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Report: Trump Wealth Built on Fraudulent Practices; Trump Standing Behind Kavanaugh; Christine Ford Not Interviewed Yet in Kavanaugh Investigation. Aired 5-6p ET

Aired October 2, 2018 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now, breaking news. Outright fraud. An explosive new report alleges that President Trump built hits real-estate empire with hundreds of millions reaped through tax dodges and fraud. Is the president really the self-made man he claims to be?

[17:00:41] Supreme violations. President Trump and members of Congress say if Supreme Court nominee Brett Kavanaugh lied to lawmakers, it could be a deal breaker. What will the FBI investigation reveal?

Stormy orders. CNN has learned that the president personally directed efforts to silence Stormy Daniels, despite publicly denying he knew about the hush money she was paid. Is this story now unraveling?

And 60 nukes. A top South Korean official says Kim Jong-un may have as many as 60 nuclear weapons. Will Mike Pompeo confront Kim about his stockpile when the secretary of state travels back to North Korea later this week?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: We're following breaking news. A "New York Times" report just out that says that, despite portraying himself as self-made, President Trump used tax dodges and fraud during the 1990s to grow the fortune he got from his parents. I'll talk about that, the Brett Kavanaugh controversy, and more with Senator Chris Coons of the Judiciary and Foreign Relations Committees. And our correspondents, analysts and specialists, they are standing by with full coverage of the day's top stories.

First, let's get more on the breaking news. Our chief political analyst Gloria Borger is with us. CNN's Kara Scannell is with us.

Kara, you've been combing through this very long 40,000-word "New York Times" report. What are you finding out?

KARA SCANNELL, CNN CORRESPONDENT: Well, Wolf, "The New York Times" just posted this story, which they said that they had talked to many people who had worked with the Trump Organization, Donald Trump's father, Fred Trump. And through this very extensive investigation, they found that Trump

participated in dubious tax schemes in the 1990s, that they said included allegations of outright fraud. That's "The New York Times" alleging that.

That they had found that the actions had -- that in effect, that Trump, by participating in these schemes, had greatly increased his fortune and that Trump had helped his parents set up sham companies to disguise millions of dollars in gifts that he had received.

Now, "The New York Times" is also reporting that, you know, at one point one of these allegations is that -- that Trump's parents had transferred to Donald Trump and his siblings $1 billion, but, in fact, the Trump family had only paid $52 million in taxes, when the tax bill could have been $500 million, Wolf.

BLITZER: There is a statement from a lawyer representing the president. What is that state?

SCANNELL: That's right. So the president's attorney, Charles Harder, has said that "'The New York Times'' allegations of fraud and tax evasion are 100 percent false and highly defamatory." He said there is no fraud or tax evasion by anyone, and that "the allegations are extremely inaccurate."

He also said that the Trumps had virtually no involvement whatsoever with these matters, that the family relied on experts such as accountants to help them with this.

BLITZER: "The New York Times," these investigative reporters, they say they've been working on this story for more than a year, a year and a half. And there's some suggestion in the article that this may explain why the president has repeatedly refused to release his tax returns, as all presidents have done going back to Gerald Ford.

SCANNELL: Well, this investigation truly reveals a lot of information that Donald Trump has never once acknowledged. I mean, he has said he's a self-made man. He often tells the story that his father had given him a $1 million loan and that he had turned that into a fortune.

And "The New York Times" investigation says that Trump's father had actually stepped in to bail him out many times over the years when his companies got into trouble, especially some of those casinos, and that Trump's father actually lent him about $60 million, not the $1 million that Trump often repeatedly says.

So all of this came out, "The New York Times" is saying, because they've seen tax returns of 200 companies. That's including his father's other shell companies that were related to this and other companies, as well as interviews with people. So this is an extensive investigation that "The Times" has worked on and which has revealed a lot of financial information that we have essentially been in the dark about, because the president hasn't released his tax returns and, frankly, won't answer many questions about them or how he made his money. BLITZER: You know, Gloria is with us, as well. Gloria, let me read a

couple sentences from this article. "The 'Times' investigation, based on a vast trove of confidential tax returns and financial records, reveals that Mr. Trump received equivalent today of at least $413 million from his father's real-estate empire, starting when he was a toddler and continuing to this day."

[17:05:18] In fact, the article adds, "By age 3, Mr. Trump was earning $200,000 a year in today's dollars from his father's empire."

Now, this totally contradicts the story he has often told over these many decades that maybe his father lent him $1 million to get started.


BLITZER: He repaid his father with interest. This paints -- this article paints a totally different picture.

BORGER: No, it's a completely different picture. It's not the self- made billionaire.

But beyond that, what this stunning investigation by "The Times" does, is it shows that this was tax evasion, if "The New York Times" is right. And you know, Mr. Harder is disputing that.

But this is not exploiting legal loopholes in the tax code for the wealthy, which we know there are, but this is doing something that is, was, apparently illegal, Wolf. And we're not, you know -- I don't know if there could still be civil penalties that -- that Trump could suffer or be charged under as a result of this. But, you know, the extent of this is kind of stunning.

