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JPMorgan to Pay $1.7 Billion in Madoff Settlement; Senate Prepares for Benefits Vote; Steubenville Rapist Freed; JetBlue was Denied Pilot Rest Rules Extension; Consumer Electronics Show Kicks Off Today

Aired January 07, 2014 - 10:30   ET

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

CAROL COSTELLO, CNN ANCHOR: Good morning. I'm Carol Costello. Thanks so much for joining me.

The nation's largest bank has struck a deal with federal prosecutors in the Bernie Madoff Ponzi scheme. You might remember some five years ago since that explosive scandal that mega financier Madoff had carried out one of the biggest investment scams in history.

JPMorgan Chase will pay $1.7 billion to settle criminal charges accusing it of ignoring obvious warning signs. Prosecutors say it's the largest ever penalty for a bank of this kind in the nation. I know that was difficult to follow and I apologize for that.

But our chief business correspondent is here and in short, JPMorgan is going to pay out $1.7 billion to victims of Bernie Madoff for its part in this scheme. We're trying to figure out what part JPMorgan played in all of this?

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: They were his banker for 20 years, a banker to a man who took money from charities, from celebrities, from mom and pop investors and had the largest Ponzi scheme in history happening right there under the nose of JPMorgan Chase, one of the biggest, most sophisticated bank pretty much in the world. That's what happened here.

And this investigation found according to the government this investigation found that there were red flags missed over and over again within JPMorgan Chase that could have prevented that. They should have found it out. They should have known that this was happening right under their nose. And their bank was being used in it.

This is what the company says. JPMorgan says we could have done a better job. They say that. They recognize they could have done a better job pulling it all together. All of these various information and concerns about Madoff that were popping up from different parts of the bank over time.

That spokesman being very careful to point out that at no point does it look like anybody within the bank was helping Madoff. They just missed it and missed it very badly. A lot of people were hurt by this, Carol. When you even look at the -- at the range of estimates for how much money was lost. At the height of my covering this, five years ago, it looked like $65 billion was missing. That's because this guy would take people's money and then he'd use that money to pay some other people. He would use that money to live his lifestyle, he would use that money to kind of cultivate this error about himself. But he wasn't trading, he wasn't growing that money.

And when the economy and the financial markets are to fall apart, he was sort of laid bare. I mean the emperor had no clothes and the whole thing fell apart. The SEC was warned. There were internal red flags at JPMorgan Chase. And still, this thing went on for years.

COSTELLO: Well it's interesting. You know this involves criminal charges against JPMorgan. But nobody is going to go to jail for this, right? They are just going to pay lots and lots of money.

ROMANS: Yes Madoff is going to jail. He is in jail, he's going to die in jail. There are five of his associates who are on trial now that basically all say they have been hoodwinked of all these people around him have said that they have been hoodwinked or they've settled with -- with prosecutors.

No I mean that's the thing that really frustrates people, whether it's Madoff or it's the mortgage mess, which was really bigger. But this is all happening at the same time. All of these major problems that the banks seem to be at the center of, the big thing that really irks -- irks you know the general public who paid for bailouts and watched Madoff run amuck, is that no, no there has been no -- nobody from a bank that's gone to jail. They just keep paying out the money.

COSTELLO: Christine Romans many thanks.

ROMANS: You're welcome.

COSTELLO: In just about half an hour, senators will vote on a procedural measure to extend unemployment benefits to 1.3 million Americans.

It's a contentious issue, it may or may not pass. The word is Senate Democrats may not have enough Republican votes to avoid a filibuster.

So let's talk about that Gloria Borger is CNN chief political analyst and Rana Foroohar is "Time" magazine's assistant managing editor as well as CNN's global economic analyst. Welcome to both of you.

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Thanks.

RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Thank you.

COSTELLO: OK so Gloria, I want to talk about the votes because something I found interesting. Of the four Republicans who might vote with the Democrats this time, three are women. I find that interesting. BORGER: Well, women very often in the Senate turn out to be sort of the great compromisers particularly someone over there Susan Collins of Maine, who is running for re-election.

But the interesting thing to me about this vote, Carol, is that it tells us a little bit about the choices as we head into 2014. You see the Democrats re-embracing the sort of populous mantle that worked really well for them in the presidential race. Remember, the President talking about I understand the middle class. Voters believe that he really understood and cared about their problems, more than Mitt Romney did.

And I think what you see for Republicans is that they are at the proverbial fork in the road. They can either vote no, which -- which many will do, or they can say and some are starting to talk about this, is just what kind of an agenda can we have for the people in this economy who have been left behind that is different from the Democrats.

