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VA Secretary Grilled over Care for Vets; Mystery of Flight 370; GM to Pay $35 Million

Aired May 16, 2014 - 10:30   ET

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

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

We do begin with breaking news.

The Department of Transportation is announcing a major penalty for General Motors over the recall of cars with those faulty ignition switches. GM has agreed to pay between $10 million and $50 million for violating federal safety laws. Those ignition defects have been linked to at least 13 deaths in the past decade.

Rene Marsh is live in Washington, our chief business correspondent Christine Romans is in New York, Alison Kosik is live at the New York Stock Exchange. Welcome to all of you. But I want to start with you Rene bring us up to speed on these penalties that GM is now facing.

RENE MARSH, CNN AVIATION AND GOVERNMENT REGULATION CORRESPONDENT: Well, Carol, according to a source in just about another 45 minutes from now, with know that Transportation Secretary Anthony Fox will make this major announcement that a settlement has been reached with GM. You said it. The automaker has agreed to pay anywhere between $10 million to $50 million. Again, this is for a violation of federal safety laws.

Now this is all stemming from GM's delayed reaction to recalling Chevy Cobalt. You may remember they had some issues with their ignition switches linked to at least 13 deaths, so now we expect that we will hear this announcement again in about another 45 minutes from now. Again, that fine expected to be anywhere from $10 million to $50 million, Carol.

COSTELLO: OK so they haven't yet decided on one exact price because I was wondering why the spread between $10 million and $50 million because that's a big spread.

MARSH: Well it's not that they haven't decided. It's just the information that we've received right now. I supposed in another 45 minutes we will hear the actually number but my source only telling me that as of right now it's anywhere between $10 million and $50 million.

COSTELLO: Understand. So Christine, how bad is this for GM? CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Well this is GM trying to get ahead of this, to resolve this and to resolve what has been a very bad public relations year for the company in terms of its recalls. I mean you've got something like almost 13 million cars have been now recalled or announced so far this year there were some recalls today there were more recalls yesterday Carol as I reported to you about 24 hours ago.

So the company is trying to resolve this because this has been a problem and an outstanding issue for the company. This particular recall is one that has really angered a lot of consumer protection advocates because this is something that -- that the company knew about for some time for a period of years. There were 13 deaths that have been tied to accidents with this ignition switch problem. Some 2.6 million of these cars recalled.

This in particular is the Cobalt issue, the car that started it all and that has really been the crux of the problem for GM. So resolving this with the government is incredibly important. There are going to be other lawsuits don't forget they have to get those resolved as well and they've got to move forward and show they're being more aggressive, not just putting out technical bulletins about cars but actually recalling cars where people could be hurt.

So this is an important turning point how GM manages this.

COSTELLO: OK so Rene let me ask you this question. You know somewhere between $10 million and $50 million 13 people died because of this. There was an obvious cover up right. They knew about it since 2004. Is this a large penalty for such infractions?

MARSH: You know, the source that I spoke to when they were telling me about the amount here, they categorized it as a pretty hefty amount. So that again coming from that source although some might argue, you know $10 million to $50 million for 13 lives lost and -- and the fact that this company knew about it and didn't act right away, some will argue that that simply is not enough.

Again, Carol, we expect to hear what that final number of that concrete number is shortly, but I'm sure that there are people out there when they hear this they will say that is just simply not enough.

COSTELLO: Well and I'm sure the lawsuits are coming from these families as well. Those are still to come. Alison, I wanted to ask you. How is GM stock doing?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: The stock only down about one percent at the moment you know you look at how it performed all year even during this whole recall and you know GM shares only down about 4.5 percent since the ignition switch recall happened in February. Because the fact of the matter is people are still out there buying GM cars. Sales are up in March and April as well. This is despite 11 million recalls happening and here's part of the reason why. From Edmonds.com one analyst telling us, you know what, people don't put two and two together at the Cadillac, the Chevy, the GMC, the Buick, their GM cars. The other part of it is most of these cars that have been recalled, they're older, they're not still being sold, so people feel confident buying other GM models.

