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Detroit Files For Bankruptcy; Cop Faces Probe On Tsarnaev Photos; Heat Wave Claims Another Life; Thousands Flee Wildfire; Fire Crews Struggle To Contain Wildfire; Detroit Officials Speak On Bankruptcy; NSA: Program Secret To Protect You; Wal-Mart Versus D.C. City Council; Bulger Witness Found Dead

Aired July 19, 2013 - 10:00   ET

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

CAROL COSTELLO, CNN ANCHOR: Once the symbol of American ingenuity, Motown is now bankrupt.

Also, she questioned Tom Cruise's relationship with bigwigs at the Church of Scientology. Now the queen of "King of Queens" is shunned.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: About morals and integrity, but then you have the audacity to tell them you have to betray your own integrity or you're out, too?

(END VIDEO CLIP)

COSTELLO: You're live in the CNN NEWSROOM.

Good morning. Thank you so much for being with me. I'm Carol Costello. History made, but not the kind you want, Detroit now bankrupt, the largest American city to ever to do so. Ironically just a year ago, President Obama boasted the auto bailout had saved the city.

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BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: We refuse to let Detroit go bankrupt. I bet on American workers and ingenuity. Three years later, that bet is paying off in a big way.

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COSTELLO: Auto manufacturers did survive, but it wasn't enough to save the city of Detroit. We're awaiting the news conference, officially announcing Detroit, is declaring bankruptcy. Poppy Harlow is live in Detroit. I see the governor and the city's emergency manager sitting there waiting. I think they were doing a mic check, I know you have new information for us now.

POPPY HARLOW, CNN CORRESPONDENT: Hi there, Carol. You know, it's interesting, you point out the automakers and that is so important because people connect Detroit with the automakers, but this city has been in decline for decades. It's not just about the automakers coming back. Actually a lot of the auto plants and jobs are based outside of the city of Detroit. This has been a result of corrupt politics for many, many decades. The city has gone from 1.8 million people to 700,000 today, that means many fewer people paying taxes.

The city has an abysmal record at even collecting taxes. On top of that, you have the decline of the auto sector. Even though it's back, it's not where it once was. The big deal is for city workers. The city workers, retired and current, their benefits could be cut dramatically. That's the big question right now I just talk to Janet Whitson, she's worked here for 32 years, and she's fed up. She's actually suing the government trying to block this. It's unclear where that lawsuit could go. Listen.

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JANET WHITSON, RETIRED DETROIT LIBRARIAN: All along, when I was there and I was promised, we were -- I was recruited, and one of the attractions of being hired at the Detroit public library rather than someplace else was the benefits package. I did everything I could. I did my part of the bargain. Now this is their part of the bargain, the library as the employer backed by the city of Detroit and I -- I need them to fulfill their end of the bargain to me.

(END VIDEOTAPE)

HARLOW: On top of this, like so many here, her house is under water, so she fears if her pension check is cut, she's going to lose her home. As we've talked about, carol, for years now cuts have to come somewhere. They're going to negotiate possibly for months, possibly for years. If they can reach a deal and get cuts from the bondholder, cuts from the pensioners, the up side is you have owe less and have more to put into things leer police services, into the things that need to be fixed in this city. That's the up side of a bankruptcy.

COSTELLO: All right, Poppy, thank you so much. That news conference has ended. It was unusual, because it was a question and answer session. We were monitoring that, and we'll tell you what they want when we get the taped turned.

Well, the financial situation is bleak in Detroit. It's not much better in Chicago. Today the Chicago teachers union said nearly 2,100 public schoolteachers and staff members are learning they're out of a job. The layoffs come less than two months after the Board of Education announced they would close 50 schools across the city.

Now we turn to the dueling images of Dzhokhar Tsarnaev. This is how you'll see him on the upcoming cover of "Rolling Stone." Looking a lot like a pop star, but this is how one trooper wants you to remember him, bloody, weak, powerless, as he sure surrendered. Today that cop is suspended for releasing these images. He says he just wanted to show the real Boston bomber.

CNN's Jason Carroll is live in New York with more. Good morning, Jason.

JASON CARROLL, CNN NATIONAL CORRESPONDENT: Good morning to you. Not only is that police officer suspended, at least temporarily. He's also under investigation. That very same police sergeant apparently felt conflicted about releasing the photos, but felt very strongly that the "Rolling Cover" was an insult and hurtful to survivors, so this was his way of helping.

