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Clinton Foundation Under Scrutiny Relating to Taxes; DNC Data Breach Discussed; Former University of Colorado Student Spared Prison After Sexually Assaulting Intoxicated Classmate; Jerry Sandusky to Take Stand in New Trial Over 2012 Conviction. Aired 10:30-11:00a

Aired August 12, 2016 - 10:30   ET

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

[10:30:50] CHRIS FRATES, CNN CORRESPONDENT: ... he's made. Now we don't know how much he's given to charity so we can't match that up against the actual claims he's made. And we also don't know how much he's actually paid in taxes, Erica.

ERICA HILL, CNN CONTRIBUTOR: And that is another one of the big questions. Meantime this is interesting timing for Hillary Clinton to say she's releasing the returns now. Because I would imagine part of that, too, may be an effort to avert some eyes from what else we're hearing about.

These increasing questions about the Clinton Foundation under scrutiny again. A source telling that the FBI and the Justice Department had actually met about a possible investigation of the Clinton Foundation. What more do we know about that?

FRATES: Yeah, this is really interesting, Erica. So what we know is that the FBI and the Justice Department, they met several months ago. They started talking about opening a public corruption case into the Clinton Foundation.

Now we know that three FBI field offices believe the probe should be launched. And that came after a bank tipped the FBI to suspicious activity by a foreign donor to the Clinton Foundation. The FBI wanted to look into whether there was a criminal conflict of interest between the State Department and the Clinton Foundation.

Now Justice officials pushed back. They argued they looked into the foundation a year earlier and they didn't find enough evidence to open a case. And some of the Justice Department even argued that the request seemed a little more political than substantive. Particularly given that this is an election year. Erica?

HILL: Oh, well we'll be watching just to see if there's anything else. Chris Frates, appreciate it, thank you. The DNC says it is now setting up a new advisory board in the wake of the hacking of several private email accounts. In a statement, the DNC says it, "will be providing appropriate notice to affected individuals next week."

Those individuals receiving the data breach notice will also receive offers of assistance to help mitigate any threats to their financial security. With me now is David Kennedy who's a security consultant and ethical hacker. David, good to have you with us today.

DAVID KENNEDY, SECURITY CONSULTANT, ETHICAL HACKER: Good morning.

HILL: When you see that plan, that -- or the statement, I should say -- about what the DNC intends to do. Notify victims next week. If I was a victim I'd want to know today. And then also saying they'd offer protection from any financial threats. What does that tell you in terms of the depth of this breach?

KENNEDY: Well originally when the DNC came out and said they were hacked, they said it was only donor information. And then a lot of information started to become public and actually leak out to the public. Where they actually hack a lot more than that (ph) email communications, and everything else.

So this is a much larger scale breach than what was originally said. And it looks like they're pretty unprepared to be able to handle it. Most folks, when they have a breach, have breach notifications out very quickly. You know, this has been a very long process for them, and were actually hacked for over a year. So, this is something that they're trying to get ahold of and we're probably pretty unprepared to handle it at this point.

HILL: Pretty unprepared. Now they're saying they're going to -- there's going to have -- be this advisory which will ...

KENNEDY: Yeah.

HILL: ... be formed. What's that actually going to do?

KENNEDY: Well you see this in most corporations where they'll have a cyber security advisory board. Which essentially establishes direction for protecting information, moving forward. So what they're trying to do is at least bolster their security so they don't experience breaches like this in the future.

And there's a huge concern with the DNC right now, that this is a small fraction of the information that was actually obtained or compromised. And that there's going to be more leaks happening throughout the actual elections, all the way going into October. So the concern now is trying to minimize that damage and find out what they actually had access to. And try to make sure that they don't have current access to their information right now.

HILL: You mentioned that these cyber security boards are something that most companies would have in place to help, of course, make sure this doesn't happen.

KENNEDY: Right.

HILL: Is it surprising at all to you that it doesn't appear there was something of that measure in place? Especially given some of the information that you're handling? Or they're handling, I should say.

KENNEDY: Based on ... based on how they were hacked, there's a company that was named Crowdstrike, which did a -- the analysis of their, what we call forensics investigations, around how this hack actually happened. And the techniques they used is what is referred to as spear fishing, or sending crafted emails to individuals to coax them.

