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EARLY START

Former Trump Adviser Pleads Guilty, Manafort, Aide Indicated; White House Minimizes Manafort Charges; Russian Reaction to Mueller's Investigation; FBI Probing Contract to Rebuild Puerto Rico's Grid. Aired 4:30-5a ET

Aired October 31, 2017 - 04:30   ET

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


CHRISTINE ROMANS, CNN ANCHOR: The president is seething. His former campaign manager indicted, a former campaign advisor pleading guilty and now helping the feds.

[04:30:02] What's in store for the special counsel and the White House?

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

ALEX MARQUARDT, CNN ANCHOR: And I'm Alex Marquardt. It is 30 minutes past the hour.

The White House this morning in full damage control after the surest sign yet that special counsel Robert Mueller is focused on collusion in his investigation of Russian interference in the 2016 election.

A Republican close to the White House says President Trump is, quote, seething. Aides are urgently warning the president not to lash out at Mueller after the indictments Monday of former Trump campaign chairman, Paul Manafort, and his lieutenant Rick Gates.

ROMANS: Those charges weren't a surprise but what was a shock was the revelation that George Papadopoulos pleaded guilty earlier this month to making false statements to the FBI. Papadopoulos admitted to lying to agents about the timing of his contact with Russians. The complaint against Papadopoulos outlines a meeting he had with a Russia-linked professor -- a professor promising dirt on Hillary Clinton.

MARQUARDT: It also lays out Papadopoulos' attempts to set up meetings between the campaign and top Russian officials. Despite White House attempts to down play Papadopoulos, he was e-mailing with campaign manager Paul Manafort. And according to "The Washington Post", he was also emailing with another campaign manager Corey Lewandowski, among others.

ROMANS: Now, the revelation that Papadopoulos is cooperating with the FBI is heightening the unease among Trump's allies.

Our coverage this morning begins with CNN's Pamela Brown in Washington.

(BEGIN VIDEOTAPE) PAMELA BROWN, CNN JUSTICE & SUPREME COURT CORRESPONDENT: Well, good morning, Christine and Alex.

Monday's charges show the Mueller investigation is zeroing in on collusion with Russia and the 2016 campaign, as well as crimes committed even before the campaign.

George Papadopoulos, a former foreign policy adviser to the Trump campaign pleaded guilty on October 5th to making false statements to the FBI about his contacts with Russia, and according to records unsealed Monday, the FBI alleges Papadopoulos falsely described his interactions with a certain foreign contact who discussed dirt related e-mails concerning Trump's opponent, Hillary Clinton.

One of the court documents describes an email sent by Papadopoulos to a high-ranking campaign official who a source says is former campaign chairman Paul Manafort. And the email had a subject line: request from Russia to meet Mr. Trump. It went on to allegedly say Russia was eager to meet with the candidate and had been reaching out. The documents alleged that campaign official, Manafort, forwarded the e- mail to another official, Rick Gates.

That email said, we need someone to communicate that DT is not doing these trips. It should be someone low level in the campaign so as not to send any signal.

In another e-mail, a campaign supervisor allegedly tells Papadopoulos: I would encourage you and another policy adviser to the campaign to make the trip if it is feasible.

That trip to Russia never happened according to the officials -- Christine and Alex.

(END VIDEOTAPE)

MARQUARDT: Our thanks to Pamela Brown.

Now, Paul Manafort and his aide Rick Gates are under house arrest. A federal judge has ordered their passports confiscated, set bond at $10 million for Manafort, and $5 million for Gates. The indictment against the men contains 12 counts, including conspiracy to launder money and tax fraud. Documents say some of the charges stem from millions that Manafort earned, much of it lobbying for Ukraine's pro- Russia government, which officials say he then laundered through offshore accounts.

ROMANS: Both men pleaded not guilty on Monday, denying any wrongdoing. The charges stretch from the mid-2000s and to Manafort's time as chairman of the Trump campaign. The accusations do not, in fact, relate directly to the Trump campaign but it is possible that the special counsel could add more charges later.

