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Muller Team Interviews Manhattan Madam; Trump Dismisses Russia Probe; Russian Spy Caught at U.S. Embassy. Aired 1-1:30p ET

Aired August 03, 2018 - 13:00   ET

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

[13:00:00] MICHAEL SHEAR, WHITE HOUSE CORRESPONDENT, "THE NEW YORK TIMES": Be a little bit more cautious.

NIA-MALIKA HENDERSON, CNN ANCHOR: All right, thanks for that.

And thanks for joining us on INSIDE POLITICS. We'll see you right back here on Sunday at 8:00 a.m. Eastern.

"WOLF" starts right now.

WOLF BLITZER, CNN ANCHOR: Hello, I'm Wolf Blitzer. It's 1:00 p.m. here in Washington. Wherever you're watching from around the world, thanks very much for joining us.

We start with breaking news on Robert Mueller and the Manhattan Madam. CNN has learned that Special Counsel Robert Mueller's team has talked to the infamous Manhattan Madam, Kristin Davis, as part of the Russia investigation. Davis worked for and is a friend of the former Trump adviser Roger Stone.

Our political correspondent Sara Murray is here. She's working this story. Also with us, former federal prosecutor, former assistant U.S. attorney for the District of Columbia, Glenn Kirschner is with us as well.

So, Sara, I know you're doing a lot of reporting on this. Walk us through the latest information we're getting.

SARA MURRAY, CNN POLITICAL CORRESPONDENT: Well, Wolf, we are learning -- me and my colleague MJ Lee, that Kristin Davis, who is famously known as the Manhattan Madam, has met with the Special Counsel Robert Mueller's team. Four sources are telling us that. And that they also are interested in bringing her back and having her testify before the grand jury.

Now, this is interesting because she's known Roger Stone for a long time, for at least a decade. She's done work for him on and off over the course of their friendship together. And it tells you that prosecutors still appear to be very interested in Roger Stone, his personal activities, his financial activities, and they may be trying to build a case against him. Now, he has not heard from the special counsel, but he has said publicly that he is bracing for the possibility of an indictment.

But, you know, Kristin Davis' story in and of itself is pretty interesting. This is someone who ran a prostitution ring. She went to jail in the scandal surrounding New York Governor Elliott Spitzer, who eventually resigned because of his own involvement in a separate prostitution service. And she's had a lot on her plate over the years. She ran for governor in 2010. That's one of the instances where she actually worked alongside Roger Stone. And one of her platforms was legalizing prostitution, legalizing marijuana. Obviously she was not successful in this bid.

And the last sort of perplexing thing about this case is we don't know exactly what the special counsel wants to get from Kristin Davis, but we do know that his prosecutors have asked some bizarre questions of other witnesses. She has a son. Roger Stone happens to be the godfather of that son. But apparently in interviews with other witnesses, people have been asked whether that child could be Roger Stone's child. Sort of difficult to figure out how this all fits into the broader scheme of whether, you know, Russia colluded or whether any Russians colluded with anyone in Donald Trump's orbit in 2016, which, of course, is one of the cores of the Mueller investigation.

BLITZER: And it's interesting, Glenn, because it comes just a few days after a federal judge ordered another Roger Stone associate to appear before the Mueller grand jury, specifically trying to get more information. How does this all add up in your mind?

GLENN KIRSCHNER, FORMER FEDERAL PROSECUTOR: Yes. So, Wolf, it does seem like this is sort of the typical strategy when you're looking at a target. Let's assume for the moment that Roger Stone is a target of Bob Mueller's investigation. You know, he is sort of circling around Mr. Stone by interviewing people who are close with him, perhaps making his way into family members. And Miss Davis, it seems, was close with Roger Stone, both personally and professionally. And interviewing somebody like that can really uncover some information important to the investigation.

For example, we all remember I think it was some weeks ago when we learned that Roger Stone actually did take a meeting with a Russian individual who was looking for, I believe, $2 million in exchange for providing Roger Stone with dirt on Hillary Clinton. Surprise, surprise.

