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The Euro Crisis; Campaign Spending

Aired May 30, 2012 - 19:00   ET


ERIN BURNETT, HOST: OUTFRONT next, how the euro crisis took a bite out of our financial future today.

And the head of Apple says he's going to start building iPhones here in the USA. Why that doesn't add up.

And is a zombie-like attack part of a growing trend in an American city? Let's go OUTFRONT.

I'm Erin Burnett and OUTFRONT tonight, stocks plunge. Thanks, Europe. The market dropped 160 points today. Now, it's down six percent in the month of May. That's the biggest monthly loss in nearly a year. And in case you were thinking that Europe's crisis was their problem and your eyes glaze over when you hear about it, this is the wake-up call.

America's 401(ks) are losing value thanks to Greece and Spain. Why? Well, because if and when Greece drops the euro, it's a little domino with a lot of punch. Next comes Spain, Portugal, Ireland, maybe even Italy. They could all fail. And that means the breakup of the world's biggest economy and America's biggest trading partner. It means at least tens of thousands of American jobs will be lost.

This is the scene in Greece now. Destitution and riots, suicide has surged. Just today a 61-year-old man left a suicide note. His name was Alexanderos (ph). He hung himself in a park in suburban Athens. The note said, quote, "Greece will be wiped off the map" and that he hoped his grandchildren wouldn't be born there. The personal toll is tragic and it's a terrible fall for something that was supposed to cure all the continent's ills.

The euro was supposed to unite Europe after suffering through two world wars which caused 75 million deaths. That's why its launch was met with massive celebration in 2002 when the first euros arrived in ATMs. In Greece, they rolled out the red carpet to see leaders pull the first euros out. This is literally in Greece on that day in January, 2002. People were partying in the streets. They were staying up until the early hours of the morning to try to commemorate the day.


UNIDENTIFIED MALE: The euro is the beginning of a stronger European union. We shall be the best in the world, the best in the world.


BURNETT: It was incredible to imagine that, people out in the streets celebrating a currency. Newspapers captured the momentous occasion. Here are some of the headlines. "EUROS BY THE BILLION: EVERYONE SHOULD DRINK TO FUTURE SUCCESS". "THE EURO IS OUR FUTURE". "THE EURO IS BORN: EUROPE HAS EMBARKED ON A GRAND EXPERIMENT." And "HOPES RUNNING HIGH AS EURO BECOMES HARD CASH". Well now many are just hoping the euro survived, including all of us here in the United States.

Peter Kenny is managing director of Knight Capital. Shawn Tully is senior editor-at-large at "Fortune". Good to see both of you and appreciate it. Peter, this is sort of -- this is the wake-up call. I mean we've known now for a year. The last month the market was this bad was September and that was because of what was going on in Europe. But how bad is this going to get?

PETER KENNY, KNIGHT CAPITAL MANAGING DIRECTOR: It could get a lot worse. I mean the euro today traded at 123, just shy of 124 versus the dollar and that's the lowest it's been. That's a two-year low. And the trend is clearly lower. There doesn't seem to be any near-term support for the currency and it is all about the risk off trade, which is why gold caught a bid, the dollar seems to have caught a bit of a bid over the last month or so.

BURNETT: U.S. stocks just went down. I mean Shawn, how much worse could this get. You know Americans looking, saying look this is an awful feeling where you have no control over something, it could get a lot worse and go on a lot longer and you see your own 401(k) getting decimated.

SHAWN TULLY, SR. EDITOR-AT-LARGE, FORTUNE MAGAZINE: Yes, that's true. I think there will be a Greek exit from the euro very, very quickly because of the run on the bank situation. It's going to cause a credit crunch because none of these loans can be rolled over.


TULLY: Because deposits are leaving. They're going to Switzerland. They're going to England. Now, in the case of a default and a devaluation if the drachma comes back, money will come back in obviously because everything will be very inexpensive in Greece.


TULLY: And there will be a much higher growth rate in Greece eventually over a six or nine-month period. We'll have a turn-around similar to what we saw in Argentina. So going out six or nine months, Europe could be growing again technically, or some of the countries that drop out in the early stages because given their labor costs that they're much too high relative to their over -- effectively overvalued currencies, these countries are rendered completely uncompetitive with -- in the eurozone.

BURNETT: So I mean before the European currency launched, the European (ph), everyone said can we imagine such a thing succeeding. Now everyone says oh it's impossible to imagine breaking up. It's the biggest economy in the world, but I mean really is this much ado about nothing. That they should just take the band-aid, rip it off your arm. You know you've got hair on your arm, right, so it hurts but you've got to rip it fast --


BURNETT: -- as opposed to what they're doing now, which is every little hair.

KENNY: There really needs to be some very, very dramatic steps taken to correct the structural clause of the European Union, the eurozone. If you look at what Iceland did, remember years back Iceland was the first -- was the canary in the coal mine.


