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No Agreement Reached in Trade Negotiations with China; Facebook Co-Founder: Zuckerberg Has Too Much Power; Major American Cities Under Cyber Attack. Aired 12-1p ET
Aired May 11, 2019 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[12:00:00] FREDRICKA WHITFIELD, ANCHOR, CNN NEWSROOM: -see things in an hour. And many of them blasting a subpoena of his son, Don Jr. and the Mueller Report. CNN's Jeremy Diamond is at the White House for us. So, Jeremy, the President has a lot on his mind this weekend. Let's start with his comments from the President about Biden and what should happen next.
JEREMY DIAMOND, CNN WHITE HOUSE CORRESPONDENT: Yes, that's right, Fredricka. Well, the President and his allies have been pushing these questions of conflict of interest stemming from Joe Biden's role in the Obama administration, focusing on Ukraine policy, at the same time, as his son Hunter Biden was on the Board of a Ukrainian natural gas company.
And so, now we're seeing the President essentially saying that he is open to the possibility of directing the Attorney General Bill Barr to investigate the Bidens over these questions of conflict of interests.
And at the same time, we're also seeing the President on Twitter venting his frustrations about investigations circling around him and his own family. The President issuing a string of retweets this morning, 62 in under 40 minutes, talking about a grab bag of red meat issues for his base.
But one of those issues was the Senate Intelligence Committee subpoena of his son Donald Trump Jr. We know that the President has been unnerved by that, and this morning he took to Twitter to share some of those frustrations in the form of retweets not only about that issue, but also voicing criticism of the Senate Intelligence Committee Chairman Richard Burr, who is of course a Republican Senator.
WHITFIELD: And then, Jeremy, what can you tell us about this report that former White House Counsel Don McGahn refused to publicly state the President did not obstruct justice.
DIAMOND: Well, our sources are telling us, Fredricka, that the White House Special Counsel Emmet flood, who has been handling essentially the response to the Mueller investigation for the White House, that he reached out to Don McGahn's attorney Bill Burck to ask him if McGahn would put out a statement saying that he did not believe the incidents involving him and the President that are detailed in the Mueller report amounted to obstruction of justice.
And we're told that McGahn declined to do so, that's despite the fact that McGahn apparently told Mueller and his team in interviews that he didn't believe the incidents involving him amounted to obstruction of justice.
But again those incidents involving McGahn have been at the heart of questions that Democrats in particular have raised about whether the President committed obstruction of justice. Of course Mr. Mueller did not reach a conclusion on that. He declined to say whether or not these incidences that he described in the report amounted to obstruction of justice.
But the Attorney General Bill Barr said that he did not believe the Justice Department had enough evidence to prosecute the President on those kinds of charges. Fredricka?
WHITFIELD: All right, Jeremy Diamond, thank you so much. All of that plus President Trump's personal attorney now reversing course. Just hours after Rudy Giuliani said he was going to Ukraine to push for an investigation into former Vice President Joe Biden, he is now saying - Giuliani is saying he's not going to go; Giuliani insinuating that something bad could happen.
(BEGIN VIDEO CLIP)
RUDY GIULIANI, ATTORNEY TO PRESIDENT DONALD TRUMP: I've decided, Shannon, I'm not going to go to the Ukraine.
SHANNON BREAM, FOX NEWS HOST: You're not going to go?
GIULIANI: I'm not going to go, because I think I'm walking into a group of people that are enemies of the President, in some cases enemies of the United States, and in one case, already a convicted person who has been found to be involved in assisting the Democrats with the 2016 election.
(END VIDEO CLIP)
WHITFIELD: So the news of this cancelled trip came soon after President Trump told Politico that he planned to talk to Giuliani about the trip. All right, let's talk about all this now with Michael Zeldin who also served as Robert Mueller's former Special Assistant at the Department of Justice. He is also a former federal prosecutor and CNN legal analyst.
Also joining me, Wes Lowery a national reporter for The Washington Post, and a CNN contributor. Good to see both of you.
