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Ceasefire Holding in Syria, Peace Talks to Begin; Top 10 Crime Stories of 2016. College Football's Final Four Kicks Off. Aired 12-1p ET

Aired December 31, 2016 - 12:00   ET

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

KATE ANDERSON BROWER, AUTHOR, "FIRST WOMEN": -- have a lot of empathy for one another.

FREDRICKA WHITFIELD, CNN ANCHOR: Yes. All right, Kate Anderson, it really is a very special sorority of sorts, isn't it? All right, thank you so much.

BROWER: Thanks.

WHITFIELD: All right, the next hour of the NEWSROOM starts right now.

Hello again, everyone. Thanks so much for joining me. I'm Fredricka Whitfield. The same malicious software used by Russian hackers to meddle in the U.S. election has been found on a laptop belonging to a Vermont utility company.

Burlington Electric says the laptop was not connected to the power grid, but did call this an attempt to infiltrate utility systems. The Vermont governor, Peter Shamlin (ph), lashing out at Russian President Vladimir Putin saying "Vermonters and all America should be both alarmed and outraged that one of the world's leading thugs, Vladimir Putin, has been attempting to hack our electric grid, which we rely upon to support our quality of life, economy, health and safety."

CNN's Polo Sandoval is following this story for us and joins me now live. So Polo, the government is still trying to sort out how far reaching this intrusion might be and I'm talking about the Vermont government as well as the federal government.

POLO SANDOVAL, CNN CORRESPONDENT: Yes, absolutely, Fred. This very quickly caught the attention of the feds because at this point, Burlington Electric, the company involved in this incident is saying that they did notice this malicious code, this malicious software on one of their laptop computers, one of the company owned laptop computers, what is important to keep in mind is this laptop computer was not reportedly not connected to the organization system which is good.

Because officials here saying that for example their customer information, also the power grid itself was never compromised. That's according to information from this electric company, which we expect to hear from in the next few hour for more information.

A little bit about what was detected here. This happened after the Obama administration, the Department of Homeland Security issued a warning to utility companies and other similar entities asking them to take a closer look at some of their network security in light of what has been going on.

As a result, this company reportedly located or at least they detected this grizzly step software that sounds familiar, because that was the same malware reportedly used by Russian hackers to try to influence the November election.

So that is one of the reasons why this is a very important story that is developing right now in the United States. It's getting the attention of, as you showed a few moments ago, from Vermont's governor, but also several elected officials, including for example, Patrick Leahy, the Vermont senator releasing a statement overnight.

I will read you a small portion of it, what this senator from Vermont is saying about the importance of this case here and what has happened. His statement reading in part, "This is beyond hackers having electronic joyrides -- this is now about trying to access utilities to potentially manipulate the grid, and shut it down in the middle of winter. This is a direct threat to Vermont and we do not take it lightly."

We have seen these kinds of things happen before, Fred, for example about a year ago, there was a massive cyber-attack that specifically attacked power grids in Ukraine, hundreds of people affected there. Since then U.S. officials have been asking organizations and utility companies in the United States to closely watch their systems for something like this.

WHITFIELD: All right. Polo Sandoval, thank you so much. Let's talk more about this. Joining me right now is former NSA adviser and cyber security consultant, David Kennedy and CNN military analyst, Major General James "Spider" Marks. Good to see both of you. Happy New Year.

David, you first, what a way to begin or say goodbye to 2016 and a way in which to say hello to 2017. This malware on this laptop in Vermont. How worrisome, potentially dangerous, is this to you?

DAVID KENNEDY, FORMER NSA ADVISER: It's alarming that the attackers are going after utility grid. One thing we should note is that we're doing same things to other countries as well. We're hacking Russia's electric grip. It's used for military preparedness in order to, you know, launch offenses if we need to.

Like we saw with Russia reportedly hacking into Ukraine's power grid. So this is happening all over the place and it's very concerning because usually the energy grid is very vulnerable. It has a number of exposures and very easy to get into.

WHITFIELD: So you are saying this is a just in case, that we would hack and other countries might hack ours and so it's not so worrisome to you until the next step is taken?

KENNEDY: It's worrisome from the fact that our grid is that vulnerable to where we see a lot of these attacks happening. But this is definitely used for military preparedness in the event that there, you know, military conflicts that occur to shut down the electric grid.