What did we also come to learn? That he had been -- he had testified behind closed doors with the House Intelligence Committee and apparently forgot about that meeting. I think it strains credulity to believe that he forgot about that meeting.

So what might Bob Mueller's investigators be doing now? Because Miss Davis is close to him personally and professionally, there's been some reporting that, for example, she would keep his schedule. Of course, the investigators are going to want to deal with her to see what kind of meetings Roger Stone was taking. Even more importantly, to see if before his testimony to the House Intelligence Committee he had been speaking with her about the meetings that he had taken because when you uncover evidence like that, it significantly undercuts a claim that I just forgot about meeting with that particular Russian.

So there are all sorts of reasons for Mueller's investigative team to want to get every bit of information, relevant, reliable information out of Miss Davis that they can.

BLITZER: It's significant, I think, and you tell me if I'm wrong, that Mueller is handling -- Mueller and his team are focusing in on Roger Stone, this part of the investigation. They haven't referred it to another U.S. district court, the Southern District of New York or out in Alexandria, Virginia, or any place like that. This is part of the Russia probe.

[13:05:09] KIRSCHNER: It sure seems like it. And Bob Mueller has taken his jurisdictional mandate very seriously because we've seen him refer cases out to, as we see now, the Eastern District of Virginia, where Paul Manafort is on trial as we speak. He has sent several investigations --

BLITZER: Michael Cohen in New York.

KIRSCHNER: Several investigations. Michael Cohen. And then recently we saw him refer some individuals for potentially unlawful lobbying activities, again, up to New York. So he really is keeping within the lines that have been drawn for him by Deputy Attorney General Rod Rosenstein.

BLITZER: I know, Sara, you're getting reaction. I assume you're -- you've consulted or tried to get reaction from the principals involved. What are they saying, if anything?

MURRAY: Well, that's right. And a lawyer who represents Kristin Davis declined to comment for this. Roger Stone and his attorney declined to comment for this.

But I can tell you that the sentiment sort of in the orbit of Roger Stone's friends and allies is they really do sort of now believe the president's line on this, that this is a witch hunt. They're saying, you know, why are people -- why is Mueller's team calling in witnesses and asking about whether Roger Stone has a love child? Why are they asking about Roger Stone's finances? They pretty much all believe that it's only a matter of time until Roger Stone gets indicted. And they believe that there will be something that has to do with potential collusion between Roger Stone and Russians.

Remember, he talked for a while openly about how he had been in contact with Julian Assange during, you know, all of this information coming out from -- about Hillary Clinton during the campaign and later walked that back. So they sort of think there will be a top line allegation about him having something to do perhaps with hacking, perhaps with Russian collusion. And it could be followed by charges that have something to do with his finances. But they maintain, and, you know, Roger Stone did not comment for this piece, but has previously maintained that he's innocent, that he had nothing to do with Russian collusion, that he didn't do anything wrong and he says that if the special counsel does bring charges against him, those are all going to be trumped up ways to just get at him over his finances.

BLITZER: Very good reporting with MJ Lee. Sara Murray, thank you very much.

Glenn Kirschner, thank you to you as well.

From democracy in the crosshairs to a Russian hoax, President Trump dismisses the entire Russia investigation only hours after his top national security team warned of a dire threat that Russia poses to the U.S. elections. One after the other, the top members of his administration warned of Russia's ongoing effort to interfere in the upcoming midterm elections here in the United States in November and undermine U.S. democracy. A White House official tells CNN, the president instructed his team to present this show of force, but, guess what, he didn't appear with them at that event. And at a rally only a few hours later, he actually said this.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: In Helsinki, I had a great meeting with Putin. We discussed everything. I had a great meeting. I had a great meeting.

We got along really well. By the way, that's a good thing, not a bad thing. That's a really good thing. Now, we're being hindered by the Russian hoax. It's a hoax, OK?

(END VIDEO CLIP)

BLITZER: Clearly in contrast to what his top national security advisers said only a few hours earlier.