Also there is this sort of effect happening where there have been so many recalls happening that people maybe becoming immune to it. Kind of in recall fatigue so you're seeing what happened to Toyota a few years ago with this recalls. Its sales and its stock price tanked. You're not seeing that happen with GM at this point. A good part of that is because a lot of these models just aren't made anymore.

COSTELLO: Interesting Alison Kosik, Rene Marsh, Christine Romans -- thanks to all of you.

ROMANS: You're welcome.

COSTELLO: In southern California people say they've never seen anything like it. Ferocious winds spinning off tornadoes of fire and pushing flames across more than 10,000 acres in San Diego County alone. At least one person has died. Listen to these terrified residents who are among the thousands chased from their homes.

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UNIDENTIFIED MALE: Wow. There it is right there. there it is right there holy (EXPLETIVE DELETED).

UNIDENTIFIED MALE: Oh, my God. Oh, my God. . Holy (EXPLETIVE DELETED).

UNIDENTIFIED MALE: Oh, my God.

UNIDENTIFIED MALE: Oh, my God. It's right there.

UNIDENTIFIED MALE: Close the store and come back.

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COSTELLO: At least eight separate fires still burning in San Diego County. Two teenagers could be charged with intentionally starting two of these fires, but so far -- well, actually the greatest single threat right now is the wind.

CNN's Gary Tuchman is at the front of those continually shifting fire lines.

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GARY TUCHMAN, CNN NATIONAL CORRESPONDENT (voice over): The scene is frightening, the sky blood red. The heat and smoke so intense, it's challenging to see.

UNIDENTIFIED MALE: We're out of here.

UNIDENTIFIED MALE: Go it's blacked out.

TUCHMAN: This is a neighborhood in San Marcos California, north of San Diego. And it's the most intense time during the wildfire the frantic efforts to stop the flames from burning down houses. Incredibly a short time before this video was shot there was relatively little fire in this area. When we got to San Marcos this is what we saw some flames but the winds starting to pick up.

(on camera): The flames and the winds spread the ashes members and that's what makes the fire spread. This area right here, 10 minutes ago, nothing at all. Now we're seeing the smoke and the flames start to form. It's very likely that within the next couple of hours, these trees, this vegetation will be gone. Right down the hill from where I'm standing in San Marcos, California, which is northeast of San Diego this is the Cal state San Marcos campus it's been around for a quarter of a century. It's now been evacuated they are hoping that the fire does not spread down there. And in this area within a five minute walk there are hundreds of homes, businesses, condominiums and lots of people.

(voice over): Choppers swoop in dropping water in the 99 degree dry heat, 30 degrees higher than the normal may highs in San Diego County. But then trouble.

(on camera): The winds continue to increase. The fire's getting bigger. It's moving closer to us and moving closer to the houses in the neighborhood. The firefighters we're talking to are getting quite concerned.

KEVIN GIEST, RESIDENT: It's scariest at the moment with the fire now like a 100 yards from the homes and I worry about the embers jumping into the grass and next to the homes.

TUCHMAN: It's frightening.

GEIST: It is. Very.

TUCHMAN: And then we see a bizarre spectacle of nature a fire tornado, a whirlwind of smoke caused by the turbulence of the wind and the intense heat. Seconds after we see it the fire starts blazing in new spots.

Grave concern now as the flames are very close to the houses and we've witnessed the fire gallop hundreds of yards in just a matter of seconds. More helicopters are called in dropping water in the smoky case. Fire personnel on the ground make sure they have an escape route if the blaze jumps again, the team work on the ground and in the air starts to pay off though. The blaze starts to diminish. At least where we are.

(on camera): The fire is still burning here but it's nothing like it was before. This lush area has been destroyed but the firefighters appeared to have done a good job saving the neighborhood right next to where we've been standing.

(voice over): An evacuation order remains in effect here though, the situation still way too volatile. The people who live here, well aware that their neighborhood could end up looking like this one on the other side of town.

Gary Tuchman, CNN, San Marcos, California.

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COSTELLO: Still to come in the NEWSROOM, VA Secretary Eric Shinseki says he's mad as hell over reports of patients' desk at VA hospitals because of those long treatment delays but he says he's not resigning. Jim Acosta live at the White House this morning. Good morning Jim.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Good morning Carol. Secretary Shinseki is not the only official who is mad as hell President Obama is also angry. But does anger equal action? We'll have a live report coming up.