Alright so Wes, let me begin with you this about-face by Rudy Giuliani. At first, he says he's going to Ukraine to dig up dirt on Joe Biden, and then he says he's not going because he was going to walk into a group of people who are enemies both to the President and the United States.
So, what can you tell us about what really is at the core of all this?
WESLEY LOWERY, NATIONAL REPORTER, WASHINGTON POST, AND CNN CONTRIBUTOR: Sure, I mean I think it's pretty remarkable when the reporting initially came out and Ken Vogel at The New York Times has done a ton of really strong reporting leading the way on this, that Rudy Giuliani the attorney for the President of the United States was going to go on this trip, seeking information not only about Hunter Biden and his role on the Board of a Ukrainian gas company, but also about the beginnings of the Mueller investigation - the Russian interference investigation and whether or not Democrats, the DNC, and other people had worked with Ukrainian intelligence on this.
It didn't really, I think, underscore the extent to which our political moment is one not of shame right, one that's relatively shameless.
[12:05:00] The idea that someone close to the President of the United States much less his personal attorney would personally lobby - travel across the world to lobby a foreign government to investigate, one, an investigation into the President United States, but two, I mean to launch an investigation or encourage them to continue investigation into the son of the person who is currently the frontrunner to be the opposing candidate to the President of the United States, does really speak to kind of where our political moment is.
Now, it's unsurprising to me and maybe it is a little surprising to me that, given the political pressure and the media pressure and the way that this was being perceived, that Rudy Giuliani has now pulled out of this meeting. But it was pretty remarkable on its face from the very beginning.
WHITFIELD: Yes, I mean Michael, it smacks of what was he or anyone thinking. I mean, hello, seeing how a foreign country meddled into the United States election, wasn't it - that the nucleus of the Mueller report? And now you've got a personal attorney who is out loud saying he's seeking potential assistance from a foreign country about meddling into the next election?
MICHAEL ZELDIN, ROBERT MUELLER'S FORMER SPECIAL ASSISTANT AT JUSTICE DEPARTMENT, AND CNN LEGAL ANALYST: Right. Well you've used Rudy Giuliani and thinking in the same sense, which I'm not sure is possible.
WHITFIELD: Oh my.
ZELDIN: Because what he says is just unbelievable. The notion that he would, through private channels, do something which the government has the authority to do, that is the State Department and the Office of International Affairs at the Justice Department have formal mechanisms by which, if they believe that there is something that is worth looking at, can be looked at.
But Giuliani is freelancing, and that's something that he's been doing all the time that he's been connected with Trump. I never think it helps Trump at all. I think it's all about Giuliani, he is a very Giuliani-centric individual and hopefully there's--
WHITFIELD: Except the President says out loud that he kind of liked the idea too.
ZELDIN: Yes, I know, I understand that. But ultimately, I hope this redounds to Giuliani's detriment because it's just unseemly to have him out there doing this sort of stuff. It's just not acceptable behavior.
WHITFIELD: Alright, so Michael let me also get you on the Democrats' now latest effort to get the President's taxes. They have issued subpoenas to the IRS, the Treasury Department, one deadline came and went, now there's a new deadline of May 17.
And if the subpoenas are ignored, what is the next step potentially? Is it contempt for the Treasury Secretary or anybody else, and if so does that even matter?
ZELDIN: Right, so what's at the heart of this is that the Treasure - the Ways and Means Committee has asked for the tax returns of the President and some of his businesses. They have a right under a specific statute to do that.
The White House is pushing back, actually the Treasury Department on behalf of the White House, is pushing back saying there's no valid legislative purpose for this inquiry, and they're therefore not going to reply.
They've subpoenaed it, it will now go to court if he contests, if he is held in contempt and then the court will have to make a decision as to whether or not Congress is acting within its authority to demand that which the statute authorizes, and whether or not if they don't do it, there's you know the possibility of contempt and jail for it.