As Pamela Brown mentioned, sources say that Manafort and Gates discussed e-mails from Papadopoulos, encouraging that outreach to the Russians. MARQUARDT: The West Wing quickly distancing itself from all of these

developments. A source close to the White House says of Manafort and Gates, quote, these guys are bad guys when they started. They were bad guys when they left.

The president also tweeting, sorry, but this is years ago before Paul Manafort was part of the Trump campaign. But why aren't crooked Hillary and the Dems the focus? That is five questions right there. Three minutes later, he added, also, there is no collusion.

ROMANS: That was before the news of George Papadopoulos' guilty plea. Since then, a rare day-long stretch of silence on the Trump Twitter account. White House lawyer Ty Cobb says the president has not responded to Papadopoulos' guilty plea because he, quote, doesn't know him. That's what the president's lawyer says, he doesn't know him. Now, Cobb admits that the two men, quote, may have been together one time in history.

MARQUARDT: That one time as Cobb put it was at a national security meeting at the campaign. A few days earlier, candidate Trump had this to say about the man his lawyer says he doesn't know.

(BEGIN AUDIO CLIP)

DONALD TRUMP, THEN-PRESIDENTIAL CANDIDATE: George Papadopoulos, he's an oil and energy consultant, excellent guy.

(END AUDIO CLIP)

[04:35:04] MARQUARDT: White House Press Secretary Sarah Huckabee Sanders also working to minimize Papadopoulos' role in the campaign.

(BEGIN VIDEO CLIP)

REPORTER: Sarah, can you just explain what George Papadopoulos' role with the campaign was?

SARAH HUCKABEE SANDERS, WHITE HOUSE PRESS SECRETARY: It was extremely limited. It was a volunteer position, and again, no activity was ever done in an official capacity on behalf of the campaign in that regard.

REPORTER: What about the outreach to the campaign officials to try to put together this --

SANDERS: You mean the outreach that was repeatedly denied?

(CROSSTALK)

SANDERS: We're not going to take any action on that?

(END VIDEO CLIP)

ROMANS: Despite Sanders' claim, the Papadopoulos court filing suggests he was acting with the campaign's blessing, a campaign e-mail Papadopoulos to go ahead with a proposed August meeting with Russian officials saying, quote, I would encourage you and another foreign policy adviser to make the trip if it is feasible. A "Washington Post' reports that e-mail came from is this man, Trump's campaign national cochairman, Sam Clovis.

MARQUARDT: And Steve Bannon, another big name in the Trump White House, weighing in on the Russian probe. A course close to the former White House chief strategist telling CNN that Bannon is pushing President Trump to fight back what he called aggressively against Robert Mueller. We've learned that Bannon wants the White House to launch a campaign against the special counsel.

ROMANS: Among Bannon's suggestions: press Republicans to cut funding to the special council and publicly debate Mueller's mandate. He's also pushing to slow document production, go on a massive PR campaign and generally try to get Capitol Hill to engage. The source tells CNN that the play nice strategy being pressed by the president, by his players, is, quote, an epic failure.

Some Trump allies mentioned the possibility of firing Mueller, but one of the president's attorneys tells CNN there are no plans to do that.

MARQUARDT: For Russia's reaction to these developments and the Russia investigation, let's bring in CNN's Oren Liebermann live in Moscow this morning.

Oren, have we heard anything from President Putin? Anything from the Kremlin?

OREN LIEBERMANN, CNN CORRESPONDENT: We haven't heard from the Kremlin yet, but do expect a daily call later on from his spokesperson where we'll be able to ask a spokesperson a couple of questions and see if we can get a Kremlin reaction.

We are seeing other reaction from Russian officials, including from an outspoken politician Aleksey Pushkov and here's what he had to say which he posted on Twitter. He points to Fox News. He says, Fox News notes there was no confirmation of the, quote, collusion between the Trump team and Russia. The adherence of the conspiracy theory screwed up once again.