Instead of just saying no, how do we help people get out of poverty in our own way and that hearkens back to the sort of old days of Jack Camp, Republican, a mentor to someone like Paul Ryan, who has been talking about poverty an awful lot these days.

So I think you are going to start hearing some different things from the Republican Party that could start to surprise people.

COSTELLO: Interesting so Rana, one of the things we are hearing from some Republicans, they want to offset the $6.4 billion extension by cutting something else, right? By cutting something else right it's an offset right. $6.4 billion to me is a lot of money but not in the grand scheme of the entire federal budget.

RONA: That's right. And I think that you know when you look at how the recovery is playing out, yes, we are in an economic recovery right now. But there are a lot of people, as Gloria says, that are still being left behind. This is still the longest period of recovery that we have had, the slowest recovery in the post-World War II era.

And it's very interesting. I do think that her analysis is spot on. The Republicans are at a fork in the road. And they do need to come up with policies that speak to Middle Americans and the people that are lower down the food chain because so far, there's been a very by bifurcated recovery. You've got to Americas really still you've got a recovery that's being felt by the top 25 percent but not by the lower 75 percent yet.

(CROSSTALK)

BORGER: Right and if the Republican Party --

(CROSSTALK)

COSTELLO: Other than semantics, Gloria, what will the Republicans adopt to prove you know they are helping those who are long-term unemployed besides tough love? BORGER: You know I think that's -- I think that's an unanswered question right now, there are some Republicans like Marco Rubio talking about what Charlie Rangel talked about in the 80s, which is these empowerment zones for communities that are really in trouble with all kinds of tax breaks. They are -- they are trying to come up. There are some of them, Marco Rubio and Paul Ryan, to come up with an agenda that whether it involves tax incentives, whether it involves a larger role for government if you will.

I mean this is a problem for the Republican Party. If you believe in small government, do you believe the government should do anything? And there are some Republicans now who are saying you know what, there is a role for government. And the role for government is helping bring people up from the bottom into the middle.

So I think this is an agenda that's evolving it will be really interesting to see. And if you can get the Democrats and Republicans fighting over the best way to help the people at the bottom, that would be a pretty interesting debate.

COSTELLO: That would be a great debate to have. Gloria Borger, Rana Foroohar -- thanks so much for joining me this morning.

Still to come in the NEWSROOM --

BORGER: Thank you.

COSTELLO: You're welcome.

Still to come in the NEWSROOM a football player found guilty of raping a 16-year-old is now free less than a year after his conviction.

CNN's Poppy Harlow is following that story.

POPPY HARLOW, CNN CORRESPONDENT: That's right, Ma'Lik Richmond, who was convicted of raping that 16-year-old girl at a series of parties in August, he is now out of juvenile detention. The rape victim's attorney tells us the statement issued by Richmond family is quote, "Disheartening because it doesn't mention the victim." We'll have that story straight ahead.

(COMMERCIAL BREAK)

COSTELLO: Ma'Lik Richmond one of two teenagers found guilty of raping a 16-year-old girl at Steubenville, Ohio is now out of juvenile detention. It was less than a year ago that Richmond and one of his football teammate were convicted. And his attorney Walter Madison issued a statement saying quote, "Ma'Lik is a better, stronger person and looks forward to school, life, and spending time with family."

CNN's Poppy Harlow joins me live with the latest. Some people are incensed at this statement.

HARLOW: Absolutely including the victim's attorney. Let's go back OK. Ma'Lik Richmond and Trenton Mays both two Steubenville high school football players, both convicted of raping this 16-year-old girl at a series of summer parties. Well Richmond was sentenced to one year, Trenton Mays was sentenced to two years because in addition to the rape, he also disseminated a nude photo of the victim. Richmond has served his sentence, his attorney told me yesterday that he has been released from juvenile detention.

But I want to read you more of that statement that the attorney issued on behalf of the Richmond family. It says "The past 16 months have been extremely challenging for Ma'Lik and his extended family. At 16 years old, Ma'Lik and his family endured hardness beyond imagined for any adult yet alone child. He has persevered the hardness and made the most of yet another unfortunate set of circumstances in his life."

Now Carol after I read that, I called Bob Fitzsimmons, who is the attorney for the victim, who we've been in touch with over the last year on all of this. And I said, what do you make of this statement? He frankly is very upset that the victim is not mentioned anywhere in this statement.

