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ERIN BURNETT OUTFRONT

Yates: Warned WH Flynn "Could Be Blackmailed" BY Russians; Trump Fires Off Multiple Tweets About Yates Hearing; Obama Warned Trump About Hiring General Flynn; Clapper: WH Vetting is "Far More Invasive"; Official Jared Kushner Takes Ethics Rules Very Seriously Aired 7-8p ET

Aired May 8, 2017 - 19:00   ET

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


WOLF BLITZER, CNN THE SITUATION ROOM WITH WOLF BLITZER HOST: Erin Burnett OutFront starts right now.

ERIN BURNETT, CNN ERIN BURNETT OUTFRONT HOST: Next, breaking news. The former acting attorney general says she warned the White House multiple times about General Mike Flynn. And we're learning Obama himself warned . So why didn't the White House listen?

Plus, Jared Kushner's sister wooing investors, name dropping the president, touting her brother's access. One former White House official calls it borderline bribery. He's our guest tonight.

And it's a drag-out fight between the singing cowboy and a self-made millionaire. Who's going to win the political race? Everyone is watching. Let's go OutFront.

And good evening. I'm Erin Burnett. OutFront tonight, breaking news. Blackmail target. The Former Acting General Sally Yates speaking publicly for the first time about General Michael Flynn's Russian connections. It's revealing that she warned the White House that Flynn, President Trump's National Security Adviser had lied repeatedly to Vice President Mike Pence and others about his contacts with Russians. These are lies that Yates says left Flynn exposed to blackmail by the Russians.

(BEGIN VIDEO CLIP)

SALLY YATES, FORMER ACTING ATTORNEY GENERAL: We believe that General Flynn was compromised with respect to the Russians. Logic would tell you that you don't want the national security adviser to be in a position where the Russians have leverage over him.

(END VIDEO CLIP)

BURNETT: Yates says she warned the White House multiple times about Flynn. And that news comes as we're learning about yet another warning, and this one was directly from then President Obama to President Trump. At this meeting you're seeing, remember it? It was just two days after the election when Trump visited the Oval Office during that meeting, Obama warned him about Flynn. Now, President Trump late today firing off a number of tweets, actually, some moments ago, calling the "Russia-Trump collusion story a total hoax" and tweeting this just moments ago, "Sally Yates made the fake media extremely unhappy today. She said nothing but old news."

Now, Yates said she expected the White House to act quickly after her warnings about Flynn, but keep in mind, that did not happen. There were multiple news reports after her warnings that exposed Flynn's behavior. And then 18 days after Yates first came forward, Flynn was actually fired. 18 days. Senator Shelton Whitehouse questioned Yates on the senate panel today. He is by guest this evening. I want to begin though OutFront with Pamela Brown. And Pamela, what we learned new today because there were many new things in the hearing was that Yates had warned the White House multiple times, including the White House counsel.

PAMELA BROWN, CNN JUSTICE CORRESPONDENT: That's right, Erin. She revealed today for the first time that she spoke with White House Counsel Don McGann three times about then National Security Adviser Michael Flynn and her concern that he could be blackmailed by the Russians. This all happening more than two weeks before the White House took action. Tonight, former acting attorney general revealing for the first time when and why she alerted the White House about her concerns regarding the now dismissed National Security Adviser Michael Flynn.

YATES: We felt like it was critical that we get this information to the White House. Because -- in part because the vice president was unknowingly making false statements to the public, and because we believed that General Flynn was compromised with respect to the Russians.

UNIDENTIFIED MALE: Raise your hand please.

BROWN: Sally Yates testifying to a senate judiciary subcommittee that she spoke to the White House on three different occasions about Flynn. The first two visits happened in the White House where she said Flynn lied to Vice President Pence about conversations he had with the Russian Ambassador. And that the vice president may be unintentionally disseminated that information to the American people.

YATES: We felt like the vice president was entitled to know that the information he had been given and that he was relaying to the American public wasn't true.

DIANNE FEINSTEIN (D), CALIFORNIA: So what you're saying is that General Flynn lied to the vice president.

YATES: That's certainly how it appeared, yes, because the vice president went out and made statements about General Flynn's conduct that he said were based on what General Flynn had told him. And we knew that that just flat wasn't true.

BROWN: And she said her biggest concern was that the Russians would use that as leverage over Flynn.

YATES: Not only did we believe that the Russians knew this, but that they likely had proof of this information. And that created a compromise situation. A situation where the national security adviser essentially could be blackmailed by the Russians.

BROWN: Yates said she first alerted White House counsel Don McGann to her concerns in late January. Two days after the FBI interviewed Flynn and a full 18 days before Flynn was fired following a bombshell Washington post report that revealed the justice department's warning to the White House.

YATES: We told them that we were giving them all of this information so that they could take action. The action that they deemed appropriate.