And the question is -- and I don't know whether his tax returns would actually have shown this -- but what it -- what this story shows is that this was done with -- with Mr. Trump, with Mr. Trump's knowledge. The president's knowledge. And that his father was doing everything he could to funnel money to Donald Trump Jr. without paying any taxes on it.

And lots of people would like to do that, but they can't, because there is a tax code that -- that people abide by. So this just outlines the ways and the inventive ways, I would have to say, in which the elder Mr. Trump tried to protect his son and funnel money.

BLITZER: And in their lead, they say these tax schemes, dubious tax schemes --


BLITZER: -- that Donald Trump used, including instances of outright fraud.

BORGER: Right.

BLITZER: Outright fraud is clearly a crime. BORGER: It is. And there are small examples of this that we've known

over the years. Like, when Donald Trump's casino was failing in Atlantic City, we knew that his father deposited $3.5 million worth of chips in the casino to try and kind of prop it up and left them there and didn't place any bets. But that's -- that's small potatoes compared to what's outlined in this -- in this piece.

BLITZER: Let me read another sentence from the article. The president's parents, Fred and Mary Trump, transferred well over $1 billion in wealth to their children, which could have produced a tax bill of $550 million under the 55 percent tax rate then imposed on gifts and inheritances. The Trumps paid a total $52.2 million, or about 5 percent, tax records show. That's another pretty stunning accusation.

BORGER: Well, I mean, it really is. And you're the -- you're the tax expert here. But this is a while ago, Wolf. This isn't in today's money. You know?

SCANNELL: It could be outside of the statute of limitations.


SCANNELL: It's 20 years ago. But there is an open question of whether there could be a civil penalty on this.

BORGER: Right.

SCANNELL: You know, especially since this is just coming to light now. "The Times" says that the example you just gave is one of a pattern of deceptive practices. And the question is, you know, how much insight could the IRS have even had into this, if they were -- if they were shell companies, if there, you know, were layers here to kind of distance and get around these gift laws in particular?

BORGER: And the "Times" says it documented 295 distinct streams of revenue that Fred Trump created over 50 years to channel wealth to his son.

So you have almost 300 ways of getting this money to Donald Trump Jr.

BLITZER: And you know, Kara, this would be -- the allegations in this article, as I say, one reason why the president repeatedly has refused to release tax returns. Because if he were to release his tax returns, and "The New York Times" said they got thousands and thousands of pages of information, not his tax returns, didn't get that. But if they were to have access to his tax returns, it would be -- it would be very, very bad for the president.

SCANNELL: It would be a lot harder for him to say that, you know, they've got it wrong or that it's not true. If you could put his tax returns side-by-side to some of these other returns.

You know, it's interesting that, you know, their attorney is just saying that this is, you know, 100 percent inaccurate, but they're not providing any explanation around it, which could be because they're thinking that they have done this legally within the tax rules. Because as you were saying, there are ways to minimize your taxes. But the way that "The Times" explains it, and like you said, in the lead, they're saying instances of outright fraud.

BLITZER: And we're going to move on, but I just want to point out that one reason why the president, presumably, is so concerned about the midterm elections, if the Democrats take majority in the House of Representatives, they'll have subpoena power. House government oversight committees, they'll be able to use the material in this article and do a major, major search of the president and these allegations of fraud.

[17:10:12] BORGER: Right. And it's -- it's not only the details of this, but it's this whole notion of the story of Donald Trump.

And you know, this piece says that Donald Trump owed his father, for example, in the late '80s $11 million, and the way they got around him having to sort of pay it back was that Fred Trump, you know, spent over $15 million to buy a stake in Trump Palace, and that -- so there was all these kind of machinations going on. And I guess the IRS just wasn't onto it at a -- at a certain point, and now maybe they will be.

BLITZER: And the president's lawyer once again flatly denying all of this.

BORGER: Yes, absolutely.

BLITZER: I want to bring in our senior White House correspondent, Jeff Zeleny. He's in Mississippi, where the president will be attending another political rally later tonight.

So what is the White House saying about this "New York Times" bombshell report?


As of now the White House is not saying anything about this report. Of course, they have known "The New York Times" has been working on this for a very long time. The president declined repeatedly to talk to the newspaper about it. And the White House simply is not commenting at all. In fact, aides are trying to get their hands around all of this.

But this has been one thing that President Trump has never wanted to talk about: his finances. Any suggestion that he is not actually as wealthy as he is, suggests that he is, or how he got his money has always been something that's got under his skin. But again, it is his tax returns that he has never wanted to release.

So we will see if he talks about that tonight at this rally in Mississippi, but this all comes on a day expressing when he's expressing optimism and frustration at the Supreme Court battle that he says is rallying Republicans, five weeks today before the midterm election.


SEN. CHUCK GRASSLEY (R-TX), CHAIRMAN, JUDICIARY COMMITTEE: Nothing but the truth, so help you God.


ZELENY (voice-over): President Trump standing squarely behind embattled Supreme Court nominee Brett Kavanaugh tonight but bluntly spelling out what would be a deal breaker.

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I don't think he should lie to Congress. And there have been a lot of people over the last year that have lied to Congress, and to me, that would not be acceptable.

