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The Lead with Jake Tapper

Interview With State Department Spokeswoman Jen Psaki; Cyber Threats; Cuba Controversy; Interview with Republican Congressman Michael McCaul on Cyberterrorism

Aired December 18, 2014 - 16:00   ET

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

JAKE TAPPER, CNN ANCHOR: This is much more about two actors and a stoner flick. This could be the future of warfare.

I'm Jake Tapper. This is THE LEAD.

The world lead. Some are saying it was a cowardly act to yank the movie from theaters. Some are saying the U.S. just lost the first cyber-war. Now that the feds appear to be pointing the finger at hackers tied to North Korea, how will the White House respond?

They aren't just a few guys in basements who likely broke into Sony. New details emerging about the secret North Korea hacking network that may, may be behind all of this lunacy, nearly 2,000 cyber-soldiers. They may already be operating throughout the world.

And the money lead. Caribbean sun, classic cars, fine cigars, horrific human rights abuses. With President Obama taking steps closer to Cuba, when can it become your next vacation destination?

Good afternoon, everyone. Welcome to THE LEAD. I'm Jake Tapper.

We begin today with breaking news in our money lead. The markets soaring for a second straight day. The Dow shot up over 400 points, this after stocks had been puttering for weeks over plunging oil prices.

Let's go right to CNN Money correspondent Alison Kosik live in the flesh.

Good to see you.

ALISON KOSIK, CNN CORRESPONDENT: Good to see you.

TAPPER: The Fed chair, Janet Yellen, came out yesterday. Her remarks set off this rally, and what exactly did she say to make the investors so excited?

KOSIK: First of all, I think it's safe to say that the Scrooge has exited stage left at this point and investors are finally getting the Santa Claus rally that they wanted.

What the Fed essentially said yesterday that it was going to take its time and it was going to be patient in when it goes ahead and raises interest rates. There was some anxiety going into yesterday's meeting which, by the way, was the last meeting of the year for the Fed, because oil prices have been so turbulent lately and usually the Fed doesn't include the oil prices in their policy-making.

This time around, they did say the oil price plunge is temporary and the Fed did say as well that that oil price plunge is good for the economy and the Fed is right about that because gas prices, $2.50 is the average that Americans are spending at the gas tank. That means more money that they are spending in the economy.

TAPPER: Some rare good news.

KOSIK: Yes.

TAPPER: Good to see you. Alison, thank you so much.

Turning now to the world lead and our top story, a virtual terror attack with very real repercussions for U.S. national security. Today, the Obama administration would not say publicly just who they think is responsible for the massive cyber-attack on Sony Pictures, but the government is getting closer and closer to confirming what CNN reported last night with unnamed U.S. officials fingering North Korean-tied hackers as the culprits.

What we know so far is that a group called Guardians of Peace raided Sony's network in November over the movie they say "The Interview" which is a not-so-gentle satire depicting an assassination plot against North Korean dictator Kim Jong-un.

Then this week the plot thickened and the hack turned into a terrorist threat when the group referencing 9/11 issued a warning to would-be moviegoers to stay away from the theaters set to show the flick. Sony announced this morning it is scrapping any plan to release the film at all.

Hollywood seems to be quite fearful. Some theaters plan to show in place of "The Interview" the 2004 film "Team America: World Police," which spoofs Kim Jong-un's father, Kim Jong Il. But this afternoon, Paramount Pictures has put a stop to that as well, today telling theaters not to run this 10-year-old movie, as first reported by Gizmodo.

And this afternoon, White House Press Secretary Josh Earnest called the situation "a serious national security matter" and blamed an unnamed sophisticated actor. But even before Obama administration officially blames North Korea, if they do, a country where most people probably don't even know what the Internet is, others are already saying that the U.S. has lost its first battle in a cyber-war.

CNN justice correspondent Pamela Brown has the latest on this story.

Pamela, what can you tell us?

PAMELA BROWN, CNN JUSTICE CORRESPONDENT: Well, Jake, you're right. Many people, including Sony executives, are calling this hack an act of terrorism and pressure is mounting on the administration to hold the culprit accountable and so sources are telling us that U.S. officials right now, as we see, are preparing to place the blame on North Korea for this unprecedented hack on Sony.

But officials are still scrambling and trying to figure out how, in fact, it is going to do this publicly. How is it going to hold North Korea accountable? Language right now is circulating among U.S. officials. The challenge here, of course, is the plan of action, how it will hold North Korea's feet to the fire.

And that's the big reason, we're told, why the administration is hesitant at this point to point the finger at North Korea. The extraordinary and unprecedented nature and circumstances surrounding this situation and the fact that the U.S. really has no diplomatic relationship with North Korea I'm told is part of the reason why this is happening so quickly compared to other similar cyber- investigations.