BROWN: Yates's testimony contradicting the White House's assertion that she merely gave a heads-up.

SEAN SPICER, WHITE HOUSE PRESS SECRETARY: The acting attorney general informed the White House counsel that they wanted to give, "a heads-up to us" on some comments that may have seemed in conflict with what the -- he had sent the vice president out in particular.

BROWN: And Sally Yates said the third time that she talked to White House Counsel Don McGann was when she called him to tell him he could look at the classified information about Michael Flynn that was causing so much concern for her and other people within the justice department. She did not know if he or anyone else in the White House took her up on that offer because the same day she made it, she was fired by President Trump for refusing to back the travel ban. So that is still a looming question, whether anyone from the White House looked at those classified materials. Erin?

BURNETT: Pamela, thank you very much. And as I said, President Trump tweeting several tweets in just the past few minutes about the hearing. The fourth one just coming up. Biggest story between Clapper and Yates is on surveillance. Why doesn't the media report on this, fake news. Coming out fighting and Sara Murray is at the White House. Sara, that is just one of four tweets in the last few minutes.

SARA MURRAY, CNN WHITE HOUSE CORRESPONDENT: That's right, Erin. The White House has been pretty silent throughout these hearings today this afternoon and Donald Trump has largely been quiet when they were ongoing. That ends now. He has taken to Twitter and has been sort in the midst of a tweet storm these last couple minutes. I'm just going to read you some of the four tweets he sent out. Including him saying, Sally Yates made the fake media extremely unhappy today.

She said nothing but old news. But of course, Yates did delve into much further detail about the conversation she had with the White House Counsel and the warning she issued about Michael Flynn's behavior and why she felt he could be subject to blackmail by the Russians. Now, Trump also went on Twitter to say this evening the Russia Trump collusion story is a total hoax. When will this taxpayer funded charade end?

Of course, we know the FBI is still looking into ties between Donald Trump campaign officials and suspected Russian operatives. And it's worth noting today that when James Clapper was testifying, he said, he was not aware of collusion, but he also wasn't aware of this FBI investigation. Erin?

BURNETT: All right. Thank you so much, Sara Murray. And OutFront now, the top democrat on the subcommittee that held the hearing today with Sally Yates, Senator Sheldon Whitehouse. And Senator, thank you for your time.

SEN. SHELDON WHITEHOUSE (D), RHODE ISLAND: Thanks, Erin.

BURNETT: You know, the president says there was nothing new. Obviously, we did learn several new things today. Did Sally Yates --

WHITEHOUSE: Learned a lot actually.

BURNETT: -- answer your questions? And you disagree with the president, obviously.

WHITEHOUSE: Yes. She did answer the questions and I think she put the spotlight where it needs to be, which is you have the acting attorney general of the United States rushing over to the White House after an FBI agent went into the White House to interview the national security adviser to the president. And she feels the matter is so urgent she doesn't wait until the agent has completed his 302, his report of the interview.

She hustles right up there because of the national security implications that she and the intelligence community see of a compromised national security adviser in the White House with the White House apparently unaware of it. So she dashes up there with this sense of urgency, with a staff person there to make sure everybody is watching what's going on, she's not the only person in the room. And what do they do? Nothing. There's an 18-day gap during which the White House fusses around with no apparent reduction in Flynn's access to classified information, his participation in highly sensitive meetings, or in any other aspect of his duties. So a lot more questions about what the hell was going on in those 18 days.

BURNETT: So let me ask you, because when you say compromised, I mean, she told you today that she warned the Trump administration multiple times, three conversations that General Flynn could be blackmailed. Here's how she said it.

(BEGIN VIDEO CLIP)

YATES: The first thing we did was to explain to Mr. McGann that the underlying conduct that General Flynn had engaged in was problematic in and of itself. The Russians also knew about what General Flynn had done. And the Russians also knew that General Flynn had misled the vice president and others. That created a compromise situation. A situation where the national security adviser essentially could be blackmailed by the Russians.

(END VIDEO CLIP)

BURNETT: So she said she was very direct about it. Why do you think, Senator, that President Trump did not fire Flynn when the White House learned of this concern? WHITEHOUSE: Well, you probably if you're in the White House want to

do a little bit of due diligence before you instantly fire someone over a report like this, but there's no indication, because of Sally Yates herself having been fired that the White House ever went to the Department of Justice and actually did any of that due diligence. And moreover, while you're doing your due diligence, presumably, you want to take precautions about a potentially turned and compromised national security adviser by restricting his access to classified information and very sensitive meetings, and they apparently did nothing to limit any of those national security liabilities.

BURNETT: So, I want to ask you a couple points on this. First of all, the President Obviously in the past few minutes tweeting, but during the day, he tweeted also at your committee, Senator Whitehouse and he said ask Sally Yates under oath if she knows how classified information got into the newspaper soon after she explained it to the White House counsel. Obviously, leaks are a problem, democrats and republicans can agree on that. But Yates said in the hearing today, your hearing, she was not the source for those leaks. Do you think that that's true or do you think someone inside the Obama White House did leak this information on Flynn to the press?