And we're seeing that same type of reaction at least from the foreign ministry spokeswoman who pointed to a mistake in one line, not even a line, a half a line, and used that mistake to essentially dismiss not only the indictment against Manafort and Gates, but essentially all of yesterday's findings. That's what we expect to see from the Kremlin.

The charges and guilty plea from Papadopoulos doesn't have actually him meeting or speaking with Russian officials, just trying to, through Russian nationals and that's something the Kremlin may point to and said, look, we were never actually in touch with these people. And the idea here that there was any sort of collusion, the Kremlin and Russian officials will still dismiss.

What could give us more insight is when we find out who the unnamed contacts are in the indictments and in the guilty plea from Papadopoulos. If they have connections to Russian officials, that may change the story, but for now, it's more of what we're seeing, which is a continued Russian denial of any sort of election meddling despite U.S. intelligence agreeing that there was and any sort of denial of collusion -- Alex.

MARQUARDT: That continued denial.

Our thanks to Oren, and it will surely be a busy day over there in Moscow as well.

ROMANS: Sure will. All right. Democrats also feeling the ripple effects of the first criminal charges in the Mueller investigation. Democratic power broker Tony Podesta says he is stepping aside from the Podesta Group, the Washington lobbying firm he founded. The brother of former Clinton campaign manager John Podesta, Tony Podesta represented a range of clients here in U.S. and abroad.

MARQUARDT: CNN reported earlier his year that the firm failed to fully disclose its work for a Ukrainian group with ties to former Trump campaign chairman Paul Manafort. Podesta's firm has since amended that paperwork. The firm also shows up in the Manafort indictment that was unsealed on Monday described as, quote, Company B.

ROMANS: All right. Thirty-nine minutes past the hour.

Everyone knows slavery was the cause behind the civil war. So why did the White House chief of staff say this?

(BEGIN VIDEO CLIP)

JOHN KELLY, WHITE HOUSE CHIEF OF STAFF: The lack of an ability to compromise led to the civil war and men and women of good faith on both sides made their stand.

(END VIDEO CLIP)

ROMANS: On both sides. Comments from John Kelly, next.

(COMMERCIAL BREAK)

[04:44:01] ROMANS: All right. President Trump will reveal his pick for Fed chair tomorrow, we're told, and it looks like current chief Janet Yellen may be out of a job. That's what a White House official tells CNN.

Leading the U.S. Central Bank, of course, is one of the most powerful posts in the world. The current frontrunner, Fed Governor Jerome Powell. Sources warned Trump could still change his mind. Powell is Republican. He's been on the Federal Reserve board since 2012 appointed by President Obama. He would be the first former investment banker to chair the Fed and the first individual who is not an economist in more than 40 years.

Powell has supported Yellen's agenda so there probably won't be a major shift in monetary policy if he gets the top job. Trump's decision will end months of speculation about Yellen. She was appointed by President Obama in 2013. Her term expires next February.

If she is not renominated, she would be the first Fed chief in nearly 40 years to not get a second term.

MARQUARDT: And White House Chief of Staff John Kelly says a lack of compromise was the root cause of the Civil War.

[04:45:04] In a Fox News interview, he was asked about removal of historic but controversial plaques honoring George Washington and Robert E. Lee.

(BEGIN VIDEO CLIP)

KELLY: Robert E. Lee was an honorable man. He was a man that gave up his country to fight for his state, which in 150 years ago was more important than country. It was always loyalty to state first back in those days. Now, it's different today. But the lack of an ability to compromise led to the civil war. And men and women of good faith on both sides made their stand.

(END VIDEO CLIP)

ROMANS: On both sides. Kelly said strikingly similar to President Trump's Charlottesville comments. Kelly, who is from Boston, made no mention of slavery, of course, which was a central conflict in the civil war.

All right. The head of the top consumer watchdog has a message for President Trump: veto this bill or it will hurt consumers. We'll tell you what he's talking about on CNN "Money Stream", next.

(COMMERCIAL BREAK)

[04:50:33] MARQUARDT: Now, the indictment and guilty plea into the Russia probe are, obviously, no laughing matter, unless you happen to be a late night host.

Then, well, listen.

