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Reports: Target Breach Tied To Russian Mob; Security Veterans; Thousands Evacuate Wildfire Near Los Angeles; West Virginia Residents Question Water Quality; First Lady: "I'm Fifty And Fabulous"; Is California Ready For The Big One?

Aired January 17, 2014 - 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: But first, the latest on the Target investigation, Christine Romans is our chief business correspondent and Phil Black is in Moscow. He has been gathering details about a possible Russian mob connection. Christine, let's talk to you about what's new in this investigation.

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: What's new is this a new kind of malware, a new kind of Trojan horse? Sophisticated international hackers able to get into the point of sale of retailers and launch this thing to stay ahead of the security software of these companies and even go in and change the parameters of what they are looking for and what they are trying to get from outside. They are calling it Kaptoxa.

It's a Russian word. Authorities are saying there are bits of Russian words in the code, Russian wording in the code and that's they are -- Phil Black could tell you more about this, but that's why they are looking in there. This can be controlled from the outside. That's what's so concerning about and the Department of Homeland Security along with the researchers, cybersecurity experts, showing this private report to retailers saying, you might have this and not know it.

This is probably bigger than just Wal-Mart and they are sort of getting a handle right now, Carol, on how big it might be. Security experts telling us, it could be up to a third of the American population could have their -- information could be in the hands of hackers.

COSTELLO: You meant to say bigger than Target, not Wal-Mart, right?

ROMANS: I meant to say bigger than Target. Thank you very much, Carol.

COSTELLO: Thank you, Christine. Now, let's bring in Phil Black. Phil, tell us what you are learning about a possible Russian mob connection?

PHIL BLACK, CNN CORRESPONDENT: Carol, it is well-known that cybercrime is big business for Russian mafia groups and organized crimes. As you heard, the code in this virus has been found to contain some Russian words, although not using Russian alphabet, using the Latin alphabet. More concerned cybercrime experts here have told us is that this particular code, closely resembles viruses they have seen up for sale on Russian language web sites.

Those viruses have also been designed with the purpose of harvesting financial information. So there are indicators. They say those indicators are not definitive. The best hackers in the world, the most professional, routinely include clues, hints, false --- includes hints to deliberately mislead those that are trying to track them down -- Carol.

COSTELLO: All right, Phil Black, Christine Romans, many thanks to both of you. Now, to President Obama's announcement next hour of new reforms of the NSA surveillance program. According to a senior administration official, the president will adopt the recommendation of a special panel and announce the end of the current form of bulk phone data collection as it exists. He is expected to act on recommendations for protecting your privacy.

He will call for scaling back surveillance on foreign leaders. Our next guest has grave concerns about any compromises in America's intelligence gathering. Frank Gaffney served as an assistant secretary of defense under President Reagan and is now president of the Center for Security Policy. Welcome, sir.

Thank you, Carol. Good to be with you.

COSTELLO: Nice to have you here. You and other national security veteran sent an open letter to the president saying that virtually change could be dangerous. Now we are hearing that the president is going to talk about changes when it comes to the NSA. How concerned are you?

FRANK GAFFNEY, FORMER ASSISTANT SECRETARY OF DEFENSE: Well, if I could segue from the last section of your program to this one, what you've just reported is evidence that mobsters and other unknown hackers are getting into private information of potentially tens, maybe hundreds of millions of Americans. That is also true of enemies that seek to do us not just harm by virtue of stealing or money or our identities, but actually killing us.

I believe and I think that the 17 luminaries who joined forces in this letter to the president warning against the sorts of changes that had been recommended, this is a very dangerous time to make the sorts of concessions or compromises or restrictions that are going to make it more difficult for those who are required to protect us against these sorts of threats to do their job.

I think that's what's going to be the practical effect of taking away some of these intelligence collection capabilities that have been subjected to very close scrutiny by executive branch, legislative and judicial branch, oversight. The checks and balances that protect our privacy for years. That needs to continue, not to be abrogated at this particular moment in time.

COSTELLO: One of the changes is possibly adding a citizen advocate who will sit on the court that decides whether the NSA can further investigate these phone records they collect or this meta data. What would be so bad about that to have a civilian in there, a citizen advocate that stands up further for the right of the people and makes the whole process more transparent?

GAFFNEY: Well, look, transparency is essentially the antithesis of classified intelligence capabilities. The more our enemies know about what we do, the more certain it is, we will have a harder time knowing what they do. We are witnessing daily with the drip, drip, drip from Edward Snowden's compromises of sensitive, classified capabilities that they are going away.