KENNY: But if you look at Iceland's economy now, they took austerity measures. They took the tough medicine --

BURNETT: Right and they're fishing again.

KENNY: Exactly.

BURNETT: They're doing what they do and doing it well and --

KENNY: And much to Mr. Tully's point, they are actually on the rebound because they took the medicine, they took the austerity steps and they got their spending in line.

BURNETT: But how bad could -- I mean Shawn, back to this point about the United States, I mean you know if it gets really bad in Europe and the economy continues to go down, then you see tens of thousands more American jobs lost, that means we could have bank issues here, right? I mean U.S. taxpayers could be on the line again for this because of Europe?

TULLY: Well there will be a severe recession because the living standards in Greece and Spain would drop a lot in the early stages of an exit, because the price of exports would soar. Therefore, their living standards would drop before their own industries can ramp up and start producing at lower costs and compete again with what are now no longer cheap imports, right? But that takes a while. So there's going to be this period of complete panic where we're going to have a big drop in European growth and it's going to hit us hard. Now, six or nine months or a year out, they're going to be growing again.

BURNETT: But what do you do during the panic? Because I mean when the panic happened in this country, I think we all remember, we're talking about the ATM image --


BURNETT: We were worried that those -- that they might not work.

UNIDENTIFIED MALE: Right. BURNETT: That our money didn't mean anything. It was a horrific feeling in everybody's stomach.

KENNY: At those moments what really drives a theme is what is valuable, which is why you saw the fight to gold over the last 10 --

BURNETT: They go gold; they go into real estate --

KENNY: Gold -- even the U.S. dollar. They go into real estate. They go into tangibles. And you're going to see some of that in the eurozone. And to Shawn's point, you're seeing capital leave Greece, capital leave Spain. Where is it going? It's going to the U.S. dollar. It's going to U.S. debt markets. It's going to Switzerland. It's going to where the risk of trade has a home.

BURNETT: All right, well thanks very much to both of you. It's a frightening moment for everyone and I think as that suicide shows such a horrible personal story for so many in these countries. It seems like a headline, but people are literally choosing to take their own lives.

Well coming up, President Obama has invited Mitt Romney to debate. Let's get real. When we looked at the numbers, it didn't add up.

And forget a possible war with Iran. Some experts say we are already in the middle of a war with Iran and we'll explain who's being killed and where.

And a break in the possible murder case of a man who vanished on his honeymoon. Police have under covered -- under covered a video that has actually showed men discussing what happened.


BURNETT: The second story tonight. President Obama gave Mitt Romney a call today. Yes, he did. It was quick and polite. According to the readout from the White House, he congratulated him on getting enough delegates to be the Republican nominee. Both sides wished each other well and said they looked forward to a healthy debate. I mean it must have been such an awkward call.

I mean you know hi, it's -- congratulations. Thank you very much. I mean I just -- you know the readout, it's a tone. I wanted to hear it. Well anyway, we look forward to a healthy debate, but let's get real. This is going to be the most expensive election in history. And once they got off the phone, they went back to saying, wow, that guy is a jerk.

Civility in 2012, does it ad up? John Avlon, Reihan Salam and Jamal Simmons are with us now. All right good to have all of you with us. And you know I'm sure they have pleasant things to say about each other as well. They have got to have respect. But the spending is going to be insane, John Avlon. We've seen strategists say, what, more than $2 billion, Super PAC spending at 133 million. It's just -- it's pretty unbelievable. JOHN AVLON, CNN CONTRIBUTOR: It already is insane.

BURNETT: So how do you get a clean, pleasant election when you've got all this money and a lot of it you know kind of the hide behind the fig leaf kind of money, right?


BURNETT: I didn't say something nasty. It was the Super PAC.

AVLON: Well we're not going to see a clean election. There's going to be a tsunami of sleaze coming across our airwaves for the next six, seven --

BURNETT: Tsunami of sleaze, I love it.

AVLON: I'm telling you and it's going to be because of Super PAC money.


AVLON: Anyone who is so naive as to think that the Super PAC money was going to be spent on positive ads, get real. This is going to be ugly. It's going to be negative. It's going to be on both sides, but already we've seen 70 percent of the ads this year so far have been negative. Only nine percent have been positive. Outside money, five times what it was when President Bush was running for reelection. We've got a problem, people, and it's going to degrade our civic discourse. It already has.

BURNETT: And Jamal, I mean is this going to be something that backfires on one or both of the candidates? I mean it is pretty amazing the stats John was saying, 70 percent of the ads so far this year negative. Back in 2008 only nine percent of them up to this point have been negative and I think at that point we all felt it was a really nasty, negative campaign.

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: Yes, and it's going to get nastier. This is not going to get better. I think today what we saw is sort of like two boxers who have been trash talking each other for the last few months come out. They bump gloves. Everybody wishes each other well. And then the next time you se me, I'm going to try to knock you into next week. And that's what we saw today. And that's what's going to be going on in this campaign from now until November.

