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Gates Testifying Against Manafort; Cohen Investigated for Tax Fraud; Giuliani Reluctant to Allow Questions; Trump's Midterm Strategy Tested. Aired 1-1:30p ET

Aired August 07, 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] JOHN KING, CNN ANCHOR: Tonight. It will be (INAUDIBLE). How you come back to see us tomorrow.

That's it, though, for today on INSIDE POLITICS. Again, see you this time tomorrow. Wolf starts right now. Have a good day.

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 more dramatic developments from the Paul Manafort trial. His former protege, Rick Gates, on the stand once again today. Just a short time ago, he testified about e-mails that show Manafort directed -- directing Gates on what to do with money coming in from secret offshore accounts. Gates also told the court he created invoices for fake amounts of money for use in wire transfers. This follows Gates' stunning testimony yesterday that he had committed years of fraud alongside Manafort and even stole several hundred thousand dollars from him.

I want to quickly go to our justice correspondent, Jessica Schneider. She's monitoring all these developments for us. So, Jessica, what's the biggest takeaway so far from today's dramatic testimony?

JESSICA SCHNEIDER, CNN JUSTICE CORRESPONDENT: The biggest takeaway, Wolf, just how elaborate this financial scheme was and how involved Paul Manafort really seemed to be, directing the movement of money here.

So Rick Gates, he's been testifying about these hundreds of e-mails where Manafort actually signs off on transferring the money their consulting company earned throughout these various foreign bank accounts. Now, Paul Manafort, this is key here, he would always write back, approving these transfers and signing it with his initial "p." Of course, this is the prosecution laying out that it was, in fact, Paul Manafort in charge.

Now, also, Rick Gates is talking about some of these fake invoices that he actually created. These -- we heard about them from the accountants last week. Gates is now owning up to it. He says the invoices were made out to some of the vendors they did business with, but the money itself, it didn't actually go to pay those vendors. Instead, the money went into the banks. And Gates said that was so the wire transfers wouldn't be recorded by the U.S. government.

And, finally, Gates has revealed today that he and Paul Manafort, well, they were interviewed by the FBI in 2014. It was part of a forfeiture investigation led by both the U.S. and Ukrainian governments. Investigators, they asked about their work for Ukraine, but they were never charged in any of this case. Now, afterward, Paul Manafort directed Gates to meet up with one of the Ukrainian business partners to fill him in about that FBI interview. And the two actually met in France.

And, of course, Wolf, Rick Gates, he is not holding back at all here. We're into several hours of his testimony now. And that's because he's at the mercy of these prosecutors. He struck a deal with them. And he's hoping the more information he gives, the more he tells the jury, the more lenient eventually his sentence will be.

Wolf.

BLITZER: Yes, the plea bargain agreement that he pleaded guilty, as we know.

Jessica Schneider, thank you for that update.

Let's get some analysis.

Joining us right now, Laura Coates, CNN legal analyst, former federal prosecutor, Michael Zeldin, former special assistant to Robert Mueller over at the department of justice, he's a CNN legal analyst as well, and Kim Wehle, a former assistant U.S. attorney, associate independent counsel during the Whitewater investigation.

So, Kim, what do you think? It looks like they're getting ready to wrap up, the prosecution, their questioning of Rick Gates, but he's got a lot of stunning information he's already released.

KIM WEHLE, FORMER ASSISTANT U.S. ATTORNEY: Sure. And the question here is, the extent to what the jury's going to believe, how this is corroborated, both by the documents and by Mr. Manafort's former accountants. That all of this is lining up. And, remember, Manafort's defense is going to be, I didn't know, I was dumb, I didn't understand this. And Rick Gates is the one who orchestrated this.

But, of course, now we know, Rick Gates met Mr. Manafort as an intern at a holiday party. It's tough to say that that narrative is actually going to come across in a real way to the jury here.

BLITZER: What can -- because pretty soon the defense will have an opportunity, Michael, to cross-examine and they're going to try to undermine this guy, Rick Gates, as much as possible. Say, you know, he's already admitted lying to federal prosecutors. You can't believe a word he says.