ZELENY: The president expressing optimism about Kavanaugh's confirmation. But also making clear he's leaving his options open until the FBI finishes its investigation.

TRUMP: I have to say that I really think that Judge Kavanaugh is going to be accepted and voted on and positively voted on, but we're going to have to see what the FBI says. They'll come back with a report.

ZELENY: With just 35 days to go before the midterm elections, the president visiting Philadelphia today on his way to the second campaign rally of the week, this time in Mississippi on the heels of a stop last night in Tennessee.

TRUMP: We're just five weeks from one of the most important congressional elections of our lifetime.

ZELENY: The Supreme Court fight is now a central issue in the battle for control of Congress, which Republicans say is bringing their party together. A rare sign of unity against tough political headwinds leading into November.

TRUMP: They are so in favor of Judge Kavanaugh. You've never seen anything like it. I actually think it's like a rallying cry for the Republicans. They are so in favor of Judge Kavanaugh.

KAVANAUGH: I demanded a hearing.

ZELENY: As Democrats and some Republicans increasingly question the tone and demeanor Kavanaugh displaced last week at the Senate Judiciary Committee --

SEN. JEFF FLAKE (R), ARIZONA: The interaction with the members was sharp and partisan, and that concerns me. And I -- tell myself, you give a little leeway because of what he's been through. But on the other hand, we can't have this on the court. We simply can't.

ZELENY: The president today defended the judge's defiance.

TRUMP: He's fighting very hard for his reputation, for his family. I thought what happened was really tough. It was tough stuff. And he's never gone through anything like this. I think he did very well.

ZELENY: But privately, CNN has learned the president's view of Kavanaugh has been complicated by stories of excessive drinking.

KAVANAUGH: I liked beer. I still like beer.

ZELENY: The president, whose brother died of complications from alcoholism, insisted today it didn't change his support of Kavanaugh.

TRUMP: Well, I don't drink. I've never had a drink. I don't drink beer. I've never had a beer, and I'm not saying good or bad. Some people like it. I just chose not to do that for a lot of reasons. So I don't see anything wrong.

ZELENY: The president again today had nothing to say about women who have come forward with stories of their own sexual assaults. Instead, he had this message for young men.

TRUMP: It's a very scary time for young men in America, when you can be guilty of something that you may not be guilty of. This is a very, very -- this is a very difficult time.


[17:15:00] ZELENY: Now, the president flying here to Mississippi from an earlier stop in Philadelphia. Certainly, or almost certainly, watching news coverage of that other big story of the day. That story, a bombshell story in "The New York Times" about how he made his money, how his family made its money. So Wolf, this will be the first opportunity for the president to address it publicly tonight at this rally, if he chooses to.

There's no question he also has Judge Kavanaugh on his mind. He does believe it's a rallying cry for the conservative base. But, Wolf, the question, as the fight for the Senate is also now in play, what will it do for those independence voters and women voters? We are now just exactly five weeks before the midterm elections -- Wolf.

BLITZER: Good point. Jeff Zeleny in South Haven, Mississippi, where the president will be speaking at a political rally later tonight.

There's also breaking news in the FBI investigation of Judge Brett Kavanaugh. Our congressional correspondent Sunlen Serfaty has that part of the story for us. She's up on Capitol Hill.

Sunlen, so Professor Ford's lawyers have now written, I take it, directly to the head of the FBI, Christopher Wray, complaining that their client hasn't been interviewed yet. Is that right?

SUNLEN SERFATY, CNN CONGRESSIONAL CORRESPONDENT: That's right, Wolf. Capitol Hill really waits on bated breath tonight for the results of this FBI investigation. The news is, indeed, that as of right now, Christine Blasey Ford's team says that they have not been contacted by the FBI in the supplemental investigation that's taking place.

They wrote this in a letter directly to FBI Director Chris Wray and the FBI general counsel, and in that letter, they say that they've sent multiple e-mails, multiple calls, multiple letters to cooperate with their investigation, but no communication from the FBI yet.

In this letter, they write, in part, "It is inconceivable that the FBI can conduct a thorough investigation of Dr. Ford's allegations without interviewing her, Judge Kavanaugh or the witnesses we have identified in our letters to you." And they certainly request a call with the FBI for more information.

But, again, up here on Capitol Hill, everyone is certainly bracing for the results of this investigation, which in large part, holds the fate of Brett Kavanaugh in its hand. And certainly, this element of the investigation, the fact that Christine Blasey Ford has not yet been contacted is certainly something that many Democratic senators up here want. Earlier this week, a group of nearly all Democratic senators on the Senate Judiciary Committee wrote letters requesting that a long list, 24 witnesses, turn over information and potentially be identified as potential informants to this FBI investigation. And so it certainly underscores how the size and the scope of the FBI investigation is so important at this late hour -- Wolf.

BLITZER: All right, Sunlen. Thank you. Sunlen Serfaty, up on Capitol Hill.

Get -- let's get some more on all of these dramatic developments. Democratic Senator Chris Coons of Delaware is joining us. He's a key member of the Judiciary Committee.

Senator, thanks so much for joining us.

SEN. CHRIS COONS (D), DELAWARE: Thank you, Wolf. Great to be on with you again.