BURNETT: Reihan, let's just play -- we know Super PACs are negative. I mean they're -- I mean I think --

REIHAN SALAM, CNN CONTRIBUTOR: Well you know I have a slightly different view, but fair enough, yes.

BURNETT: I know you don't -- right -- I mean I know you don't think they're necessarily all bad.

SALAM: Yes. BURNETT: And by the way, you've got some real convincing arguments on that front, but separate issue. But here's the biggest spender so far Restore Our Future, Mitt Romney's related Super PAC, here's what it did before. Here you go.


UNIDENTIFIED FEMALE, POLITICAL AD: You know what makes Barack Obama happy? Newt Gingrich's baggage, Newt has more baggage than the airlines. Santorum voted to raise the debt limit five times, increasing spending and debt by $3 trillion. And he even voted to let convicted felons vote.


BURNETT: That's just a taste of what we saw in the primaries. It's -- by the way, they have taken that off their YouTube channel as if they think in this day and age that means it goes away, but you know --


SALAM: Look, here's -- my own view is that even without the Super PACs being present, this would have been a very nasty and contentious campaign for a simple reason. John Heilemann has a great big article in "New York" magazine about the Obama campaign and its approach to this year. And you know there are quotes from leading officials in the campaign who are talking about how they're going to drive a wedge between Mitt Romney and women, between Mitt Romney and Latinos, between Mitt Romney and young voters. They want to run an aggressive fear-based campaign because it's going to be very effective for them. In a similar vein, George W. Bush in 2004 presented himself as a decisive commander-in-chief during a time of war.

That's what incumbent presidents do. When you have a record that is ambiguous, when you have an economic climate that is tough, you run an incredibly fierce, ferocious, tough campaign. Republicans do it and Democrats do it. And then the person on the other side is going to have to respond. That's the way it goes. The Super PACs definitely contribute to this environment in some sense, but even without them, the campaigns themselves are intending to run a tough campaign because the stakes are very high.

AVLON: But there's a difference between tough and principled and sleazy and overwhelmingly negative. And the Super PACs have just super charged this instinct. You know this goes back a long time. This used to be called positive polarization when Nixon ran for president. You can get any Republican strategist (INAUDIBLE) talking about driving wedges. This is part of the standard operating procedure, but now they have a new weapon in their arsenal. It is huge. It is unprecedented and it's going to create its own kind of economy all based on polarizing the American people.

BURNETT: And Jamal --

SIMMONS: Erin -- BURNETT: Yes, go ahead.

SIMMONS: (INAUDIBLE) ad about this what makes Super PACs really dangerous is that they devolve power from the elected official who we can make a judgment on. You can vote yes or no for Obama or Romney to the hands of staffers, advisers, independent billionaires who we have no ability to influence what they say or do and we're giving them the power to help set the tone for the debate and I think that's the most dangerous part about Super PACs.

BURNETT: I mean all that may be true. The only thing I'll say is we switched topics and I'm not saying I totally agree with you, Reihan, but I mean before you had people with huge influence and kind of ambiguously named organizations that sort of were all about one cause that gave money and it was a little bit harder to see the money. I mean now it may be vial, but at least you can see who's spending money. I mean so it's very transparent. But let me play an ad, Jamal, Planned Parenthood. This is one of the ads the president is running obviously to try to push on the women's issue against Mitt Romney. Play this and get your response.



MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Planned Parenthood, we're going to get rid of that.

UNIDENTIFIED FEMALE, POLITICAL AD: Romney is saying he'll deny women the birth control and cancer screenings they depend on. When Romney says --

ROMNEY: Do I believe the Supreme Court should overturn Roe v. Wade? Yes.

UNIDENTIFIED FEMALE, POLITICAL AD: He's saying he'll deny women the right to make their own medical decisions.


BURNETT: And Jamal, I just want to make it clear that was Planned Parenthood -- I'm sorry -- not the Obama campaign running that.


BURNETT: But will that sort of thing stick? I mean obviously the Romney campaign is coming out and saying look we're just against federal funding for Planned Parenthood. That's different than saying we're against health care for women. But that these sorts of ads are obviously intended to give a different takeaway to the viewer.

SIMMONS: Oh absolutely and I've been on the receiving end of some of those ads when I've worked on campaigns in the past. And what happens is you spend a lot of time, you send paragraphs trying to explain why your position isn't what they said in six words. And I'm going to tell you paragraphs don't beat six words. It's a very tough -- it's a very tough environment to be in. And Mitt Romney has to take it seriously because if you look at the last couple of elections, the president beat John McCain by about 13 points with women. And in 2004, John Kerry only got about three points better with women than George Bush and George Bush won. So losing women by double digits is not the way to get to the White House.

BURNETT: All right thanks to all three. Appreciate it.

