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Trump Facing Questions Over Tax Bombshell; Trump Surrogates Praise His "Genius" with Taxes; Former Trump Contractors Speak Out; Show

Aired October 03, 2016 - 09:00   ET

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

[09:00:41] CAROL COSTELLO, CNN ANCHOR: And good morning. I'm Carol Costello. Thanks so much for joining me.

Donald Trump beginning a new week in a very familiar place, fighting controversy. This time, over his taxes. "The New York Times" is reporting Trump declared a loss of more than $900 million in 1995, a move that while legal could have allowed him to avoid paying Federal income taxes for 18 years.

CNN has not been able to independently verify the authenticity of the documents which "The Times" says were mailed to reporter anonymously last month, but the Trump campaign has not challenged any of the facts in that "New York Times" story.

All of this as Trump kicks off a day of visits in two swing states. These are live pictures from Herndon, Virginia, where Trump will speak at an event focused on the military and national security at any time. From there, Mr. Trump heads west for the start of a multiday tour beginning in the battleground state of Colorado.

CNN is tracking all of these developments. Senior White House Correspondent Jim Acosta is covering the Trump campaign, while Senior Washington Correspondent Joe Johns has more on Hillary Clinton's trip to another critical state, Ohio.

But, Jim, let's start with you. Good morning.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Good morning, Carol. Who would have thought that the October surprise would have come on October 1st, but that appears to be what happened over Saturday night when we saw that "New York Times" bombshell report.

As you just mentioned, Donald Trump -- we can put those tax returns back up on screen -- showing back in 1995, claimed a loss on his casino business of $915, 700 million, nearly $1 billion in losses there.

As you said, Carol, that is something that could have tax experts say enabled him to avoid paying taxes for some 18 years, and it sort of tees up what Hillary Clinton was talking about at that debate. We could go at Hofstra University. Here's how that exchange went just one week ago.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, (D) PRESIDENTIAL CANDIDATE: The only years that anybody has ever seen were a couple of years when he had to turn them over to state authorities when he was trying to a casino license, and they showed he didn't pay any Federal income tax. So if he's a --

DONALD TRUMP, (R) PRESIDENTIAL CANDIDATE: That makes me smart.

(END VIDEO CLIP)

ACOSTA: So Donald Trump there saying that he was smart. And, Carol, over the weekend, you could just hear the messaging, the spinning taking place inside the Trump campaign.

Two of their top surrogates were on the Sunday talk shows basically echoing what Donald Trump said in that debate, that he is smart. Newt Gingrich, Rudy Giuliani, Chris Christie, all of his top surrogates are out there saying this makes him a genius for avoiding paying taxes.

As you said, the Trump campaign has not denied the fact that he didn't pay taxes. We haven't heard that from the Trump campaign, but consider how Rudy Giuliani and Chris Christie talked about this over the weekend. Here is what they had to say.

(BEGIN VIDEO CLIP)

RUDY GIULIANI, FORMER NEW YORK CITY MAYOR: I mean, the reality is he's a genius. What he did was he took advantage of something that could save his enterprise and he did something we admire in America. He came back. The art of the deal is all about that. He talks about it. So did Steve jobs. So did Winston Churchill. Winston Churchill was thrown out of politics twice and came back.

Great men have big failures and then they take those failures and they turn them to great results. I'd rather have a genius, like Donald Trump, running this country than someone like Hillary Clinton and all she seems to do is to produce jobs for the FBI.

(END VIDEO CLIP)

ACOSTA: And we should point out Donald Trump put out a tweet himself, talking about all of this. He didn't really get into whether or not that 1995 tax return was authentic, but here's what he had to say, "I know our complex tax laws better than anyone who has ever run for president and am the only one who can fix them," with the hashtag there, "failing New York Times."

He didn't say hashtag "incorrect" or "wrong New York Times," so he doesn't seem to be challenging the authenticity of that report, Carol.

But, you know, we talked about how we talked to Trump voters at these rallies from time to time. Today of all days, I think, Carol, would be a very interesting day to talk to some of those Trump supporters out there. They've stuck with him through thick and thin. The question is, will they stick by him even though he has not

apparently been paying Federal income taxes for nearly two decades. If it is true, what is laid out in this tax return from 1995 and what tax experts tell us, it'll be very interesting to find out if his supporters stood by him after this, what could be a very damaging report. Carol.