And I want to read you part of what Bob Fitzsimmons sent us. He wrote, quote, "Although, everyone hopes convicted criminals are rehabilitated. It is disheartening that this convicted rapist's press release does not make a single reference to the victim and her family, whom he and his co-defendant scarred for life. One would expect to see the defendant publicly apologize for all the pain he caused rather than make statements about himself."

That, coming from Bob Fitzsimmons, who represented -- the personal attorney for the victim and her family through all of this. Of course it was the state of Ohio, the attorney general's office who prosecuted this case. I talked to them this morning. They had no further comment.

So what happens now? As you heard from the statement, Richmond will go back to school, et cetera. But both Richmond and Mays have been classified as Tier 2 sex offenders. That means that wherever they live, Carol, they will have to register with the local sheriff there every six months for 20 years. But Ma'Lik Richmond served his sentence. And yes, the victim's attorney not happy at all with that statement.

COSTELLO: The part of that that got me was the unfortunate set of circumstances --

HARLOW: Right.

COSTELLO: -- well, seriously?

HARLOW: And Carol, I also just want to point out, this case got so much national media attention and in large part, other than the fact that this 16-year-old girl was raped, it was all over social media. So photos of her, horrible things said about her online, every time that happened, she was revictimized again and again and again.

That is what happens, that's the horrible side of social media, for her. But obviously, she has been through it again and again and again. COSTELLO: And again right now. Poppy Harlow, thanks so much.

Still to come in the NEWSROOM, deadly attacks in Russia have put the spotlight on security during the Sochi Olympics. So, will the games be safe? CNN's Diana Magnay is looking into that.

DIANA MAGNAY, CNN CORRESPONDENT: It's one month now and today marks the day when the security operation is beefed up dramatically. We will be telling you how and why in a few moments.

(COMMERCIAL BREAK)

COSTELLO: All right. We told you at the top of our show that JetBlue decided to shut down its entire operations in four major cities in the United States for 17 hours angering many, many passengers. Thousands of passengers -- some of whom have been stuck in airports for days.

JetBlue said it had to do this in part because of a new FAA rule meant to make flying safer, meant to save us from exhausted pilots being behind the controls in those cockpits.

Well we have some new developments to tell you about. Christine Romans has the lowdown -- what is it?

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Hi there Carol. Our regulation team, Mike Ahlers and Rene Marsh in Washington reporting that the FAA is saying that JetBlue, the only airline to publicly blame those FAA rest rules for part of its delay problems, they had actually asked for a waiver, for an extension of those new rules.

Late last year they had asked for a waiver of that. They wanted to push it off and give themselves perhaps more time to be ready and they were denied. The FAA saying that JetBlue was the only airline to ask for more time to implement those new regulations and they were denied. And of course, JetBlue is the only airline to publicly say that those new regulations are part, not all, but part of its problem right now with this 17-hour sort of reset in the northeast.

What are those rules? Those rules require ten hours of rest. It requires rest time, a certain amount of rest time for flight crews. It is more rest time than they had had before. And partly because of a (inaudible) air crash that had fatalities several years ago in which pilot fatigue was blamed. So they wanted to make sure they were protecting against pilot fatigue. JetBlue asking to extend that for a bit and denied from the government -- Carol.

COSTELLO: Right. And you're wearing many hats for us today and I sure do appreciate it.

I wanted to ask you about a vote taking place on the Senate floor right now. It's a procedural vote on extending the unemployment benefits in this country. The voting has just begun. Everybody is wondering if Democrats will be able to get the five Republican votes they need to get this thing through.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Mr. Wicker -- no.

(END VIDEO CLIP)

ROMANS: For some time, the betting, you know -- I guess the betting money in Washington and Wall Street was that they would eventually extend this thing because it is a mid-term election year. And people who are long-term unemployed, those 1.3 million who need those checks, they are Democrats and they Republicans.

But this has turned into a fight about how are you going to pay for it, when are you going to end entitlements and also emergency benefits before they become entitlements also among Republicans sort of an indictment of a slow recovery from the President. They say, look, the Obama economy should be creating more jobs, not creating more government paid for checks for people who can't find work. So that's sort of where this has all gone.

It is a political fight, Carol. But there are 1.3 million people who have a $300 check every week that hangs in the balance. The economy is getting better but it's not getting better enough yet to absorb all those people back.

COSTELLO: No, a very slow recovery. Christine Romans, many thanks to you.

ROMANS: You're welcome.

COSTELLO: Still to come in the NEWSROOM -- the nation's largest consumer electronics show kicks off today in Las Vegas. Could the next big piece of technology be revealed this week? We are live from the show floor after a break.