The sources and methods are simply no longer able to obtain information that is required to protect us in a very dangerous world. Are you feeling lucky is the question I would ask to all Americans? Do you think you can dispense with what is practically speaking an insurance policy against the sorts of plots that we know enemies that wish us harm have pursued in the past and are almost certainly working hard at right now.

They are very good at using both technology and operational procedures to keep those activities secret from us. We have to stay ahead of them. I think that's where these kinds of technical skills and assets are needed more in the future probably than even in the past.

COSTELLO: I will ask you this question because we just showed our viewers a pole in the last hour that most Americans now feel Edward Snowden is more whistle blower than trader. In your mind, I'll ask you this simple question, did Edward Snowden win in this case, as the president in about an hour will go on national television and talk about changes to the NSA?

Well, Edward Snowden, I believe, is a trader. I think that what he has done with help from communist China and now Russia is evidence of the purpose that he is engaged in. This is not whistle blowing. This is deliberate destruction of very sensitive national security capabilities. I think the American people may indulge in this kind of belief this is all fine, this is no problem, the president can IBC ip these up by the roots without cost until we are attacked again.

I regret to say this. It is a certitude that efforts will be made to do that to us. They may be much more destructive in the future than anything we have seen to date. God help us if we have not used the capabilities that we have to protect against that. I'm afraid that is going to be the verdict of history if we go down this road.

We'll listen to what the president has to say in just about an hour. Frank Gaffney, former assistant secretary of defense. Thanks so much for joining me.

Three men in police custody accused of starting that raging wild fire near Los Angeles. Police say the group of 20-somethings started a campfire and were carelessly tossing paper into the fire when a gust of wind blew hot ambers into the brush. Take a look at what that did. These are live aerials from our affiliate, KABC, in Glendora, California.

More than 700 firefighters battling the blaze there, officials say it is at least 30 percent contained. Five homes have been destroyed. More than a dozen other buildings damaged and thousands of people are leaving the area.

(BEGIN VIDEO CLIP)

BARBARA LEWIS, RESIDENT: If the wind gets stronger, it is going to probably catch over here and that's scary.

ZACK HUTCHENS, RESIDENT: I have my mom's car, my car, my sister's car, we are packed and ready to go, waiting for the last minute to make the final decision.

MARCUS ORTIZ, RESIDENT: That's our major concern, the winds. At nighttime, the wind kicks up here. Those embers flying can make a bad mess up here.

(END VIDEO CLIP)

COSTELLO: Adding fuel to the fire, California is in the troves of its worst drought since the 1980s. It has been more than a week since 300,000 residents in West Virginia were told to stop using their water thanks to the big chemical leak. Today, more than two-thirds have been told the water is now safe to drink but is it? Pregnant women are still being told not to drink the water. CNN's Jean Casarez has more.

(BEGIN VIDEOTAPE)

JEAN CASAREZ, CNN CORRESPONDENT (voice-over): Jacqueline Bevan and her family have been waiting for eight days to be able to use their tap water. At the same time, the CDC is recommending out of an abundance of caution that pregnant women don't drink the water until there is no trace of the chemical anymore.

JACQUELINE BEVAN, CHARLESTON, WEST VIRGINIA RESIDENT: We just don't know what we are drinking. If the CDC is saying that pregnant women can't drink it, I think that is going to go for all of us.

CASAREZ (on camera): If this isn't safe for pregnant women, how can we say anyone is safe in drinking the water?

UNIDENTIFIED MALE: Well, that is a good question. There is a lot unknown about this potential chemical that could harm humans.

CASAREZ: It was soon after the chemical leak federal authorities determined that one part per million of 4-Methylcyclohexanemethanol or MCHM could be deemed safe to assume. But they also admit that was based on limited information.

SCOTT SIMONTON, WEST VIRGINIA ENVIRONMENTAL CONTROL BOARD: Right now, it is an acceptable standard. I don't think anybody can call it a safe standard.

CASAREZ: CNN had independent water testing done which showed the chemical was present in water deemed safe, but well below the one part per million threshold. That water is now being used by more than 200,000 people in the affected area. Dr. Rahul Gupta, director of the Kanawha Charleston Health Department says following more and more people now using their tap water, hospital visits actually spiked mid- week.

DR. RAHUL GUPTA, KANAWHA CHARLESTON HEALTH DEPARTMENT: When people come to us and report that right after they have taken a shower, they have had this rash. We have had people walk in here with scary- looking rashes.

CASAREZ: After an earlier chemical explosion in this area, the Chemical Safety Board recommended in 2011, that West Virginia give Dr. Gupta the authority to establish a hazardous chemical release prevention program, which could have included monitoring the chemicals stored just upriver from Charleston's water treatment plant.