That's actually very tough to protect against but the methods they were using to hack weren't very advanced. They should've been detected in the very early stages of this happening. So it kind of shows a lot of insecure processes happening within the DNC that they should've already had established.

So, yeah, it's a little surprising that they didn't have this type of protections already built into place ahead of time. But also I will say that it is common across the board, both in the private and public sector, where security's really, really a struggle for most organizations, for most government officials. I mean the federal government is one of the worst.

HILL: Right.

KENNEDY: So this is something that we need to take seriously. If you do information online you have to have protections, and it needs to be built into what you do. And you can see that the DNC didn't have that.

HILL: As you touched on there, is some concern that this is just the tip of the iceberg in many ways. Nancy Pelosi has called this an electronic Watergate. What do you make of that phrasing?

KENNEDY: Well what's interesting is that this is being attributed to Russia. Now there's been no evidence provided (ph) to the public so I can't say whether or not that's accurate. But what you're seeing now is if that's the case, you have other foreign governments trying to influence election cycles based off of what may be perceived as bad foreign policy.

They view Hillary Clinton very much so in the fact that, maybe bat (ph) against her foreign policy and Trump may be more inclined to work with Russia. So you're seeing actual foreign entities try to shape and change the direction of an actual voting system. That's pretty alarming to me and I think it's pretty alarming to most folks in the security industry. And it's something that we really haven't seen before in the past.

So I would say this is pretty big in the grand scheme of things. And we're using hacking and information warfare as a method to influence other governments. And it's something that is a huge problem, not only with Russia, but with China, with Iran. It's kind of the wild West right now from what we're seeing. For intellectual property theft, for intelligence-gaining purposes, for swaying what we call different ways of influencing people, or Psy-ops. It's a problem.

HILL: It also paints a very scary picture. But we appreciate you being here to help us -- help walk us through it. David Kennedy, appreciate the insight today, thank you.

KENNEDY: Thanks, Erica, appreciate it. HILL: Still to come, outrage in Colorado. A former college student

spared a prison sentence after sexually assaulting a drunk classmate.

[10:36:00]

(COMMERCIAL BREAK)

[10:40:20]

HILL: Critics calling it a slap on the wrist. A former University of Colorado student spared prison time. Instead, a judge sentenced Austin Wilkerson to two years in county jail under work release, for sexually assaulting a drunk classmate. There is some talk that it's disturbingly similar, as well, to the case of an ex-Stanford swimmer sentenced to six months for raping an unconscious woman. CNN's Dan Simon is following the story for us. Dan, good morning.

DAN SIMON, CNN CORRESPONDENT: Good morning, Erica. Once again you have a rape taking place on a college campus. This happening in March of 2014 at the University of Colorado at Boulder. This was a St. Patrick's Day party and the victim in this case was intoxicated. She had too much to drink.

And the suspect, or the defendant, Austin Wilkerson, said he was going to look after the victim. And somehow she found herself alone with him in his off-campus residence. And that's when this rape took place. Obviously, prosecutors are very disappointed with the sentence. You talked about it, this is what they had to say, take a look.

(BEGIN VIDEO CLIP)

CARYN DATZ, PROSECUTOR: This is a victim that was targeted because of the state that she was in. She was heavily intoxicated.

LISA SACCOMANNO, PROSECUTOR: He definitely, in our opinion, and as we argued to the court throughout the process, has given whatever version of the story, at that moment, is best going to serve him.

(END VIDEO CLIP)

SIMON: Well, Wilkerson could have gotten decades in state prison but the judge, Patrick Butler, gave him just two years at the county jail under a work release program. Meaning, he can come and go. He can go to work or go to school, and then he goes to county jail at night.

Now this was a recommendation that came from the probation department. So typically judges follow those kinds of recommendations. But of course victims say this is an example of a system that just does not take college rape seriously. Erica?

HILL: A lot of outrage over that decision. Dan Simon for us this morning, thank you. Jerry Sandusky is expected to testify today at his appeals hearing. It will be the first time the former Penn State Assistant Football Coach has taken the stand. The 72-year old says bad lawyering led to his 2012 conviction of sexually abusing 10 boys. He's back in the court for a new trial.

Still to come, in Rio it was a golden night for olympic athletes named Simone. We'll have the very latest on Team USA's big win.