WHITFIELD: And complying and contempt are usually taken very seriously. How do you see this, Michael, that the Treasury Secretary has already testified? It's not going to happen and there had been other threats of contempt involving people in the Trump administration, and it doesn't seem to shake anyone.
ZELDIN: Well that's right. It seems to me that they've made a decision that across the board, with respect to Nadler and Schiff and Richie Neal that all of these subpoenas for Congressional oversight that is in - they are entitled to, they are just going to stonewall. That seems to be a strategy that they've adopted.
They seem to be willing to take the contempt citation. They understand fully well that, if there is litigation around contempt, it could be months and months and even years, and that that delay advantages them, because I think that they believe that the information that's being sought will be damaging to their political and legal interests.
And so, they've made a decision that, if that's the case, rather than give it up, we'll stonewall and delay and hope that the 2020 election comes and goes before anyone sees - any of these documents see the light of day.
WHITFIELD: And Wes, in the last hour, I talked to Congressman Lloyd Doggett, and this is what he had to say about why Democrats do want to see the President's taxes.
(BEGIN VIDEO CLIP)
REP. LLOYD DOGGETT (D-TX): when The New York Times in great investigative reporting showed that Donald Trump was not just a loser, but the biggest loser of any taxpayer individually in America at one point,
[12:10:00] his response was that dodging taxes was just sport, to use his word not unlike his comment a couple of years ago that he was smart, because he hadn't paid taxes.
(END VIDEO CLIP)
WHITFIELD: And so, Wes, folks have reviewed the history of Donald Trump and what has been learned about his taxes in that New York Times report that he lost more than $1 million - $1 billion in a ten-year - during a ten-year span. Does this give Democrats the ammunition to help justify what it is they're looking for in demanding his tax returns?
LOWERY: It certainly doesn't hurt the Democrats' argument. Now, to be clear, I mean this is going to be a partisan fight it seemed on the merits and legal experts have been weighing in on this at this point for not just weeks and months, but for years, that the Democrats did in fact have the authority to subpoena these tax records.
And Trump has decided he's going to continue fighting that in part in a strategy that might force this over to the courts and stretch this out past the election date, at which point he has much less to lose no matter what comes out.
But I do think that both of these stories, both of these lines of conversation, both about the subpoenas around President Trump's tax returns, but also about Rudy Giuliani and Ukraine speak to two big themes.
The first is, how is the President attempting to grapple and fight back at the Congressional oversight of the Democrats who now run the House?
But second, what are the President's - what is the President going to be willing to do now that he is the President himself running a campaign.
So, when you think about things like having perhaps interactions with foreign governments or encouraging explicitly or otherwise either interference of foreign governments, that's one thing when you are a private businessman who's running for President.
It's a different thing when you are the President himself and you have the ability to instruct the Attorney General to do things, the ability to instruct the Treasury Secretary to do things.
And so, what we're seeing is President Trump being the same Donald Trump that he was back in 2016, except now he's the President of the United States. And so, when he asks for something or does something, he's doing it with the force of the United States government as opposed to just with the RNC or with his campaign staff.
WHITFIELD: All right, West Lowery and Michael Zeldin, we'll leave it there for now. Thanks so much.
WHITFIELD: All right, still ahead this breaking news, two barges colliding into an oil tanker spilling chemicals into a busy Texas shipping channel. A live report coming up.
And one of Facebook's founders, now calling for the company to be broken up. The reason he's so concerned, straight ahead.
[12:15:00] (COMMERCIAL BREAK)
WHITFIELD: Right now, thousands of barrels of a toxic gas product are leaking into a shipping channel near Houston, following a barge collision. A tugboat pushing two barges collided with an oil tanker on Friday, almost ripping one of the barges in half.
The crash occurred inside the Houston Ship Channel near Bay Port. CNN's Ed Lavandera is live in Houston where officials just updated the situation. So, what are you learning, Ed?
ED LAVANDERA, CORRESPONDENT, CNN: Hi, Fredricka. Well investigators say they still don't know what caused these vessels to collide on Friday afternoon in the Houston Ship Channel, but there is an environmental concern, as 9,000 barrels of this gasoline product has leaked into the Houston Ship Channel.