Let's go to our senior White House correspondent Jeff Zeleny.

Jeff, what's behind the disconnect between the president, who says it's all a hoax, and his own administration when it comes to Russia? They say this is an enormous threat facing the United States.

JEFF ZELENY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Wolf, clearly the president not speaking with the same voice of his national security officials. That was the big question hanging over the rally last evening in Pennsylvania. Of course, coming just hours, as you said, after his full national security apparatus speaking there from the White House in a way we have not seen before. To have the director of the FBI, the intelligence director, the homeland security secretary, and others speaking about this, it seemed that the White House was turning the page on Russian election meddling. And then the president, of course, with the biggest megaphone of all, not talking about that, not amplifying that message.

Now, the White House says they are on the same page. They say privately the president is giving this directive for his officials to say on this, and he is taking it seriously. But, Wolf, publicly, he is doing anything but. By calling it a hoax yet again, it is certainly sending a message that the U.S. is not taking this seriously. There is no other way to draw attention to something than to have the president talk about it in public. And so far, the president has been unwilling to do that.

When you talk to supporters of his and long-time friends of his and ask them why he can't do this, they say that this is the one thing, the Russian election meddling, that simply getting to him. He does not want to be seen as illegitimate. He does not want to be seen as, you know, that his 2016 victory was anything but that, a victory. But, Wolf, it does make you wonder why he can't just move on and talk about this forcefully.

Now, the question is, will the government be focused on this in the three months or so before the midterm elections? They say they are. But, again, without the president talking about it, it makes you wonder if it's a top priority, Wolf.

[13:10:08] BLITZER: Nothing, I take it, on the president's schedule today? He's out in New Jersey at his -- at his golf club.

ZELENY: No, there is nothing on his public schedule, Wolf. We do know that he was looking at those strong economic numbers coming in this morning. The unemployment rate, of course, going down to 3.9 percent. Some of us thought we would hear from him this morning, but we did not hear from him. He is not planning to speak at all today. He'll be going to Ohio tomorrow to campaign for a House race.

But, Wolf, he is scheduled to be here on a working vacation for the next week and a half or so until August 13th about. But you can be sure, we'll likely be hearing from him in some fashion at some point, Wolf.

BLITZER: Even if it's only on Twitter, I'm sure we will.

All right, Jeff, thank you very much.

ZELENY: Indeed.

BLITZER: Jeff Zeleny reporting.

Joining us now, Mike Rogers, he's CNN's national security commentator, and former chairman of the House Intelligence Committee.

Mike, thanks very much for coming in. A pretty impressive show of force yesterday by the president's top national security team. All of them showing up speaking forcefully against what Russia did during the 2016 elections, what they're attempting to do in the upcoming midterms, yet the president says only a few hours later it's a Russia hoax.

MIKE ROGERS, CNN NATIONAL SECURITY COMMENTATOR: Yes, pretty powerful display from the intelligence community, including the FBI and the law enforcement side, and what they're doing. It's a little confounding. I just -- I passionately believe the president cannot separate this notion of which -- and I think he believes this -- there was no collusion on his behalf. He did -- he doesn't understand this investigation. And what the Russians actually did to try to influence the election and pit Americans against American. And they're ramping it up. And so I think he believes, if he admits that that, in fact, is the case, he might -- his presidency might not be a legitimate win. And I think you have to separate both of those issues. And I just don't think he can get there. But the good news for Americans is these -- all of these folks came

out. So they didn't just talk to the Russians. They didn't talk to the American public. They also talked to the workforce of the intelligence community saying, we're committed to this. We're going to unleash some of the assets that we have.

BLITZER: And with all due respect to the top national security team, including Dan Coats, the director of national intelligence, the secretary of homeland security, the director of the national security agency, they were all there, the FBI director. It's one thing for the Russians and Putin to hear them, but it's another thing for them to hear from the president of the United States.

