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Federal Prosecutors Indict Avenatti for Fraud, Embezzlement; This Week in Remarkable Congressional Hearings; Waters, Mnuchin Trade Shots in Testy Hearing; Rep. Porter Grills JPMorgan Chase CEO Over Employee Wages; Trump Meets with South Korean President. Aired 12:30- 1p ET

Aired April 11, 2019 - 12:30   ET


[12:30:00] NICK HANNA, U.S. ATTORNEY, CENTRAL DISTRICT OF CALIFORNIA: Because the county had not yet approved a trust for the disabled client. The house client one wanted to buy fell out of escrow because the money already paid by the county had been pilfered by Mr. Avenatti.

And to further complicate matters for client one, Mr. Avenatti who promised to respond to a social security administration inquiry related to client one's disability failed to do so. And two months ago, client one lost his social security benefits.

The other three client matters outlined in the indictment regarding Mr. Avenatti's alleged theft of millions of dollars are similar. Mr. Avenatti received the money on behalf of clients and simply took the money to finance his businesses and personal expenses. In one case after receiving $2.75 million for a client, Mr. Avenatti allegedly took nearly all that money and used it to pay for his portion of a private jet, a jet incidentally that we seized yesterday.

With respect to the tax matters, Special Agent Corner will provide you with the details of the new offenses alleged in the tax indictment, but I want to note that some of the money withheld from the paychecks of employees of his coffee company, money that was being held in trust and was supposed to be used to pay payroll taxes was instead used by Mr. Avenatti in relation to other crimes alleged in the indictment, including making lulling payments for clients for whom he had stolen -- from whom he had stolen settlement money.

Following Mr. Avenatti's arrest on March 25th, I discussed the facts related to an alleged bank fraud set forth in the criminal complaint. The indictment re-states these offenses which began in 2014 which when Mr. Avenatti allegedly defrauded the Peoples Bank, a federally insured financial institution in Mississippi, by making false representations about his income. Very simply, these false claims about his income were made by submitting factious income tax returns for both himself and his law firm. These personal tax returns submitted to the bank were clearly faked because as reflected in the indictment, Mr. Avenatti failed to file any personal income tax returns since 2010.

Moreover, the law firm tax return was fraudulent because it claimed millions of dollars in gross income, more than what was actually reported to the IRS. In the fourth area of criminal conduct alleged in the indictment, Mr. Avenatti allegedly filed under penalty of perjury a series of documents in the United States bankruptcy court that fraudulently understated the amount of money that was coming into his bankrupt law firm. The indictment also alleges that Mr. Avenatti lied during under oath testimony that he had not received any fees in relation to a particular case when he, in fact, had received those fees. The bankruptcy cases related to the theft of client funds because Mr. Avenatti allegedly used money stolen from one client to pay his creditors, including to pay off an IRS tax lien at issue in the bankruptcy.

If convicted of the 36 crimes alleged in the indictment, Mr. Avenatti would face a statutory maximum sentence of 333 years in federal prison, plus a mandatory two-year consecutive term for an identity theft count. Of course, the ultimate sentence would be up to a judge following a conviction.

At this point, I want to stress that Mr. Avenatti is presumed innocent unless and until he is proven guilty beyond a reasonable doubt in court. The indictment also contains two forfeiture allegations. In the event of -- that in the event of his conviction seek to have proceeds of Mr. Avenatti's fraudulent conduct forfeited to the government. In relation to this as I mentioned, authorities seized a $5 million jet that Mr. Avenatti co-owned, a purchase he made with money allegedly stolen from a client.

I want to express my appreciation to the IRS criminal investigators who have done excellent work on this case. This matter is the result of over two and a half years of tax collection.

JOHN KING, CNN ANCHOR: Listen there to Nick Hanna, he is the United States attorney in Los Angeles detailing stunning charges against Michael Avenatti, the attorney who gained national fame, of course, representing Stormy Daniels, the adult film start who alleges she had a relationship with then businessman Donald Trump.