[09:04:58] COSTELLO: All right, Jim Acosta reporting live for us this morning.

So here's the thing, with this billion dollar loss, the very people Trump now says he wants to help, he hurt in Atlantic City. Small business people hired by Trump to build his glitzy casinos say they were stiffed through Trump's bankruptcy filing. The Jenkins family built bathroom portions for Trump's Taj Mahal and dozens of other contractors who got pennies on the dollar for their work. Here's the Jenkins family.

(BEGIN VIDEO CLIP)

BETH ROSSER, OWNER, TRIAD BUILDING SPECIALTIES: He put so many good contract out of business.

PAUL FRIEL, OWNER, EDWARD J. FRIEL COMPANY: If you went against him, he simply put a list out and said these are bad guys and everybody else is a good guy.

JESSICA SCHNEIDER, CNN CORRESPONDENT: And you guys were on that list?

FRIEL: We were on the list.

SCHNEIDER: And did you ever get work in Atlantic City again?

FRIEL: Never.

NAT HYMAN, OWNER, LANDAU JEWELRY: I think I spent over a million dollars in litigation with him. The bottom line was, I would have been much happier, Jess, if he would have left me alone and simply left me to do my business. To him, it was sport and to me, it was my life.

(END VIDEO CLIP)

COSTELLO: During the last debate, Trump claimed these people did not do a good job. But now, you have to wonder whether Trump have the money to pay them at all. So here to discuss all of this, Larry Sabato, director of the University of Virginia Center for Politics; Mark Matthews, Washington correspondent for "The Denver Post"; Jason Johnson is politics editor for theroot.com, a political science professor at Morgan State University and Sirius XM contributor; and Christine Romans is our chief business correspondent.

All right. So, Christine, I want to start with you. Purely from a business standpoint, Donald Trump says he's a great businessman but he lost almost a billion dollars in 1995. And that wasn't his first bankruptcy, so who knows how much money he's lost over the years. CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Look, billion

dollars. It was so big that the tax preparer told "The New York Times" that he had to go in there and type in the first two numbers, the nine and the one, to fit it on there because the tax software didn't even recognize that big of a loss.

What was happening at that time? Atlantic City was imploding. He had made an ill-timed foray into an airline, right? He had just come off of the big ownership of The Plaza. There was a lot big happening there that was imploding on him. The fact that he lost so much money and then stretching it out over so many years, if in fact that's what happened, it is perfectly legal.

But one of the ironies this morning is that the fairness, the breaks that the tax code gave him, is not a break that he gave many of the people who were working for him at the time. And that's something that a lot of people noted today.

COSTELLO: So these contractors that we just heard from, right? They say Donald Trump stiffed them and didn't pay them. And he claimed they were doing such a bad job that he refused to pay them, but they say something entirely different. But don't you wonder, is it he didn't have the money to pay them so he flew the coop?

ROMANS: If we could see those tax returns, we would know more. We've only seen three pages of those big tax returns. That's why the public wants to see those returns and people want to see what exactly was going on there because of these accusations against him at that time.

You know, he has always focused on how he was, you know, a phoenix from the ashes, Carol. How he came up out of that big loss and used failure as a launching pad to something else, to something bigger.

But the fact that he was living so lavishly and outwardly living so lavishly for many years and maybe not paying income taxes, that's -- income taxes build roads, they build schools, they help pay our debts and helps service our debts. So here's someone who has also criticized many people. He criticized Barack Obama, the President. He's criticized hedge fund managers for not paying their fair share.

COSTELLO: I'm sorry. These contractors in Atlantic, l bet pay their income taxes through all their hardship after what happened to them in Atlantic City.

ROMANS: Well, they probably had losses they had to carry too on their taxes as well, quite frankly.

COSTELLO: OK. So, Larry, I want to go to you. So Trump surrogates, you heard them saying he's a genius because he managed to work the tax code and he did it to his own benefit. He's not a bad businessman, he's a genius. Is he?