BLITZER: All right. We're going to get to the Kavanaugh nomination just in a few moments. But I immediately need to get your reaction to this really blockbuster bombshell report in "The New York Times," which details a series of schemes that Donald Trump allegedly used to avoid paying federal income taxes, state income taxes, on the fortune that he inherited from his mother and father. "The New York Times" says some of those schemes amount to what "The New York Times" calls outright fraud.

I know you haven't had a chance to read all 40,000 words. It's a very, very long article. They'd been working on it for a year and a half. But you know the headlines. What do you make of this report?

COONS: Wolf, I've read the first few pages of the story, and it certainly is striking. First in the ways that it pushes back very forcefully against the president's own narrative of himself as a self- made man who received, at most, $1 million in loans that he had to pay back from his father.

This article instead suggests documents, that he received something like $413 million in today's dollars in value inherited from his father. That's a significant fortune. And then second, it goes through ways in which the president avoided

paying taxes. Tax avoidance efforts, or schemes, that may come up against the line of fraud or cross over it.

As you mentioned in the introduction, the president denies all of these allegations and says this was done by tax professionals. But this may be one important insight into why he is the first president in modern times to not release his tax returns and has so far refused to do so even into -- halfway through his term as president.

BLITZER: Yes, I've gone through this article. I printed it out. It's about 45 pages right here. It's very long. Very detailed. Very complex. But as you know, a lot of this happened long before Donald Trump ran for president of the United States.

Is this something, the allegations in this article, is this something that the Congress, the House, the Senate, needs to look into?

COONS: The House may well take that up. As you know, in the minority here in the Senate, we're unable to get the issuance of subpoenas. We've been unable to compel the disclosure of the president's taxes. So that really would be dependent upon the outcome of the elections in five weeks.

[17:20:10] BLITZER: Yes, the House -- the Democrats take the majority --

COONS: Right.

BLITZER: -- then they'll have subpoena power. They can subpoena whatever they want.

By the way, if the Democrats take the majority in the Senate, you guys there will be able to do the same thing.

COONS: That's right.

BLITZER: Let's see what happens in the elections.

I want to move onto the controversy, and it's growing, surrounding confirmation vote for Judge Brett Kavanaugh.

Lawyers for Christine Blasey Ford, the professor, they've sent a letter to the FBI director, Christopher Wray. They're outraged, as you just heard, that she hasn't yet been interviewed as part of this supplemental probe. Do you think the FBI can produce a credible report without formally sitting down with her?

COONS: Well, Wolf, I published a public editorial today, laying out what I think are the key elements of a credible investigation. I've conveyed those concerns several days ago privately to colleagues, to the White House, but I thought it was important I lay them out today.

An element there is the interview of all the relevant witnesses who can speak to the allegations that Dr. Ford brought forward. Obviously, I'd assume Dr. Ford would be on that list of individuals who would be questioned. Although there are many senators who are lawyers on the Senate Judiciary Committee, the questioning that we did last Thursday certainly isn't the same thing as a professional investigation inquiry or questioning session with the FBI.

So it was my expectation both Judge Kavanaugh and Dr. Ford would be questioned by the FBI, and then they would pursue any leads or any new information or witnesses that came out of that questioning.

I also think, Wolf, that there are obvious documents for the FBI to be using in their weeklong investigation. For example, Judge Kavanaugh's calendar, which he presented to the committee and said, "Here. This proves I could not have been engaged in the sorts of actions that Dr. Ford suggests." There's a number of individuals and dates that I think would be relevant to the investigation from that calendar.

So it's my hope that, given President Trump's recent statements that the FBI is free to pursue whatever leads they think are appropriate in their professional judgment, that there are many FBI agents pursuing parallel investigations this week, and I am very much looking forward to seeing their work product on Friday.

BLITZER: Yes. We just showed a graphic of that calendar. As you know, the Republican leader, the majority leader, Mitch McConnell, insists that the FBI report will not be used to delay a vote on Judge Kavanaugh.

How much time do you think the senators need to read and consider this final FBI report once it -- once it's officially released to the Senate?

COONS: Well, I think we should have access to the work product, to the investigatory summaries of FBI agents, as well as a final report. Not just a brief or a redacted summary. And it could take several hours for senators to review that material. I would think most senators would want much of a day to reach a conclusion, based on what's in that material.

It certainly would make sense to have all senators briefed at the same time so that we're all aware of what it's available and we're all able to process it at the same time.

Many witnesses who are trying to connect with the FBI, like Dr. Ford, have come forward and said they're having difficulty finding the right contact to be questioned by the FBI. And I'm concerned that that's going to end up being an issue we'll spend a lot of time on here in the next day or two.

BLITZER: Your friend, Senator Jeff Flake, a Republican, was clearly very instrumental in arranging for this supplemental FBI investigation. You've seen him throughout this entire process. You guys are close. Has his thinking evolved over the last few days?

COONS: Well, I'll let Senator Flake speak for himself. I just want to make sure that, you know, folks realize that Senator Flake is a conservative. He would like to see a conservative on the Supreme Court. But our friendship opened a window for him to be listen to his doubts and his conscience and to ask that there be a weeklong pause, and he has worked diligently to make sure it's an appropriately robust and open investigation. He's made public statements to that effect.