Originally, investigators had said that it was 25,000 barrels. But they have lowered that number now to 9,000 barrels of this gasoline product. They are focusing also on the recovery. These - two of these barges between them were carrying 50,000 barrels of this gasoline product. One of those barges, which holds about half of that, is capsized so they're in the process of trying to recover that and make sure that that tank doesn't rupture, spilling more of this gasoline into the water there. Company officials spoke just a little while ago, updating folks on the situation there, in the ship channel.
(BEGIN VIDEO CLIP)
JIM GUIDRY, INCIDENT COMMANDER, KIRBY INLAND MARINE: Our vessel, The Voyager, with two barges loaded with Reformate were struck by the ship Genesis River, and one of our barges has lost approximately 9,000 barrels of Reformate.
The other barge capsized, but has not leaked any cargo at this time. And we currently have about 3,600 feet of boom in place and we're working to put an additional 12,000 feet of boom, with 29 boats and 88 people in place.
(END VIDEO CLIP) LAVANDERA: So that boom that they're talking about is that a tube-like material that floats on top of the water. All of that is being deployed to try to contain that fuel from moving with the currents away from that site, and they're trying to clean that up.
Company officials and investigators say that there is around-the-clock air monitoring going on as well and that none of that is showing any kind of hazardous effects for people who live nearby and in those areas.
And they also say that their efforts today will be - we reported a lot here over the last few days about the weather situation. Some more rain expected here in the Houston area. They say they do expect weather to hamper some of the recovery efforts and the investigative efforts throughout the day, but that so far they're - they will work through it and no plans yet to stop that, because of the weather. Fredricka?
WHITFIELD: All right, Ed Lavandera in Houston, thank you so much. All right, coming up, no deal. Trade talks between the U.S. and China sputter, despite President Trump adding new tariffs, but who really pays the price when the U.S. raises rates on foreign goods? We'll ask the President and CEO of American Apparel, next.
[12:20:00] (COMMERCIAL BREAK)
WHITFIELD: Trade negotiations between U.S. and Chinese officials ended with no deal. President Trump tweeted that the conversations were candid and constructive; but just hours before, he slapped huge tariffs on products coming from China. As CNN's Tom Foreman explains, it's going to hit eventually your wallet.
(BEGIN VIDEO CLIP)
TOM FOREMAN, BROADCAST JOURNALIST, CNN: Despite friendly handshakes between team Trump and the Chinese delegates, trade talks have stalled. No deal on the horizon.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Hello everybody.
FOREMAN: And no sign of President Trump giving an inch on the 25% tariff he's launched on Chinese goods.
TRUMP: I happen to think that tariffs for a country are very powerful. We are the piggy bank that everybody steals from, including China.
FOREMAN: But American consumers could soon feel a greater impact, if the tariffs expand to consumer products as threatened. China would be expected to pass on those expenses, jacking up prices on smartphones, computers, televisions, fitness trackers, and much more.
The extra cost for the average American family of four is expected to be close to $800. What could drive it? Three quarters of the toys bought in the U.S. are made in China, including these hugely popular dolls.
93 percent of Chinese made footwear, including some shoes for Nike could be hit, so could clothing, Bluetooth headsets and even drones.
Trump's tariffs on China last year steered away from consumer goods and focused on industrial items such as solar panels, steel, and aluminum. Those costs were passed on by American companies.
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: American consumers are already paying, they just don't really know, it's kind of a stealth tax. But it's going to become a very obvious tax not too far from now, if this continues.
FOREMAN: The major markets are already showing unease over the clash.
[12:25:00] In the next three years, if China and the U.S. continue warring over trade, economists say both countries could see their economies slow down and close to a million American jobs might be lost.
Still, the President has long insisted China is cheating the U.S. by stealing intellectual property, manipulating currency, and most recently reneging on a framework for a deal. And he's convinced China will blink first, tweeting tariffs will make our country much stronger not weaker just sit back and watch.