We've done the same thing to Iran. You may remember (inaudible). Those were to cripple the Iran centrifuges from actively being able to develop their program and their power grid there. So we see this happening all the time from China, from Russia, Iran, and we do the same thing back as well.

[12:05:06]WHITFIELD: So General Marks, you know, sources telling CNN that they are not clear on the full scope or intent or if it is indeed an isolated event even hearing David's explanation. Should that pacify a lot of worries or is it still very concerning to you about the potential?

MAJ. GENERAL JAMES "SPIDER" MARKS (RETIRED), CNN MILITARY ANALYST: No, it's very concerning. In fact, what David described is a standard operating procedure where we have access and Russia and China and others, North Korea, they have access and have taken advantage of that access.

What we have with all activities online are completely ungoverned so we have this level of acceptedness and the risks of going too far are cataclysmic.

If for example, we got -- if the Russians got into the electrical system and were able to affect, let's say from Charlotte, North Carolina, all the way down to Jacksonville, what you have is air traffic, banking, and financial systems.

You have what we call scatus (ph) systems, which are the electro mechanical systems that govern traffic lights and dams opening and closing and gates opening, and elevators working.

So just the standard safety procedures, health and hospitals, monitoring of patients, all of that becomes at risk and could be brought down. That's the level that we're talking about.

We've reached this level where what we need to do, Fred, is establish some kind of protocol, not unlike our efforts 60 years ago with nuclear proliferation treaties and discussions on what we knew as mutually assured destruction. We've reached a level where it is that dangerous and that risky.

WHITFIELD: So then David, the malware has been identified. It will be further examined, but to what degree, what are U.S. intelligence investigators looking at? How are they dissecting this to try to figure out its origins, trace it, and learn more about motivations?

KENNEDY: There is two pieces when you typically identify an incident. There is a technique called reverse engineering, which allows you to take apart that malware and figure out who coded it.

There are strings in there that indicate certain patterns that Russia would use or other countries. But what we also look for are indicators of compromise, how that malware got there in the first place and the infrastructure that was used to send that.

A good example is with the recent jar that was released from DHS, they released indicators of compromise as well as a long list of infrastructure that was used by reportedly Russian intelligence and officials or you know, hackers or what not.

Those are all things that they look at to see if that infrastructure is the same, where it is tied back to and who they are actively monitoring that would deploy such malware to this infrastructure.

So it's a pretty, you know, methodical way of going through things to try to identify. It's a difficult process because these infrastructures change all the time.

WHITFIELD: So General Marks, does this mean now, you know, an investigation of many major utility companies across the country to investigate, see if there is malware that will appear on anyone else's computers?

MARKS: Fredricka, I would hope so. I would hope everybody is doing a very aggressive job of getting into their systems to determine where their vulnerabilities are. Again, let's be frank with each other. Vulnerabilities exist, it's a very porous system.

And it's only a matter of time before we have this very cataclysmic event. The only thing that's moderating behavior is some internal gyro. Russia has decided not to go further than to plant this malware and not activate it.

We'll see how far it could go in the electric grid system that could affect all of the north east. So we need to --

KENNEDY: And vice-versa.

MARKS: Absolutely. We do that. It's essentially a constant reconnaissance as a military guy that is the way I would put it. We probe, evaluate, and peer over the shoulder 24/7 online all the time. Russia does that to us and China does that to us.

Because of that capability, we need to have these discussions that lead to protocol so that we can know exactly what is on the table and what we're talking about so we don't have some bad event occur because somebody gets a hair that tells them I'm just going to pull the trigger, push the button that makes this happy.

WHITFIELD: All right, General and David, thank you so. Appreciate it.

MARKS: Yes, happy topic. Sorry, Fred.

WHITFIELD: I know.

KENNEDY: Happy New Year.

WHITFIELD: We're all very uplifted. Happy New Year. All right, thanks. Next, a New Year's message from Donald Trump and it's not the typical holiday greeting from a president-elect. You are going to see it next.

Back to the fun stuff, New Year's celebrations under way around the world. This is the fireworks display from Hong Kong ringing in 2017. Pretty beautiful. We'll be right back.