LARRY SABATO, DIRECTOR, UNIVERSITY OF VIRGINIA CENTER FOR POLITICS: Well, I don't know what his IQ is, but I don't think it's genius to avoid paying your fair share of Federal income taxes. You know, think about what this means. Trump said he is smart because

he has avoided paying Federal income taxes probably for many years. And Rudy Giuliani and Chris Christie essentially called him a genius for doing that.

What's the message sent to the tens of millions of Americans who actually pay their fair share? It means they're chumps. It means they're stupid. You know, I like the sentence at the IRS on the wall, "Taxes are the price we pay for civilization." Donald Trump hasn't paid for much civilization.

COSTELLO: You know, the other thing I'm curious about, Christine, you know, Trump says, you know, I can close loopholes. I understand the rig system and only I can fix it. So you've studied his tax plan. Would his tax plan close the loophole that allowed him to legally dodge taxes for 18 years?

ROMANS: No. To take a big loss, no. To change some of those real estate -- special treatment for real estate developers, no. He has --

[09:10:00] COSTELLO: So he's not going to fix that part of the rig system --

ROMANS: He --

COSTELLO: -- when you look at his tax plan right now?

ROMANS: No. He has pledged to makes sure the hedge fund managers have to pay more and he has pledged to cut taxes for everyone and cut taxes from the middle class, but closing that specific loophole, no.

And even we've asked the surrogates about that on the air all morning long, and they keep pointing the fact that he would revise the tax code in general and that would be beneficial to the economy and they kind of go to his overall tax plan. But no, that particular loophole is there.

COSTELLO: So, Jason, doesn't that prompt you to ask, would Donald Trump really fix the rigged system at his own expense?

JASON JOHNSON, POLITICAL SCIENCE PROFESSOR, MORGAN STATE UNIVERSITY: Exactly, Carol. That is the question that I think that any soft leaners or independents now are thinking about. Donald Trump has not paid people that he was supposed to pay. He's gone bankrupt. He's been sued thousands of times. He doesn't want to reveal his finances.

And he's basically saying, because I've been able to game the system so long, I'm actually going to fix it. That's like the guy who breaks into your house and then tells you, you know, you should hire me for security. There's no reason to believe that Donald Trump is actually going to take down the very system that he's been taking advantage of.

And I think what's really key about this, Carol, is this. All these regular small business people, they look like the voters that Donald Trump is supposedly supporting. They look like the regular hardworking men and women, working class Whites that Donald Trump is supposedly championing. And this, I think, is a legitimate problem.

COSTELLO: OK. So I go to you, Mark, because you work for "The Denver Post," right? Colorado, Trump and Clinton are running neck and neck, so how do you suppose this will play?

MARK MATTHEWS, WASHINGTON CORRESPONDENT, THE DENVER POST: Well, right now, both Clinton and Trump need to watch themselves in Colorado. This is a very volatile electorate out there. You know, for the first time, independent voters outranked both Democrats and Republicans. And this is a state that supported both Bernie Sanders and Ted Cruz, so right now Colorado voters are very unsure about who they support.

And, you know, polls have been going up and down right now. But the biggest question right now in Colorado is, you know, what happened to Clinton's support? She was up about double digits about a month ago. That's fallen now to single digits, sometimes even tied. And so a lot of people are wondering what's said on the campaign trail in the next couple weeks really could affect things because mailing ballots in Colorado go out in about two weeks.

COSTELLO: So what about those independents, what do they think about Trump?

MATTHEWS: Well, right now, it's a bit of an open question. You know, one of the most interesting things that we've seen in the polls is that support for Gary Johnson and support for Jill Stein together sometimes is more than 20 percent. So one in five Colorado voters are thinking about a third party candidate, and that means a lot of soft support that could either way.

And there's a political operative in Colorado that told me once for independents and for a lot of other folks, you have to be right on several issues. You got to get right on guns, God, gays and ganja. And so whatever happens on those four issues and what are the candidates saying could really affect things in the next couple weeks.

COSTELLO: Oh, I needed a smile. Thanks so much. OK, you guys stick around, Larry Sabato, Mark Matthews, Jason Johnson. And I'll say good bye to you, Christine Romans, but she'll be back with us throughout the day.

Still to come to the NEWSROOM. Donald Trump is set to speak at an event in Virginia, this after launching a string of attacks on Hillary Clinton over the weekend, her health, her marriage. Absolutely nothing was off limits.

