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EARLY START

Yates Warned White House Flynn "Could Be Blackmailed"; Future of Travel Ban; Kushner Family Business Apologizes. Aired 4:30-5a ET

Aired May 9, 2017 - 04:30   ET

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


(COMMERCIAL BREAK)

[04:30:42] DAVID BRIGGS, CNN ANCHOR: President Trump fighting back, dismissing a probe into his campaign ties to Russia as key figures testify to Congress. What's ahead for that investigation?

CHRISTINE ROMANS, CNN ANCHOR: And President Trump's travel ban faces new scrutiny this morning as an appellate court weighs whether campaign statements about Muslims should impact its survival.

Welcome back to EARLY START. I'm Christine Romans.

BRIGGS: And I'm Dave Briggs.

And one thing we haven't heard about this Republican health care push is calling it Obamacare 2.0.

ROMANS: Yeah.

BRIGGS: That's from a conservative Republican in the House Freedom Caucus. It happened yesterday in Iowa. We'll talk about that straight ahead.

But, first, fierce pushback by the president to forceful testimony from former acting attorney general Sally Yates. She was testifying to a Senate committee. Yates made it clear the Justice Department was seriously concerned about then-national security adviser Michael Flynn.

Yates says she told the White House that Flynn's talks with the Russian ambassador and his lies to the vice president about those talks made Flynn vulnerable to blackmail.

ROMANS: Yates says she gave those warnings in meetings with the president's lawyer, expecting some action, but nothing happened.

(BEGIN VIDEO CLIP)

SALLY YATES, FORMER ACTING ATTORNEY GENERAL: 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.

(END VIDEO CLIP)

ROMANS: Now, the Senate hearing came moments after we learned that last November, President Obama personally warned President-elect Trump not to hire Flynn as national security adviser in a 90-minute meeting in the Oval Office. He went out of his way to say: don't hire Flynn. With Yates now on the record and persistent leaks about Flynn, it makes sense to wonder, what might emerge next? Where does this go from here?

We begin our coverage with chief national security correspondent Jim Sciutto in Washington.

(BEGIN VIDEOTAPE)

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: Christine and Dave, it was a hearing full of headlines, really. The former acting attorney general, Sally Yates, sharply contradicting the White House version of events regarding fired national security adviser Michael Flynn. In fact, Yates said before the hearing that she made clear that the president's closest national security adviser was in danger of being blackmailed by Russia.

YATES: 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.

SCIUTTO: Now, the hearing was intended to focus on Russian interference in the U.S. election. On the key question of whether Trump advisers colluded with Russia in that interference, the former Director of National Intelligence James Clapper said that he had not seen evidence. Yates, however, was less definitive. CNN's own reporting is that the FBI continues to investigate both communications between Trump advisers and Russian officials as well as possible collusion.

Clapper confirmed that Russia collected on Democratic and GOP targets but only leaked on the Democrats. He and Yates both expect Russia to continue to attack U.S. elections and both parties in U.S. elections going forward -- Christine and Dave.

(END VIDEOTAPE)

BRIGGS: All right. Jim, thanks.

White House reaction to the Senate testimony was swift and it was fierce. President Trump tweeted, quote: the Russia Trump collusion story's a total hoax. When will this taxpayer funded charade end? He added: Director Clapper reiterated what everybody, including the fake media, already knows -- there is no evidence of collusion with Russia and Trump.

ROMANS: All right, let's take a look at those comments in particular. FBI Director James Comey has publicly confirmed the bureau is investigating alleged collusion between the Trump campaign and the Kremlin. The president was apparently so pleased with his comment about James Clapper, by the way, he pinned the tweet to his Twitter banner.

BRIGGS: That drew a wave of scorn on social media. The banner was pulled around midnight Eastern Time.

The White House trying to blame the Obama administration for the Michael Flynn mess. They're questioning why Flynn's security clearance wasn't pulled when he headed up the defense intelligence agency back in 2014.

[04:35:01] Now, Flynn was forced out of that post over policy and management disagreements.

ROMANS: All right. Yates and Clapper's testimony forming the backdrop for a meeting tomorrow between Russian Foreign Minister Sergey Lavrov and Secretary of State Tillerson in Washington. The official agenda, of course, is Ukraine, Syria, and other bilateral issues with Russia's hack of the U.S. election likely looming over these talks.

For more, we turn to CNN's Matthew Chance. He's in Moscow this morning where President Putin spoke this morning at a parade, a parade marking Russia's victory over the Nazis in World War II.

Matthew, are we expecting the Yates testimony to affect the Tillerson/Lavrov discussion at all?

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, I think it will in the sense that you say, which is that that whole controversy over the issue of collusion will be hanging over any meeting that we see now between U.S. and Russian officials. Of course, this will be the first time that Lavrov, the Russian Foreign Minister Sergey Lavrov, will travel to the United States to meet with Rex Tillerson, the secretary of state.