I'm told that talks on this have been accelerated. And why North Korea? I know a lot of people are asking this, what's the evidence? Well, behind the obvious reason, that is, that they wanted to shut down the movie about its leader you talked about, Jake, law enforcement sources say the blueprint of the current attack mimicked the hack against South Korean banks and media organizations last year.

And, according to a North Korean defector that CNN spoke with, the North Koreans have a vast secretive network of hackers around the world called Bureau 121. So there's a lot speculation about whether they may have been responsible for this, Jake.

TAPPER: Bureau 121. Pamela Brown, thank you so much.

Let's go straight to CNN chief security national correspondent Jim Sciutto.

Jim, we already heard the White House call this a serious situation. White House officials are now saying they did not put any pressure on Sony or the movie theaters to pull "The Interview." That aside, how does the White House plan to respond to what clearly seems to be cyber-terrorism?

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: Yes, no question.

The White House said today it wants a proportional response, but one that does not give in to any provocation. They are clearly still working out exactly how to achieve that balance, but we know that several options are under discussion, including, as Pamela said, tightening already stringent sanctions on the dirt poor North Korean economy.

(BEGIN VIDEOTAPE)

SCIUTTO (voice-over): With the administration close to publicly blaming North Korea for the Sony hack, meetings now under way at the White House to launch what it calls a "proportional response."

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: As the members of the national security team meet to discuss this matter, they are considering a range of options.

SCIUTTO: The administration has several potentially powerful steps at its disposal. The U.S. could impose further economic sanctions on North Korea, including applying even stricter restrictions on Pyongyang's access to dollar-denominated trade, the desperately poor communist country's economic lifeline to fuel, food and, crucially, weapons.

REP. ED ROYCE (R), CALIFORNIA: If we block them from the international financial community, they can't get the hard currency that they need in order to carry out the types of activities, clandestine activities they are doing, as well as their nuclear weapons program.

SCIUTTO: This is a tactic the administration has applied with great effect against Iran regarding its nuclear program and more recently against Russia following its invasion of Crimea and Eastern Ukraine.

Naming and shaming North Korea publicly is another step, a move the U.S. took years to make with Beijing, despite its multiple and systematic cyber-attacks against U.S. businesses and government departments.

If U.S. investigators identify the individuals behind the hack, the U.S. could also levy criminal charges against North Korean hackers, a step the U.S. took against an elite group of Chinese hackers earlier this year believed housed at this building outside of Shanghai and known as Unit 61398.

JIM LEWIS, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES: One of the reasons you haven't seen an aggressive U.S. response is we don't know what they would do back and we don't want to start a second Korean war. We don't want to see cyber-attacks that we can't stop. So North Korea, not at the top of the league when it comes to cyber-attack, not even good as Iran, but very dangerous.

(END VIDEOTAPE)

SCIUTTO: So what about a retaliatory cyber-hack by the U.S.? That is a response the U.S. is extremely wary even of considering, fearing it could cause a dangerous and escalating cycle of cyber-attack and counterattack and perhaps even military action.

There's some concern about renewed efforts by North Korea to test a missile or at worst a nuclear weapon, but so far the U.S. not seeing any of the preparations, Jake, that they would see before such a step and that's something of course that they watch very closely with satellites and other means of gathering intelligence.

TAPPER: Jim Sciutto in Washington, thank you so much.

Here now to discuss the threat to U.S. security, State Department spokesperson Jen Psaki.

JEN PSAKI, STATE DEPARTMENT SPOKESWOMAN: Hi, Jake.

TAPPER: Good to see you.

Jen, a major company was hacked and essentially shut down for some time. Now Americans are being threatened by these same hackers with 9/11-style attacks at their local movie theater. Is this cyber- terrorism?

PSAKI: Well, Jake, I think it's important to separate those two things.

One, we take the cyber-attacks very seriously. As you have mentioned in your reporting already, there's an ongoing process and the national security team has been meeting about what to do about this.

The second piece about threats against movie theaters, we have looked into that. There's no credible intelligence to back that up. But cyber-security is serious. It's one of the biggest emerging threats we face, and not just as it relates to this case. But, broadly, we have seen it from other countries.

It's something we work with the private sector on and will continue to be a big priority for this administration.

TAPPER: But Americans were threatened by these same hackers and they obviously wreaked havoc on Sony's hardware and the operations of a major company in this country. Is it cyber-terrorism? If not, what does one have to do to be considered to be cyber-terrorists?

PSAKI: Well, I don't think there's any benefit in putting new labels on it.

It's a cyber-hack. We're looking into who is behind it and we're finishing up that process, so we're working to do that. And we're discussing a range of options. The fact is, there are private sector companies that have been hacked by a range of sources. The government was recently hacked. And this is something we take very seriously and we're having ongoing discussions about how to address.