And I think that's an admirable contribution he's making to move the Senate towards being closer to a shared set of facts. As we saw last Thursday and Friday, the Senate Judiciary Committee on which we both serve, was tearing itself apart with our conflict over Judge Kavanaugh's nomination and the allegations against him. And I think what Senator Flake has done here is a very constructive step.

BLITZER: I know you've spent a lot of time with your friend Senator Flake. Do you think he's becoming perhaps a bit more or less comfortable with the prospect of voting for Kavanaugh?

[17:25:02] COONS: Well, I'm not going to make a prediction on that, Wolf. I just -- I just know that he's very concerned about this FBI investigation being appropriate. And he and I both, in our own way, will deliberate on what material is presented to the Senate by the end of the week.

BLITZER: Do you think there will be a final vote by Friday?

COONS: Well, that depends on whether the FBI delivers a full investigatory report by Friday. When we came to an agreement that it would be a one-week supplemental background investigation, it was certainly my expectation that this process would conclude by this Friday.

BLITZER: Senator Lindsey Graham, your Republican colleague from South Carolina says President Trump should re-nominate Judge Kavanaugh if the Senate votes him down. How do you think that would go over in the Senate?

COONS: You know, frankly, I think that would depend on what the reason was why Judge Kavanaugh was not confirmed. So -- if there were credible allegations that went directly to the truthfulness, fitness, credibility of Judge Kavanaugh, my hunch is if would be unwise for the president to re-nominate him.

If for some reason that's not the case, he is withdrawn or withdraws himself for reasons unrelated to that, then I don't know why the president would re-nominate him, but what Senator Graham is pointing to is that he thinks this will be a fighting issue in the upcoming elections now five weeks ago.

BLITZER: Senator Coons, thanks for joining us.

COONS: Thank you.

BLITZER: All right. There's breaking news we're following. We're going to have much more on "The New York Times" report alleging that President Trump used what "The New York Times" calls dubious tax schemes and outright fraud to build his fortune.

(COMMERCIAL BREAK) [17:31:06] WOLF BLITZER, CNN ANCHOR: We're awaiting President Trump reaction to this afternoon's breaking news, a truly devastating "New York Times" article alleging Mr. Trump greatly increased the fortune he received from his parents by taking part in dubious tax schemes during the 1990s, including what "The New York Times" calls instances of, quote, "outright fraud."

Our legal and political specialists have been poring over the "Times" investigation story. And Laura Coates, you're our legal analyst. What are your major takeaways from this very, very long article?

LAURA COATES, CNN LEGAL ANALYST: Well, the No. 1 thing is you have somebody who apparently is engaged in blatant tax fraud and evasion. Not simply exploiting legal loopholes but actually doing it in an unlawful way. Not just looking at it from a loophole standpoint, but actual, perhaps, criminal activity.

Now, the limitations period has probably largely run on any of these claims, although there is some variety of how long you can actually go from the last instance of tax evasion, your attempt to do so.

But civil, civil tax fraud does not have a limitations period. And that's one, in fact, you can also have the penalties, financially speaking. And also, this is not just the first case you've heard about the president of the United States having an issue about maybe having to release his tax returns to defend whether or not he actually engaged in tax fraud or is not providing or reporting income.

Remember, there are two emoluments cases, as well, that may force him to show his tax returns. So in a long line of things, you have the issue of why didn't you turn it over in the first place? What is it you may be trying to avoid scrutiny over? And why are you claiming now that you have an audit? And that's the reason you can't turn anything over. Well, that's not actually barring you from doing it.

This may actually be the straw that breaks the camel's back to release the information.

BLITZER: You're absolutely right. There is no time limit on civil damages for tax fraud.

COATES: Right.

BLITZER: If they want to pursue that. The president's lawyer, Phil Mudd, issued a statement. I'll read it. "'The New York Times'' allegation of fraud and tax evasion are 100 percent false and highly defamatory. There was no fraud or tax evasion by anyone. The facts upon which 'The Times' bases its false allegations are extremely inaccurate."

The statement then adds, "President Trump had virtually no involvement whatsoever with these matters. The affairs were handled by other Trump family members who are not experts themselves and, therefore, relied entirely upon the aforementioned licensed professionals to ensure full compliance with the law.

What's your reaction to that?

PHIL MUDD, CNN COUNTERTERRORISM ANALYST: Really? Hmm. So the president lied, cheated and stole. He lied to us repeatedly, starting with the Obama birth certificate. If you think people like Stormy Daniels and those lies are insignificant, how about getting off a plane from a meeting with the North Korean leader and saying we're safer and then realizing months later there is no agreement on what happens with North Korean missiles and nukes?

How about cheating, in this case, in personal relationships where he said he knew nothing, and he paid off a "Playboy" model and a pole dancer? When he told us on Air Force One he didn't know.

And then we're supposed to look at this and say, "Hey, we tell our kids don't cheat in school. Don't lie, and don't steal from your mom's purse." But in this case, 40 percent of the American people say, "I'm going to believe his lawyers, because despite the fact that the president repeatedly has lied, cheated and stolen, in this case we've got to believe him."