Wow, our Carrie Cordero is with us, and you go through these 36 charges, the U.S. attorney saying if convicted, he never gets the full sentence but he could get 333 years in prison.

[12:35:03] Wire fraud, tax fraud, bank fraud, bankruptcy fraud, including getting settlements for clients including a paraplegic and keeping the money, and spending it on himself and lying and cheating. It sounds like they're essentially accusing Michael Avenatti's legal business of being a Ponzi scheme.

CARRIE CORDERO, CNN LEGAL ANALYST: He's a con man, no other way to describe it. I mean, they just outlined an entire panoply of fraudulent charges. He was defrauding his clients, and clearly they have lots of evidence of him knowing exactly what he was doing, he was filing fraudulent tax documents, lying to banks. I mean it, you name it, there's a financial fraud case in here, and so they have now gone back and they have detailed it. And either he'll take it to trial or he'll more likely plead guilty because he's facing significant jail time. KING: And knowing all of this under investigation for years, they talk about the tax liens, they talked about coming back to him, so as all of this is playing out he takes on this national case, he takes on the president of the United States, he starts showing up at big dinners, he starts going to Democratic fund -- Democratic dinners around the country saying I might run for president. He shows up at every hearing at the Michael Cohen trial. What's the word for that?

CORDERO: Look, it -- like I said are, it's a con. I mean, he came out in public and portrayed himself -- you know, people think, well, somebody is a lawyer, therefore, they have credibility. But he had all of this going on behind the scenes, and a lot of reputable people and organizations had him on and gave him a public forum and he, I think in many of his appearances as -- with respect to the Stormy Daniels case, it was very apparent I think to myself and other lawyers that over time he was doing things that were obviously in his interests and is not in his client's interests so he will be disbarred. He is facing significant criminal exposure here, and his public moment is up.

KING: And to her credit, she finally figured that out and dumped him before this happened.

We'll take a quick break. When we come back, it's been an interesting week on Capitol Hill, including some tough questions and some interesting answers.


[12:41:28] KING: It has been a really remarkable week on Capitol Hill, interesting moments on issues ranging from the Mueller report and the president's taxes to go big divides over climate change and diversity. Sometimes when we edit for the time we can lose some of the context and the drama so let's take a few of these moments, let them breathe and talk them over. Beginning with the attorney general's surprising use of the term "spying".


WILLIAM BARR, ATTORNEY GENERAL: We want to make sure that during elect -- I think spying on a political campaign is a big deal, it's a big deal. I'm not talking about the FBI necessarily but intelligence agencies more broadly.

SEN. JEANNE SHAHEEN (D-NH): So you're not suggesting though that spying occurred?

BARR: I don't -- well, I guess you could -- I think there is -- spying did occur. Yes, I think spying did occur.

SHAHEEN: Well, let me --

BARR: But the question is whether it was predicated, adequately predicated, and I'm not suggesting that it wasn't adequately predicated. Mr. Chairman, could I add one point of clarification --


BARR: -- that I just want to make it clearly looking -- thinking back on all the different colloquies here that I'm not saying that improper surveillance occurred. I'm saying that I am concerned about it and looking into it.


KING: So he dug a hole, they tried to dig a hole out. Again, he's used the word spying several times, and this is a very experienced veteran attorney. We talked a little bit earlier in the program about the substance of that and the Democrats are now saying it leaves him distrustful.

It was fascinating to see what happened in that room, the senators, both Democrats, and Republicans said whoa, he just said spying. At one point, Senator Schaaf, we didn't play this part, of Hawaii saying, I'm offering you a chance to get out of this because you understand what this is going to do in the cable television universe, right?