WHITEHOUSE: There was nothing about Sally Yates today that seemed the least bit incredible. Our chairman, Lindsey Graham, was very impressed by the candor and the forthrightness of her testimony. When she said she had no part in that and has never leaked any information, I think everybody in that room believed her. How it got there remains an open question. But a considerable number of people within the FBI would have known about this problem. And, you know, we just don't know any more than that.

But I don't think anybody came away from the hearing believing that Sally Yates had lied to us and actually had a role in leaking that information to the Washington Post.

BURNETT: Should be -

WHITEHOUSE: Plus -

BURNETT: Yes.

WHITEHOUSE: You know, she's testifying about it now. It's not like this is some giant national security breach. The reason that President Trump is focusing on this is that it just embarrassed them. And who knows when they would have taken action if the Washington post hadn't blown the story up. So we didn't actually suffer national security harm as a result of this leak. The White House suffered embarrassment about mishandling this situation because of this leak. But that is a very different thing than a national security problem from a leak.

BURNETT: So on this issue of her motivation, OK? It came up today under questioning in part from Senator Ted Cruz and he questioned Yates about whether her warning, her multiple warnings were based on partisanship and her animosity towards the president. He pointed out she obviously didn't agree with him on the travel ban, He refused to defend his travel ban when she was the acting attorney general. Here's part of that exchange.

(BEGIN VIDEO CLIP)

SEN. TED CRUZ (R), TEXAS: In the over 200 years of the Department of Justice history, are you aware of any instance in which the Department of Justice has formally approved the legality of a policy and three days later, the attorney general is directing the department not to follow that policy and to defy that policy.

YATES: I'm not, but I'm also not aware of a situation where the office of legal counsel was advised not to tell the attorney general about it until after it was over.

CRUZ: Thank you, Ms. Yates. I would note that might be the case if there's reason to suspect partisanship.

(END VIDEO CLIP)

BURNETT: An aggressive back and forth there. Senator, do you think Cruz has any point, that Yates may be motivated by personal and political reasons or you think that's dead wrong?

WHITEHOUSE: I think it's not only wrong. I think it's really low. This is a woman who has worked in the Department of Justice under republican and democratic administrations without blemish for 27 years. She has risen to the top of her profession and did a terrific job as deputy attorney general with broad support from republicans as well as democrats. You know, in this particular matter, she has been vindicated by the courts that have looked at the same executive order and said, yes, Sally Yates was right.

This is unconstitutional. We throw it out. So the idea that you can cobble together some partisanship on her part out of making the right legal decision after 27 years of loyal service to the country, it was a low moment and a low blow.

BURNETT: From Senator Cruz. All right. Well, thank you very much, Senator Whitehouse. I appreciate your time. Senator Sheldon Whitehouse there.

OutFront next, the White House blaming President Obama for Michael Flynn, even after Obama personally warned Trump. Much more on that warning next.

Plus, we'll take you inside a meeting with Jared Kushner's sister and potential investors. What was she offering in turn for her money?

And Jeanne Moos with VIPs behind the wheel.

(COMMERCIAL BREAK)

BURNETT: Breaking news. The White House confirming that former President Obama warned then President-elect Trump about making General Flynn national security adviser. That warning from the then-president of the United States directly. Apparently during their Oval Office meeting just two days after the election. The Press Secretary Sean Spicer though says, that is the Obama administration that still must answer for General Flynn's security clearance and that the warning itself should be expected.

(BEGIN VIDEO CLIP)

SPICER: President Obama made it known that he wasn't exactly a fan of General Flynn's. Which is frankly shouldn't come as a surprise to anyone that given that general Flynn had worked for President Obama, was an outspoken critic of President Obama's shortcomings specifically as it related to his lack of strategy confronting ISIS and other threats around that were facing America.

(END VIDEO CLIP)

BURNETT: OutFront, our senior political analyst, Mark Preston, former adviser to four presidents including Nixon and Clinton , David Gergen, former White House communications director for President Obama, Jen Psaki, and former republican congressman and former senior adviser to the Trump campaign, Jack Kingston. Thanks to all. So Jen, you just Sean Spicer, he's saying, look, the real reason President Obama warned Donald Trump about Flynn was because Flynn was critical of Obama. He didn't like him, and that is why Trump dismissed the warning because he thought it was one guy not liking another. Does that add up to you?

JEN PSAKI, FORMER WHITE HOUSE COMMUNICATIONS DIRECTOR UNDER OBAMA: It is true that it wasn't a state secret what President Obama thought of Michael Flynn. He fired him in 2014. And his views were shared by a number of people high up in the national security team who worked under President Obama and who had worked under republicans as well. Because the jump from DIA to national security adviser is a big jump.