The Treasury Secretary has called the talks constructive, but that doesn't tell us much about how long the impasse might last or how far the impact may reach. Tom Foreman, CNN, Washington.
(END VIDEO CLIP)
WHITFIELD: All right, with me right now is Rick Helfenbein, he is the President and CEO of the American Apparel & Footwear Association, which represents more than 1,000 brand names. You are primarily a public policy voice, but you're not necessarily American Apparel, the brand name, just to make it very clear for a lot of folks who are familiar with the label American Apparel.
Alright, good to see you. So, you have expressed some real concerns now that these higher tariffs really could be fatal for some American businesses. To what extent?
RICK HELFENBEIN, PRESIDENT AND CEO, AMERICAN APPAREL & FOOTWEAR ASSOCIATION: Well, this is real pain for our industry. It's not passive pain. It's sort of like Thursday night was a fairy tale that had just reached Chapter 11. Cinderella's clothes are suddenly going to go back to rags and there's no glass slipper to bail us out anymore.
U.S. trade representatives in the past have been actually very kind to us. They did stay away from consumables and they did hit us with 10%. They hit us in handbags, hats, backpacks, gloves, baseball gloves.
We've been able to finesse that. We cannot finesse 25%, it will cause severe damage to our industry. And if that wasn't a bad enough story Thursday night, the President did announce that the balance of goods which would include all apparel and all footwear, the list in that could be released as early as Monday. So, our members are in distress to say the least.
WHITFIELD: So some reports indicate that families could experience someone - something like $800 more out-of-pocket expense as a result of these tariffs, with the products that you buy. Do you think that's an exaggeration or do you worry that that is about right?
HELFENBEIN: No, actually I think that number is not nearly as high as it's going to be. In America, this is going to sound funny, but Americans buy on the average eight pairs of shoes and 68 garments. And you multiply that out and it just gets worse.
And you can't imagine a handbag going from $80 to $110, because remember that the Chinese are taxing the leather that comes from America, and it goes into China and they're taxing it going in and it's taxed when coming back. So, there's a doubling effect.
Plus, retailers work on what we call IMUs and the EMUs, margins, and they get multiplied. They get multiplied through the system. So, we don't really know, we can only estimate what a family of four will pay, but they will pay more.
So far they haven't noticed it. If you are a consumer and you go fill up your card, it's $2.50 a gallon, you get that. If it goes to $6 a gallon, you get that really big time. So, we have a lot of concerns, we are very worried. Retail is not in the best shape it's ever been.
And I mean, think about this, 2017 we had more bankruptcies than we did in 2008 and 2009. Last year, we lost over 100 million square feet of retail space. And this year, in the first four months of the year, they've been announcing more doors closing at retail than all of last year.
So, retail is struggling, prices go up. When prices go up, sales go down, jobs get lost. This is not a good thing. This is voodoo economics.
WHITFIELD: So that the President is very optimistic. I mean he just tweeted out this saying such an easy way to avoid tariffs, make or produce your goods and products in the good old USA, it's very simple. And this from the President who, especially on the campaign trail, he was criticized largely that so many of his products were made overseas. So, how do you interpret his words today?
HELFENBEIN: Well, it's a bit of fiction. I mean realistically, when I started in this business, we made so much in the USA. Today, Made in USA is less than 3% of the market. And one of the reasons - I mean think about this, 97% of all apparel, 98% of all footwear is imported into the United States.
[12:30:00] And if you look at the China numbers, 41 percent of apparel, 72 percent of footwear, 84 percent of accessories and clothing, backpacks and handbags comes from China.
We don't have a place to move this. And yes, we would love to make more in America but it's not possible. It's not practical. And we don't have a whole lot of places to go with these products. I mean, it gets confusing but think about this, on the apparel side, China has a 41 percent market share. The next closest is Vietnam at 14 percent. So between the two countries, that's 55 percent of the U.S. market. In Bangladesh, India, Indonesia, that's 70 percent of the U.S. market.