Not me, Wolf. Not me. I don't buy it.

BLITZER: You know, Dana, the issue of the president releasing publicly tax returns, a big issue during the campaign. At one point said he would do it. Got nothing to hide. Of course, has not done it to this very day. And the suggestion in "The New York Times" article is, perhaps this is the reason -- alleged fraud -- he has not released years and years of his tax returns.


Now, this very dense, very long story is very clear in saying that it is not about recent business dealings. It's older. Not very old, because it looks like it goes through the '90s when his father passed away. Late '90s and 1999. So, you know, we're talking about something that's almost, almost 20 years old.

[17:35:05] Having said that, you're right. I mean, if he were to have -- if he followed protocol, and followed precedent, then he would have released at least most -- more recent tax returns. I'm not sure if that would have done anything.

You know, look, there's so -- this is, again, so thick, so dense, so meticulously reported, that it's going to take a while to go through it. The question is, and we have to say -- I'm just talking just the raw politics here. You alluded to this, Phil. That it's "The New York Times," which certainly, we all know does some excellent, excellent reporting, but it is an easy target and a target that the president has been setting up in rally after rally, tweet after tweet for years as a foil of his, and of the -- of the Republican Party. So the way that this plays out politically might not be how you would initially think, but maybe this one is different.

BLITZER: He calls it the failing "New York Times" often.

RON BROWNSTEIN, CNN SENIOR POLITICAL ANALYST: It's an incredible piece of journalism. I mean, it is remarkable, the level of detail that could be acquired by anyone who doesn't have subpoena power. The detail that goes through here.

And by the way, someone with subpoena power has already suggested this afternoon. New York state has indicated just since the publication that they want to look into all of this.

I mean, the detail in here is really revealing. If you look at, for example, the -- I think the biggest episode they're discussing is when the father's assets had to be transferred to the children. And they talk about, in great specificity, two distinct schemes that were used to devalue those assets and thus minimize the potential estate tax.

One was to create a sham company and pay it inflated billing as a way of kind of blinding down assets and transferring the money to the kids that way. And even more explosively, they argue there was systematically fraudulent, or at least highly misleading, appraisals done of all the properties to vastly undervalue them relative to other properties being sold literally blocks away as a way of lowering the valuation that would be -- that would be taxed.

And this went on over an extended period of time. Not like kind of one, kind of a one-shot deal. This was almost like a military campaign as "The New York Times" lays it out. It becomes very implausible to argue that you were not aware of something of this magnitude, and duration and systematic nature.

I would agree, look, I don't know what the electoral impact of this will be. I think that most people who have turned away from the president because they -- because of how they view him personally, they've already turned away. But it is just one more of these clouds and one more fodder for both state investigators and, potentially, a Democratic Congress to investigate.

COATES: And by the way -- sorry. By the way, Paul Manafort just was convicted of tax evasion.


COATES: It's not as if this is a far reach to people to look at this notion and say, "I think I've heard about the issue of tax evasion recently and about money laundering." Perhaps about trying to siphon away funding to not have to have the full responsibility to pay Uncle Sam. This is nothing something that's a foreign notion to people.

The word "systemic" is so important here, as well. Because if you think of, like, criminal liability, technically, it runs after the very last instance that you tried to hide the assets, or your last act of tax evasion.

BASH: Could this be within the statute of limitations?

COATES: It could be conceivably, if they're able to prove -- we're far from that at this point in time -- that the last instance of evasive behavior was within the six-year period or within that three- year period. That may be a reason not to turn it over. So this reporting is excellent. If it's true, it would go hand in

hand with the Trump fraud organization about their own tax evasion issues and tax hiding.

BROWNSTEIN: Just to underscore the point, it is inconceivable that the activity that's described in this report could occur without all involved being aware of it, because it was so extensive, so elongated and so systematic. This was not just a one-time deal. This was something that was done over months and months and months.

BLITZER: It's a good point. Because Phil, in this "New York Times" article, it really destroys the myth that the president ever many decades tried to suggest that he was a self-made man. Yes, his dad may have lent him $1 million. He had some units out in Queens or Brooklyn. But he took that $1 million, repaid his father with interest, and built this huge billion-dollar empire.

"The New York Times" says that's not true, that Mr. Trump, based on "The New York Times" investigation, Mr. Trump received the equivalent today of at least $413 million from his father's real-estate empire, starting when he was a toddler and continuing to this day. In fact, the article says by age 3, Donald Trump was earning $200,000 a year in today's dollars from his father's empire.

MUDD: It doesn't destroy that myth. The president has created an alternate myth. That alternate myth has been productive since day one of his campaign. And that is to tell the American people, people like this are Washington insiders or New York insiders and don't trust them.

[17:40:04] I'll tell you what the story is here. It's not what happened decades ago. It's why the family needs to be concerned about the acquisition of records from the family lawyer.

The tone that's set here and the tactics are used -- that are used to raise money. If you want to tell me that those weren't the same tactics that might have been used when Michael Cohen was dealing with real-estate money coming in from Russia, I'm going to say that the fish rots from the head. And this tells me that decades ago that happened, and I suspect that documents that the man that we've forgotten, the Mueller team are looking at about more recent events, reflect the same sort of activity.