(BEGIN VIDEO CLIPS)

SETH MEYERS, LATE NIGHT HOST/COMEDIAN: A source close to the Trump administration told CNN today that the indictments of two former Trump campaign officials has zero to do with the White House. To be fair, you could say the same thing about President Trump on any given day.

Wow, he allegedly laundered $1 million through a rug store. And not only that, the rug he bought wasn't even convincing. He added also, there is no collusion. So bad at this. It's like getting pulled off and saying I wasn't speeding officer and also, there's no cocaine in the glove compartment.

STEPHEN COLBERT, LATE NIGHT HOST/COMEDIAN: The first indictment in the Russia investigation, and who's our first lucky winner? Why it's former Trump campaign manager Paul Manafort seen here looking innocent before proven guilty?

Now I know it's almost Halloween but it really feels more like Christmas. Paul Manafort, Paul Manafort, you're just the first of many --

We also learned about an FBI investigation into former Trump foreign policy advisor and groomsman offering you ecstasy at the ceremony. George Papadopoulos. While working to elect Donald Trump, he repeatedly tried to arrange a meeting between the Trump campaign and Russian government officials. You can't do that. That's Don Jr.'s job.

(END VIDEO CLIPS)

ROMANS: All right. Stephen Colbert having way too much fun there last night.

All right. The FBI is now looking into a $300 million contract Whitefish Energy struck with Puerto Rico's power authority to rebuild the island's power grid after Hurricane Maria. Members of Congress have raised concern over the way that contract was awarded to the small Montana firm. It turns out, the company has ties to the Trump administration.

CNN's Leyla Santiago has more from San Juan.

(BEGIN VIDEOTAPE)

LEYLA SANTIAGO, CNN CORRESPONDENT: Christine and Alex, the FBI now wants more answers on this. They have opened a preliminary inquiry to find out more about that $300 million deal between Whitefish Energy and Puerto Rico's power authority.

Now, the governor is still standing by his decision to call for the termination of that contract. He says he has no evidence of any wrongdoing but he says this is all become a distraction. A distraction, he says, because of controversy.

Many have questioned how a 2-year-old company based out of Montana with very few employees landed such a big deal with such big responsibilities to restore Puerto Rico's power grid. And I got to tell you, as we were out and about talking to people today, we definitely sensed the frustration. We even talked to subcontractors of Whitefish and they tell us they're frustrated because of what any believe are politics getting in the way, what they believe are delays in the progress.

And for so many on this island, of 3.5 million U.S. citizens, now the question is, where do we go from here? So, many are waiting to see what will happen next when it comes to restoring energy and power for the people on this island, nearly six weeks after Hurricane Maria struck -- Christine, Alex.

(END VIDEOTAPE)

MARQUARDT: All right. Thanks to Leyla Santiago who's been on the story since the very beginning.

Now, breaking overnight in Salt Lake City, one person is shot and killed just off the campus of the University of Utah. Police say the suspected gunman Austin Boutain is considered armed and dangerous. Our affiliate KSL says police have been combing the foothills around the school into the early morning hours. The victim was in a vehicle when the fatal shots were fired. We will bring you all the details as they become available.

The defense is resting its case in the corruption trial against New Jersey Senator Bob Menendez and a wealthy doctor. This after a federal judge refused their lawyers' request to declare a mistrial based on the judge's rulings and comments. That means neither Menendez nor Dr. Salomon Melgen will testify. The case could go to the jury later this week.

ROMANS: The attorneys and judge are expected to meet today for a conference outside the presence of a jury.

[04:55:03] Prosecutors say Menendez accepted extravagant trips and six-figure campaign contributions in exchange for getting the Obama administration to help Dr. Melgen with his business disputes. But men deny any wrongdoing.

MARQUARDT: "House of Cards" is being canceled after its sixth season. The announcement comes less than a day after star Kevin Spacey was accused of sexual misconduct by "Star Trek Discovery" actor Anthony Rapp. Rapp says he was 14 years old at the time. A source tells CNN the decision to end the series and the allegations facing Spacey are not related.