We're kind of trapped in our own skin. We don't have any place to go, and we start paying 25 percent -- you know, this isn't the first time the president has come out with this. In the first Republican debate 2016, there was a talk about 45 percent tariffs. And think about this, also, this shirt that I'm wearing right here, already carries a 20 percent tariff, add 25 with that, there's your 45.
The president has been true to his word and the American consumer may feel the pain. I do give the president a lot of credit, we have issues with China. And it's great to bring them to the table to talk. But he's now used tariffs to -- as a weapon. They've been weaponized, and that's not what they were designed for. So, we have some big concerns.
FREDRICKA WHITFIELD, CNN ANCHOR: Rick Helfenbein, we'll leave it there for now. And thank you so much for joining me.
It is the biggest social media website in the world but is Facebook a little too big? CEO Mark Zuckerberg has too much power. One of the platform's co-founders says yes to all of that. More on that right after this.
[12:35:52] WHITFIELD: As Facebook braces for a possible multibillion- dollar penalty over its privacy practices, one of its co-founders is suggesting it's time to break up the social media site.
(BEGIN VIDEO CLIP)
CHRIS HUGHES, FACEBOOK CO-FOUNDER: It's not a personal beef but it is personal. I mean, I've been friends with Mark for 15-plus years. I don't know if we'll be friends on the other side of this piece but I have no beef with him. I like Mark, I love his family. He's a good person.
I also think he has too much power. And I should say that I think that ultimately, it's up to the government to solve this.
(END VIDEO CLIP)
WHITFIELD: Chris Hughes co-founded Facebook with Mark Zuckerberg and two others back when they were students at Harvard. Hughes sold off his shares back in 2012. His op-ed was published in the New York Times. Let's talk more.
Joining me right now, CNN Tech Reporter Brian Fung. This is pretty scathing criticism even though he tries to couch it with, you know, I like him, you know, we've been friends for a long time. So, the bottom line is Chris Hughes right that it's time to break it all up? BRIAN FUNG, CNN TECH REPORTER: Well, you know, we have to talk a little bit first about what he's proposing here and whether or not it's feasible. Those are really the two key questions that we have to grapple with. And, you know, I'll take, you know, the question of whether or not -- of what he's proposing first.
You know, I think what Hughes has suggested is one, spinning off companies like Instagram and WhatsApp which Facebook owns. And then second, getting an independent regulator, separate government agency to oversee the tech industry much more closely. And, you know, these are pretty substantial asks here. You know, the FTC, the Federal Trade Commission is currently investigating Facebook for privacy practices. But experts tell me that if the agency were to try to break up the company, that would likely require a separate proceeding that would be an anti-trust proceeding, not related to this investigation.
So, that sort of gives you an idea of how difficult it might be to actually achieve some of what Chris Hughes is suggesting here.
WHITFIELD: And so I guess, in the meantime, you know, Facebook has offered to appoint some type of privacy czar. Is that an answer? And is that even realistic? What would the expectations be?
FUNG: Right. Well, that gets -- come to the heart of the question that a lot of policymakers are grappling with right now. Just how much self-regulation will be effective when it comes to reigning in big tech companies? And how much intervention needs to be brought in by the federal government or state government even/or international bodies. And so, you know, Facebook has said it's willing to submit to European style rules such as the law governing privacy in Europe, known as GDPR. It says that you know, for everyone to agree to a single common global standard like GDPR would make it much easier for Facebook to comply with.
On the other hand, critics of GDPR say it's very burdensome on individual consumers because the regulations essentially require you to hit accept and give your consent to every single website you visit. It's just not realistic. And so, one big question here is, whether or not those rules are enough and where the line is drawn between that and self-regulation.
WHITFIELD: Who can forget that, you know, Zuckerberg did testify before Congress last year about Facebook's handling of user information. Take a listen.
(BEGIN VIDEO CLIP)
MARK ZUCKERBERG FACEBOOK CEO: I think a lot of times regulation, by definition, puts in place rules that a company that is larger, that has resources like ours can easily comply with. But that might be more difficult for a smaller start-up to comply with. So, I think these are all things that need to be thought through very carefully when thinking through what rules we want to put in place.