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COSTELLO: Embattled V.A. Secretary Eric Shinseki says he's mad as hell but he's not resigning. The retired Army general getting hammered by members of the Senate Veterans Affairs Committee. They're demanding answers following a CNN report detailing dozens of patient desks at the V.A. hospital in Phoenix because of long treatment delays.

Jim Acosta is live at the White House for reaction there. Good morning, Jim.

ACOSTA: Good morning, Carol. That's right White House officials here say President Obama is angry and wants answers after learning about those allegations facing the Department of Veteran Affairs, but the general in charge of that department says he does not want to leave his post until he finds that those problems affecting his agency have been resolved.

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ACOSTA (voice over): As public outrage mounts over reports that dozens of veterans died waiting for care from the V.A. system, Secretary of Veteran Affairs Eric Shinseki insisted at a Senate Committee hearing he is just as furious.

ERIC SHINSEKI, VETERANS AFFAIRS SECRETARY: Any allegation, any adverse incident like this, makes me as -- makes me mad as hell.

ACOSTA: But that wasn't enough for lawmakers who demanded to know whether the Department knew about allegations that some VA officials used secret waiting lists to hide long delays for care.

SEN. RICHARD BLUMENTHAL (D), CONNECTICUT: Isn't there evidence here of criminal wrongdoing, that is falsifying records, false statements to the federal government? That's a crime.

SHINSEKI: Should be, yes.

ACOSTA: Unlike other investigations on Capitol Hill these days this grilling was bipartisan.

SEN. DEAN HELLER (R), NEVADA: Do you believe that you're ultimately responsible for all of this.

SHINSEKI: I am.

DENIS MCDONOUGH, WHITE HOUSE CHIEF OF STAFF: Rick is going to get to the bottom of this.

ACOSTA: While the White House is standing by Shinseki, the President's chief of staff, Denis McDonough told CNN's Jake Tapper, Mr. Obama lashed out when he first learned of the story.

MCDONOUGH: Nobody is more mad than the President and I have the scars to show it.

ACOSTA: What's more outrageous is that advocates of veterans maintain accusations of long wait time and poor care with the VA system are nothing new saying there's plenty of blame to go around.

CARL BLAKE, PARALYZED VETERANS OF AMERICA: The administration and Congress both bear the responsibility of these problems.

ACOSTA: For now, the General turned secretary now at the center of the VA firestorm says he wanted to right the wrongs of the system he leads.

SHINSEKI: I intend to continue this mission until I'm satisfied, either that goal or I'm told by the commander in chief that my time has been served.

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ACOSTA: And Secretary Shinseki also testified that he's only found isolated cases of officials cooking their books, falsifying their records, and we should also point out the Inspector General who testified yesterday upon Capitol Hill. Said he has not found a direct correlation yet between these long wait times and this neglected care and these veterans debts. But he also cautioned that federal prosecutors are now working on the case -- Carol.

COSTELLO: Jim Acosta reporting live from the White House this morning. I'll be right back.

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COSTELLO: Checking some top stories for you at 49 minutes past the hour. A suspect now in custody after a deadly bank robbery in Cairo, Illinois -- two employees were killed while another was critically injured. Illinois state police say the man entered the bank armed with a knife and a handgun. The investigation is ongoing.

The launch of a Russian communications satellite when the rocket carrying it veered off course, it triggered a key emergency propulsion system to shut down. Officials on the ground lost contact with the rocket about nine minutes after take off. Beyonce, Jay-Z, and Solange Knowles say they're, quote, "A united family" and they're putting that elevator fight way behind them. The clash between Queen B's little sis and her husband went viral sparking wide speculation about its cause. In a statement the Carter-Knowles clan is not opening up about that but says the most important thing is that they all worked through it together.

It's been one of the most important parts into the investigation of Malaysian Airlines Flight 370. That satellite data that has shaped the search for the missing jet. But some 70 days after the plane disappeared there are questions about who has that data and why the public has not seen it.

CNN's Jim Clancy tried to get some answers.