And ahead, Apple's CEO said something that took our breath away. We looked into it. He said he wants to make iPhones here in the United States. But does it add up?

And a man's horrifying flesh-eating attack could be part of a growing problem. It's truly bizarre what we found in our investigation. We'll be back.


BURNETT: So last night ""The Wall Street Journal's" All Things Digital Conference opened up with the CEO of Apple, Tim Cook. And a little bit of his talk was about manufacturing. He said this.


UNIDENTIFIED MALE: Will there be an Apple product ever made again in the United States?

UNIDENTIFIED MALE: I want there to be.

UNIDENTIFIED MALE: So will it ever say on the back of an Apple product, designed in California, assembled in the United States?

TIM COOK, APPLE CEO: It may. It may. And even though it doesn't say that today, you could put down there several parts are from the United States.


BURNETT: All right and then he continued to say he wanted to make iPhones here. And so, look, Tim Cook wants to make things in the U.S. instead of China, but what would that cost? Well, so we found out. We contacted IHS (ph) Market Research about what it would cost per iPhone to move manufacturing from China back here. So if you just consider labor costs, labor costs alone, it's an extra $25 an iPhone.

Now, when you're looking at $225 in China and $250 in the U.S., you may say, hey, that's not much. But it's a lot. Apple sells a lot of phones. In the U.S. there's also health benefits to consider and they'd have to build new factories here, because a lot of the parts aren't made here. And all the microprocessor chips inside iPhones, every single one made for Apple is made by Samsung, which brings me to tonight's number 28.

Yesterday Samsung launched its new Galaxy 3 phone in 28 countries. Hundreds of people were lining up at stores around the world. Nope, not at Apple stores, Samsung store, the kind of anticipation you usually only see though for an Apple product. So is Samsung the new Apple? This is startling.

Last year Samsung passed Apple as the world's top Smartphone maker. In the first three months of this year, Samsung has sold 44.5 million Smartphones, 21,000 phones every hour. Compare that to Apple. They only sold about 35 million phones. The Galaxy 2 sold 20 million units for Samsung and they say the 3 will do even better. And here's why. For the past two decades, Samsung has invested a lot of money in the Olympics.

They have got media relays, torch relays, parties. This year they hired British stars like David Beckham and Jamie Oliver (ph) and introduced an interactive Olympic experience that travels around the world teaching people about the Olympics and, of course, about Samsung. It's probably no surprise that it was just announced the Galaxy 3 is the official device of the 2012 Olympics.

And you say why, why does that matter? Well I'll tell you why. Because after they dumped a ton of cash in the Beijing Olympics four years ago, Samsung's mobile market share doubled in China. The very same China that Apple says it wants to move out of. Apple is the biggest company in the United States, but while it's focused on righting some of its PR wrongs on labor in China and possible tax evasion, Samsung seems poised, at least for now, to give it a real run for its money.

Well still to come in our second half, there's a lot of talk of a possible war with Iran, but tonight one expert OUTFRONT to say we're already in a war with Iran right now.

And what is this all about?


UNIDENTIFIED MALE: I'm sick of it. Every year we give power to one person.



BURNETT: Welcome back to the second half of OUTFRONT. We start the second half with stories we care about where we focus on our own reporting from the front lines. And today the Dow down 160 points thanks to concerns about Europe, part of the reason oil prices fell about $3. Shawn Tully of "Fortune" told us what would happen to the U.S. if the situation in Europe gets worse.


TULLY: There's going to be this period of complete panic where we're going to have a big drop in European growth and it's going to hit us hard. Now six or nine months or a year out, they're going to be growing again.


BURNETT: Scottish police have charged a former "News of the World" editor with perjury. Andy Coulson's arrest relates to evidence he gave in a trial of a politician in December, 2010. The case was related to a story in "News of the World" which is the paper at the center of the phone hacking scandal in Britain. CNN's Dan Rivers says the arrest is significant because of the job Coulson held after he left the paper. He was British Prime Minister David Cameron's media chief.

Well a judge has denied Jerry Sandusky's request to delay his child rape trial. His attorneys had argued they needed more time to prepare their case. Sandusky has pleaded not guilty to charges that he sexually abused 10 boys over a period of 14 years. Our Sara Gannon reports that Sandusky's attorney cannot appeal the decision before the trial starts.

Well, Illinois State Legislator Mike Bost was not happy about having to debate a pension reform proposal just hours after it passed a vote. Here's what he did.


STATE REP. MIKE BOST (R), ILLINOIS: Once again, total power in one person's hands -- not the American way! These damn bills that come out of here all the damn time, come out here at the last second and I've got to try to figure out how to vote for my people! How ashamed -- you should be ashamed of yourselves! I'm sick of it!


BURNETT: I think we all know how he feels. I mean, you know, you've got to say. That was pretty -- pretty passionate.