(END VIDEO CLIP) WHITFIELD: So did anything concrete come from that?
FUNG: Well, Facebook has, you know, said it's launched more programs to try and handle things like misinformation and hate speech on its platform, it's hired a lot more human moderators.
[12:40:04] But overall, you know, these issues are still big problems for the company and it's, you know, trying to search for answers here along with policymakers. You know, just yesterday, Facebook said or Mark Zuckerberg said he was hopeful that a proposal by French officials to, you know, essentially create more oversight over Facebook would move forward that proposal, you know, would look pretty similar to what, you know, already exists at the E.U. level. But, you know, one big question is, can that be imported essentially to the United States and U.S. market?
WHITFIELD: All right, Brian Fung, good to see you. We'll leave it there for now.
FUNG: My pleasure. Thanks for having me.
WHITFIELD: All right, still ahead, cities held hostage. Baltimore is the latest American city brought to a crawl after a ransomware attack. The crippling problem on the rise across the U.S. next.
(BEGIN VIDEO CLIP)
[12:45:00] WHITFIELD: Some major U.S. cities are under a cyber attack with hackers demanding millions of dollars in ransom. That's according to a new report that shows a disturbing increase in ransomware attacks. Local governments are finding their computer systems crippled and held hostage by hackers.
CNN Senior National Correspondent Alex Marquardt reports.
ALEX MARQUARDT, CNN SENIOR NATIONAL CORRESPONDENT: This city of Baltimore is under an extensive cyber attack. Hackers
launching an aggressive virus called Robinhood and holding many government computers hostage. The assault causing police e-mails to go down as did the board of elections. The finance department couldn't do business this week. Fax machines and printers were on the fritz.
UNIDENTIFIED MALE: We know that the team, they're working hard. And we do know that they are not in control of certain parts of our system. It's really frustrating, and this could happen to anyone.
MARQUARDT: And it does. A new report shared exclusively with CNN by Recorded Future is one of the first to measure the scope of these kinds of attacks, showing that across the country, ransomware attacks are on the rise, crippling counties, cities, and towns, costing them millions of dollars. Since 2013, malicious foreign actors have been detected targeting local governments, law enforcement, and universities 169 times. Twenty-two attacks alone this year. Figures the group behind the new study says which represent the tip of an iceberg. ALLAN LASKA, THREAT INTELLIGENCE ANALYST, RECORDED FUTURE: The bad guys see state and local governments as a target that is willing to pay and that they may be able to get a lot of money out of. If nothing else, they may be able to get a lot of news coverage out of.
MARQUARDT: The attackers are not governments. This isn't about politics, but money attacking targets big and small, often underfunded when it comes to cybersecurity.
LASKA: They've got a bunch of dedicated people, but they don't have the latest tools and equipment to protect themselves.
MARQUARDT: Eric Wyatt is one of those dedicated people. Last fall, he fought off a multi-pronged ransom attack on his 100,000 person community north of Anchorage, Alaska.
ERIC WYATT, MATANUSKA-SUSITNA BOROUGH IT DIRECTOR: They were so into our network that they brought down the vast majority of our work stations and servers. This type of attack that we saw was far worse than anything I had seen in my past being in this industry for over 35 years.
MARQUARDT: One thousand employees were affected. Old typewriters had to be dusted off. The ransom wasn't paid but it cost $2.5 million to fix the problems which still linger today almost a year later.
WYATT: We are outgunned. We don't have the resources to fight this fight. The people that are attacking us are better organized, better funded, and we don't have the same level of capability that they do. So they see us as a soft target, often we are.
MARQUARDT: The FBI is among the first calls that victims make. Now they say attackers have moved from targeting individuals to larger prizes because it's more lucrative.
ADAM LAWSON, SUPERVISORY SPECIAL AGENT, FBI MAJOR CYBER CRIMES UNIT: We're seeing larger and larger ransomware demands of these victims.