JULIE HIRSCHFELD DAVIS, CNN POLITICAL ANALYST: Well, and you can tell in that second response there that he was thinking about that in real time, that he said it and then when he saw the reaction both from Senator Shaheen and from others on the committee, he thought, OK, well, maybe I better just kind of at least put this at an arm's length so that I can later go back and explain what I meant or what I might have meant. But clearly, by -- you know, he used the word surveillance the second time. Clearly, by using the word spying and continuing to use it, he was basically refusing to back down from it all to go there.

I mean, he was trying to moderate what he said, but it was -- it was interesting to watch that unfold in that room and for him to -- for it to dawn on the senators like what, who they are dealing with here in this position and what he's willing to say.

PHIL MATTINGLY, CNN CONGRESSIONAL CORRESPONDENT: Yes. Look, clearly a veteran for using the word colloquy in the middle of a congressional hearing. Like, he's been around before when he does that. But to Julie's point, like watching Senator Jeanne Shaheen's face who was the first one who's answering the question or was asking the question when he said that before he kind of came in afterward seems like if it was proper or predicated kind of underscored the entire moment and frankly the entire two-plus hours of that hearing. Where you saw senators who immediately knew this is a very loaded term and seeing the last two years flash before their eyes and recognizing as Senator Schatz did that this is going to be a big deal no matter what, and it is, and it was and it's going to be fascinating to see how this plays out over the course of the next couple of months.

KING: And of course the president liked and we're all going to hear more from the president.

Here's another moment, this is Chairman -- Chairwoman Maxine Waters of the House Financial Services Committee, someone who has been a target of the president, he calls her congresswoman low IQ. She's now a chairwoman, the Treasury secretary in the chair, he generally has pretty good relations with the Democrats. He's worked hard to have good relations with the Democrats but this moment went to foul.


REP. MAXINE WATERS (D-CA): So is it possible that you could give us another 15 minutes to get to these?

[12:45:02] STEVE MNUCHIN, TREASURY SECRETARY: No, I have a foreign leader waiting in my office at 5:30, OK? I agreed to stay longer. It will be embarrassing if I keep this person waiting for a long period of time. I respect the committee and we want to have a good working relationship with you so I hope you'll understand. I'm already going to be late for my 5:30 meeting.

WATERS: I do understand. We are late on the time, unfortunately. We are all pressed for time.

MNUCHIN: If you'd wish to keep me here so that I don't have my important meeting and continue to grill me, then we can do that. I will cancel my meeting and I will not be back here. I will be very clear if that's the way you'd like to have this relationship.

WATERS: Thank you. The gentleman, the secretary has agreed to stay to hear all of the rest of the members. Please cancel your meeting and respect our time.

Who is next on the list?

MNUCHIN: You're instructing me to stay here, and I should cancel.

WATERS: No, you just made me an offer.

MNUCHIN: No, I didn't make you an offer.

WATERS: You made me an offer that I accepted.

MNUCHIN: I did not make an offer, just -- let's be clear. You're instructing me, you are ordering me to stay here.

WATERS: No, I'm not ordering you, I'm responding. I said you may leave any time you want. You may go any time you want.

MNUCHIN: Please dismiss everybody. I believe you're supposed to take the gravel and bang it. That's the --

WATERS: Please do not instruct me as to how I am to conduct this committee.


KING: Well, welcome to divided government. Again, there's going to be contention from time to time. You have a Democratic House and a Republican administration. Secretary Mnuchin works hard actually to keep pretty good open channels with the Democrats. How much of that as he knows again the boss has a history with Maxine Waters? What was that?

KAITLAN COLLINS, CNN WHITE HOUSE CORRESPONDENT: You're never supposed to lose your cool in a moment like that, and he certainly did. When he was just being pressed not even on something like Bill Barr was being peppered with questions yesterday and did not lose his cool. That was just over timing and when he could leave that they got into such a heated debate. Whether or not it's wise is a question that people inside the White House are debating because, of course, she's the chairwoman who conducts oversight of the department that he leads, so it's probably best not to get in a fight with her over timing.