All right, well, now, Illinois has some serious money problems because its unfunded pension obligations are $83 billion and the state check, it has A-plus credit rating, which is the second lowest among the states. Representative Bost will be our guest tomorrow night.

Well, it has been 300 days since the U.S. lost its top credit rating. What are we doing to get it back? Obviously, the 160-point market drop today didn't help. I want to give a little credit to Apple, it did try to help. The stock was up more than a percent.

Speaking of, when I referred to taxes, I want to refer you to the article which discussed Apple's tax avoidance. Check out "The New York Times" how Apple side steps billions in taxes. It's a great article from April 28th.

And now, our third story OUTFRONT: The United States proxy war with Iran.

And we're learning some startling details tonight about the "Flame". Now, the "Flame" is a powerful computer super virus that's been attacking Iranian government computers. And we've learned a little more about what it can do. It can capture what's on your screen. It records conversations. It can detect what users are actually on a network, and it can collect passwords.

But who is behind this crippling cyber attack, which apparently has been in process for a couple of years? Experts see the links between this virus and the Stuxnet, which you may recall attacked Iran's nuclear plants in 2010 and was suspected by many to be the work of Israeli intelligence. Iran blames Israel and the U.S. for the mysterious deaths of at least four Iranian nuclear scientists over the past two years and Iran is fighting back.

In October of last year, U.S. agents disrupted an Iranian assassination for higher plot targeting Saudi Arabia's ambassador to the United States. Iran denies that. In February, there were three attacks on Israeli diplomats in India, Georgia and Thailand, all that used similar magnetic bombs. Israel has blamed Iran.

And then there's this "Washington Post" headline with chilling details of Iran-linked plots to kill American diplomats and their families in Azerbaijan.

OUTFRONT tonight, the reporter who broke that story, Joby Warrick, and former CIA officer who specialized in Iran, Art Keller.

OK. Great to have both of you with us and really appreciate you taking the time.

Let me just start by asking -- are we really, do you think, in a proxy war with Iran? Joby, is that fair to say that at this point?

: Yes, we call it a shadow war. It's been under way for a long time. Both sides are involved in it. I think we've just see the Iranians step it up a lot in the last few months. They have been doing things they have been -- you know, they've been cautious to do before, like attacking diplomats overseas. Now we see for the first time really targeting Americans too, which is new and pretty chilling.

BURNETT: It is. And also when you couple that attack with obviously with what the U.S. says was an Iranian-sponsored attack on the Saudi ambassador that would have killed U.S. civilians in Washington. It seems as if it's taken another step forward.

Art, from your study of Stuxnet and the "Flame", which is the new one, do you think the U.S. or Israel is involved? Is this the U.S.?

ART KELLER, FORMER CIA OFFICER: Well, with the Stuxnet, I'm pretty confident that was the U.S., simply because of the precision of the virus and the care which it took to only attack very specific computer controllers that had to be controlling a uranium centrifuge, and it was designed to then erase itself after the attack. So it was only hurting very narrow things.

"Flame", I haven't been able to determine yet because I have had that it does surveillance, but it also has the potential to wipe hard drives. So, one is a simple straightforward espionage thing. The other is more a covert action and an attack and a pretty blatant one. So, that suggests it might be a little bit more heavy-handed and not have fully the precision that Stuxnet did. So that muddies the water a little bit. I do believe that the Stuxnet probably originated with the U.S., but this one is more heads up in the air.

BURNETT: Hmm, that's pretty interesting. And, Joby, when you talk about your reporting about how it's possible that Iranian-linked people were trying to kill American diplomats and their families in Azerbaijan, how closely can they link those plots to the Iranian government? That always seems to be the problem, that direct link.

WARRICK: It's always the M.O. with the Iranians. They never do something directly. They usually have a proxy. It's usually Hezbollah, maybe one of these another militant groups that it works with. So that way it has plausible deniability. It can be take a few steps back and people wonder: was it the Iranians or was it not?

In the case of this Azerbaijani attack, they once again hired local -- they hired some local Azerbaijani gangsters and gave them materials, rifles, explosives and set this thing up with some Iranian involvement, with stuff coming from Iran, with direction coming from Iran, but just a few steps back so they don't look directly responsible if something goes wrong.

BURNETT: And, Joby, you've reported that since there's been this latest round of talks, which have really been on hold for years between the West, the U.S. and Iran on the nuclear program, that the attacks have sort of slowed down. But obviously the talks right now sort of seem to be going nowhere.

So if they end without a solution, are we going to se more of these sorts of attacks? Are there more in the works now should we assume?

WARRICK: That's a good question because, you know, part of this -- the action by the Iranians is striking back. They had four of their scientists killed in these bombings within their own country. They have been attacked now three times with cyber viruses that have gone to the heart of their industry -- to their nuclear power plants, to disrupting their whole society.

So they're looking to lash back. I think they called a bit of a truce for several months because these talks were beginning to happen. Now that the talks are being derailed, it appears, so maybe it will be back on again. We'll have to wait and see.