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JIM CLANCY, CNN CORRESPONDENT: What happened to Flight 370 is the biggest mystery in the history of modern aviation, but the raw data gleaned from satellite handshakes as the plane flew thousands of miles off course is not a mystery. It may instead become a controversy.

UNIDENTIFIED MALE: The raw detail is with INMARSAT, not with Malaysia, not with Australia, not with (inaudible). So if there's any request for this raw data to be made available to the public, it must be made through INMARSAT.

CLANCY: Australian officials heading the search in the Southern Indian Ocean tell CNN they don't have the raw data either. But INMARSAT, the company that owns the satellites insist that data has already been released.

CHRIS MCLAUGHLIN, INMARSAT: We've shared the information that we have and it's for the investigation to decide what and when it puts it out.

CLANCY: The truth it seems somewhere in between. Malaysia as a country in charge of the investigation is supposed to control the release of any information but in this case the conclusions were shared in a presentation on a laptop computer. Malaysia's transport minister insists he doesn't have the raw data itself.

Malaysia and everyone else have the conclusions. That's the sequence of maps that was produced by reading satellite data that show the jetliner was somewhere along a huge arc. Further calculations aided by Boeing, Malaysian Airlines and others, placed Flight 370 in the Southern Indian Ocean, nearly out of fuel, and far from land.

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CLANCY: Is a reassessment of raw satellite data in order? Well, CNN has asked the Malaysian government if it would request raw data INMARSAT in the hopes that it could then in some form perhaps be made public and openly examine. Angus Houston, the man in charge of the search warns some of the world's best experts are confident the current analysis is correct but even he doesn't rule out some kind of review. COSTELLO: That was Jim Clancy reporting.

The Malaysian government says it had set up a new committee to help streamline communications between the countries involved in the search and the families that are supposed to be involved in that as well. We'll keep you posted.

I'll be right back.

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COSTELLO: All right. We have more information on the federal government levying a multi-million dollar fine against General Motors for covering up that faulty ignition defect. But in the end those faulty ignition switches killed 13 people. Rene Marsh is in Washington with more on this story.

What's the fine?

RENE MARSH, CNN CORRESPONDENT: Well, we now know that it is the maximum penalty possible, Carol -- $35 million. We were just talking about this a short time ago. You said, you know, is anywhere between $10 million to $50 million enough, now we know it's $35 million and we know that that maximum penalty they could levy against GM for their failure to act quickly as far as recalling the Chevy Cobalt.

Also within this bulletin that we just received from the department of Transportation, they're urging support for their mission to get congress to pass what's called, "The Grow America act which would essentially increase these sort of penalties from the maximum of $35 million to a maximum of $300. So that is the latest that we have here.

Again just to reset for you we got word that the U.S. Department of Transportation, specifically the transportation secretary Anthony Fox would be making an announcement and that would be happening at around 11:15 in which he'll be talking about this major settlement made with GM and, of course, this all stems from their delayed reaction to recalling the Chevy Cobalts once they realized that there was a problem with the ignition switch, Carol.

COSTELLO: And the interesting thing about this is, you know, this is one recall but GM recently instituted five more recalls. You have to wonder what's going on in the automotive industry.

MARSH: Absolutely. And speaking of GM they did just put out a press release today. I'll just give you a little bit from it because I'm just looking at it for the first time. They're essentially saying that they have a crime table where have a timetable or schedule in which they'll get all the parts needed for this specific Chevy Cobalt recall to ensure that they have the products in place, that they can quickly repair the vehicles that need to be repaired.

And that is linked to the announcement that we're going to hear in another 15 minutes because not only do they have to pay the money, they have to make sure they get these parts in a timely fashion and get these vehicles fixed in a timely fashion as well. And so we have word from GM that they have a plan in place to do just that -- Carol.

COSTELLO: OK. I'll let you go because I know you want to do some more reporting on this issue. Again, the federal government levying GM with a $35 million fine for those faulty ignition switches. You would think that that would affect GM's stock, but it has not yet so far.

Thank you so much for joining me today. I'm Carol Costello.

COSTELLO: "@THIS HOUR WITH MICHAELA AND BERMAN" starts now.