(COMMERCIAL BREAK)

[10:46:35]

HILL: A devastating report from the government. Intelligence officials altering reports to paint a rosier picture in the fight against ISIS. To talk a little bit more about that we're joined by former Intelligence Officer and former Federal Prosecutor, David Locke Hall. So when we talk about something like a report that's been altered to look a little bit rosier, what's the trickle down effect on that? To troops in the field, for example, people overseas trying to do their job. How does that impact their day-to-day?

DAVID LOCKE HALL, FORMER INTELLIGENCE OFFICER, U.S. NAVY RESERVE: Well it's very impactual. The whole purpose of the intelligence process is to identify and distribute information that's truthful and accurate. So if the process is corrupted in that way then the trickle down would be that the people on the ground would get incorrect information. Which could have very serious tactical implications.

HILL: I'm -- it also -- there's so much to ask you about in terms of how do you fare it out, good over bad. I want to take a look a little bit -- you're featured in this week's episode of "Declassified" -- let's look at that and then talk a little bit on the back ...

HALL: Sure.

HILL: ... about what we're seeing here.

(BEGIN VIDEOTAPE)

HALL: One of the early inquiries we got from an Iranian arms dealer would (ph) be a guy named Amir Ardebili. He asked for a very wide range of military components. And some, actually, we assessed as being potentially for nuclear weapons purposes.

This guy is clearly bad news. So we needed to start a relationship with him in order to make a case like this happen. Ardebili used to send us request for, I mean, hundreds of requests for quotation. And we were constantly providing him quotes. For the most part he was not, you know, closing a deal.

JOHN MALANDRA, SUPERVISORY SPECIAL AGENT, ICE HOMELAND SECURITY: We had a lot of instances where he committed to us through email that he was going to procure something. We would provide banking information and the money would never come.

P.J. LECHLEITNER, DEPUTY SPECIAL AGENT IN CHARGE, ICE HOMELAND SECURITY INVESTIGATIONS: We almost had nothing from him and largely wrote him off because he wasn't really dealing with us. So we weren't sure if he got spooked, he saw something he didn't like, which happens. Or he's just flighty and didn't want to deal with us anymore.

MALANDRA: It's a never-ending learning curve. Running an undercover business is a tedious process because we're really not businesspeople.

HALL: We were trying to figure out, are we doing things the right way? Because we're not in this trade. What we are, are pretending to be in this trade. So that's why we wanted to learn more about the illegal international arms market. Basically, we needed help.

(END VIDEOTAPE)

HILL: It's fascinating to hear you and other folks talk about it. And the sort of tedious process, and how you figure out what you're doing. And we saw part of you there, and you were talking about a deal you were involved in as part of a -- when you were a federal prosecutor.

HALL: That's correct.

HILL: So what happened in that? And how do you establish that relationship where you can actually end up with actionable intelligence that you know you can rely on?

HALL: We had Homeland Security Investigations agents and DCIS agents had formed a -- an undercover company called Cross International. And through that company we were dealing with arms dealers internationally. Who were -- including Ardebili who was in Iran -- who were all trying to acquire different types of military components.

And so it was -- it's really through that undercover process that you generate the kind of intelligence you're talking about. Where you can identify who's trying to acquire what.

HILL: And when you get that -- and when do you know when you've actually got it? You know, is there, is there -- is it a lightbulb moment? Is it it's -- because it's very much a team sport.

HALL: It definitely is a team sport. And it is a lightbulb moment in that the moment when you know you've succeeded in getting -- in achieving your goal and getting the information you close the deal. So once he -- or any target -- agrees to actually pay and shows up with the money and closes the deal, then you know it's real.

HILL: That the showing up, not the -- as we heard, you know -- we sent the bank information, didn't follow through.

HALL: Exactly.

HILL: It's when there's finally a follow up (ph)

HALL: And talk is cheap.

HILL: Yeah. It's all -- it's fascinating and I look forward to seeing more.

HALL: Thank you. HILL: Appreciate you coming in, thanks again. David Locke Hall

joining us. Of course, for more insight into the life of an undercover agent, you can see it all this Sunday, 10:00 p.m. on "Declassified."

Still to come, American athletes just racking up gold medals. The historic performances landing olympians, both new and old, in the record book. Coy Wire is live in Rio for us, that's next.