BURNETT: Art, speaking of those CNN has just obtained some pictures that I want to show you. We've got these pictures right before the show. These are new images of the site of Parchin.

We've talked a lot about this on this show. This is the site where some foreign governments allege the building at the bottom was used for high explosive testing, that could be nuclear testing. There's been allegations they've been trying to clean up this site.

So, I'll show you the after-picture. The before-picture was April 9th. This picture is on May 25th. You can see according, to the satellite image, ISI are saying the small buildings have been razed, there's machinery tracks, there's been water coming out of the high explosives chambers indicating they're cleaning it up. How significant, Art, these pictures in terms of setting back the West's belief that Iran is serious?

KELLER: Well, material swipe sampling which can take very, very minute particles of any kind of enriched material is one of the chief weapons in the arsenal of IAEA inspectors. So this further suggests that they have something to hide and it's also a page from their old play book, because there is a facility called the Physics Research Center that the IAEA wanted to look at and not only did they clean it up, they bulldozed the whole thing and then bulldozed two feet of top soil and said, yes, you can come look at it now.

So they have done this kind of thing in the past and it really is kind of audaciously in your face, saying, yes, we'll let you in to do it after we've removed everything that could possibly get us in trouble.

BURNETT: Art, thank you both very much. Joby, thanks very much.

Joby is pretty incredible, about that Azerbaijan alleged plot.

Well, our fourth story OUTFRONT: new evidence in the case of a Connecticut man who disappeared while on his honeymoon in 2005. You probably remember this story. The evidence now points to foul play.

George Smith and his wife, Jennifer, were on a cruise in the GNC when they went separate ways after a night of partying. Jennifer said she never saw her husband again. His body has never been found, but now a videotape made by a group of men who helped Smith to his room the night he vanished is giving the FBI some fresh leads.

OUTFRONT tonight, George Smith's sister Bree Smith, and family's lawyer, Mike Jones.

Bree, let me start with you. What do you know or have you heard, seen in this video? What is new?

BREE SMITH, BROTHER DISAPPEARED AT SEA: Well, we haven't actually seen the video, but from what we have gathered it's a group of the Russian men last seen with my brother sitting around a table. Apparently during the course of their discussions, one of them makes an incriminating remark.

BURNETT: About something about your brother?


BURNETT: That maybe he was with him or what happened to him?

SMITH: That's right.

BURNETT: And, Mike, you spoke to the men. You did depositions.

MIKE JONES, ATTORNEY FOR SMITH FAMILY: I did their depositions, that's correct.

BURNETT: You did their depositions. Does this surprise you that this is happening or that you hadn't seen this before?

JONES: I actually found out about the tape about a year ago and I found out in conjunction with a turnover of evidence by royal Caribbean to us in connection with the settlement of a lawsuit against them. I was on a phone conversation with one of their in-house counsel and all of a sudden he mentioned this tape which I hadn't heard about and it certainly hadn't come out in the depositions.

There had been talk in one of the depositions about videotaping the things they had done on the ship but it was more in reference to sightseeing.

BURNETT: Because the Russians themselves taking a videotape was the Russians themselves, right? Taking a videotape of themselves --

JONES: Filming themselves, yes.

Apparently, they were filming everything that they did, including what turned out to be an alleged sexuality assault a couple of nights after George died. So these kids basically filmed basically everything they did.

BURNETT: And what were they like in the deposition? What are these people -- I mean obviously it's horrific what we know on the tape -- whether this ends up being something that they did as well. But --

JONES: Well, interesting because I took basically four depositions. One was of Josh Askin, a young California man who was hanging out with the so-called Russians. In his deposition for 40 minutes, he took the Fifth Amendment, invoked the Fifth Amendment. So, he didn't answer anything.

And then I took Zachary Rozenberg's deposition and he alternated between taking the Fifth Amendment and answering some of the questions.

Rusty Kofman gave a lot more information but there was a lot of talk about "I just don't remember" -- which was interesting because it was a seminal moment in his life.

And then Greg Rozenberg was very chatty and I took his deposition is a Florida state penitentiary because he was in there prison for a three-year stint on drug trafficking. So he was talking about everything and anything. But unfortunately, he sort of rambled along and he even got into discussions about polygraphs and failed polygraphs.

BURNETT: Do you think that they're -- that this could be the answer that you've been looking for? I mean, have you come to terms with never knowing or always believe there was something and foul play involved?

SMITH: Oh, we knew from day one that there was foul play involved, but we always believed that we would have justice. It's just unfortunately taken longer than we expected. But we think that this is perhaps the missing puzzle piece that the authorities have been waiting for, and this in conjunction with the evidence that we have amassed through the years. Hopefully, this will bring arrests. That's what we're hopeful for at this point.

BURNETT: I mean, how do you feel, you've got to be so frustrated that this tape has been there, they had it a year ago and they didn't hear this?