They both share, or both administrations, the Russian and the U.S., share the same views when it comes to this issue of collusion in the presidential elections. They both say it's fake news. They've both used that language. They both say it's false and there's nothing to it, and they say it's getting in the way of these two countries forging a more productive relationship.

And what they're trying to do, they say, is to move beyond that and to carry on, regardless. So, it's in that context, I think, that Sergey Lavrov, the Russian foreign minister, will be traveling to Moscow. He's on his way there now, and meeting Rex Tillerson, the secretary of state, there tomorrow.

ROMANS: All right. Thanks so much for that, Matthew Chance for us this morning in Moscow.

President Trump's travel ban now hanging in the balance after a critical federal appeals court hearing, both sides under intense questioning from judges on the Fourth Circuit. Administration lawyers were repeatedly pressed on statements the president made during the campaign about a Muslim ban.

CNN's Laura Jarrett was at that hearing. She joins us this morning from Washington.

Good morning, Laura.

LAURA JARRETT, CNN JUSTICE REPORTER: Good morning, Christine.

Well, the judges grilled those parties for nearly two hours yesterday on a host of issues, but what really stuck out is the way in which this case highlights a tension, if you will, between how courts are trying to defer to the president's national security judgment on the one hand and safeguarding constitutional rights on the other. And the judges really challenged the plaintiff's lawyer on this point to try to explain, how is the president ever supposed to protect the country if his campaign statements about Muslims forever taint his policy goals, Christine?

ROMANS: You know, Laura, did these judges seem persuaded by the government's argument that campaign statements don't matter?

JARRETT: So, DOJ's position on this, it really wants to draw a line in the sand between statements he made on the campaign versus statements he made as president, because the idea is he took an oath of office and protected the Constitution as president. But most of the judges were really skeptical at best about this line in the sand, because it seems to fly in the face of common sense.

One judge said this is the most important issue in the case. Another said, look, it would be almost willful blindness to ignore Trump's statements from the campaign, Christine.

ROMANS: Only yesterday, the White House took down the statement about a Muslim ban from the president's campaign website after a reporter asked Sean Spicer about it. Could that affect the outcome of this case?

JARRETT: This development was really remarkable yesterday because we had that going on at the same time as this hearing. And so, yesterday, there was a statement on the website entitled "Preventing Muslim Immigration." They have now deleted it, but the URL is still up there, and it did call for a complete and total shutdown of Muslims entering the U.S., and the judges latched on to that website several times in the hearing yesterday, saying, look, Trump never repudiated his call for a Muslim ban. He never said I'm sorry. He never disavowed it.

And the fact that the website was only taken down after reporters raised it yesterday probably isn't particularly helpful to Trump's case, given the timing here, Christine.

ROMANS: All right. Laura Jarrett for us bright and early this morning, this Tuesday morning in Washington -- thank you.

JARRETT: Thanks. BRIGGS: Critics raising questions this morning about the

administration's commitment to regulation based on sound science, this after the Interior Department freezes the work of about 60 of its science advisory boards. A memo obtained by CNN says the department is suspending all board meetings until at least September.

An interior official confirmed to CNN that Interior Secretary Ryan Zinke wants to assess whether the advisory boards are achieving their purpose. News of the memo came as CNN learned the head of the Environmental Protection Agency, Scott Pruitt, dismissed half of the scientists serving on a review board that provides guidance to his agency.

ROMANS: All right, to money now. The economy is buzzing, earnings are strong, investor fear is at a 24-year low, but that isn't enough to give the stock market a boost, because Wall Street is waiting on tax reform.

[04:40:08] Wall Street's fear gauge, we call it the VIX Index. Look at that, Dave, the lowest since 1993.

The result of France's election eased investor anxiety a lot, but it isn't translating into market gains. Stocks have barely budged since April 25th.

Why April 25th? Well, that's because on April 26th, the Trump administration released its tax outline, and investors want more details, specifically on tax cuts. Lower taxes could stimulate the economy with a flood of cash.

For example, I want to show you these five companies -- Apple, Google parent Alphabet, Microsoft, Cisco and Oracle. Together, they have more than $500 billion overseas just sitting in bank accounts. Until investors have a better sense of Trump's economic proposals, his tax proposals, the stock market will probably tread water.

Don't feel too bad, though, the market has enjoyed quite a run since the election and all three major indices are at or near record highs. But I think there is a pause here that is justified until we get more details on tax reform.

BRIGGS: Yes. A great piece in the "Wall Street Journal" about repatriation and can they bring back some of the money sitting overseas? How much will they tax it? At what level?

ROMANS: And how do you make sure all the money that comes back, those goodies that come back at maybe a super low tax rate, if Congress does that, how do you make sure it creates jobs?

BRIGGS: Yes, to shareholders.