MICHAEL ZELDIN, CNN LEGAL ANALYST: That's exactly right. So that they could say to the jury, you have a reasonable doubt when you get to the jury room to deliberate. The problem is, is that Gates' testimony is corroborated by all the e-mails, by the accountants, by the tax preparers, by the weight of the bank records in the fraud aspect of this case. Even if they don't like Gates, I think it's going to be hard to discredit what he says because there's so much support for it. Remember, we have two cases going on here. We have tax fraud, when they were making a lot of money and moving it through Cyprus, and then we have bank fraud, where they had no money and they were trying to trick banks into lending them money. And both of those aspects of the case are very well supported by other witnesses and documentary evidence.

BLITZER: You believe that -- the testimony so far, both of these guys, Manafort and Rick Gates, very, very sleazy.

LAURA COATES, CNN LEGAL ANALYST: A very sleazy operation. You're affixed with this conundrum, do you believe the accused liar or the admitted liar. But the credibility game and contest can only go so far because birds of a feather do flock together. And the jury's going to look at this and say, OK, fine, I've got one sleazy person who's doing money laundering and stealing from their employer, so to speak, I've got someone else who's evading Uncle Sam and trying to launder money the way I've never been able to do and cannot do that want to be a legal -- you know, a legally following (ph) citizen of the United States of America. So you've got this conundrum.

[13:05:28] But for the jury here, they're seeing, why is this person on trial? And wouldn't you -- you have an accountant telling them that I also forged information, falsified documents. You've got his right hand man saying the same thing. This is a great equalizer of sorts.

Now, the prosecution will try, Wolf, to say, well, do not pay much attention to this cooperation agreement, as if that's the thing that says you can't believe him, he would lie just to protect his own hide, in this case. In many ways, he has that sentences hanging in front of him as a carrot. He must tell the truth. It enhances his credibility.

BLITZER: Everybody stand by for a moment because there's more news just coming into CNN. "The Wall Street Journal" is now reporting that federal prosecutors are looking into possible tax fraud by Michael Cohen, the president's former fixer and lawyer.

Let's get some analysis of what we're just learning from "The Wall Street Journal."

And, Laura, let me start with you, because "The Wall Street Journal" headline, former Trump lawyer Michael Cohen under investigation for tax fraud. We know the U.S. attorney, the federal attorney for the Southern District of New York, in New York City, in Manhattan, they're investigating him. He's under criminal investigation. He hasn't been charged with any wrongdoing yet.

COATES: Right.

BLITZER: But they've raided his home, they've raided his apartment at the Regency Hotel in New York. They've raided his safe deposit box, his office.

A line jumps out at me from this "Wall Street Journal" article. Federal authorities are assessing whether Mr. Cohen's income from his taxi medallion business was underreported in federal tax returns. One of the people said, the income included hundreds of thousands of dollars received in cash and other payments over the last five years.

So what does this say to you, that they're squeezing this guy big time right now?

COATES: Well, I'm hearing deja vu. This is precisely, in a way, what Paul Manafort is on trial for, underreporting his income, trying to evade tax payments and obligations, and somebody in the orbit of the president of the United States, who would presumably know about their conduct in some way, shape or form. And so I'm seeing a bit of a deja vu.

What's interesting here is that unlike the case of Paul Manafort, remember, Mueller has not wanted the case of Michael Cohen. He has passed this off to a different district court, a different U.S. attorney's office. So I was curious as to why he's chosen to argue on behalf of one and not the other. And probably because of the role that Michael Cohen did not play on the campaign, unlike Paul Manafort.

BLITZER: How do you see it?

ZELDIN: Well, this is what you expect in a situation with a depreciating asset like a taxi medallion. Remember, medallions were worth 1.2 million until Uber came.

BLITZER: Each medallion.

ZELDIN: Each medallion. Then Uber comes along and this is a depreciating asset. So he's got a whole host of money invested in these medallions. He's got to deal with this, with the banks, with his taxes. It makes perfect sense to me that there would be fraud on the banks and fraud in the preparation of his taxes as it relates to that asset.