MARQUARDT: A problem the FBI believes is only getting worse.
LAWSON: People are paying the ransom and encouraging the behavior. So I think we will continue to see an escalation in the sophistication of ransomware attacks.
MARQUARDT: The good news is that according to the study which was obtained exclusively by my colleague Kevin Collier, just 17 percent of state and local governments actually end up paying the ransom. Still, we have seen a surge of attacks against them. Attackers seeing them as ripe targets because of all the attention that they get when governments are taken offline.
Alex Marquardt, CNN, New York.
WHITFIELD: All right, for more on ransomware attacks, let's bring in Jonathan Wackrow, a former Secret Service agent under President Obama. Good to see you. So --
JONATHAN WACKROW, CNN LAW ENFORCEMENT ANALYST: Good to see you.
WHITFIELD: -- why are these risks associated with ransomware and why the public sector computer system?
WACKROW: Well, listen, I think we have to look at right now is the risk of this ransomware is on the rise. It's on the rise so much so that over the last two years we have seen a 97 percent increase in the amount of attacks that are launched against organizations and individuals. And to put a finer point on that, actually in 2019, every 14 seconds an organization is going to be affected by a malware attack that seeks to insert ransomware into their network. So, the risk of it is just right now, the sheer volume in the ability of organizations both public and private to defend against this.
When we talk about, you know, cities such as Baltimore that, you know, just had this attack, you know, it's less about them being targeted directly and it's more about them being a victim of opportunity. Traditionally, you know, we saw from some reporting is that they are, you know, unorganized. They don't have a solid structure to defend against this type of attack. And that, in itself, makes them a victim, easy prey for attackers to come in and take hold of critical data systems within the enterprise such as 911 emergency response and social services.
[12:50:11] So, we're going to see these ransom attacks continue for a long time to come.
WHITFIELD: So do you see that all cases cannot be handled the same and that paying ransomware actually might be a good decision in certain cases?
WACKROW: Well, first of all, law enforcement does not encourage payment of any type of ransom. At the end of the day, if you start paying this ransom, all you're doing is you're fueling the criminal enterprise that feeds it. So that is not recommended by any law enforcement entity.
But at the end of the day, it's a business decision that needs to be made. If your organization doesn't have the resiliency to come back from the attack, you may be forced to go ahead and pay that ransom.
WHITFIELD: All right. And so, what, if anything, can be done to prevent or even reduce, you know, the impact of these attacks?
WACKROW: Well, this is about, you know, establishing whether it's a private contract or in the public sector, establishing a culture of cybersecurity awareness. Making sure everyone understands what they need to do to prevent this. If you are attacked, what do you do? You isolate the infected computer systems, you back off the, you know, back off power from affected computers.
But you contact law enforcement immediately so they are aware. A lot of the times, unfortunately, these ransomwares go unreported. WHITFIELD: All right, Jonathan Wackrow, always good to see you. Thank you so much.
WACKROW: Thanks, Fred.
WHITFIELD: We'll be right back.
[12:55:21] WHITFIELD: An American hostage is among those rescued after being kidnapped in West Africa May 1st. The U.S. military assisted in the operation. These two men from France and a South Korean woman were also rescued. One of them is describing the ordeal as hell. The French minister for the armed forces says four terrorists were killed in the operation.
And it's a somber graduation day at the University of North Carolina at Charlotte. One of the students who was injured but survived the shooting there 10 days ago will receive her degree. Two victims, Riley Howell and Ellis Parlier will also receive degrees in memoriam. The school has announced $1 million in scholarships in memory of the slain students.
And see what happens when victims and offenders of violent crimes meet face-to-face on the new CNN original series, "The Redemption Project with Van Jones" tomorrow night, 9:00. Followed by an all-new episode of "United Shades of America with W. Kamau Bell" at 10 Eastern. Only on CNN.
WHITFIELD: Hello, again, thanks so much for joining me this Saturday. I'm Fredricka Whitfield.