KING: The flip side is he had a foreign leader visiting him in his office. I'm sure his staff said the secretary will be up but he has to be out by Timex and the chairwoman fairly said sorry, too bad.

DAVIS: Right. Well -- and to your point, I mean, there is one person who probably loved watching that exchange and thought he did great at that moment and that's Donald Trump. I mean, Trump does not mind if his Treasury secretary goes Capitol Hill and basically says to the chairwoman of the Financial Services Committee, particularly someone he has made it clear he doesn't like and doesn't think is smart or qualified, you know, I got to go, you have to let me go. But it was just an amazing sort of passive-aggressive off. The fact that you know -- you know, you -- if you want to leave you can leave. Well, you offered me to stay and, you know, neither one of them was willing to back down.

And if you're Maxine Waters at that moment, that's what you do, it's her committee. She's in charge, and she wanted to make it clear if he was going to leave, that's fine but that's -- it was going to be clear that he was going to be getting up and going. And the hearing was going to continue without him and that would be seen as disrespectful of the committee and so she was sort of daring him to do that. He was daring her to instruct him not to.

KING: I like that term, we should have that in the program, a passive-aggressive off.

MATTINGLY: And there's gamesmanship and we've seen it kind of behind the scenes, we've seen letters going back and forth and there's gamesmanship and it underscores that this is a new world. Where they're having to deal with committee chairs that they might not agree with and might not necessarily get along with.

But keep in mind, Maxine Waters has been around for a long time. She knows what she's doing. You see the YouTube videos or you see her making kind of fire-breathing speeches towards the base. She understands how committees work, she also knew that the secretary and the committee had agreed on a hard out and decided to push it anyway. She knows what she's doing.

KING: All right, so both -- in an odd way politically, there's substance and policy that gets discussed with the secretary. Politically, Mnuchin did well, Secretary Mnuchin did well with the boss, Maxine Waters did perfectly fine with the audience she cares most about by standing up to him and getting in his grill a little bit.

OK, let's move on, here's another new member of Congress, Katie Porter, she just flipped a district, she had a big name anyway. She's a Democrat who flipped a Republican district in Orange County in the last election. Before she came to Congress, she worked as a watchdog in California on the big banks, somebody like an Elizabeth Warren. Somebody going after the big banks questioning them.

She's made a quick name for herself in congressional hearings of going after the big guys. If you're a corporate executive, a banking executive across from her and you're in that committee, you better be prepared. Yesterday, it was the JPMorgan Chase CEO Jamie Dimon, Congresswoman Porter saying, hey, you know, an entry-level worker at your firm, sir, is having a hard time making ends meet.


REP. KATIE PORTER (D-CA): My question for you, Mr. Dimon, is how should she manage this budget shortfall while she's working full time at your bank?

JAMIE DIMON, CEO, JPMORGAN CHASE: I don't know that all your numbers were accurate that. That number is a start -- is generally a starter job.

PORTER: She is a starting employee, she has a six-year-old child, this is her first job. She doesn't have the ability right now to spend your $31 million.

DIMON: I'm always sympathetic.

PORTER: She's short 567. What would you suggest she do?

DIMON: I don't know, I'd have to think about that.

PORTER: Would you recommend that she take out a JPMorgan Chase credit card and run a deficit?

[12:50:00] DIMON: I don't know, I'd have to think about it.

PORTER: Oh but what I'd like you to do is provide a way for families to make ends meet.


MATTINGLY: Yes, so that's some (INAUDIBLE) on the target list that Katie Porter who is on the lowest end of the diads of the House Financial Services Committee because she is a freshman, is not considered one of the kinds of highest profile members of the caucus because she's not necessarily on social media as much, on magazine covers as much. Here's the important thing to remember about Katie Porter particularly as it portends to the Financial Services Committee.