ROGERS: Clearly. And the one issue that you have to ask -- so if you're going to disrupt Russian activity, you need some offensive capabilities. Those are considered covert action, really sensitive. Lots of thought goes into making sure that you hit the right target, you do the right thing. It needs a presidential sign-off. So if you're -- all of those guys were great and the men and women who stood there are doing great things, but if you really want to disrupt going into 2018, you have to have some offensive capability. That does need to have a policy wrapped around it and it has to have authorization from the president. That's the one thing we didn't get from that hearing that we --

BLITZER: And we certainly didn't hear from the president himself. He could have showed up at that event together with his national security team. And he certainly could have discussed it later in the evening when he had that big rally out in Pennsylvania. But he was silent on that, except for calling it a hoax. Usually he calls it a witch hunt.

I want you to listen to Dan Coats, the director of national intelligence. He spoke about the Helsinki summit between the president and Russian President Putin. But then he uttered these words.

(BEGIN VIDEO CLIP)

DAN COATS, DIRECTOR OF NATIONAL INTELLIGENCE: I'm not in a position to either understand fully or talk about what happened at Helsinki. I'll throw it over to the national security director here to -- to address that question.

(END VIDEO CLIP)

BLITZER: That was pretty shocking to hear the director of national intelligence, the top intelligence officer in the United States, say that he's not in a position to understand fully what happened in Helsinki.

ROGERS: That may have been the fastest hand-off of a question I've ever seen by somebody in a major press conference.

BLITZER: Wouldn't he be briefed specifically on what happened?

ROGERS: You would hope so. You would hope so. And something even more concerned me later, Wolf. When the national security adviser came out and said, no, no, no, Putin told us what happened in the meeting. Remember when he came out and said, Putin told us that that was the question that the president asked. You never empower an adversary with the narrative. And now we have to get any confirmation of what happened in that hearing, not just from the president, but Putin and his information operation crew are using this to their full advantage.

BLITZER: Very quickly, because I've heard from some U.S. cyber experts, counterintelligence experts, say the only way the Russians are fully going to appreciate what they've been doing is if the U.S. does something similar to them. Do some hacking, go on the cyber offensive against Putin and his top oligarchs, specifically reveal some of their secret e-mails, expose some of the money laundering that's going on, and send that direct message to them. Maybe that will have an impact.

[13:15:06] ROGERS: That is one aspect. And that piece has been talked about for years. Could you disclose -- do you remember the Panama papers and all of those disclosures? That started to get a little bit at Putin's circle, in his oligarchs, the money that they were stealing. But it has to be more than that, Wolf. It can't be just, we're going to embarrass you a little bit. There has to be disruption.

So we have the capability, the U.S. government, the National Security Agency, to disrupt certain cyber activities. It's hard. You have to be accurate. It's not an easy thing to do. But we can do it. Remember, that's the part that the president has to sign off on. If you're going to another country to disrupt some activity like that, it's under something called Title 50, and you need lots of authorizations. The president normally is in that chain. He could delegate, but we just don't know that piece. I'm going to guess we haven't gotten an idea yet on what those offensive cyber actions would look like. Those area -- if you want to disrupt the Russians, you absolutely have to have some offensive capability.

BLITZER: And you have to have the authorization to do it. But there's no doubt the U.S. has that capability --

ROGERS: Absolutely.

BLITZER: If the president of the United States were to say --

ROGERS: Do you remember when Mike Rogers came and said the president hadn't told me to do anything?

BLITZER: Yes.

ROGERS: That was what was so concerning. He's the guy that needed to hear it from the president in order to (INAUDIBLE) --

BLITZER: The former director of national --

ROGERS: Former director.

BLITZER: The National Security Agency. Not this Mike Rogers, the former chairman of the House Intelligence Committee.

ROGERS: You have us -- you can't have (INAUDIBLE).

BLITZER: Stand by. There's more news we're following.

In the trial of the president's former campaign chairman, the people who handled his money taking the stand. You're going to hear what they said when they were asked about what they knew.

Plus, as the U.S. unemployment rate falls, China now retaliating in the president's trade war. How far will this go?