He's somebody who didn't have expertise in a lot of areas that would be relevant, and he just -- they thought there was a widespread view that there were better people for the job. So, it's not a surprise he shared that. But the more concerning warning to everyone should be the warning done by Sally Yates. That he is somebody who was vulnerable to influence of Russia, and that was something that was done, as we all know now, long after President Obama and President Trump had that meeting.

BURNETT: Congressman Kingston, what do you say?

JACK KINGSTON, FORMER TRUMP CAMPAIGN SENIOR ADVISER: I say that Ted Cruz was 100 percent right today. I have to disagree with Sheldon Whitehouse. Ted Cruz dismantled Sally Yates. Showed her to be the political hack that she is and basically said this is a woman you can't really rely on. So when she goes to Don McGann with information, it's very hard to trust particularly when you have every motivation in the world for a Sally Yates or Barack Obama to say something bad about General Flynn.

So I think the White House did what it should have done. It proceeded with caution. And keep in mind, she did not say, hey, he was giving away nuclear secrets. What she appeared to say is that he talked about sanctions or whatever, but his story was not was related to the vice president. So, the very -- that's a - that's a big warning sign but it's not like he's actually peddling nuclear secrets out of the back door. So, I'd say the White House did what it should have done. It proceeded with caution, they looked into it further and then they fired him.

BURNETT: OK. But proceeded with caution. The problem is, at least as of this point, there's no real record of that. I mean, Mark, of course, you have the president's warning and you have Sally Yates' warnings, right? But after all of those warnings, General Flynn is right there for the most important national security meetings that the president had, phone calls with the king of Saudi Arabia, phone calls actually with the Russian President, Vladimir Putin, so they've been warned they could be blackmailed by the Russians and they still have him in on a call with Vladimir Putin. There's no physical evidence that they were concerned.

MARK PRESTON, CNN SENIOR POLITICAL ANALYST: Right. There's no physical evidence that they actually sequestered General Flynn from information as they did an investigation and look, there's obviously a lot more for the story to come out, but I do want to disagree with what the congressman said about her showing that she was a partisan hack. A partisan hack because she went to the White House and expressed some concerns about somebody who is going to be the national security adviser.

I thought she came across as incredibly credible today. I don't think that she came across as a partisan hack at all. And just because she had a disagreement with the Muslim ban, that cannot be equated along the same line, a parallel line, as her concern about what was going on with General Flynn at the time, Erin.

BURNETT: Congressman Kingston, response to that? I mean, why would she pick general Flynn as a way to lash out about the ban?

KINGSTON: When Senator Cruz, who is a scholarly guy, who has argued in front of the Supreme Court says, can you name one case in 200 years where the attorney general does not obey an order from the commander- in-chief in terms of enforcing a law, and she decides she wants to have it both ways, that she's going to be judge and jury, or as Senator Kennedy asked her, when did you become a member of the Supreme Court?

I have to say, I don't -- I think this was a very disappointing hearing for the democrats. I think they were loaded for -- there. They were hoping something would happen. She basically reiterated what's already been reported for weeks and months now. And I think the whole hearing was a sleeper, much ado about nothing.

BURNETT: All right. David Gergen, you know, we learned many things in terms of the number of warnings, the nature of those warnings, who was involved. There were a lot of crucial details, but of course, we did know that she had warned, Congressman Kingston, that's important. But when it comes to this issue of vetting which is how they're fighting back today, the White House, David, they're saying that General Flynn was vetted by the Obama administration. So, the -- you know, if they were concerned, they could have suspended his security clearance, right? The Obama administration did. But they didn't. And they're saying that that's part of the reason they weren't that concerned because obviously, the Obama administration wasn't that concerned. The National Intelligence Director James Clapper pointed out today though that a White House job would require a whole different and higher level of screening than that General Flynn would have already had. Here's what Clapper said.

(BEGIN VIDEO CLIP)

JAMES CLAPPER, FORMER DIRECTOR OF NATIONAL INTELLIGENCE: I know what I went through as a political appointee twice in two -- in a republican and democratic administration. And the vetting process for either a political appointee or someone working in the White House is far, far more invasive and far, far more thorough than a standard TSSCI clearance process.

(END VIDEO CLIP)

BURNETT: David, do you see any evidence that the White House was acting on that or aware of that? Obviously again, what we have to go on is the visual record, which was they were warned multiple times and then there's 18 days, General Flynn did not seem to be excluded from any top secret events.

DAVID GERGEN, FORMER PRESIDENTIAL ADVISER: Listen, we go back and forth making essentially partisan arguments. The way to resolve this is let the general counsel of the White House go up and testify under oath. Just as Sally Yates did. And if he wants to contradict her testimony, then let's get some more evidence in. But let's do it on the basis of the evidence. Not on the basis of she's a political hack, no, in fact, she worked there for 27 years for both republicans and democrats.