SMITH: It's frustrating, but we're also in the process of trying to transfer the case from the district of Connecticut to the district of -- southern district of New York and we hope that with new, fresh eyes from the FBI and the U.S. attorney's office looking at the evidence, they may come to a different conclusion.

BURNETT: Are you frustrated -- I mean, I know that George's wife was, for a while, a suspect. I know that was something you never thought was the case. Do you think that they lost valuable time and weren't maybe looking other places because of that?

SMITH: I'm not sure. I know that she was the suspect in Turkey, but from the evidence that Royal Caribbean provided to us, she was actually not with the Royal Caribbean cruise employee, Lloyd Botha (ph), as was first discussed.


SMITH: So, when we first got that information from Royal Caribbean, we transferred our focus from Jennifer and the Lloyd, both of the Royal Caribbean employees, to the four men last seen with my brother.

BURNETT: All right. Well, we're hoping this will bring an answer and closure. Thanks so much to both of you.

JONES: Thank so much.

SMITH: Thank you.

BURNETT: And still OUTFRONT, a man's frightening and violent zombie-like attack. It actually could be part of the new trend. It has police in one U.S. city extremely concerned.

And the United Nations has named the new leader of tourism. He also happens to have the title of worst dictator in the world.


BURNETT: We're back with tonight's "Outer Circle," where we reach out to our sources around the world.

And tonight, we start in Syria, where the U.N. has discovered another 13 people shot to death with their hands tied behind their backs.

Ivan Watson is following the story. I asked him who's responsible. (BEGIN VIDEO CLIP)

IVAN WATSON, CNN CORRESPONDENT: Erin, United Nations observers made a gruesome discovery of at least 13 bodies outside the eastern Syrian city of Deir al-Zor. All of them had their hands bound behind their backs. They appeared to have been summarily executed, some with gunshots at very close range to the back of their heads. The U.N. observers are not saying who may have carried out these executions.

We've talked to Syrian activists in that area who claimed all 13 victims were rebels and their bodies were dumped by Syrian security forces out of vehicles. We cannot confirm these claims.

Turkey and Japan had expelled Syria's diplomats from their capitals in protest for a massacre last Friday, bringing the number of countries that have done this to more than a dozen. The Syrian government has responded tit for tat by expelling the Dutch charge d'affaires from Damascus -- Erin.


BURNETT: Thanks to Ivan.

And now to Canada where police today issued an arrest warrant for a gay porn star, Luka Rocco Magnotta, in a grisly murder case where a man's torso was found behind an apartment building in Montreal, while a hand and foot believed to be from the same body were sent by mail to Ottawa.

CBC's Judy Trinh is covering the story and I asked what police know about the suspect.


JUDY TRINH, CBC: Erin, police have a suspect. He's a 29-year- old Eric Newman, better known by his alias as Luka Rocco Magnotta. Montreal police believe Magnotta killed his male victim inside this apartment. Veteran detectives say they have never seen such a grisly scene.

It all began yesterday when a janitor in Montreal discovered a torso stuffed inside a suitcase. That was around the same time in Ottawa, a blood-smeared package was being delivered to the headquarters of the conservative party of Canada. That's the party our prime minister belongs to.

Now, a few hours later, a second body part was discovered. It was a left hand. Now, DNA testing have linked the hand and foot in Ottawa to the torso in Montreal. And even more troubling CBC News sources tell us that Magnotta may have filmed the killing and dismemberment of his victim -- Erin.


BURNETT: All right, thank you.

And now let's check in with Soledad who's in for Anderson with a look at what's coming up on "A.C. 360".

Hey, Soledad.

SOLEDAD O'BRIEN, CNN ANCHOR: Hey, Erin. Good evening to you.

More on Syria tonight on "360": The options and consequences for stopping the slaughter. Pictures are now emerging of another brutal slaying, this one in the eastern province called Deir al-Zor. Thirteen bodies all with their hands tied behind their backs.

This evening, I'll speak with Fareed Zakaria on why the world cannot seem to find the courage to intervene, and former CIA officer Bob Baer will join me with Syria's scary stockpile of chemical weapons.

And tonight, a "360" follow, the birther denials that just won't go away. Donald Trump continues to wheel out birther talking points, even though the president has shown the world his long form birth certificate. If you need more proof than that, we have it ahead on "360". We sent Gary Tuchman to Hawaii to once and for all put doubts to rest.

And stories of how Latino voters could be the swing vote come November. That and much more tonight.

Erin, back to you.

BURNETT: Thanks, Soledad. See you in a just a few minutes.

And now, our fifth story OUTFRONT: the gruesome face eating attack in Miami could be part of a trend. An example of something larger and much more dangerous. Miami police say they have seen similar cases recently of people behaving strangely and showing what appears to be super human strength.