BLITZER: Dana, you correctly point out the president, I'm sure, would just rail against what he calls the failing "New York Times."

BASH: Right.

BLITZER: But there will be political fallout, especially if the Democrats take the majority in the House.

BASH: Right. But also remember, this whole story hits on a few of the president's most sensitive nerves. His wealth. His father. And his family. And the fact that, in addition to the allegations of fraud, the fact that over and over, there are narratives of his father bailing him out because of bad business decisions. So all of those things, it is hard to imagine the president not

acting, as we have seen him act and react so many times when you hit these nerve. And it is going to be very interesting to see when he gives his next rally, how much he seizes on that.

BLITZER: He's about to attend a political rally --

BASH: Never mind when he picks up his phone.

BLITZER: -- in Mississippi.

BASH: Exactly.

BLITZER: We'll see how he reacts. We'll stand by for that.

Everybody stick around. We're going to continue to follow this story.

We're also following new developments in the Stormy Daniels saga. CNN has learned the president himself was directly involved in efforts earlier this year to silence the porn star. Stand by. We have new details.

And later, an alarming new estimate about how many nuclear weapons Kim Jong-un may possess. Will a new visit by the secretary of state, Mike Pompeo, later this week convince the young dictator to destroy any of them?


[17:46:42] WOLF BLITZER, CNN ANCHOR: We're going to stay on top of the breaking news, "The New York times" blockbuster article detailing what the newspaper calls dubious tax schemes and outright fraud to build the President's business empire.

There's also new information tonight in the Stormy Daniels saga. CNN has learned that President Trump was directly involved in efforts to silence the porn star despite later publicly denying any knowledge of the hush money she was paid.

Let's go to our national correspondent Athena Jones. She's working the story for us in New York.

Athena, the President's story regarding Stormy Daniels continues to unravel.

ATHENA JONES, CNN NATIONAL CORRESPONDENT: Hi, Wolf. That's right, the plot is thickening here.

We've talked a lot about what President Trump knew about the hush agreement with Stormy Daniels and when he knew it. Now, we're learning that despite those repeated denials, Trump not only knew about the October 2016 payment; earlier this year, he pressed his then-lawyer Michael Cohen to enforce the hush agreement.

We've also learned that his son, Eric Trump, and a lawyer for the Trump Organization were involved. (BEGIN VIDEOTAPE)

JONES (voice-over): Tonight, a source with direct knowledge tells CNN President Trump personally directed an effort to keep porn star Stormy Daniels quiet about a sexual encounter she says she had with him in 2006.

In February, the President called his now-former personal attorney Michael Cohen and instructed him to seek a restraining order against Daniels through a confidential arbitration proceeding in California.


JONES (voice-over): This after learning she was considering talking to the media despite the $130,000 hush agreement she reached with Cohen weeks before the 2016 presidential election. That means Trump wasn't telling the truth two months later in April when he denied knowledge of the payment.

UNIDENTIFIED FEMALE: Mr. President, did you know about the $130,000 payment to Stormy Daniels?



TRUMP: What else?

UNIDENTIFIED FEMALE: Why did Michael Cohen make that statement if there was no truth to her allegations?

TRUMP: Well, you have to ask Michael Cohen. Michael's my -- an attorney and you'll have to ask Michael Cohen.

JONES (voice-over): Trump has consistently denied any affair with Daniels who spoke with Anderson Cooper about the alleged encounter in March.

ANDERSON COOPER, CNN HOST: And you had sex with him?


COOPER: You were 27, he was 60. Were you physically attracted to him?


COOPER: How do we know you're telling the truth?

DANIELS: Because I have no reason to lie.

JONES (voice-over): The source says Trump directed Cohen to coordinate the effort involving his son, Eric Trump, and an outside lawyer; telling Cohen, regarding legal costs, don't worry, I'll pay for everything. "The Wall Street Journal," which first reported the story, says the

President, days later, had a second phone call with Cohen in the Manhattan office of the outside lawyer, Lawrence Rosen.

Eric Trump, who runs the Trump Organization with his brother, Don Junior, told a staff attorney in California to sign off on the arbitration paperwork Rosen's firm prepared.

A person close to the situation told "The Journal," Eric Trump acted as the President's son and not in his role as a company executive.

On March 6th, Daniels sued President Trump and the company Cohen had set up to pay her, Essential Consultants LLC, alleging the hush money was not enforceable because Trump himself hadn't signed it.

The next day, White House Press Secretary Sarah Sanders said the case had already been won in arbitration.

SARAH HUCKABEE SANDERS, WHITE HOUSE PRESS SECRETARY: I can share that that arbitration was won in the President's favor and I would refer you to the President's outside counsel on any details beyond that.

[17:50:02] JONES (voice-over): In fact, a restraining order was issued but Daniels ignored it.


JONES: Now, President Trump's direct personal involvement in the effort to keep Daniels quiet with the help of his company contradicts public statements made at the time by Trump himself, by Michael Cohen, and by the Trump Organization. And it shows the President's ties to his company continued into this year, long after he handed over control to his sons.