And Donald Trump Junior compares the Democratic Party platform here in the United States to the Nazis. I'll speak live with a Democratic congressman, his response.

All that coming up.

(COMMERCIAL BREAK)

[13:21:13] BLITZER: A startling revelation that a suspected Russian spy was working inside the walls of the United States embassy in Moscow. A worker for the U.S. Secret Service in regular contact with Russian intelligence officials for a decade.

Our global affairs correspondent Elise Labott is working this story for us.

Elise, what can you tell us, first of all, about this alleged spy and what officials are now saying about the kind of access she had inside the U.S. embassy?

ELISE LABOTT, CNN GLOBAL AFFAIRS CORRESPONDENT: Well, Wolf, this was shocking to U.S. officials. The amount of information that was going to the FSB, the Russian primary security agency. This is a woman who worked at the U.S. embassy for more than a decade. She was working for the U.S. Secret Service, which obviously has to do with presidential and vice presidential detail. She came under suspicion during a regular security review in 2016. She was caught, Wolf, red-handed when the diplomatic security of the embassy noticed that she was giving too much information to the FSB. These officials have some contact with Russian officials as part of their job, but she was having unauthorized meetings and communications. And they did a sting and they caught her red-handed.

Now, Wolf, this woman, she didn't have access to national security information, according to officials. She did have access to the Secret Service intranet system, if you will, the internal system, and the e- mail system. But officials tell me she didn't have access to national security information, Wolf. She did, however, have a security clearance that was revoked when she was fired a few months into 2017.

BLITZER: All right, very intriguing indeed.

Elise, thank you very much.

I want to bring back Mike Rogers, the former chairman of the House Intelligence Committee, our national security commentator. How extraordinary is this?

ROGERS: Well, I mean, the Russians are very, very aggressive. The one thing that was interesting about this, is that there's some -- the Secret Service is taking some heat for not taking it seriously. They said, oh, she didn't have access to the -- to anything outside of a very low classification intranet system.

The problem is, she had access to the embassy. And if you remember back in the '80s, it was rife with listening devices. As a matter of fact, our State Department was penetrated in the late '90s. of Russians had something placed in a table in a conference room that was a listening device that was beaming out very sensitive conversations.

So it's not just the fact that she had access to the intranet. It's the fact that she had access to the building. She could identify people coming and going for the FSB. She could bring devices in likely. And through that process, could have caused a lot more harm than just being the person that was doing low-level administration work.

And that's what worried me about the Secret Service not doing a full- blown what did we lose and what risk did she pose and all the people that -- did she touch inside the embassy. That's where you have to start being concerned.

BLITZER: An enormous concern, I know, is that she had, for a decade, she got to know a lot of these people at the U.S. embassy. She would talk to them, have little lunches, private meetings or whatever. She would get a lot of information presumably that could potentially could be useful to Russian intelligence. There's a lot they need to work out of this (ph).

ROGERS: Including identifying people who work for the CIA inside the building who are under cover, would likely come into contact with Secret Service folks.

BLITZER: Yes.

ROGERS: And she would have the ability to observe that. Even if she's outside watching that meeting take place, that's of value to the FSB in Russia.

BLITZER: Yes, it certainly is.

Mike Rogers, thanks very much.

There's more news. As the U.S. unemployment rate falls, China now retaliating in the president's trade war. We're going to discuss the consequences.

[13:24:54] Plus, a significant change in tone from the secretary of state. Why Mike Pompeo is now saying North Korea is not, repeat not, living up to its promise to denuclearize.

(COMMERCIAL BREAK) BLITZER: Donald Trump Junior compares the platform of the Democratic Party here in the United States to the platform of the Nazi party in Germany in the early 1930s. The president's eldest son drew the comparison in an interview with a right-wing commentator on the One America News Network. Listen.

[13:30:08] (BEGIN VIDEO CLIP)

DONALD TRUMP JUNIOR, PRESIDENT TRUMP'S SON: You know, you see the Nazi platform of the early 1930s and what was actually put out there as their -- and you look at it compared to like the --