All right. Members of Congress being forced to answer for their votes to repeal and replace Obamacare, and not all are happy about it. Iowa Congressman Rod Blum, a member of the conservative freedom caucus who called the bill Obamacare 2.0 and voted in favor of it walked out of an interview when pressed on the source of all of his campaign donations.

(BEGIN VIDEO CLIP)

REP. ROD BLUM (R), IOWA: I don't represent all Iowans. I represent the first district of Iowa. That be like saying, shouldn't I be able to, even though I live in Dubuque, vote in Iowa City?

REPORTER: Would you still take donations from a Republican in Iowa City?

BLUM: I'm done. This is ridiculous.

REPORTER: We --

BLUM: You're going to just sit here and just badger me.

(END VIDEO CLIP)

BRIGGS: All right. A few hours later, the congressman faced heated constituents at a town hall meeting where most of the pre-screened audience yelled at him. Now, again, he prescreened this town hall to make sure that the people in that town hall were from his district.

Some criticized that, but isn't that what the town halls should be about, Christine? They should be people from his constituency. It shouldn't be from out of state, that's for sure.

ROMANS: That's the discussion with the reporter, who said there were people upset they were prescreened. I think they were also not allowing signs to come in, so people holding up red and green for we agree with you or disagree with you. But it was on the health care issue that people in that crowd, screened or not screened, were most upset about.

BRIGGS: Well, one Democrat in the audience said it was ineffective, we wasted the congressman's time by screaming at him and not having a real conversation.

ROMANS: Yes.

BRIGGS: So, perhaps a better dialogue is indeed needed.

The family of President Trump's son-in-law, Jared Kushner, apologizing after using his name to draw foreign investors to a project. More details about the ethical concerns, next.

(COMMERCIAL BREAK)

[04:47:24] ROMANS: Boosting troop levels in Afghanistan on the agenda when national security adviser H.R. McMaster meets with President Trump today. He'll be presenting final proposals for ramping up forces with anywhere from 1,500 to 5,000 new troops to accelerate training missions for Afghan forces.

Also being presented to the president, strategy options for fighting the Afghan Taliban and more military strikes against the terror group. The White House is not saying when President Trump makes a final decision.

BRIGGS: An apology from the family-owned business of President Trump's son-in-law and top adviser, Jared Kushner. Kushner companies claims it never meant to drop Jared's name at an investment conference in China, insisting the move was not designed to lure investors to a real estate project in New Jersey. White House officials refusing to say whether they demand the apology.

CNN's Matt Rivers in Beijing with a closer look at the latest ethics controversy swirling around the White House.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Two, one!

MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT (voice-over): A glitzy event in Beijing, where about 100 people turned up to hear a simple pitch -- give us at least $500,000, and we can help you get a U.S. green card. The event was hosted by Nicole Kushner Meyer, the sister of top presidential adviser and Donald Trump's son-in-law, Jared Kushner.

Speaking on behalf of Kushner companies, she was seeking $150 million in investment for a new luxury tower in New Jersey under a visa program called EB-5.

The much-criticized program allows wealthy foreigners to invest at least $500,000 into commercial projects in the U.S., as long as the project creates at least ten full-time jobs for Americans, that investor can apply for a U.S. green card, which can eventually lead to citizenship.

Critics have said the program amounts to selling U.S. citizenship, though many admit it has helped spur some growth. The vast majority of foreigners taking recent advantage of the EB-5 program have been Chinese. The fact that Kushner companies, a real estate development firm, would be in Beijing, seeking funding under the program is not unusual. In fact, it's common practice, an easy way to secure lots of funding.

What is unusual is that Jared Kushner was until January the CEO of Kushner companies. His sister mentioned that to investors, saying, quote, in 2008, my brother, Jared Kushner, joined the family company as CEO and recently moved to Washington to join the administration.

Though she didn't specifically mention President Trump, it raises ethical questions.

[04:50:01] Jared Kushner has been a key adviser to the president on China, helping set the agenda for Chinese President Xi Jinping's first meeting with Trump back in April. Kushner retains a vast array of business holdings, although he has sold many of them, but the presentation could lead to questions about whether his family's business is using his proximity to the president as a selling point for luring investors. A lawyer for Kushner told CNN in a statement, quote, Mr. Kushner has

no involvement in the operation of Kushner companies and divested his interests in the one journal square project by selling them to a family trust that he, his wife, and his children are not beneficiaries of. As previously stated, he will recuse from particular matters concerning the EB-5 visa program.

Still, it's clear the company might understand the optics of their Beijing presentation.

(on camera): CNN found out about this event because of this ad. It was actually posted in the elevator of our building here in Beijing, so we took a photo. You can clearly see it says Kushner One right there, and later on, it says in part, quote, "invest $500,000, and emigrate to the United States."