GUPTA: That would have helped us to have an idea to develop some sort of a comprehensive program in order to insure that those chemicals are being stored in a safe manner.

CASAREZ: But the state decided not to institute that program. With the safety of this chemical in question, this family isn't sure they even want to stay in West Virginia.

BEVAN: I have a child. I want to raise him here. I want to know that he is going to grow up safe and I feel like West Virginia has let me down.

CASAREZ: Jean Casarez, CNN, Charleston, West Virginia.

(END VIDEOTAPE)

COSTELLO: Now, the company responsible for the leak, Freedom Industries, is now blaming a broken water pipe near its property for this mess. A source tells the "Charleston Gazette," water from the broken pipe got underneath the tanks and froze and somehow punctured the tank from the bottom. We'll keep you posted.

Still to come, the hottest ticket in Washington this weekend will be to the White House where Michelle Obama will celebrate the big 5-0. We will talk more about her big day and why Americans are now saying that 50 is the perfect age.

(COMMERCIAL BREAK)

COSTELLO: Fifty and fabulous, that's how Michelle Obama describes her birthday today and she will celebrate like a first lady. The president is throwing a big bash for her at the White House titled Snacks and Sips and Dancing and Desert and rumor has it BFF, Beyonce, might sing happy birthday.

"People" magazine even gave Michele Obama a spot on the cover of its current devoting several pages to Michele's milestones. Let's talk about Mrs. O's 5-0 and the larger issue of women turning 50. With me now, Jodi Kantor, a "New York Times" correspondent and author of "The Obamas" and Michaela Angela Davis, a CNN commentator and writer. Good morning to both of you.

Good morning. OK, so Jody, I'll post this question to you, why are we making such a big deal that Michelle Obama is turning 50? JODI KANTOR, AUTHOR, "THE OBAMAS": We can't exactly say it is a news event, can we? You know, I don't think it is so much that there is real content or import for the nation in her turning 50, but just people are fascinated by Michelle Obama. She is a first lady. She is a cultural icon as you can see. "People" devour any slight scraps of information she feeds her kids or what her own leisure habits are. I think it is probably just a general social excuse to talk about her.

COSTELLO: I hope so, because, Michaela, I don't remember we made a big deal of President Obama turning 50, right? He just turned 50 and we said, he is a little grayer but presidents get a little grayer.

MICHAELA ANGELA DAVIS, CNN COMMENTATOR: That's right. It is so different for women. Fifty is that decade that gets sort of sketchy for women. The way women have to negotiate irrefutable and the way men have to negotiate youth is very different. A man gets distinguished and a woman starts to disappear. Michelle Obama creates this new narrative of what it means to be a woman who is 50, what it looks like to be a great American woman and to have so much vitality and sexiness and futurism isn't usually the kind of ideals we attach to a 50-year-old woman. I think it's a big difference between a president who is young at 50.

COSTELLO: You've hit it, Michaela. At 50, women are supposed to dry up and die. I must say, whenever the media makes a big deal out of women turning 50, I wrote a CNN.com article about it. I am going to find the part where I am going to read it to you. I put it really well. I'm happy that Mrs. Obama is able to celebrate her special day with loved ones, but articles about women turning the big 50 often get under my skin and not in a good way.

People not only asked Mrs. Obama if she had peaked at 50, but whether she would consider plastic surgery or Botox. I don't recall anybody asking Mr. Obama whether he turned 50 whether he would consider fillers or to stop playing basketball. I'm just saying, Jody, will there come a time when women of any age, you talk about women the same way when they turn 40 that you do when they turn 50, so when will all of that end? When will people just talk to us about our accomplishments?

KANTOR: In a funny way, Michelle Obama is not every woman, right? She is the first lady of the United States. Part of the fact that everybody is making a big deal, it's almost evidence of how well her strategy has worked as first lady. She has maintained a high profile and a low profile. Her celebrity is unavoidable. I'm the mom and chief. I'm not involved in administration issues.

I don't want to cause controversy or negative headlines. There is no topic that is safer in many ways than turning 50 and the fact she has got everybody to pay attention to it or the fact that people are naturally focusing on it is kind of a triumph as to somehow she is conducting her strategy.

COSTELLO: I have to agree with that and Michaela, I must say that in just looking at and I will talk about style, I will. Looking at her style, she is age appropriate but she is modern. She is certainly not the housewives of New York or Atlanta or wherever where women over 50 appear in itty-bitty bikinis and bling and have some 25-year-old guy on their arm. Most women I know are not like that. This is more the real woman of 50 today, I would say, Michelle Obama.