You know, you can go either way on that. I happen to think that the White House when the president of the United States, Barack Obama, goes and warns the incoming president about something, he brings up a particular name, my understanding has been that he - that when he went in, he warned him on national security grounds not to appoint General Flynn. You would think the president-elect at that point would blow the whistle and say bring his group in and say let's figure this out, let's go deeper.

And then again, when you have the acting attorney general comes to you twice and then calls you on the phone, that is a five-alarm fire that that person is trying to bring to you. And if you're at the White House, I've had this happened, people from the justice department who did not necessarily share the views of the president calling and saying, you know, you really ought to watch out on this. You pay attention to that in the White House. You don't dismiss it and let it go for 18 days and then only come out with it because it gets in the newspapers.

BURNETT: All right. Thank you all very much. I appreciate your time. And next, new details on Jared Kushner's sister and her controversial

pitch to real estate investors in China. How much was she using access to her brother and the president of the United States to get money for Jared Kushner's family company.

And why the Trump campaign suddenly took down a website with wording that could derail one of the president's campaign promises.

(COMMERCIAL BREAK)

BURNETT: Breaking news. The White House on the defensive tonight after Jared Kushner's sister was caught on tape offering investors from China American visas if they invested in one of the Kushner family properties. Nicole Kushner Meyer also touted her brother's close ties to the president as his senior adviser. Tonight, the White House telling CNN, "Jared takes the ethics rules very seriously and would never compromise himself or the administration." Tom foreman is OutFront.

UNIDENTIFIED FEMALE: Three, two, one.

TOM FOREMAN, CNN CORRESPONDENT: Give us a half million and get a green card. That was the apparent offer as the Kushner companies courted investors in China. But hold on -- the former head of that company, Jared Kushner, is an unpaid adviser and son-in-law to President Donald Trump, once again, raising howls about a potential conflict of interest, and putting the White House on defense.

SEAN SPICER, WHITE HOUSE PRESS SECRETARY: Jared has done everything to comply with the ethics rules to make sure it had nothing to do with him per se. He wasn't involved.

FOREMAN: To be assured, Jared Kushner has said he'll have nothing to do with his family's business while he's working for the government, but the appeal to Chinese investors suggested otherwise. It was led by Kushner's sister Nicole, who noted, "My brother recently moved to Washington to join the administration."

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I think we have made tremendous progress in our relationship with China.

FOREMAN: The presentation also included a picture showing President Trump's role in the EB-5 visa program, which can give big investors who create at least ten American jobs permanent residency. While the program has its fans including many Chinese moguls, it's also been criticized to selling American residency to rich foreigners. The White House says it's one of many visa programs under review.

SPICER: We're going to continue to work with Congress on that.

FOREMAN: Add in a previous controversy over the Kushner film considering a Chinese bailout for a big New York real estate deal and it was enough to reignite concerns among critics of this business- loving White House.

(END VIDEOTAPE) FOREMAN: Now, the Kushner company insists it was not trying to trade upon Jared Kushner's high-profile connections and it has publicly apologized for even mentioning his name. However, they also ushered journalists out of that sales pitch in Beijing before we got to hear what might have been said privately -- Erin.

BURNETT: Tom Foreman, thank you.

And OUTFRONT now, Richard Painter, the former White House ethics lawyer for former President George W. Bush and Kayleigh McEnany, the contributor for "The Hill".

Thanks to both.

Richard, the Kushner company insists it was not trading on Jared's White House connections. Your response?

RICHARD PAINTER, FORMER GW BUSH WHITE HOUSE ETHICS LAWYER: Well, their conduct came very, very close to solicitation of a bribe. They were asking for money to be paid to the family of the United States government official in return for official United States government action, and it is strongly implying that Jared Kushner could weigh in their favor by showing a picture of the president of the United States, who is his boss, and mentioning him there at the meeting. They didn't need to do either of those things.

I think the implication was very clear, this is conduct very, very close to the line with respect to the criminal bribery statutes. They should be excluded from this program from participating in this program going forward. That's really the only answer at this point.

BURNETT: So, Kayleigh, let me just read again what Jared Kushner's sister said in this meeting. She said, "My brother recently moved to Washington to join the administration." She then went on to show the slide showing President Trump as the, quote, key decision maker on the visa program, and then, of course, there were images of Trump throughout the room -- everyone can see in this video -- this picture here. I mean, there's pictures of Trump in the room.

How is she not touting her access, Kayleigh?

KAYLEIGH MCENANY, CNN POLITICAL COMMENTATOR: Look, there are a few qualifying facts here. Number one, she says that the picture placed in the video or the presentation of Trump was actually put in there by the event organizers. She would not -- Kushner companies would not have placed that picture there. Secondly, she said that she mentioned Jared Kushner's name to suggest that he's no longer part of the project. He's exited, he's entered the administration.