BLITZER: And, you know, because he hasn't been charged with any crime, although there is a criminal investigation underway right now, but this article is very devastating, you know, Kim. If you take a look, he was the president's lawyer and fixer for a decade, maybe 12 years. He's in deep trouble right now. You've got the former chairman of the president's campaign, Paul Manafort, in deep trouble right now. The deputy campaign chairman, Rick Gates, in deep trouble. The president's former national security adviser, Michael Flynn, in deep trouble right now. What does that say to you?

WEHLE: Yes, so there's certainly connections to the president. We don't know how to connect the dots. But there are a couple things here.

One is that the Justice Department is sending a very strong message, we are on our game. We've got our facts. We are ready to go after these people. And I think also farming some of it out to other parts of the Justice Department makes it a little harder for Trump to play the, I'm firing Mueller card and calling everything off. I mean I think that's one really important point. The other thing is --

BLITZER: Because you make the point that Mueller referred the Michael Cohen case to the Southern District of New York, the U.S. attorney for the Southern District of New York?

WEHLE: Yes, there -- exactly. The tendrils are in different places in terms of how this entire operation is being investigated and prosecuted. So I know there's a lot of concern we're going to see another Saturday night massacre, like we saw with Nixon, where the president's going to call everything off and then we won't have the rule of law actually function any more. But I think it's a smart move to have other parts of the Justice Department that are answering to Jeff Sessions and not to Rod Rosenstein address some of these issues.

BLITZER: What it also says to me, Laura, and I'm anxious to get your thoughts, is they're squeezing Michael Cohen big time right now to make sure that he does flip, that he does cooperate, pleads guilty to whatever crimes they may have against him, and he could be an excellent witness in terms of the bigger picture.

COATES: He could be. And, of course, all these mounting legal jeopardy cases are going to make him uniquely desiring of doing that very thing. But, remember, they actually have to want to hear from him. You can't just say to a prosecutor, I'd like to make a deal that's favorable to me if I don't actually want to hear from you. And why would I not want to hear from you? I already have the information someplace else. I no longer need you. When it was important for you to come forward, you did not. You'll remember, we've seen him already, though the press, through his attorney, try to give little nuggets and kernels of information and he has not gotten a deal yet. It says to me there is some sort of reluctance on the part of Mueller's team to say, well, we won't be giving you a deal. And I'm curious as to why they haven't.

[13:10:32] BLITZER: Everybody stand by. There's more we need to follow up on.

We're also getting some new reporting right now that suggests the president's legal team is reluctant for the president to answer any questions about possible obstruction of justice in an interview with Robert Mueller and his team. You're going to find out what happens if they refuse.

Plus, a huge primary night here in America that may paint a clearer picture for the midterm elections. Will President Trump's pick -- will the picks win out tonight? And how successful will socialist backed Democrats be tonight?

Also, as Iran gets hit with U.S. sanctions, Israel says the regime should be, quote, vanished from the world. This as President Trump issues a new threat against any nation dealing with Iran. Stand by. We have new information.

(COMMERCIAL BREAK) [13:15:37] BLITZER: Will he or won't he? That's still the question surrounding President Trump and the Russia investigation. Will the president of the United States answer questions in person from the Special Counsel Robert Mueller? But it seems there's another sticking point right now. Namely, the obstruction investigation.

Let's go to our White House correspondent Kaitlan Collins. She's outside the president's Bedminster golf resort in New Jersey. The president's been vacationing there over the past several days.

Where do we stand right now on the interview with the -- with the -- the interview negotiations, Kaitlan?

KAITLAN COLLINS, CNN WHITE HOUSE CORRESPONDENT: Wolf, we still seem to be very much in the middle of this. This has been going on for eight months now, the back and forth between the president's legal team and the special counsel's team over whether or not he's actually going to sit down with an interview with the special counsel.

Now, what we do know, the latest reporting that we have, is that the president's legal team is prepared to respond in the coming days to the latest proposal from Robert Mueller's team. Now, Wolf, you'll remember that proposal was that they would agree to limit the number of questions about obstruction of justice, but they still wanted to ask the president those questions in person. That is something the president's legal team does not want to agree to. They actually want to have no questions about obstruction of justice. Rudy Giuliani has made that quite clear. Instead, hoping the questions can only focus on collusion and events that occurred before President Trump took office.