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CARROLL (voice-over): These new photos showing a much different picture of Dzhokhar Tsarnaev captured by police, a bloody face, his hands up, the lasers from a sniper's rifle trained on his forehead a vastly different image from the one depicted in the controversial "Rolling Stone" cover. Massachusetts State Police Sergeant Sean Murphy says he was so angry with "Rolling Stones" cover he released these new photographs to "Boston" magazine.

The police tactic photographer told the magazine quote, "What Rolling Stone did was wrong. The guy is evil. This is the real Boston bomber, not someone fluffed and buffed for the cover of Rolling Stone."

UNIDENTIFIED MALE: I think that's the real face of terror. I agree with him 100 percent.

CARROLL: Boston magazine's editor told CNN, Murphy thought the cover sent the wrong message.

UNIDENTIFIED MALE (via telephone): I think he was genuinely worried about the impact on the families of the victims and I think he was also worried that certain impressionable people might be lured to replicate that by the glamorous looking photo on the "Rolling Stone" cover.

CARROLL: Tsarnaev's first public appearance since his arrest was in court last week. He pleaded not guilty to 30 federal charges including four killings while images like these are already having an impact, some say the focus is all wrong.

UNIDENTIFIED FEMALE: I think they should focus the attention on the brave people and the people who lost their lives, not the monster who caused it all.

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CARROLL: Apparently Murphy did not want "Rolling Stone" to have the last say, so he decided to release the photos himself. A police spokesman said the release of the photos was not authorized by the Massachusetts State Police. Murphy was suspended for a day and faces a hearing next week to determine his status. I should also point out that Boston magazine also says they have hundreds of similar types of photos from various sources. They plan to publish those photos in the September issue, so look forward to seeing more photos of Tsarnaev, whether people in Boston like it or not.

COSTELLO: But those photos probably came from private individuals --

CARROLL: Absolutely.

COSTELLO: The photos we showed came from a police officer. Could he get fired over this, Jason?

CARROLL: It's definitely a possibility, 31-old-year Christopher Way Bridge of San Antonio mind nary action, but based on just from speaking to people in Boston, and from spending time there, I would be surprised if he was fired, not disciplined, simply because the people there in Boston tend to really stick by their first responders, and how well they reacted to the shooting action to the bombing there. I would be very surprised, but --

COSTELLO: All right, Jason Carroll, reporting live for us this morning.

It's 8 minutes past the hour, check some other top stories. The Texas man arrested for pulling out a pistol with a bullet in the chamber near the White house. Police say 31-year-old Christopher Wade Brig of San Antonio had 171 more rounds in his back pack. He said reportedly he was, quote, only going to fire off a couple shots. President Obama was at the White House at the time.

In Dallas/Fort Worth, Texas, health officials trying to find the source of a nasty intestinal infection, at least 48 cases had been reported. The sickness is called cyclospora. It's usually spread by drinking water or eating foods, but the source of the outbreak the source of the outbreak is unknown.

Coming up in the NEWSROOM, a wild fire threatens south of the residents in Southern California, it's nowhere near contained, a live report for you coming in the NEWSROOM.

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COSTELLO: We're following dangerous and deadly weather that's plaguing the nation from California all the way to Massachusetts, in the west, thousands of people evacuating from a roaring wildfire that's burned more than 35 square miles. Investigators say the fire was started by humans. Out east the scorching heat wave has claimed another life. Relief could soon by on the way, though, in the form of a violent storm system.

We have CNN team coverage. CNN's Casey Wian at the epicenter of those wildfires in California and meteorologist, Indra Petersons is in New York. So relief is coming, but we're going to get slammed by storms.

INDRA PETERSONS, AMS METEOROLOGLIST: I was talking to my crew about the way to like sweaty flip-flops, and it's insane, but in all seriousness, it is dangerous. People are literally taking a break by walking into a shop for ac, walking a little further and then into another building. That's exactly what they should be doing. Heat is dangerous. The number one killer of all weather events combined.

Today the heat is on We're talking about a stronger or higher temperature than what we saw yesterday. We're talking major cities. Detroit, Chicago, today will feel like 107. Everyone wants to know when will we see this relief? We're no longer seeing the advisories in the Dakotas today, and that's thanks to a cold front sliding to the south. Keep in mind, this is all hot, humid air, once you combine that with a cold front, we'll be triggering thunderstorms. Today stretching from eastern portions of Iowa, all the way over to -- and we'll be talking about severe weather following that as well. So anywhere that cold front goes, it's another front, going from the threat of heat to a threat of severe weather even the threat of tornadoes not out of the question, yes, hard to believe.