(COMMERCIAL BREAK)

COSTELLO: 2013 was a pretty big year for technology and gadgets. Samsung released its first smart watch, the Galaxy Gear. Google introduced its wearable Google glass. And of course, we have a new iPhone to round things out. But what's ahead for 2014?

The technology heavyweights are pulling out all the stops at this year's Consumer Electronics Show. Brett Larson is with techbytes.com. He joins us live from Las Vegas. Good morning.

BRETT LARSON, TECHBYTES.COM: Good morning Carol. Good to be here. It's a big show already and the doors haven't even opened. They don't even open for another two hours. We're expecting over 150,000 people will walk through the doors to see all 20,000 the new devices that we are all going to want to get our hands on.

COSTELLO: Yes. Well, let's talk about some of those devices. Should we start with the new TVs that are out? What are they 4k --

LARSON: I think we should.

COSTELLO: Yes.

LARSON: I know -- right? Ultrahigh-definition. That means that the television you have had all along, the HDTV it is now outdated. And yes, they have a curve to them. This is from Samsung. We've got a couple of vendors out not. So here is the TV. It is four times the resolution. But you see there it has a curve to it, which is kind of cool. When you're standing in front of it, you don't notice the curve as much. It just kind of feels like the contents are kind of reaching and giving you a little bit of a hug.

The picture quality on this thing is crazy good. We are running through this video of like all these different places in the world. And every once in a while, you like see a person walk through and you're like, "I can tell he is wearing some Levi's jeans." These things we expect to be in the stores probably in the next three to four months.

Something I discovered yesterday, this is called the phone soap. Check this out. This was actually a kick starter idea from two cousins that is now a reality. You put your smartphone in here. These are UV lights and they kill the germs on your smartphone while they charge it. And you just close it down. It runs for four minutes. It kills all the germs on your phone so that your phone is safe.

Everybody has already had their breakfast but I don't want to tell you how dirty and gross your cell phones get. They are 18 times dirtier than most things that we touch.

COSTELLO: I totally believe that.

LARSON: We can't forget about the dog collar called Voice that keeps tabs on all of your pup's vital signs and then sends it to the veterinarian so you are good to go. That's just a sample of the 20,000 things that we're going to see here -- Carol.

COSTELLO: Love that. Brett Larson thanks for the preview. We appreciate it.

Two Montana snowboarders thought they were having a little fun following a moose down a slope but wildlife officials are not laughing.

Jeanne Moos has more on the wild moose chase.

(BEGIN VIDEO CLIP)

JEANNE MOOS, CNN CORRESPONDENT: What do you say when you see your buddy ahead of you snowboarding down a mountain chasing a moose.

UNIDENTIFIED MALE: Oh, my God.

MOOS: Charlie Rush and Hunter Lamereaux were snowboarding at White Fish Mountain Resort in Montana when they stumbled on the moose apparently at a loss for any words but those. The wild moose chase continued until suddenly, the moose stopped and turned at which pointed our intrepid cameraman wiped out. Charlie rush managed to rush by the moose.

But he says --

UNIDENTIFIED MALE: It runs at my friend. I see my friend crawling up and running as fast as he can.

MOOS: The moose took off. Hunter posted the video on his Facebook page with the caption, "Just chasing a moose while snowboarding, no big deal" but the (inaudible) National Forest Service thought it was a big enough deal to fine Charlie Rush $225.

UNIDENTIFIED MALE: We do have regulations about harassing wildlife. What they did fell under that.

MOOS: Charlie says they weren't harassing it. They were trying to get around it. He is debating whether to fight the fine to clear his name.

UNIDENTIFIED MALE: I just don't like how everyone is dissing on us and saying we are horrible people and jerks.

MOOS: He says he has never hurt an animal his entire life. That he won't hunt or fish.

UNIDENTIFIED MALE: I love moose. I never realized how big they were until I got that close to one.

MOOS: Moose are nothing to trifle with. The last time I did a moose story, a mother moose took on a truck. The driver gingerly tried to get around mom and her calves. She rammed the vehicle four times. That moose actually ended up chasing the truck.

UNIDENTIFIED MALE: Let's get out of here.

MOOS: Even when you hit a moose, did you actually have a hoof print on your face.

UNIDENTIFIED FEMALE: Right up there.

MOOS: The moral for our snowboarders. Don't mess with a moose. You could end up doing a face plant with moose tracks planted on your face.

Jeanne Moos, CNN. New York.

(END VIDEO CLIP)

COSTELLO: Thank you so much for joining me today. I'm Carol Costello. "LEGAL VIEW" with Ashleigh Banfield starts now.