DAVIS: You used the right word. She is very modern and chic. She has this ability to seem very glamorous, but attainable at the same time. I wouldn't say she was every woman and earthy. She has got this easy glamour in the way she dresses up and down and mixes and matches and surprises and uses a diverse designer pool is really speaking to her. She starts trends that aren't silly but they also aren't so elite that all women. Every woman got a cardigan and could put a belt around their sheath dress. She made comments that are attainable. It is hard to look effortless. It takes a lot of work to appear effortless.

KANTOR: Her legacy. That is a big part of her legacy. It is not something she talks a lot about. We are still a country that marketed Barbie dolls to the world. Part of her unspoken message as first lady is that you do not have to be a blonde size 4 to be very beautiful. She is 50 and will soon be over the age of 50. You don't have to be young to be very beautiful.

COSTELLO: When people say about older women like Helen Mirren. People say, she looks so great at 50. Why don't they just say she looks beautiful, period.

DAVIS: I think Michelle Obama's biggest legacy is this new image that she is expanding this narrow narrative of what an American woman looks like. What does an American beauty that she has stature and substance and hips and lips and black from a distance and her hair changes. These things are new to this level of celebrity.

I'm also turning 50 this year. So this is a big deal for me as well to talk about it with ease because 50-year-old women remind people that people age. Often, this is the time that we're supposed to not say who we are and not say how old we are and not be proud of this big juicy life we get to celebrate now. It is kind of a big deal that she is making America talk about what it looks like and what are the responsibilities for women at 50. They look exciting if we are looking at her.

COSTELLO: Thank you so much, Michaela Angela Davis and Jodi Kantor. I appreciate the conversation this morning.

KANTOR: Thank you. Happy birthday, Michaela.

DAVIS: It is coming, not yet. Thanks. Bye, Jodi.

COSTELLO: We'll be back in a minute.

(COMMERCIAL BREAK)

COSTELLO: Is California ready for the big one? It's a question being examined on the 20th year of the North Ridge earthquake. CNN's Casey Wian looks at the lessons learned.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): The North Ridge earthquake killed 57 people, injured nearly 9,000 and damaged more than 112,000 structures and caused about $20 billion in direct losses. Odds are a bigger, more damaging, more deadly quake is coming. Lurking in the desert east of L.A., the San Andreas fault overdue for the so-called big one by about 150 years.

(on camera): Is this the type of quake that you worry most about happening sometime in the near future?

KATE HUTTON, SEISMOLOGIST, CELTECH: Yes. We worry about this kind of scenario. It would be a major disaster for the nation. It would be like having North Ridge here and North Ridge here and North Ridge here.

WIAN (voice-over): During North Ridge, computers were so overwhelmed, it took scientists about an hour to figure out the quake's magnitude and epicenter.

HUTTON: You have significantly more information in your pocket now in the cell phone than we had in 1994.

WIAN: Then Southern California only had a handful of GPS mapping stations and digital seismic monitors. Now, there are hundreds capable of providing instantaneous information about quake location and intensity. That's critical in deciding where to deploy emergency resources.

THOMAS JORDAN, SOUTHERN CALIFORNIA EARTHQUAKE CENTER: The North Ridge earthquake occurred on a blind thrust fault.

WIAN: A fault no one even knew existed. This is the map of Southern California's known faults in 1994. Many more have since been discovered including one under downtown Los Angeles.

JORDAN: If an earthquake would occur in there, it could be as large as magnitude 7 or a 7.5 and would be extremely destructive.

WIAN: If you saw the 1974 movie, "Earthquake" you get the idea except building codes are stricter so you might not see skyscrapers topple.

(on camera): In the 20 years since the North Ridge earthquake, there has been an extensive public education campaign to show people just how dangerous earthquakes can be. Part of that is this earthquake simulatore which attempts to replicate a quake much stronger than the North Ridge quake to show that most of the danger is from objects falling, not from buildings collapsing.

(voice-over): Ready America sells earthquake preparedness kits. It booms after North Ridge, not so much now.

JEFF PRIMES, PRESIDENT, READY AMERICA: FEMA tells us they are not going to be there for the first three days or longer. You need to be able to take care of yourself. WIAN: In the works and early warning system which could give a minute's notice to the earthquake, allowing trains to be slowed and surgeries stopped.

UNIDENTIFIED FEMALE: Every other country got earthquake early warning because of a damaging earthquake that killed a lot of people.

WIAN: For now, the best advice remains like it was in 1994, drop, cover, and hold on. Casey Wian, CNN, Los Angeles.

(END VIDEOTAPE)

COSTELLO: Still to come in the NEWSROOM, we are minutes away from President Obama's unveiling of changes to the NSA spying program. You see all the reporters waiting. A preview from Washington for you next.

(COMMERCIAL BREAK)