COSTELLO: We're just getting slammed in every direction.

PETERSONS: I really need to come with good news once in a while.

COSTELLO: Thank you, we appreciate it.

Let's go to Idyllwild in California, where that wildfire is forcing 6,000 people to leave their homes behind. Good morning, Casey.

CASEY WIAN, CNN CORRESPONDENT: Good morning, Carol. There is actually some good news here in Idyllwild this morning. Firefighters say they're making great progress holding the line on the mountain fire, which they have kept behind that ridge there. You could see the smoke from the fire, which has now grown to about 25,000 acres. They've got 3,000 -- more than 3,000 firefighters. They've got 19 helicopters, 10 fixed-wing aircraft. They've been successful in keeping that fire from crossing that ridge.

Even so, the town of Idyllwild remains under a mandatory evacuation, 4,000 people out of this town. It's always eerie as a reporter when you're in a town in a mandatory evacuation zone and see all these businesses that would normally be open. They're not. There is one restaurant in town that has stayed open. Here's what the owner had to tell us.

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WIAN: What's been the reaction to customers?

ASHLEY STEWART, RED KETTLE CAFE OWNER: Thrilled. A warm cooked meal that they don't have to clean up after.

WIAN: Have you had many firefighters?

STEWART. A lot. We've had quite a few crews have come through here.

(END VIDEO CLIP)

WIAN: Now, this blaze still remains at only 15 percent containment. They are getting some cooperation from the weather. The humidity is much higher than it has been over the last couple of days. The winds reasonably calm. There is a weather front coming in, expecting some moisture. They're also concerned that could be lightning and higher winds, so we're not out of the woods yet.

COSTELLO: All right, Casey Wian reporting from California.

D.C. wants large retailers to pay hourly employees 30 percent more than the minimum wage, but Wal-Mart says, no way. The wage battle is next.

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COSTELLO: All right, we told you at the top of the show that the city of Detroit has officially declared bankruptcy. This is Kevin Orr, Detroit's Emergency Manager, speaking to reporters right now. Let's listen.

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KEVIN ORR, EMERGENCY MANAGER, DETROIT: Both our casino revenue, as well as the $40 million payment that I defaulted on, on June 14th. As secured creditors to impair that interest we had to make an adjustment, but more important, they agreed to release their lien, they have agreed to allow us access of $180 million of annual revenue, which if you look at the plan proposal we put out on June 14th, it requires cash flow of at least that much to address the $125 million yearly.

We want to use for blight remediation, for health, safes and well fair concerns. We would have no course, no plan of adjustment without that revenue in addition they agreed to give us a discount on the swap obligation that we had, which was somewhere in the neighborhood of $350 million, which signed years and years ago. The total value of that resolution to the city is somewhere in the neighborhood of $75 million to $80 million plus the $180 million for secured party agreeing to give up their security interest that's why we did that deal.

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COSTELLO: All right, let's step away from this. I believe what Mr. Orr is talking about, since Detroit has delayed bankruptcy, it gives Detroit a cash flow, he's telling reporters that Detroit had no choice, that could provide for basic services in the city of Detroit. So now the long slog begins to financial recovery. Of course, we'll keep you posted.

It's 21 minutes past the hour, now for some top stories, the head of the NSA speaking out in defense of its controversial surveillance program at the Aspin Security Festival.

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GENERAL KEITH ALEXANDER, DIRECTOR, NATIONAL SECURITY ADVISER: The purpose of these programs, the reason we use secrecy is not to hide it from the American people, not to hide it from you, but to hide it from those who walk among you who are trying to kill you.

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COSTELLO: NSA Director General Keith Alexander said the agency has, quote, "concrete proof terrorists are making changes in reaction to information made public by Edward Snowden."

Here's another sign of the narrowing divide between trendy department stores and discount retailers. Target or Tar-jay is adding beauty consultants, a fancy title for people who help shoppers choose the right shade of lipstick or most suitable skin lotion. Target says those advisers should be more 10 percent of the stores by the end of the year.

In sports, the NBA's unveiling five new rules for the next season and instant replay will play a much bigger role beginning with the first tip off in the fall. Referees will be able to view videotape to overturn or uphold different fouls called.