And I just want to be clear, I mean, I don't think this is anywhere close to a bribe. I defer, in all due respect, to Richard. He's an expert in this field, I am not.

But I will say is this was a legal program, this EB-5 company where companies, you solicit their investments and they invest in the United States. In return for that, they get visas. So, it wasn't some nefarious side deal, you know, Kushner's sister

came up with it. It is a legitimate United States program.

BURNETT: So, Jared Kushner's family, by the way, his company, has benefitted big time from the specific visa. Just one example, Kushner companies did an investment called Trump Bay Street. It's in New Jersey. They raised $50 million for that, a quarter of the entire funding from EB-5 investments.

Is this relevant, Richard?

PAINTER: It is relevant. And when she mentions the name of Jared Kushner, who is a United States government official, who is a White House official, unnecessarily, absolutely no reason to mention his name other than to refer to his position in the White House, and then they show a picture of the president of the United States and blame that on the event organizer, no business person would make a presentation without being familiar with their own slides.

[19:35:01] This is absolutely ridiculous. And this is the type of thing that I have warned against all along with respect to both the Trump family and the Kushner family. That they would hold on to business interests, creating conflicts of interest, and everything get blamed on somebody like an event organizer when something like this happens. It's unacceptable.

BURNETT: Kayleigh, the question is, if she's saying my brother recently went and worked for the Trump administration, I know you're giving a reason for that, which would not be nefarious, but it would seem you would be familiar with what was in the slides, right? And clearly, in this case, the event organizer was under the impression that the whole point was to show that Trump is in charge of the visa program and she knows Kushner so buy in, right?

What are we missing?

MCENANY: Well, the slide that showed Trump actually showed four or five other pictures and they were just illustrating a pathway in which a visa is decided upon. I agree with you that in the future, she should not mention Jared's name, even though I think she had innocent intent here. But I do think it bears mentioning that Jared Kushner himself, he stepped aside, resigned as CEO of Kushner Companies. He's divested from this project, One Journal Square.

You know, he's taking extraordinary measures to separate himself from his company, resigning, putting this in trust. And the president has gone above and beyond even when he was not legally required to do so.

BURNETT: Right. Of course, and trust, worth as much as $600 million, right? No one is saying, he can't be -- you know, has to give up the money all together, I suppose, but obviously, he's still going to be a beneficiary even though in a trust.

Richard, what is the right thing to do at this point? I mean, now that this happened, and this really only happened, no one expected it to happen. Some reporters happened in the room, including ours, the "A.P.", "The New York Times", they then had to leave the room. But otherwise, no one would have known this happened.

PAINTER: Well, Jared Kushner should tell his family members what he should have told them to begin with and what they should have known, which is to never use his name and refer to his official position when trying to solicit investments or any other deals anywhere.

And second, the Kushner family should be excluded from the program. This is conduct that's unacceptable. As I say, it comes very close to violating the bribery statutes.

The Chinese investors over there, they know how governments, including their own operate. People curry favor with the families. They're close to people in power, and they get what they want. And the U.S. is becoming yet one more country that does business that way.

That was an unacceptable presentation, and blaming it on the event organizer is a joke. I would never have a picture of the president of the United States in a slide presentation I was making and then turn around and say I didn't know it was there. That's all the fault of the event organizer. That's just rubbish.

BURNETT: All right. Quick final word. Rubbish, Kayleigh?

MCENANY: No, I think there's a group of individuals that want to see this president embroiled in conflict.

This was an innocent situation. The sister should not have mentioned his name. She won't do so going forward. But all she was saying is he's no longer a part of this, which is compliant with ethics laws.

BURNETT: All right. Thank you both. I appreciate it.

And OUTFRONT next, another American detained by North Korea tonight. What is Kim Jong-un's game?

And the election everybody is talking about -- a self-made millionaire versus a singing cowboy.

(COMMERCIAL BREAK)

[19:42:10] BURNETT: Breaking news: the president's travel ban coming under intense questioning in a federal appeals court today. They heard from White House lawyers who defended the ban.

(BEGIN AUDIO CLIP)

ACTING SOLICITOR GENERAL: He made clear he was not talking about Muslims all over the world. And that's why this is not a Muslim ban.

JUDGE: He's never repudiated what he said about the Muslim ban. It's still on his website. The district court here found that it's on his website -- campaign website today. Or as of the day he wrote the opinion.

ACTING SOLICITOR GENERAL: Judge King, it is an archived press statement from 16 months ago. JUDGE: He said it.

(END AUDIO CLIP)

BURNETT: So just at the top of the line of questions, the president's call for a Muslim ban was actually finally removed from his campaign website.

OUTFRONT now, the Democratic Senator Jeff Merkley of Oregon, member of the Senate Foreign Relations Committee.