This was billed as a public event and we shot it from the crowd on an iPhone, but other organizations who showed up got kicked out. Reporters with both "The New York Times" and "Washington Post" were asked to leave. "The Post" wrote that when they asked why, quote, a PR person who declined to identify herself said simply: this is not the story we want.

Matt Rivers, CNN, Beijing.

(END VIDEOTAPE)

ROMANS: So, he has recused himself from any kind of decisions about the EB-5 program, but the president has been very firm about restricting legal and illegal immigration, and the EB-5 program has been criticized as simply buying a golden ticket to the United States.

BRIGGS: Will we see action on the EB-5 from the administration. That will be interesting.

ROMANS: All right. A company in expensive trouble with the federal government over tuna. We'll tell you who on "CNN Money Stream" next.

(COMMERCIAL BREAK)

BRIGGS: Jimmy Kimmel returning to late night, thanking well-wishers and taking on critics who blasted him for an emotional monologue last week after his newborn son's health scare.

(BEGIN VIDEO CLIP)

JIMMY KIMMEL, HOST, JIMMY KIMMEL LIVE: As a result of my powerful words on that night, Republicans in Congress had second thoughts about repeal and replace, and I saved health insurance in the United States of America. Thank you.

(CHEERS AND APPLAUSE)

What? I didn't? I didn't save it? They voted against it anyway?

I would like to apologize for saying that children in America should have health care. It was insensitive. It was offensive and I hope you can find it in your heart to forgive me.

There were also some not-so-nice things that people said online about me, including members of the media. Now, this is from -- this is a real headline from the "New York Post", Jimmy Kimmel's obscene lies about kids and medical care.

Yes, it is true that if you have an emergency, they will do an operation, and that's terrific if your baby's health problems are all solved during that one visit. The only problem is that never, ever happens.

We've had a dozen doctors' appointments since our son had surgery. You've got a cardiologist, the pediatrician, surgeon. Some kids need an ambulance to transport them. That doesn't even count the parents who have to miss work for all this stuff.

I think it's important to remind everyone that this is Donald Trump's doctor, OK? This is who he chose to handle his health care, of all the doctors in New York, he picked the one who looks like the guy you'd buy peyote from at Burning Man.

(END VIDEO CLIP)

ROMANS: OK. So, that was a strong move.

BRIGGS: That was a pretty good point.

All right. Kimmel also invited Republican Senator Bill Cassidy to the show. Cassidy, who is a doctor, last week suggested a, quote, Jimmy Kimmel test, where children born with defects like Kimmel's son could get the care they need in their first year.

Kimmel says his son, Billy, is doing well, eating and sleeping and gaining weight and thanked fans for the humbling outpouring of support.

Now, Senator Cassidy I think deserves some credit, Christine --

ROMANS: Sure.

BRIGGS: -- for coming on the show.

ROMANS: Yes.

BRIGGS: -- for answering all the questions. He hopes the Senate bill addresses these issues regarding lifetime caps, regarding Medicaid changes, the cuts that were in the House bill. We have no idea what comes out of the Senate.

ROMANS: I know.

BRIGGS: But if you listen to Cassidy, it sounds like the right bill may.

ROMANS: Talking policy on late night. It's, you know --

BRIGGS: It's outstanding.

ROMANS: This is the world we live in.

Let's check on "CNN Money Stream" this morning.

Global markets up slightly. U.S. futures, wow, that's doing nothing this morning after it did nothing yesterday. All three indices rose, look, less than 0.1 percent, like five points on the Dow. But guess what, that was enough for the S&P and NASDAQ to hit record highs -- right up here, just hanging in record-high territory.

You know, trading may have been muted, but Emmanuel Macron's victory in the French election, it sent the Wall Street fear gauge to its lowest level in decades.

Apple is the first $800 billion company after billionaire investor Warren Buffett said he nearly tripled his stake in the tech giant. The stock rose 3.2 percent to an all-time high. That put the market value above $800 bill, the largest of any U.S. company.

Apple shares have had a great year. If you own the stock, you know it. The stock is up 32 percent so far this year and it's sitting on piles and piles and oodles of cash overseas and a lot of people hope there will be tax reform to bring that cash home.

Coach bagged a great deal, the company buying competitor Kate Spade for $2.4 -- get that? Coach bagged a great deal?

BRIGGS: I did. That was --

ROMANS: Tuesday morning, bad business pun on Tuesday morning, whoo- hoo!

This is the latest effort to appeal to a younger, trendier shopper. This is good news for the company but bad news for bargain hunters. Coach said the savings generated by the deal will allow Kate Spade to have fewer online flash sales, which helps bolster the brand's luxury image.

All right. And Bumble Bee Foods pleading guilty for price-fixing tuna. The company will pay $25 million for its role in a conspiracy to raise and maintain prices between 2011 and 2013. That's according to the Department of Justice.