She knows this stuff. She has worked in this stuff. She has worked on mortgage fraud investigations. She is close kind of acolyte of Elizabeth Warren. And talk -- when she came into Congress, I remember talking to people who work in the banking industry pointing her out and saying watch her because of what she's going to do because she actually knows what she's talking about. Which I'm not going to besmirch anybody in Congress but that's doesn't necessarily always the case on some of these committees.

And there's value to that, and you've seen --

KING: Very diplomatic.

MATTINGLY: That was good. You saw that with her and the Equifax CEO who she'd lit up in a hearing. You saw it with the now former Wells Fargo CEO who she lit up in a hearing.

KING: Let me stop you actually because we want to show you this. This is the point of having this conversation today, stepping a little bit to show you the moments. The Equifax CEO. Here's another one of Katie Porter's moments.


PORTER: My question for you is whether you would be willing to share today your social security, your birth date, and your address at this public hearing.

MARK BEGOR, EQUIFAX CEO: I would be a bit uncomfortable doing that, Congresswoman. If you would so oblige me I'd prefer not to.

PORTER: If you agree that exposing this kind of information, information like that, that you have in your credit reports creates harm, therefore you're unwilling to share it, why are your lawyers arguing in federal court that there was no injury and no harm created by your data breach?

BEGOR: Congresswoman, it's really hard for me to comment on what our lawyers are doing.

PORTER: Respectfully, excuse me but you do employ those lawyers and you -- they do operate at your direction.


KING: Good for her. He does. Whatever your position on the issues, he's the CEO, he does employ those lawyers. They are representing him.

You're right. You were being kind though. Some members go into these hearings just not prepared. She's not on that list.

DAVIS: Well -- I mean, what's interesting is you're right in that, you know, she doesn't have the social media following that like an Alexandria Ocasio-Cortez has and that sort of thing, but it's fascinating to watch these new members really kind of take the reins at these hearings and basically go in preparing for moments like that, you know. Basically, to take their opportunity of, you know, they have five minutes for questions and to actually, you know, have a list of somebody's personal finances and to have a concrete example of how you can't make ends meet on a budget like that with a job like that.

These are ways -- you know, that moment actually has gone somewhat viral. You know, that kind of got around as did the Equifax moment, and it's a way of them, you know, trying to elevate their issues and make their mark in a way that we haven't necessarily seen from more junior members in the past and I think it's going to make a difference.

COLLINS: Or even senior members who usually use those five minutes to make some kind of political statement, or they spent the first four minutes talking and then they ask a few questions. Instead, it's just very pointed questions that put these powerful people on the spot and at times embarrass them.

KING: We're about a minute and a half away from the president of the United States. I'm going to sneak in one more here. Some veteran members of Congress do come prepared. This is Al Green yesterday.


REP. AL GREEN (D-TX): As I look at the panel and I'm grateful for your attendance, the eye would perceive that the seven of you have something in common. You appear to be white men. I may be mistaken. If one among you happens to be something other than a white male, would you kindly extend a hand into the air?

If you believe that your likely successor will be a woman or a person of color, would you kindly extend a hand into the air?

All white men and none of you, not one, appears to believe that your successor will be a female or a person of color. Is your bank likely to have a female or a person of color within the next decade? Kindly extend the hand into the air.

Two, three, four, five. Five. Without giving the commentary that I would dearly like to give, I'll move on.


KING: He didn't have to give commentary. He made his point.

[12:55:00] The president of the United States at the White House.

(Foreign Language)


UNIDENTIFIED FEMALE: Mr. President, are you -- on an economic project for South Korea and North Korea, are you willing to allow some leeway in relaxing sanctions so that South Korea can pursue some more economic projects with North Korea?

TRUMP: Well, we are discussing certain humanitarian things right now, and I'm OK with that, to be honest, and I think you have to be OK with that. And South Korea's doing certain things to help out with food and various other things for North Korea, and we'll discuss different things inside.