TAPPER: How concerned is the Obama administration about the precedent being set here? A movie is put out. Another country's leaders don't like it, the company is hacked, Americans are threatened and basically at the end of the day, the American people blink, the United States backs down. Isn't that a horrible precedent?

PSAKI: I can assure you, Jake, the United States government is not blinking. We're backing down. We're not in a crouching or fear position here.

We're well aware of the cyber-threats from not just North Korea, but other countries out there. The fact is, businesses, including movies, movie companies make business decisions. And that's up to them to make. Private sector companies make their own decisions. That's the beauty of the private sector in the United States.

But we're going to continue to speak out. We believe in freedom of speech, expression, that actors and actresses should be able to continue to do that. TAPPER: How much did the State Department or the Obama

administration, more broadly, advise Sony on this film?

There are reports that you viewed it, the State Department viewed it before it was released or prepared to be released. And what have you said to them more recently? I can't imagine that the U.S. government would want an American company pulling a movie from theaters, you know, from this dictator in North Korea.

PSAKI: Well, Jake, we have been in close touch with Sony as we work through the FBI. And other appropriate law enforcement agencies have been as we work to track down the perpetrators of this.

And we have offered a range of services to them. Broadly speaking, we certainly don't -- we're not in the business of signing off on movies or content. Imagine if that was the case. That's not what we do in the United States. And we continue to convey that we believe in freedom of expression, whether that's the media or whether that's artists in a movie.

TAPPER: But did anyone at the State Department see the movie ahead of time and give an opinion as to whether or not you thought this might set off this international firestorm?

PSAKI: I have not come across anyone who saw the movie in advance.

It is a normal part of the process for us to consult with the private sector, including movie companies, to talk about issues in the world. And we're certainly the experts on that. And that happened in this case as well. But, no, we don't sign off on the content of movies.

TAPPER: Jen, is North Korea really capable of pulling this off on its own? Doesn't the level of sophistication with the attack, with what was leaked, the follow-up threats, doesn't that suggest a more sophisticated nation that might be involved?

PSAKI: Well, Jake, we have learned a lot over the past couple of years about how cyber-security threats work and come about.

And they have come from a range of sources, some small and some larger. And certainly part of the investigation has been looking into the capabilities and capacity and what they could do and that's a process that is ongoing right now.

TAPPER: What is the U.S. going to do if it is, in fact, North Korea that did this? I can't imagine there's much left to sanction.

PSAKI: We do already a range of sanctions already in place, given their abysmal human rights record and a range of rhetoric and threats that they have made.

We have a range of options. Those are being discussed by the national security team. I'm not going to outline those from here, but I'm sure that's something we will talk about once there is a conclusion made.

TAPPER: State Department spokesperson Jen Psaki, thanks and happy holidays to you.

PSAKI: Thanks, Jake. You, too.

TAPPER: Can anyone really prevent another cyber-attack like the one that took place at Sony? Should the U.S. government being responsible for protecting your personal information online, even if it's at private companies? Maybe the company you work for should take a more proactive approach.

The plan in the works to defend your information against hackers, that's next.

(COMMERCIAL BREAK)

TAPPER: Welcome back to THE LEAD. I'm Jake Tapper.

In our world lead -- is this a victory for cyberterrorists? That's the question many are now asking, now that Sony Pictures has canceled the release of the controversial comedy "The Interview." But what, if anything, is the U.S. government or private sector doing to protect our country's most vulnerable information? Forget the movie.

Republican Congressman Michael McCaul, chair of the Homeland Security Committee in the House, is with us live from Austin, Texas.

Congressman McCaul, thanks for being here.

REP. MICHAEL MCCAUL (R-TX), CHAIRMAN, HOMELAND SECURITY COMMITTEE: Thanks, Jake.

TAPPER: So, the movie has been pulled. Were Americans ever really in any real danger, though?

MCCAUL: Well, according to the Department of Homeland Security and FBI, the 9/11-style threat didn't turn out to really be credible. I sort of agree with you that pulling the movie sort of caves into what I consider to be a terrorist threat. Certainly, it's a cyberterrorism event that needs a proportionate response and I think that's what's being debated right now.

With respect to how do we protect ourselves from these attacks, I passed a bill last day of the Congress that was signed into law today by the president that will better protect our critical infrastructures, we call 'em, where we can share these malicious codes, this threat information, with the private sector, and private sector in turn with the federal government. I think that's going to go a long ways to protecting this nation from a future terrorist attack.

But any time you give in to them, you empower them. And I'm concerned we're going to see more of these types of threats based upon political and free speech.