(COMMERCIAL BREAK)

CAROL COSTELLO, CNN ANCHOR: Nothing says Ohio like Lebron James, and Lebron James says I'm with her, a huge endorsement from the king for Hillary Clinton. To say he's a star is an understatement. He won a championship for the Cavs after 52 years of agony and attracted a record breaking 1 million people to the victory rally.

But Lebron James transcends basketball, donating his time and money to children from northeast Ohio to make their dreams possible. CNN's Joe Johns has more on the importance of this endorsement. Good morning.

JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: Good morning, Carol. The voter registration period is ending in Ohio in about one week and the Lebron James endorsement comes just as Hillary Clinton returns to Ohio for the first time since her trip on Labor Day.

So in the short term the campaign is hoping to get some help on its push to get more Clinton supporters on the voting s right now especially millennials, African-American voters, part of the coalition that got President Obama elected.

What's remarkable about the James endorsement is how impassioned it is and very much in the language of the Clinton campaign he writes, "I do know we need a president who brings us together and keeps us unified policies and ideas that divide us more are not the solution. We must all stand together no matter where we're from or the color of our skin."

Hillary Clinton for her part was in North Carolina on Sunday speaking at an African-American church focusing on the police use of force issues that have been in the spotlight there. Listen.

(BEGIN VIDEO CLIP)

HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: I'm a grandmother. And like every grandmother, I worry about the safety and but my worries are not the same as black grandmothers who have different and deeper fears about the world that their grandchildren face.

(END VIDEO CLIP)

JOHNS: Hillary Clinton visiting Toledo and Akron, Ohio in the buckeye state today and while there has been some good news for Clinton in a number of states, Ohio hasn't been great for her so far. Donald Trump still running strong there -- Carol.

COSTELLO: All right, Joe Johns reporting live from Washington. While Clinton laid out her economic plan for Ohio voters today. Donald Trump will hold a roundtable discussion in Harden, Virginia. We'll bring that to you live when it happens.

But if Trump's rally was any indication he will keep things personal, mocking Hillary Clinton's bout with pneumonia and accusing her of cheating on bill.

(BEGIN VIDEO CLIP)

[09:20:02]DONALD TRUMP (R), PRESIDENTIAL CANDIDATE: She's supposed to fight all of these different things and she can't make it 15 feet to her car. Give me a break. Give me a break. Give me a break!

Hillary Clinton's only loyalty is to her financial contributors and to herself. I don't even think she's loyal to bill, if you want to know the truth. And really, folks, really, why should she be, right?

(END VIDEO CLIP) COSTELLO: All right. So let's talk about this. Larry Sabato is back as well as Mark Matthews and Jason Johnson, thanks to all of you. Jason, I want to start with you because you are from the great state of Ohio.

So how will all of this play in Ohio? You know, there are a lot of working class people especially in the cities that Hillary Clinton is visiting today, Akron and in Toledo and of course, she'll bring up Lebron James. You have to believe she will bring up that tax issue.

JASON JOHNSON, POLITICS EDITOR, THEROOT.COM: Yes. She is, Carol. Here is the thing. I'm an Ohio voter and this state has become a very, very interesting place for the Clinton campaign. They have been bombarding it with celebrities.

I talked to a lot of my students there who work for Republicans and Democrats. They had Lance Bass doing a debate party, the entire cast of "The West Wing" and now they have Lebron James.

For some reason Hillary Clinton is still behind in this state. But here's what's really interesting about this. Even though she'll be campaigning there and Trump is in the lead, there is a possibility this year that Hillary Clinton could actually still be elected president of the United States without winning Ohio.

If that happens, it completely changes the importance of this state going forward. So this is a very, very interesting couple of weeks. We don't know how important Ohio will be to her final calculation.

WHITFIELD: You know, it's interesting to say that because I've been reading a lot about that very topic and, Larry, I'll pose this question to you. The reason that Ohio won't go the Democratic way this time is because Ohio's minority population is actually shrinking and some people say that Georgia could become the new Ohio and Ohio could become the new Georgia.

LARRY SABATO, DIRECTOR, UNIVERSITY OF VIRGINIA CENTER FOR POLITICS: Well, one thing's for sure, Carol, Ohio is more Republican than the nation as a whole. It was more Republican in both of President Obama's elections and let's remember Ohio usually has voted for the winner.