Over the weekend, Rudy Eugene attacked a 65-year-old homeless man, chewing off most his face. Police say he was probably high on a drug known as bath salts. We have to warn you we have new pictures tonight, they are disturbing. Police say he was naked, he was growling like an animal, he was shot and killed by police when he refused to stop but it took multiple shots. That is leading to the descriptions of what seems to be super human strength.

OUTFRONT tonight, Armando Aguilar, president of the Miami's Fraternal Order of Police, ask you a few questions in a moment, sir.

But, first, Elizabeth Cohen, is here, our senior correspondent, looking in the bizarre effects of bath salts.

And, Elizabeth, let me just ask you, what are bath salts? Can you explain exactly what they are? What are they and can they -- can they do things like appear to happen here where this man was literally growling, acting like a dog?

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Erin, first of all, bath salts have nothing to do with the bath. They are not actual bath salts. It's just a name that they were given. And they are amphetamines, often one of many different drugs. These are chemicals that people make sometimes in their own homes.

These are man-made, sort of home-made kind of recipes. And they are sold sometimes in places like gas stations. It actually used to be legal because they were new chemicals. Now they are illegal.

Now, not everyone who uses bath salts will have this effect, that is obvious. But it can have this effect for several reasons. It's a stimulant. So, it's kind of like meth, for example. It's kind of like ecstasy.

And so, several things go on. One, people start to hallucinate, become psychotic. And two, sometimes they don't feel pain. So they are not feeling pain even if someone hits them or does -- inflicting anything on them, they don't feel pain.

Let's go through sometimes what bath salts can do because the list is quite scary for something you can buy in a gas stations -- combative, violent behavior, hallucinations, psychosis, confusion, paranoia. So, this man didn't get stronger because of the bath salts, but he perhaps was paranoid, he became psychotic. He imagined things, and he perhaps didn't feel any pain if he was using bath salts.

BURNETT: All right. Well, Elizabeth, thank you very much.

You know, bath salts themselves are disturbing. Obviously, there's tests going on right now to se whether this man was on bath salts. It's possible that it could have been something else or something combined with something else, LSD.

Armando, let me just ask you -- you were on the scene of the incident, what was your reaction? What did you see?

ARMANDO AGUILAR. PRESIDENT, MIAMI FRATERNAL ORDER OF POLICE: Well, I have been a police officer for 30 years now. This was, by far, the most gruesome scene that I've ever seen in my life. We've had as you said before, two other instances where the persons have disrobed themselves and have become very, very violent, in those two other cases, they have admitted to taking LSD and we believe it's being mixed with some sort of other drugs, in this particular case we won't know until the final toxicology report comes in.

But the cases were so similar in nature that they both, all three took of their clothes, all three became psychotic, all three had super human strength and felt no pain. It's very concerning to us because it's not just an act of a crazy person if there is, in fact, a drug out there that people are taking that is making them psychotic like this, we're going to see more and more of it.

It's very important that we know how to deal with these individuals.


AGUILAR: And be able to contain them and get them medical attention they need right away. In this particular case, obviously, we couldn't, because it was so dramatic they had to use deadly force.

BURNETT: So, I mean, it's just a horrible story. When you talk about seeing incidents like this in the past few months, I mean, I know you were talking about one guy who would strip down naked, was attacking multiple people, and it took what was it 15 police officers to subdue him?

AGUILAR: Yes, he was running around naked, hit by a taxi. He jumped on the taxi, beating the occupants in the taxi. When the police arrived, it took 15 officers to subdue him, the tasers discharges had no effect on him whatsoever.

He took the baton from one of our female officers and injured her arm. It took at least 15 officers to be able to contain him.

BURNETT: That's just stunning.

All right. Well, Armando, thank you very much. Appreciate you taking the time and sharing some of those stories. Bizarre that is happening.

Well, Robert Mugabe is the world's worth dictator and the new face of something pretty incredible. That's next.


BURNETT: In the past, the United Nations has taken heat for the people it has chosen to represent it. This time, when it was time to pick someone to aid the U.N.'s world tourism organization and promoting responsible, sustainable, and universally accessible tourism, the U.N. went with a world leader.

Who you might ask? Robert Mugabe. Well, if you've never heard of him, he's the 88-year-old president of Zimbabwe, who's also called the worst dictator in the world. Since he assumed control of the country in 1980, he has been accused of promoting policies that have resulted in mass food shortages, high poverty and 95 percent unemployment rate.

If that wasn't enough, he's also considered one of the worst living mass murderers, linked to the deaths of 20,000 people. Just last year, he was tied to the murder of Solomon Mujuru, the husband of his own vice president in a car crash.

But perhaps the strangest part of all this -- the U.N. tourism membership includes 155 countries and seven territories and Robert Mugabe can't visit a lot of them. Maybe because "TIME" dubbed him world's worst dictator he's under a European travel ban. That's right. The U.N.'s world tourism organization is hoping a man who can't travel will promote tourism.

Anderson Cooper starts now.