TAPER: I think -- I believe it's in Texas, there was a movie theater that was going to show -- instead of "The Interview", they were going to show "Team America: World Police" from 10 years ago, a movie that mocks Kim Jong-un's father, Kim Jong-il, and Paramount pulled the movie. So, it's not just Sony.

What do you make of these decisions being made by studios? Obviously, they are concerned that if anything happens, they will be held liable and accused of putting profits before people.

MCCAUL: Yes. It's the Alamo Drafthouse here in Austin.

I would say that, you know, look, Sony and private movie theaters are free to make any choices that they think are necessary, that they deem aren't appropriate. However, I do think by pulling the movies they gave the North Koreans -- and let's be honest where this threat came from -- I think U.S. officials have reported that this came from North Korea, this Bureau 121.

And what they effectively did was give them a victory, and gave them precisely what they want to achieve, and that is the pulling down of this movie. And I hope at some point, this movie will be shown, and perhaps the intrigue built over it will make it more of a money maker. I don't know. But I think pulling it gave them exactly what they wanted.

TAPPER: And I guess the converse argument, when I was talking to a Hollywood friend yesterday, is that people were -- the people that control the theaters and the people who made the movie were so afraid that if anything happened, even something not done by the North Koreans, just a lone wolf or a copycat or whatever, that they would then be attacked by many of the same people who are criticizing them now for caving, for -- you know, somebody said they should change their name to "Neville Chamberlain Pictures".

MCCAUL: Well, I can understand that, particularly around the Christmas holidays. That is a date we're concerned with in the counterterrorism business. But I can see maybe a cooling off period and then showing the movie at a later date.

But I think it's also important that the administration in terms of attribution, that means tracing back the attack where it came from. Clearly, I believe this came from North Korea, a state sponsor of cyberterrorism. I think it's important that the administration respond under the military doctrine of proportionate response. I know they are trying to calculate that as we speak.

But I think these economic sanctions that have been lifted against North Korea, we need to revisit those sanctions and we need to have a response to this because any time a state sponsor has an act of cyberterrorism against the United States and in our way of life, if there's no retaliation or no response, then there's no deterrent value or no deterrent effect. And I think that's why it's so important that we have a response to this.

TAPPER: I hear what you're saying in terms of the response. I wonder, however, if that then leads to an escalating cyberwar between the United States and North Korea, that is, of course, the concern that we're hearing from Obama administration officials.

MCCAUL: Well, I understand that as well but the fact is we live in a dangerous cyberwarfare now.

It's kind of a new frontier, if you will, Jake, kind of the Wild West. We've been hit by Iran, our financial sector, already. There have been attacks by Russia and China, espionage, stealing things.

And we need to kind of calculate what is an act of warfare in the cyberspace, and what is the appropriate retaliation in the act of a cyberwarfare. And I don't think that's clear right now. I think the rules of the game and the rules of warfare are not clear right now and something going into this next frontier we need to more clearly define.

TAPPER: Congressman Michael McCaul, thank you so much. Happy holidays, sir.

MCCAUL: You, too, Jake. Thanks so much.

TAPPER: White sand beaches, sunny skies, human rights abuses. It could soon be your dream vacation, Cuba. The president pushing to ease travel restrictions there, but don't call your travel agent just yet.

Plus, a network of cyberhackers positioned around the world. One man says North Korea is behind the cryptic operation. You just heard Congressman McCaul say the same thing. Its claims of a so-called "Bureau 121", next.

(COMMERCIAL BREAK)

TAPPER: Welcome back to THE LEAD. I'm Jake Tapper.

More now on our world lead the Sony hack has pulled the curtain back on a dangerous and mysterious branch of the North Korean military cybersoldiers, who -- North Korean defectors say -- are rigorously trained in the art of destruction and their battlefield can be pretty much anywhere in the world because they wage war from behind a computer screen.

These North Korean hackers are said to be handpicked and trained to the secluded complex in Pyongyang known as "Bureau 121". And from there, 1,800 or so agents travel throughout the globe. They are said to be infiltrating enemy nations, including the United States.

Let's talk about this now with Hemu Nigam, a cybersecurity expert and the former vice president of worldwide Internet enforcement for the Most Pictures Association of America, along with Gordon Chang, a familiar guest in the show, a columnist for Forbes.com, and the author of "The Coming Collapse of China."

Hemu, let me start with you. What can you tell me about Bureau 121? How does it operate? What are these results being trained to do precisely?

HEMU NIGAM, CYBERSECURITY EXPERT: Bureau 121, I think the best way to call it, it's a very silent enemy that can create very loud noise when it hits. It's a bunch of incredibly intelligent individuals who are sitting around the world taken care of by the government, getting all the resources they need, whose sole job is to figure out how to break into systems, either destroy them, change them, steal from them, leave notes on them. That's their job. It's an -- in essence, an army of special forces individuals.