Senator, let me ask you this question -- obviously, the travel ban now struck down in multiple places, going through the Appeals Court process. The president believes, he says, for national security reasons that this nation needs to do this.

Do you believe tonight that this travel ban is over? That it's dead?

SEN. JEFF MERKLEY (D-OR), FOREIGN RELATIONS COMMITTEE: No, not at all. Of course, we'll have to have the fourth district weigh in and then the ninth district is holding a hearing on Monday. We'll have to see how they decide.

It's headed for the Supreme Court. We can see that in part by seeing that the entire panel sat in instead of having just a panel of three judges. The entire board sat in on this conversation today.

BURNETT: So, I also want to ask you a couple questions on another big development tonight, as you're on the Foreign Relations Committee. North Korea, we have just learned, has detained a fourth American citizen. The second American taken hostage by Pyongyang since President Trump took office.

Why do you think from your briefings that Kim Jong-un is doing this?

MERKLEY: Well, he's putting as many pieces on the chess board as possible in this confrontation with the United States. What we have seen is a very different message from the Trump administration. There is a massive space in which miscommunication can occur.

Is it military force, is it Chinese pressure, or is it dialogue and negotiations? All three have been mentioned in different capacities. And it's extremely concerning, delicate situation, dangerous situation.

Indeed, we're having elections in South Korea going on as we speak. And it looks like the candidate who is arguing for dialogue along with economic sanctions seems to be leading.

BURNETT: So, the two Americans that we have seen in the past two weeks, obviously, President Trump hasn't publicly weighed in on this yet, but they were both professors at a top university in North Korea, Pyongyang University of Science and Technology. Is it possible, Senator, that they are spies?

MERKLEY: Well, we don't have information that would give us any indication that that could possibly be the case. But it's not really the point.

[19:45:02] I mean, as far as we're aware, any of us are aware, these are simply folks who were doing their job, came in and taught a class for a month, was preparing to leave the country and was snatched up by the North Korean government. And even a student, a student who was just taking down a banner as a souvenir, and I remember taking down wall posters when I was a student in Italy and thinking, oh, am I going to get -- this student is getting 15 years of hard labor for seeking a souvenir out of North Korea.

Clearly, it had nothing to do with representing a threat to the government. They're grabbing people.

BURNETT: So, last weekend, North Korea accused the U.S. of trying to assassinate Kim Jong-un with biological weapons. The U.S. says this is groundless, of course. But the secretary of state, Rex Tillerson, came out and said the objective in North Korea is not regime change.

Do you support that stance now that the Trump administration has put it out there, to not pursue regime change in North Korea?

MERKLEY: Well, this is an important statement in terms of how North Korea reacts. And China has said the same thing. So, this is a coordinated American-Chinese statement saying -- in fact, China put it out in "China Daily". And they said it is clear we -- the United States and America -- we're not trying to produce regime change. We're not preparing to decapitate the government. We're simply saying that your nuclear provocations are unacceptable.

And that was interesting for China to say that, that directly, that publicly, and I gather it's likely. While I don't know this classified sense, but it's very likely if China is making that in a public way, they're also providing private pressure to that effect.

BURNETT: Well, thank you very much, Senator. Good to talk to you again.

MERKLEY: Oh, you're welcome. Take care, Erin.

BURNETT: And OUTFRONT next, Republican congressman tonight in damage control mode after this.

(BEGIN VIDEO CLIP)

REP. RAUL LABRADOR (R), IDAHO: Nobody dies because they don't have access to health care.

(BOOS)

(END VIDEO CLIP)

BURNETT: And what can Queen Elizabeth do that Donald Trump can't? Jeanne Moos has answers.

(COMMERCIAL BREAK)

[19:50:34] BURNETT: New tonight, one Republican congressman doing damage control after this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: You are mandating people in Medicaid accept dying. You are making a mandate that will kill people.

LABRADOR: No one wants anybody to die. You know, that line is so indefensible. Nobody dies because they don't have access to health care.

(BOOS)

(END VIDEO CLIP)

BURNETT: Congressman Labrador now says, "I was responding to the false notion that the Republican health care plan will cause people to die in the streets, which I completely reject."

Now, this exchange came as health care is now a heated debate across this country, including in one race that the entire country is now watching.

Kyung Lah is OUTFRONT.

(BEGIN VIDEOTAPE)

ROB QUIST (D), U.S. CONGRESSIONAL CANDIDATE - MONTANA (singing): I would stand up for you --

KYUNG LAH, CNN NATIONAL CORRESPONDENT (voice-over): Could you be hearing the biggest political upset since Trump's election? Democrat Rob Quist bets so, in the upcoming special election to replace former Montana Congressman Ryan Zinke, now interior secretary.

Quist croons Montana cowboy from boots, buckle to hat. A political newbie, but local musical icon and poet, roving across the Big Sky State, hoping his appeal will upend this bright red state and national politics.