But there are two exceptions and they are both Democrats, John F. Kennedy in 1960 and Franklin Roosevelt in 1944. Hillary Clinton might be the third one. She's doing worse in Ohio and especially Iowa than in any other swing state.

So, you know, Ohio used to be considered the ultimate bellwether, to cite a book that has been written by my associate, (inaudible) about Ohio. But Ohio is not really the bellwether it used to be, so this election may prove it.

COSTELLO: OK, so, Mark, Colorado is still very much a bellwether state, right?

MARK MATTHEWS, WASHINGTON CORRESPONDENT, "THE DENVER POST": It's very true.

COSTELLO: Very true. So Trump's personal attacks on Hillary Clinton, especially his attack on maybe Hillary Clinton cheated on Bill, right. She doesn't have the stamina. Trump poking fun at her bout with pneumonia. Do those things play in a swing state like Colorado?

MATTHEWS: It could although Colorado has a reputation for some pragmatism. It's been going back and forth. Barack Obama won Colorado in 2008 and again in 2012, but Republican Cory Gardner won a Senate race, a close Senate race in 2014 so, you know, right now a lot of watching are female voters along the front range.

This is down from Ft. Collins to Denver to Colorado Springs, and these voters might be watching a lot of this, and a big question, too, is what's happening to Republican voters in the state?

Again, the Colorado delegation was the one that led the revolt and led the coup against Donald Trump during the Republican National Convention. And whether these voters stayed home, whether they go for Donald Trump, whether or not they go for Gary Johnson, that's a big question. These Republican female voters are going to be a key demographic coming up this fall.

COSTELLO: OK. So let's talk about female voters because Trump's surrogate, Rudy Giuliani, came out and said something that was -- I didn't really know what he meant by that, but I'll let our viewers listen for themselves. He said something like Trump was a better choice than, well, I'll let the viewers hear for themselves. Here it is.

(BEGIN VIDEO CLIP)

RUDY GIULIANI, FORMER NEW YORK CITY MAYOR: Don't you think a man who has this kind of economic genius is a lot better for the United States than a woman -- and the only thing she's ever produced is a lot of work for the FBI checking out her emails.

(END VIDEO CLIP)

COSTELLO: So, Larry, what -- I'm a woman so the first thing I thought is, like, what is he saying, that a woman can't handle the economy because she's female? I'm not sure he was quite saying that. What do you think?

[09:25:09]SABATO: Well, it certainly wasn't (inaudible) by Mayor Giuliani and, Carol, it's just one more reason, along with a long pattern of behavior by Donald Trump that was detailed by the "Associated Press" over the weekend in terms of Trump's dealings with women on "The Apprentice."

It was pretty shocking what they had in that report. This is another indication of why we apparently had headed toward are record gender gap in this presidential election. Women a very disproportionately against Hillary Clinton and men are disproportionately for Trump.

And you know, it's the women who are 52 percent to 53 percent of the electorate. You would rather win women than men.

COSTELLO: OK. So, Jason, what do you think Trump will say today in Virginia because that's another important state although Hillary Clinton does lead in Virginia, but he has to win over these female voters, these minority voters in states like Virginia, like Colorado, like Nevada, like Florida. So what can he say?

JOHNSON: Well, he could keep saying what he's saying, Carol, because there's a certain segment of women in America that find Trump's bravado appealing. They say to themselves, well, that wouldn't be me, or they don't like Rosie O'Donnell either.

So you know, Donald Trump is not going to change what he's saying, but I will say this and this is really important heading into the next town hall debate. All of these attacks on women, they're not going to go over well in a town hall.

These attacks on Bill Clinton and Hillary's marriage is not going to go over well in a town hall. A town hall people want to talk to you about how you're going to fix their problems. If he wastes any of his time attacking Hillary Clinton, you will see an audible gasp in that room and he will lose that debate worse than he did the first.

COSTELLO: All right, I have to leave it there. Larry Sabato, Mark Matthews, Jason Johnson, many thanks.

Coming up in the NEWSROOM, Bernie Sanders rips Donald Trump's tax bombshell. Will his supporters follow suit?

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