(COMMERCIAL BREAK)

[12:13:08]

WHITFIELD: All right, welcome back. I'm Fredricka Whitfield. So President-Elect Donald Trump is issuing a New Year's greeting today, but it seems to be directed at his adversaries, tweeting this, this morning, quote, "Happy New Year to all, including my many enemies and those who have fought me and lost so badly, they just don't know what to do. Love."

All right, let's bring in CNN's Ryan Nobles. So Ryan, there is that and then there are the sentiments dismissing U.S. intelligence, criticizing President Obama's retaliation against Russia and Trump's continued praise of Putin. So, how is this setting the stage for what could be a pretty important pivotal first week in the New Year?

RYAN NOBLES, CNN CORRESPONDENT: Yes, Fredricka, you could argue that this has become one of the biggest issues confronting Donald Trump as he gets set to take office here in a couple of weeks. This controversy over the relationship between the United States and Russia and where he intends to take that relationship is something that many here in Washington are debating.

And you're right. Donald Trump was very complimentary of Vladimir Putin after Putin decided not to retaliate to President Obama after President Obama put in that new round of sanctions over the past couple of days.

Take a look at this tweet from Trump which came out a few days ago. Trump said, "Great move on the delay," and then he put in parenthesis, "by V. Putin. I always knew he was very smart."

And this follows a pattern by Donald Trump. He is often talked about Vladimir Putin in glowing terms and he said repeatedly on the campaign trail that he would like to forge a better relationship between the United States and Russia.

That stands in very much opposition by the current administration and by many Republicans and Democrats in Congress -- Fredricka.

WHITFIELD: And what is the expectation of how this could upset Republicans who do support sanctions, in fact are even asking for more?

[12:15:01]NOBLES: Yes, and I think that will be one of the biggest things that Donald Trump has on his plate in the New Year is this group Republican senators in particular who are not all that enamored with the idea of cozying up to Russia.

Listen to what John McCain, a leading Republican, said about Russia's alleged intervention in the United States election.

(BEGIN VIDEO CLIP)

SENATOR JOHN MCCAIN (R), ARIZONA: When you attack a country, it's an act of war. And so we have to make sure that there is a price to pay so that we can perhaps persuade the Russians to stop this kind of attacks on our very fundamentals of democracy.

(END VIDEO CLIP)

NOBLES: This is so important, Fredricka, because there is only a four seat majority for Republicans in the Senate, so that means Donald Trump needs all four of those votes if he wants to enact his agenda. For the most part these Republican senators, who many criticized Trump during the campaign have warmed up to him on an overall basis.

On this key issue of Russia, there is still some serious dissention and that could make life difficult for him in the early days of his administration.

WHITFIELD: All right, Ryan Nobles, thanks so much in Washington. Let's talk more about this now with CNN political commentator, Tara Setmayer, and Betsy McCaughey, the former lieutenant-governor of New York and a Donald Trump supporter. Good to see both of you and Happy New Year.

All right, so Tara you first, you know, how worrisome is this issue of the malware being found on a Vermont utility laptop, all on the heels of this praise that Donald Trump continues to pile on to Vladimir Putin and the ties being made between Russia and the malware.

TARA SETMAYER, CNN POLITICAL COMMENTATOR: I think it's a legitimate concern. Donald Trump and his incoming administration, they cannot continue to put their heads in the sand about what Russia is trying to do. Mitt Romney had it right back in 2012. Russia is one of our greatest political foes and since then they've been consolidating power.

Vladimir Putin has been thumbing his nose at President Obama and the United States for the last few years and you have Donald Trump coming in, poo-pooing intelligence community reports and what's going on and with Russia even brazenly now with their interference in our election.

I mean, this is real. And as a Republican and as someone who worked for a member of Congress who sat on the Foreign Affairs Committee, we've been watching what is going on with Russia and it's something that I think other fellow Republicans, including like we just saw in the report, especially in the Senate Foreign Relations Committee, are well aware of and not going to sit back and accept.

You know, I caution my other fellow Republicans who have been excusing this away, I don't know, we're supposed to be the Reagan would not be happy with what is going on and the way we're handling Russia. WHITFIELD: So Betsy, you know, why is it -- yes, I mean, Donald Trump has said, you know, he will tackle it when he gets into office. There was, you know, the sentiment coming from Vladimir Putin to delay it and then you have Donald Trump who then says he is praising him for being smart, for delaying it. Why is it important to send that message and then send a message of New Year's you know, greeting to my enemies as opposed to taking this matter really seriously?