Again, the relationship is a much different relationship than it was two years ago. You'll remember what that was all with, and certainly during the Obama administration where nuclear weapons were being tested often, where rockets and missiles were being sent up in many cases over Japan. And that we are in a much different situation right now so we'll be discussing that very much actually.


UNIDENTIFIED FEMALE: Mr. President? Do you still love WikiLeaks?

TRUMP: I know nothing about WikiLeaks. It's not my thing. And I know there is something having to do with Julian Assange. I've been seeing what's happened with Assange, and that will be a determination. I would imagine mostly by the attorney general who is doing an excellent job so he'll be making a determination. I know nothing really about him. It's not my deal in life.

UNIDENTIFIED FEMALE: What would you like to see happen? What kind of punishment?

TRUMP: I don't really have any opinion. I know the attorney general will be involved in that and he'll make a decision. OK?

UNIDENTIFIED FEMALE: Mr. President, are you pleased with your attorney general yesterday, he said that there was spying into your campaign in 2016?

TRUMP: Yes, I think what he said was absolutely true. There was absolutely spying into my campaign. I'll go a step further, in my opinion, it was illegal spying, unprecedented spying and something that should never be allowed to happen in our country again. And I think his answer was actually a very accurate one and a lot of people saw that -- a lot of people understand, many, many people understand the situation and want to be open to that situation. Hard to believe it could have happened, but it did. There was spying in my campaign, and his answer was a very accurate one.

UNIDENTIFIED FEMALE: Mr. President, is a third summit with North Korea's chairman in mind? And does that also include --

TRUMP: It could happen. A third summit could happen, and it's step by step. It's not a fast process. I never said it would be. It's step by step.

I enjoy the summits, I enjoy being with the chairman. I think it's been very productive, and it really is a step by step. It's not going to go fast. I've been telling you that for a long time. If it goes fast it's not going to be the proper deal.

UNIDENTIFIED FEMALE: Is a three-way summit with the leaders of the --

TRUMP: Well, that could happen also. I think that would be largely dependent on Chairman Kim because President Moon will do what's necessary. I know President Moon has been fighting this battle for a long time. He's done an excellent job.

I consider him a great ally, and a lot of good things are happening. A lot of good things are happening in the world. Our economy is the best it's ever been. Our employment numbers, unemployment, and employment are the best they have ever been. We have more people working right now in the United States than we've ever before, almost 160 million people.

And likewise, South Korea is doing very well. Their economy is doing very well, and I think our trade deal has helped that process. So we're sitting on two great countries right now, and we're leading two great countries, and we think that -- I can speak for myself and I think can I speak for President Moon. We think that North Korea has tremendous potential and real potential under the leadership of Kim Jong-un. Let's see how it all works out.

UNIDENTIFIED FEMALE: Mr. President, have you communicated with Kim Jong-un in the last two weeks since you told us --

TRUMP: I don't want to comment on that, but we have a very good relationship.

UNIDENTIFIED FEMALE: Back to the Mueller report, are you concerned that Barr said that he's not going to (INAUDIBLE) to protect your --

TRUMP: No, I'm not concerned about anything because frankly there was no collusion and there was no obstruction. And we never did anything wrong. The people that did something wrong were the other side, the dirty cops and a lot of the problems that were caused. It's a disgrace what happened and, again, it should never happen to a president again.

You are just lucky I happen to be the president because a lot of other presidents would have reacted much differently than I reacted. You're very lucky I was the president during this scam during the Russian hoax as I call it. So, no, I'm not concerned at all. The bottom line, the result is no collusion, no obstruction, and that's the way it is. And I know a lot of people were very disappointed, but they knew the real answer.

You know, when the Democrats go behind the scenes and they go into a room backstage and they sit and they talk and they laugh because they know it's all a big scam, a big hoax. And it's called politics, but this is dirty politics, and this is actually treason.