the man I know and I think the man most Americans know.

RIPLEY: But Giuliani remains defiant, even as he risks stepping farther away from his image as America's mayor.

(END VIDEOTAPE)

MALVEAUX: And Will Ripley joins us.

Will, you and I covered the Obama campaign 2007, 2008, and it harkens back to the days when we heard things about, you know, the opponents trying to paint Obama as other, he's not like us, didn't grow up like us, he wasn't raised like us, that kind of thing. Would this kind of argument fly and work for 2016? Do you think the Republicans are going to want to embrace this kind of thing that Giuliani is saying, whether dismissing it or not? Do they want to go there with the Millennials in 2016 using this?

RIPLEY: I've been talking to a lot of analysts who feel -- and I think a lot of Americans would share the feeling -- that this argument is getting old, frankly, because it goes back so many years. What Rudy Giuliani is saying about the president's not only alleged not love of his country but his background, allegations that he was influenced by Communists and Socialists as a child, this is something that's been said for years and it's not a relevant argument to a lot of people anymore. And that's why you see, you know, members of the Republican Party, who are widely believed to be favorites for nomination next year, not condemning Giuliani, but they are distancing themselves, reaffirming their love for their country.

MALVEAUX: I wonder, too, if this has to do with the fact that we are having at this time in this country this discussion, this heated discussion over war, you know, patriotism, war, how much we're going to give in blood and treasure in our fight against ISIS. If somebody thinks that might resonate in some way, it will be fascinating to see.

Will, as always, excellent reporting.

RIPLEY: Thank you.

MALVEAUX: Thank you.

I'm Suzanne Malveaux, and I'll see you back here at 7:00 p.m. eastern.

"SMERCONISH" starts after this quick break.

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