(on camera): This is a state where Trump won by more than 20 percentage points.

QUIST: It's going to be a challenge. This is about Montana values and I think that's where I can connect.

LAH (voice-over): Quist's campaign buoyed by energized Democrats, cash pouring in, $2.5 million so far. Average donation, $35 or less, says the campaign.

Bernie Sanders tweeting he'll campaign for Quist later this month. Some independents like Jill Weiser say Trump is why they're picking Quist.

JILL WEISER, MONTANA VOTER: Donald Trump has me so outraged, that I feel like I've been slapped in the face.

DONALD TRUMP, JR., FIRST SON: We have an incredible opportunity here.

LAH: But Trump is not a bad word in Montana for Republican contender Greg Gianforte, campaigning with the president's eldest son, and lining up with nearly all the president's positions.

A self-made millionaire who moved to Montana 20 years ago. He spent nearly six million of his own money in the race from Montana's governor and barely lost.

GREG GIANFORTE (R), U.S. CONGRESSIONAL CANDIDATE - MONTANA: There couldn't be more difference. My opponent is just Nancy Pelosi with a cowboy hat. I think we need to repeal and replace Obamacare, to get premiums down and preserve rural access.

LAH: Health care already divisive in this special election. Gianforte on the defensive over reports that he's supported the controversial House vote on health care in a private phone call with donors. But a spokesman tells CNN Gianforte was taken out of context, and has been consistent. He does not support the current bill because he's concerned about rates, rule access and pre-existing conditions.

Quist calling Gianforte dishonest and playing to special interest.

LEE BANVILLE, ASSOCIATE PROFESSOR, UNIVERSITY OF MONTANA: Rob Quist plays with the heart, and Greg Gianforte is kind of playing to the head. And my guess is the head will still probably win?

LAH: A question, in what should be a slam dunk says University of Montana professor Lee Banville. But Montanans who picked an incumbent Democratic governor and U.S. senator last November are les predictable than you think.

BANVILLE: Montanans are much more likely to want to hang out with the guy who plays the banjo that the guy who made millions of dollars in software.

ADVERTISEMENT: It's time to fight back.

LAH: That's why the mud is flying. Gianforte saying Quist wants a gun registry.

QUIST: I'm Rob Quist and I approve this message to defend your rights.

LAH: Quist firing back.

(END VIDEOTAPE)

LAH: Both campaigns say this race is tighter than they anticipated, and an influx of national money from both sides, as May 25th approaches, could only make it tighter -- Erin.

BURNETT: Well, its' something to watch.

All right, thank you very much, Kyung.

And next, world leaders behind the wheel. Jeanne Moos on the queen's Sunday outing that has the internet on super drive.

(COMMERCIAL BREAK)

[19:57:45] BURNETT: There's only one person on the U.K. allowed to drive without a license and she was on the road this weekend.

Here's Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT: One British paper dubbed her the queen of the road, 91-year-old Queen Elizabeth was spotted driving her Jaguar home from church. It's enough to make car loving American presidents envious because they just can't say --

UNIDENTIFIED MALE: Let's hop in.

MOOS: President Trump was the latest to lament by, "I like to drive. I can't drive anymore." And this is a guy who's owned everything from a Ferrari to a Lamborghini, to a Mercedes McLaren, in which he posed for Vogue with his pregnant wife.

Melania has fondly posted pictures of her husband at the wheel of his Rolls. With their son Barron riding shotgun.

No Rolls for Hillary, a Cutlass Ciera was the car she drove to the White House.

HILLARY CLINTON (D), FORMER PRESIDENTIAL CANDIDATE: The last time I actually drove a car myself was 1996 and I remember it very well and unfortunately, so does the Secret Service, which is why I haven't driven since then.

MOOS: President Bill Clinton told Ellen driving was the thing he missed most.

BILL CLINTON, FORMER PRESIDENT: Whenever I'm on the golf course, I always make them let me drive the golf cart.

MOOS: George W. Bush used to scratch his itch to drive by taking leaders like Germany's Angela Merkel on tours of his ranch in his pickup.

GEORGE W. BUSH, FORMER PRESIDENT: I still know how to drive.

MOOS: Sometimes, the only way a White House occupant gets to drive is with the host of a comedy show.

But President Obama had to confine his 1965 Stingray joyride to the White House grounds.

UNIDENTIFIED MALE: I like you hanging over the wheel.

BARACK OBAMA, FORMER PRESIDENT: Yes, yes.

MOOS: James Corden came to the White House to pick up Michelle. And Jay Leno gave Joe Biden an excuse to burn some rubber, in the

V.P.'s '67 Corvette.

But these are the exceptions. Usually, these wannabe drivers are carried around like packages.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BURNETT: And thank you so much for joining us. Anderson's next.