You heard that in Rudy Giuliani's quote to "The Washington Post," saying there is a real reluctance to allow those questions about obstruction of justice if the president does sit down with them. So they seem to be very much in the middle of this still, this cat-and- mouse game, going back and forth.

But what we do know, that even though these negotiations hit a wall after the FBI raided Michael Cohen's house, office, and hotel, the president no longer seeming willing to sit down with the special counsel, he does, in recent weeks, seem to be expressing that interest once again in sitting down with him, putting him at odds with his legal team here, Wolf, but it does seem that it will be the president who makes the final decision about whether or not he's going to sit down with Robert Mueller.

BLITZER: We'll see what happens,

Kaitlan, thank you very much.

Back with us now, Kim Wehle, Michael Zeldin, Laura Coates.

What do you think, is there a chance the president will actually sit down with Robert Mueller and his team face to face, answer questions?

COATES: I think he's using the media as a focus group of whether or not he should do so, knowing that the court of public opinion will ultimately influence the impeachment process, if there ever is one.

I think it's in his best interest to speak with his attorneys present, which would not happen if he were subpoenaed and go before a grand jury. You want that harness and potentially a muzzle around him and a script in front of him to answer questions that would not be allowed to be there if he had a grand jury. It's in his interest. Whether he'll actually follow suit is very different.

BLITZER: Because the argument -- one of the points that were made, maybe he'll answer questions on these allegations of, quote, collusion, but he's only going to do it in written form, Q&A, any questions involving obstruction of justice.

ZELDIN: Right. So you have three different things going on here. You have coordination conspiracy pre-election. There's no executive privilege. He has a very hard time denying Mueller the right to talk to him about that.

BLITZER: And that's the collusion issue.

ZELDIN: That's the collusion issue.

Then you get to obstruction. Obstruction breaks into two different parts. One is the firing of Comey.

Now, he received information from his topped advisers, Rosenstein and Sessions, about whether to fire Comey. That falls within the executive privilege. That's what they don't want to talk about.

But then there is, in obstruction, also the firing of Flynn, the interference with the FBI by the intelligence community, the interference alleged with the Burr committee. All of that doesn't include executive privilege. So they're really trying to parse this out into various pieces so they are only talking about things that don't implicate executive privilege.

BLITZER: You know, Kim, it's interesting, if they refuse to answer questions, if the president refuses to answer questions, he potentially could be subpoenaed. And that could wind up a decision before the U.S. Supreme Court.

I want you to listen to what one Democratic congressman, Adam Smith of Washington state, told me last night.

(BEGIN VIDEO CLIP)

REP. ADAM SMITH (D), WASHINGTON: Nobody has the right to ignore a subpoena. However, remember the Supreme Court that we have. You know, if this goes all the way up to this Supreme Court, you can bring it back to Nixon when the Supreme Court at that time, you know, required President Nixon to turn over the tapes because they were following the law. But as I've noted before, this Supreme Court seems to make its decisions based on what Donald Trump and the Republican Party want, as opposed to precedence of the Constitution.

(END VIDEO CLIP) [13:20:10] BLITZER: So if this issue goes up to the Supreme Court, what do you think?

WEHLE: Yes. I mean I think it's hard to get around the Nixon case. And, in addition, even executive privilege wouldn't necessarily protect the president from speaking, responding to a subpoena.

But the other issue is we are dealing with President Trump. So even in the world where we have an order from a court saying you must comply and you must actually respond to the subpoena, this is not a person that I would put -- would assume would necessarily comply. He might say, listen, I don't think that's a real court, I don't have to, I'm the president of the United States, I'm the head of the executive branch, I choose to ignore it. And then we're in a full-fledged constitutional crisis.

BLITZER: But even if the Supreme Court says you must comply, he could always plead the Fifth and not necessarily comply.

WEHLE: For specific questions, yes.