BETSY MCCAUGHEY (R), FORMER LIEUTENANT GOVERNOR OF NEW YORK: He is taking it seriously and pursuing the smarter strategy.

WHITFIELD: What do you mean by that?

MCCAUGHEY: He is going to fortify American defense. He is putting into the top positions people like Michael Lynch and "Mad Dog" Mattis.

(CROSSTALK)

MCCAUGHEY: Let me explain. He is doing substantive things and also unleashing America's energy development, all to make America a stronger country in the world. But let me just finish.

WHITFIELD: He is making a convincing argument on all of that. You are trying to make that convincing argument because you are not really addressing the matter at hand.

MCCAUGHEY: I am. Why not mollify an egomaniac who has hands on nuclear weapons. Trump is strengthening and fortifying the nation rather than picking a fight with a bully from a position of weakness. Look what Barack Obama has done. He has ejected 35 petty diplomats from a mansion in Maryland. Did he go after Putin when he invaded Crimea? No. Did he go after the Chinese --

WHITFIELD: This is now on U.S. soil.

MCCAUGHEY: I am going to finish. Did he go after the Chinese --

WHITFIELD: Are you saying that the sitting president should not, before his term is up, address this issue?

MCCAUGHEY: Not in such a petty way. Let me tell you he has ignored cyber security for eight years. For example, when the Chinese hacked the Office of Personnel Management and exposed the records of 22 million Americans, Barack Obama did nothing. No expulsions, no sanctions. Again and again when nations have attacked us, when the Iranians seized our sailors, no sanctions, no expulsions.

[12:20:04]So the fact is that Trump is going to increase the strength of this nation and the world before he picks a fight with a petty dictator --

WHITFIELD: Why do you --

MCCAUGHEY: -- strength with insults.

WHITFIELD: At issue right now is a response to evidence coming from 17 intelligence communities.

MCCAUGHEY: They're laughing at the response. The Russians are laughing at the response, 35 diplomats ejected from a luxurious Maryland mansion, what difference does it make, it's nothing.

SETMAYER: As much as I agree that President Obama's response to Russia and China and others has been tepid, we agree on that. But Barack Obama is leaving office in a couple weeks, he is not going to be president any more. Donald Trump is.

And what Donald Trump has been doing is when Betsy just said, we should mollify an egotistical maniac, were you talking about Putin or Trump? Because Donald Trump is an egomaniac that has an affinity for strong men. No U.S. president --

MCCAUGHEY: That is a stupid insult that does not advance the interest of the United States. That's a stupid insult at the president-elect does not advance the benefit of our country.

SETMAYER: Putin, it's right there in front of us. Maybe you need to tell that to Donald Trump because he is the one who continues to praise Putin who is a --

MCCAUGHEY: I will not tell that to Donald Trump. What I will say is that for eight years Barack Obama ignored the cyber security.

WHITFIELD: When someone is trying to chime in, you are calling it interrupting, but you are doing the same thing, which really is we are trying to have --

MCCAUGHEY: You are insulting the president-elect.

SETMAYER: It's fact what he has been doing with Vladimir Putin. Let me say something else about Putin is doing, he is a very shrewd dictator there in Russia. Vladimir Putin has been which used to be the KGB, for years he's been consolidating that, representing what Stalin did. That is very scary stuff.

Putin is doing serious things while Donald Trump is over here tweeting about how smart Putin is. So these are legitimate concerns that the American people should pay attention to and that is what our Congress is supposed to do for oversight to balance this out.

This is not advancing. You think that Donald Trump sending out a tweet talking Happy New Year to all my haters and losers too that that's presidential, that's advancing the argument, that's a mature way for the president of the United States to begin office.