ROMANS: Netflix did not offer an official statement on the show's cancellation, but it did address the allegations in a joint statement with a company that produces the series, saying: Executives traveled to Baltimore to make sure that the cast and crew feel safe and supported. They said that, as scheduled, Spacey was not working on set right now.

MARQUARDT: The Halloween forecast calling for cool ghouls tonight across much of the country.

Let's bring in meteorologist Pedram Javaheri.

(BEGIN VIDEOTAPE)

PEDRAM JAVAHERI, AMS METEOROLOGIST: Christine and Alex, good morning to you both. How about the colder air here really locked into portions of the Midwest, temps that you would see maybe in December or January for your Halloween day. The best we can do in Chicago, 43, Detroit, 42, Syracuse, 47, maybe some morning snow showers across portions of the Great Lakes, but work your way into the northeast, upper end, mid 50s, but we're looking at in 70s down around the south here.

But the chilly air really confined toward the Upper Midwest for today. And you notice the lake effect snow machine is on in full effect across this region, really going to see isolated pockets of some moderate snow come down throughout the afternoon but generally, the story will be the breezy weather left in place here from our departing disturbance yesterday. But expect these winds to begin to die down through the afternoon and

evening hours especially come Wednesday afternoon and how about this forecast? Climbing up to the 70s in New York and Washington, closing on 80s around parts of the south, even St. Louis could touch 70 degrees come Thursday afternoon. And for next, good chance, above average temperatures return for the eastern half of the country, guys.

(END VIDEOTAPE)

ROMANS: All right. Pedram, thank you very much. That's your weather.

Let's talk about money this morning. Check on "Money Stream". Global stock markets are higher after Wall Street retreated from record territory. U.S. stocks dropped after news broke that those long awaited corporate tax cuts could be gradual. Bloomberg reports the House is considering a progressive rate cut over several years. Pharma company Merck also drives tax lower, shares feel 6 percent after Merck announced a setback to its key cancer medicine.

Sprint and T-Mobile's rumored merger appears to be over. Reports of a collapse broke Monday. Softbank, the Japanese conglomerate with a majority stake in Sprint. It's calling off negotiations. The concern was over the ownership structure of the combined business. Reps for all three companies did not immediately comment but this marks the second high profile failure to combine the two carriers. Both stocks tanked on the news.

All right. The head of the top U.S. consumer watchdog has a message for President Trump. Veto this bill or you will hurt consumers. The bill in question, repeal the rule that bans arbitration clauses. Final companies use those to stop customers from filing class action suits.

CFPB head Richard Cordray making a last ditch plea to President Trump to preserve this rule. White House applauded the bill which Cordray acknowledged: Many have told me I'm wasting my time writing this letter. Adding that the rule protects people who want to take action together to right the wrongs done to them. Cordray, a Democrat, is an unpopular figure among Republicans. Many have called on Trump to fire him.

That rule got a lot of attention when the Senate decided to roll it back.

MARQUARDT: All right. Well, EARLY START continues right now.

(MUSIC)

ROMANS: All right. A guilty plea. Two indictments and a lot of attention in the White House, the first big move by the Russian special counsel suggests a widening net. Could more dominos be ready to fall?

A lot to get to this morning. Good morning and welcome to EARLY START. I'm Christine Romans. MARQUARDT: And I'm Alex Marquardt. It is Tuesday, October 31st. It

is 5:00 a.m. in the East.

The White House is in full damage control after the surest sign yet that special counsel Robert Mueller is focused on collusion in his investigation of Russian interference into the 2016 presidential election. A Republican close to the White House says that President Trump is, quote, seething. His aides are urgently warning the president not to lash out at Mueller after the indictments Monday of former Trump campaign chairman Paul Manafort and his lieutenant, Rick Gates.

ROMANS: Now, those charges weren't necessary a surprise, but what was a shock was the revelation that campaign foreign policy advisor, George Papadopoulos, pleaded guilty earlier this month to making false statements to the FBI. Papadopoulos admitted to lying to agents about the timing of his contacts with Russians.