A battle is brewing between Wal-Mart and Washington, D.C.'S city council with 1,800 potential jobs caught right in the middle. The city council wants the retail giant to pay a living wage of nearly $13 an hour, but Wal-Mart is calling foul and now says plans for six new stores in the area of in limbo. Alison Kosik is following this story.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Good morning, Carol. So the status is this bill is this. It is sitting on Mayor Vincent Gray's desk. He's deciding whether or not to veto it. What it does is that it requires large retailers like Wal-Mart to pay its workers at least $12.50 an hour. That happens to be way above the $8.25 minimum wage that's currently in place in the capitol.

Here's the problem. Some could say it's Wal-Mart's bargaining chip is that Wal-Mart had been planning on opening six new stories there which would have added 1,800 jobs. Now Wal-Mart is say it's going to put the brakes on three of the stores saying it would be too expensive if this bill goes through.

COSTELLO: Of course, there's two sides to every story, what is Wal- Mart saying about why it doesn't want to pay $13 an hour?

KOSIK: First let me actually say what workers have a stake in this. You know, this really amounts to an increase in their salary of more than $4 an hour. Some in the city council say a raise this size would make a huge difference to those on the lower end of the pay scale. They say given more buying power, it helps the D.C. economy. It's 8.3 percent. You know what, D.C. could use these jobs, the extra money as well. They could use all this badly.

Now Wal-Mart has its side. It believes it's being unfairly picked on, unfairly singled out because of its size, and says two of the main competitors, Safeway and Giant, which are huge employers in the area are exempt from this law because both of those companies have union toss negotiate wages.

Remember, Wal-Mart is not unionized. The retailers say the only way would be to raise prices which would hurt customers, so they're saying this opened a huge can of worms. If D.C. dictates what Wal-Mart pays its workers, why wouldn't other cities do the same? Some say why not change D.C.'s minimum wage, make it higher, instead of cherry-picking companies, but in the end, experts say they're likely to come to some sort of middle ground on this issue.

COSTELLO: Alison Kosik, thanks so much. In Boston, please have another mob mystery on their hands. The man who was at one point going to testify against James "Whitey" Bulger has turned up dead. Everyone wants to know if he was murdered. Susan Candiotti is tracking the story.

SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: Carol, good morning, organized crime, gruesome mob hits, all kinds of compelling testimony during the trial of Whitey Bulger, but it's what happened outside the courtroom that also now has everyone buzzing.

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SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT (voice-over): A day after he was dropped from the prosecution witness list, Stephen Rakes is dead, a jogger finding his body by the side of a road about 30 miles from his home. Rakes' mysterious death a shock at the height of the trial of Boston's notorious crime boss, James "Whitey" Bulger.

The 59-year-old Rakes, nicknamed Stippo, was a regular at Bulger's trial. For years he contended Bulger and his gang stole his South Boston liquor store and took it over as a mob headquarters. Rakes recently made that clear to reporters outside court.

STEPHEN RAKES, DECEASED WITNESS IN BULGER TRIAL: My liquor store was never for sale, never, never, never.

CANDIOTTI: During a nearly 20-year reign of terror from the '70s to the '90s, Bulger ruled the streets of South Boston. Testimony shows he was also an FBI informant during those years working with a corrupt FBI agent. A 32-count indictment against him includes 19 murders. One of those murders was Steven Davis' sister. He last saw Rakes Tuesday after Rakes was dropped from the government's witness list.

UNIDENTIFIED MALE: This here seems like reflecting back to the late '70s, early '80s, when people were getting killed. A rat, someone's going to testify, and, bang, they wind up getting killed or disappeared or something.

CANDIOTTI: Investigators say they were no signs of trauma in Rakes' death. Some media reports have suggested suicide. Davis isn't buying it.

(on camera): Is there any way this could be suicide?

DAVIS: A 110 percent no.

(END VIDEOTAPE)

CANDIOTTI: With no obvious trauma, investigators are now waiting for toxicology results to help explain what happened to a man whose 30- year dream of testifying against Whitey Bulger was cut short by prosecutors just before he died -- Carol.

COSTELLO: Susan Candiotti reporting.

For three days they camped out, waited and finally Trayvon Martin supporters holding rallies at the state capitol were heard. They probably didn't like what they heard. We'll be right back.

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