MCCAUGHEY: It's more important than words and the fact is for eight years President Obama ignored cyber security. The inspector general's report from the State Department revealed that the cyber security protection set up after 9/11 to safe guard the communications between our diplomats is totally in shambles and that's just one example. Instead of just talking tough, president-elect --

WHITFIELD: Mixed messages are being sent. You are talking about tough messages, mixed messages --

MCCAUGHEY: I don't think about talking like a bully until you prepare your nation to adequately defend itself and President-elect Trump has chosen two people, "Mad Dog" Mattis and Mike Lynch to replace two utter weaklings, Ashton Carter and Susan Rice.

He has already announced that there will be a much more formidable defense budget. He has announced that he will unleash energy production in our country so we will not be dependent on foreign nations for our energy supplies. That is countermeasures to strengthen the American power.

WHITFIELD: I think this representative of what that first week or first 100 days might be like in 20 days after the inauguration and the swearing in of President-elect Donald Trump. We're going to leave it right there. Tara Setmayer, Betsy McCaughey, thank you so much, ladies and Happy New Year. Can we say that, can we agree on that one?

MCCAUGHEY: Happy New Year, Tara.

WHITFIELD: All right, thanks so much, Ladies.

All right, New York City meantime preparing for tonight's big New Year's Eve celebration in Times Square. Security is very tight, as many as 7,000 police officers on duty tonight. We'll go live there next.

And the party begins right here on CNN at 8:00 Eastern Time with Kathy Griffin and Anderson Cooper and we will be right back.

(COMMERCIAL BREAK)

[12:27:16]

WHITFIELD: All right, welcome back. Live pictures right now of Time Square, the excitement is building and lots of folks are already pouring in. They want to get their perfect spot just in time for the ball to drop tonight for the celebration.

As many as 7,000 police officers are also there, side by side with the throngs of people patrolling Times Square making sure it is a safe, fun night. The city is ramping up security after recent terror attacks in France and Germany.

CNN's Jessica Schneider is in Times Square. So Jessica, what more can you tell us about the precautions being put in place and how really people are starting to pour in to Times Square and are very much comforted by what they do see in terms of security?

JESSICA SCHNEIDER, CNN CORRESPONDENT: Yes, that's right. You see the crush of the crowd all around me, Fredricka. The people who are already in the pens, they're just over that way through that massive crowd, but they have gone through extensive screening to get into those pens.

To give you a better glimpse at exactly what it is like out here, let me make our way through this crowd and go back toward the barriers, these barriers extend for about 20 blocks here. The NYPD putting in significant security measures, even enhanced measures this year.

Take a look at the breakdown of the numbers, 65 sanitation trucks are set up all over the perimeter of Times Square, filled with sand and they'll be used as a barrier if there were to be any sort of threat out here.

Again, there is no credible threat against Times Square or New York City itself, but all of these are precautions. In addition, though, they'll have 100 blocker vehicles, also 7,000 police officers stationed throughout the city.

Those included 550 new graduates from the police academy. In addition 65 pens are set up like this one and they will filled to capacity, expecting upwards of 3,000 people in each of these pens.

I talked to some of those hearty people who have been waiting out here already for hours.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: We all live together at USF and so we planned this trip out a year ago and so we're really excited. We've been looking forward to the ball drop since last New Year's.

UNIDENTIFIED FEMALE: I'm really looking forward to watching the ball drop with five of my really good friends.

(END VIDEO CLIP)

SCHNEIDER: Already the pens have begun to fill up. The people trickling in throughout the day and waiting for that ball drop at midnight. Of course, there will be a visible presence of those heavy weapons officers as well as counterterrorism teams that will be out here making sure that everything stays safe.

And back at police headquarters, there will be about 30 reps from city and state agencies keeping an eye out on all the video monitors out here all over Times Square. Keeping it safe and keeping it fun as well -- Fredricka.

WHITFIELD: All right, very, very important combination. Thank you so much. Jessica Schneider, Times Square.

All right, the ceasefire in Syria is holding at this hour. A truce brokered by Russia and Turkey. Our next guest says the U.S. has lost its place of power in the region. We'll look at the crisis as peace talks are set to begin.

(COMMERCIAL BREAK)

WHITFIELD: Hello everyone. I'm Fredricka Whitfield, thank you so much for joining me here from Manhattan. All right, rebels in Syria say, they will no longer follow the ceasefire if the regime continues to violate it. But despite some skirmishes reported by both sides, the ceasefire is holding. And that has allowed some in Aleppo to come out into the streets as you see here.