We've reached out to the White House, to the Trump Organization, and to Michael Cohen for comment on this, and we've not heard back -- Wolf.

BLITZER: If you hear back from them, let us know. Athena, thank you very much.

There's more breaking news coming into THE SITUATION ROOM. We now know when Secretary of State Mike Pompeo is heading back to North Korea, but his trip comes just as we're getting an alarming new warning about Kim Jong-un's arsenal of nuclear weapons.

Let's bring in our own Brian Todd. Brian, what are you hearing?

BRIAN TODD, CNN CORRESPONDENT: Wolf, we had confirmed that Secretary Pompeo will be in Pyongyang this Sunday. He will meet with Kim Jong- un then and will try to lay the groundwork for a second summit between President Trump and Kim.

But tonight, we're also learning new information about Kim's stockpile of nuclear weapons which shows no signs of diminishing, even as the two leaders keep praising one another. (BEGIN VIDEOTAPE)

TODD (voice-over): Tonight, as President Trump is dispatching his Secretary of State, Mike Pompeo, to Pyongyang to meet with his former archenemy, Kim Jong-un, there's a new and sobering assessment of how Kim is moving ahead with his nuclear weapons program, mostly in secret.

South Korea's Unification Minister says South Korea's intelligence community estimates North Korea may have as few as 20 or as many as 60 nuclear warheads. It's a jarring figure that U.S. intelligence officials declined to confirm or discuss with CNN but that former weapons inspectors say rings true.

What is your own estimate based on the plants you think they have?

DAVID ALBRIGHT, FORMER WEAPONS INSPECTOR, UNITED NATIONS: Yes. Our conservative estimate, based on that they may or may not have a second enrichment plant in addition to Yongbyon, is they have -- North Korea has about 15 to 35 nuclear weapons.

TODD (voice-over): But former U.N. weapons inspector David Albright, whose firm tracks North Korea's nuclear program, says if, as he suspects, the North Koreans are operating a top-secret uranium enrichment plant called Kangsong just southwest of Pyongyang.

ALBRIGHT: Our estimate goes up to about 25 to 45.

TODD (voice-over): Kim's regime has never acknowledged that secret plant at Kangsong and hasn't recently allowed inspectors into the country despite all the diplomatic niceties with President Trump.

Is Kim secretly racing ahead with building his nuclear arsenal while shaking the hands of the President and his Secretary of State?

ALBRIGHT: There's no evidence that he is racing ahead. I would argue, based on what we see, it's the same level of operation it has been for the last couple of years. But North Korea has not been forthright about what its nuclear capabilities are.

TODD (voice-over): Albright says, at this pace, even while he talks with Trump, Kim can still produce about three to five nuclear bombs a year in secret.

TRUMP: And then we fell in love, OK?

TODD (voice-over): As Trump continues to praise North Korea's brutal dictator, veteran diplomats are now pouring over a new statement from Kim Jong-un's news outlet.

The statement addresses Kim's long-standing demand that the U.S. declare a formal end to the Korean War. America has resisted that because it would likely mean a withdrawal of the 28,500 U.S. troops from South Korea.

Kim's regime now says, quote, if the U.S. doesn't want the end of war, the DPRK will also not particularly hope for it. Analysts do not believe Kim's regime is actually dropping that demand for a formal end to the war.

DEAN CHENG, SENIOR RESEARCH FELLOW, THE HERITAGE FOUNDATION: I think what this is signaling is that North Korea is not so desperate for an American acquiescence to the end of war declaration. That it will put its nuclear weapons on the table first.

What they seem to be saying instead is, if you're not prepared to concede on this point, we're certainly not going to concede on being a nuclear weapon state.


TODD: Analysts say if the U.S. ever did agree to an end-of-war declaration and the pullback or withdrawal of U.S. forces from South Korea, that America would first insist that the North Koreans pull back many of their troops, their missiles, their artillery pieces from that border region. Something that Kim Jong-un's regime would, at the very least, be reluctant to do, Wolf.

BLITZER: All right, Brian, thank you. Brian Todd reporting.

There's more breaking news. We're following a truly bombshell "New York Times" report saying President Trump used, quote, dubious tax schemes and, quote, outright fraud to build his fortune and is not the self-made man he claims to be.


BLITZER: Happening now, breaking news. Accused of tax fraud. An in- depth investigation by "The New York Times" finds President Trump engaged in dubious tax schemes in the 1990s to increase the fortune he received from his father. New questions tonight about the source of Mr. Trump's wealth.

Not acceptable. The President warns Brett Kavanaugh will have crossed a red line if it turns out his Supreme Court nominee lied to Congress. Are FBI investigators finding any evidence that Kavanaugh gave false testimony under oath?

Quieting Stormy. We have new information about the President's personal involvement in trying to silence the porn star, even as he was denying any knowledge about their hush money deal. Did Mr. Trump try to drag his son, Eric, into the Stormy Daniels cover-up?

[18:00:05] And poison at the Pentagon. Envelopes addressed to the Defense Secretary and a top U.S. Navy official have tested positive for the deadly substance ricin.