BLITZER: OK, guys, excellent conversation. Guys, thanks very much. The legal perspective.

There's other news we're following, including a very important primary night here in America. You're going to hear why the president will be watching very closely, including his 11th hour endorsement and the controversial candidacy of one of his most famous loyalists.

Also, CNN uncovers past columns by the vice president of the United States, Mike Pence, who argues that a sitting president can be removed from office over the issue of morals.

(COMMERCIAL BREAK)

[13:26:09] BLITZER: Right now, voters in five states, they're heading to the polls. This will be another major chance to gauge the temperature of voters ahead of November's midterm elections here in the United States. We're watching primaries, specifically in Kansas, Michigan, Missouri, and Washington state.

But all eyes really are on the special election in Ohio's 12th district, where a reliably Republican seat is at risk of switching parties. Republican State Senator Troy Balderson is squaring off against Democrat Danny O'Connor. Trump, the president of the United States, has thrown his support behind Balderson, who's fighting to maintain the Republicans' three-decade-old hold on the 12th district.

Joining us now with the big things to watch, associated editor and columnist for RealClearPolitics, A.B. Stoddard.

Let's talk about Ohio tonight. This is an important race. We're going to be watching it to see if we learn there could be a blue wave, a Democratic wave, in November.

A.B. STODDARD, ASSOCIATE EDITOR AND COLUMNIST, REALCLEARPOLITICS: Wolf, the Democrats are already over performing in this district. I think the former incumbent won it by 37 points in 2016, Trump by 11. So that wasn't a Democratic fantasy. That was a Democratic fever dream. The idea that this race is too close to call, the idea that the early voting is coming in better for the Democrats is very much spooking Republicans.

Even a close call tonight, a near miss for Republicans, they hold on by a little, is an indication that they will be in for incredible amounts of surprises in otherwise unthinkable places, spending resources all over the map in newly competitive races across the country before November 6th.

BLITZER: We're going to be watching this congressional district very closely.

We're also watching a race in Kansas right now. A race where the president only recently came in and endorsed Kris Kobach for that seat.

STODDARD: Republicans have made it very clear in the last 24 hours, Wolf, they did not want this to happen. There is a sitting Republican governor. He replaced a former governor, Governor Sam Brownback, who vacated the seat to go to the administration. Kris Kobach is the secretary of the state. A very controversial figure. He ran up President Obama -- President Trump's voter fraud commission. It was not a successful story. Many, many secretaries of states, his colleagues around the country, rejected his methods. They wouldn't share their data with him. The idea that Trump is coming in at the last minute and could throw this to Kobach would be a gift for Democrats who think that it would make the Democrats far more competitive in the general election and God forbid have a Democratic governor in Kansas.

BLITZER: Yes, if that happens, that would be a huge, luge deal.

We're also watching, on the Democratic side, to see where this party, the Democratic Party, is moving as a result of what happened in New York City just a few weeks ago. Alexandria Ocasio-Cortez, she won a Democratic primary against a long-time Democratic sitting congressman. And we're seeing if her support for some of these other congressional candidates and gubernatorial candidate really can make an impression. And we're also seeing if whether the Democrats are moving towards this notion of being Democratic socialists.

STODDARD: Well, the party leadership certainly hopes not, Wolf. They'd like to take back the White House in 2020, and they're very conflicted about this movement. They want a star. They need a star. They want the spark and the heat but not the wildfire. So this is being watched with tremendous caution.

The first candidate, James Thompson, he came close in Mike Pompeo's seat, which was vacated. And he almost won by five seats in a district that Trump won by something like 27. So he is on the heels trying to compete about Ron -- against Ron Estes. He did quite well. He is hoping for a comeback and he has the best chance. Brent Welder is the Bernie Sanders/Ocasio-Cortez candidate that the

Democratic establishment is worried if -- if he prevails, they will lose the seat anyway to the incumbent, Kevin Yoder.

[13:30:00] Cori Bush is running in Missouri against a family legacy. Lacy Clay in that seat since 2001. His father, Bill Clay, one of the founding members of the Congressional Black Caucus.