COY WIRE, CNN SPORTS ANCHOR: Bom Dia, Erica. It's becoming a beautiful day here in Rio. And we have some beautiful stories to share with you. Simone Biles, Simone Manuel, and of course, Michael Phelps. That and more coming up after the break.

[10:51:20]

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[10:55:33]

HILL: He is one of baseball's most polarizing players. And tonight, Alex Rodriguez becomes one of its most polarizing ex-players. After a dozen years with the team, the Yankees announcing they'll release A- Rod after tonight's game. The player has (ph) put up numbers that would typically assure a place in the Hall of Fame. Steroid controversies however, have shattered his career and helped to taint the fans' view of him. Rodriguez will stay on with the Yankees organization as a team advisor. Olympic diving training has been canceled today. Why? The green

water. It's been sitting in the pool -- you can see it there -- for days. And organizers have blamed chemicals and algae for the change. They say the pool needs to sit still in order for the water to turn blue again. British diver Tom Daley responded by tweeting, "Diving pool was closed this morning. Hopefully that means we haven't been diving in anything too bad the last couple of days."

All of this comes just one day after stellar performances by U.S. olympians in swimming and gymnastics that have upped the gold medal count now to 16. CNN Sports Anchor Coy Wire is watching all of the action, joins us now live from Rio. I feel like each day just gets better than the next.

WIRE: It really does. And we're getting to witness it so we're very fortunate as sports fans, to watch history in the making. The U.S. women's gymnastics team, you can see why they were being called America's sweethearts before these games. They're gracious, they're humble, they're kind. And the team literally leaping over their competition in Rio.

And it's Simone Biles, wins the all-around final, taking home her second gold medal. And a crazy stat for you, Erica, she had a 2.1 margin of victory. That's more than the margins of victories from 1980-2012 combined. So you have incredible individual accomplishments, but after her gold last night she was humble, she was thinking about her team. Here she is.

(BEGIN VIDEO CLIP)

SIMONE BILES, TWO TIME GOLD MEDALIST: I'm just Simone Biles. Because no one wants to be like any other girl. You say, "oh you're this, you're this," but I'm not that, I'm just me. It's very rewarding to see everyone congratulate me. And everyone that believed in me, I can't thank them enough.

Once we got into the apartment, they all ran, screamed and jumped on me and Aly. And they attacked us, and it was very sweet. And then Gabby texted me while I was at the NBC House and that meant a lot to me. And then whenever I got into my room, Maddie and Laurie wrote me a note and put it on my bedside.

(END VIDEO CLIP)

WIRE: All right on to Michael Phelps earning his fourth gold medal of these Rio games. Once again dominant in the 200 meter IM, winning the event for the fourth straight olympics. No swimmer had ever done that. Now it was a highly anticipated showdown between Phelps and his teammate, and good friend, Ryan Lochte. Lochte said he was a bit off, he finished his fifth. But Phelps getting it done. We'll see him again today in the 100 meter butterfly final. If he wins that, Erica, that'll be four olympic golds in that event as well.

Check out this scene from the Ravens preseason game last night. They put Phelps' race up on the jumbotron and watched him win it during a time-out. Phelps is from Baltimore, he's a huge Ravens fan. And it's clear, his hometown a huge fan of him as well.

Now another historical moment yesterday. American Simone Manuel becoming the first African American woman to medal in an individual swimming event. She wins gold in the 100 meter freestyle. Sharing that medal and an olympic record with Canadian Penny Oleksiak, making history. A 20-year old Stanford student using these moments, Erica, after her win to say that it was for all those who came before her. And now Simone Manuel an inspiration looking to create positive change in our country.

HILL: That she is. She really kind of gave me chills when she was talking afterwards. And you think about all of these milestones and everything these athletes work so hard for. It has been an incredible first week of competition. I know you were saying earlier now track and field is getting underway. We're going to have to move out of the pool now, and outside.

WIRE: Exactly right. And if the weather's clearing up a bit. We have shot put starting off tonight. And the Sunday final -- 100 meter final, I think is the big anticipation. Everyone looking forward to a likely match up between Usain Bolt and Justin Gatlin from the U.S.

HILL: We will be looking forward to that, and to your updates as well. We'll also be looking to see when the color of the water in the pool changes. Coy Wire for us live in Rio. Thanks to all of you for joining me today. I'm Erica Hill. AT THIS HOUR with Berman and Bolduan ...

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