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ERIN BURNETT OUTFRONT

JPMorgan Stocks; Mitt Fights Back; Honor Student Faces Deportation

Aired July 13, 2012 - 19:00   ET

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


ERIN BURNETT, HOST: OUTFRONT next -- so you lose $6 billion and your stock goes up six percent for the biggest gainer in America. How does that add up? Well, it adds up to how much we do not know about our banks. And the feds bust two men, accusing them of trying to supply Iran with illegal nuclear material from the United States and the first in our new series "Cold Wars". Billions and billions of dollars spent to drill for oil in the Arctic but will it actually ever happen?

Let's go OUTFRONT.

Well, good evening, everyone. I'm Erin Burnett and OUTFRONT tonight, losing money rewarded big time. Today, JPMorgan's stock was up like a July firework surging six percent. And in fact it brought the whole market along for a Friday the 13th surprise. It was the best day for stocks this month. And it doesn't add up.

So, JPMorgan shares popped in reaction to the bank announcing that losses from that high-profile trading blunder we've been talking so much about now top $5.8 billion. Now, that $5.8 billion is about three times more than the company said it would lose on this trade just weeks ago. Today the CEO of JPMorgan, Jamie Dimon, took questions on an earnings conference call, and he said he's learned a lesson.

(BEGIN VIDEO CLIP)

JAMIE DIMON, CEO, JPMORGAN: We've learned a lot. I can tell you this has shaken our company to the core.

(END VIDEO CLIP)

BURNETT: But the truth is no one is sure if other banks have trades like this going on or whether it will happen again at JPMorgan. Because the truth is that we do not know very much about our banks. Jamie Dimon didn't know about the now infamous trade for so long that for weeks he defended media coverage of it as a tempest in a tea pot. And today, Dimon said he didn't know much about something else that could cost his bank and the entire banking industry big money. That is, how widespread is manipulation of the key interest rate that sets American mortgages and credit cards?

(BEGIN VIDEO CLIP)

DIMON: All I can say is like all of these things, you know with a lot of people doing exams (INAUDIBLE) we're totally open to regulators and investigators and I'd be a little patient if I were you. You know not everything is the same. It's going to take a while. Not all companies are in the same position.

(END VIDEO CLIP)

BURNETT: As of today, Morgan Stanley -- yes, I understand it's ironic banks making estimates about banks and what they're doing or not doing. Anyway, analysts there estimate that the so-called Libor (ph) rate manipulation scandal could cost banks $14 billion. Now that's fines and fees on the banks. So you may say great, they should pay it, those jerks. But here's what it means, is $14 million less for those banks to lend, which will hurt all the rest of us.

Frankly banks are crucial for our economy. We need them and we need them to thrive. But they have become so big that they seem to control our fate. Just yesterday on this show, Dan Gross, the economics editor at Yahoo! Finance, suggested that the U.S. economy is sort of like the Titanic. I loved the image and it got us playing a little game.

So take a look at this little image we have here. Our economy is the Titanic. You know it feels invincible and huge. The most amaze thing in the history of the earth. Even after the financial crisis you know pretty much just like the Titanic was, right? We were sailing along until we hit that JPMorgan trading loss.

That little iceberg thing at the top and it jolted everybody. It jolted our ship. And we said, wow, is our economy still at risk from banks? But then after a few minutes of fear the shaking stopped and we went back to having a good time on our ship. The problem is, is 90 percent of an iceberg is under water.

So below us at this very moment, our little ship, America, could be a massive chunk of ice. Because there is so much we cannot see. There are trades that can bring banks down and this. The top four banks in the United States of America are equivalent to 51 percent of our entire economy. That is pretty stunning, everybody.

The entire output, all the cars we make, the computers we make, everything we do in this country, banks assets are 51 percent of that value. They're equivalent to that, $7.7 trillion. Trust us; big problems there can sink our little Titanic just like that.

OUTFRONT tonight is Stephen Moore, economics writer for "The Wall Street Journal" editorial page and Jon Cowan, co-founder and president of Third Way, a centrist think tank. Good to see both of you. Appreciate your taking the time. Steve Moore, let me start with you.

(CROSSTALK)

BURNETT: Obviously you know JPMorgan shares surge because things could be worse, but the Titanic image is still very frightening when we look at banks and if someone like Jamie Dimon isn't sure how big, how widespread, how significant the interest rate manipulation scandal might be. STEPHEN MOORE, WALL STREET JOURNAL EDITORIAL PAGE: Well we certainly learned that back in 2008, Erin, when two weeks before the big financial crisis, nobody thought there was a crisis and two or three weeks later, we saw major banks that basically their stocks went down to nothing. So you're right, these things can happen very quickly where the valuation of these big banks can fall very substantially. I do think what happened in the case of JPMorgan is I think investors thought that there was a lot more than six billion of losses.

I think that they thought -- you know we had talked a few weeks ago that the losses could be 10 billion or more, so it's no too surprising to me that when they said it was closer to six billion, the value of the shares went up. In terms of what we do about this manipulation, apparent manipulation of the Libor (ph) rates, the problem here is it's not really a market, Erin. It's set by the banks. It's kind of an insider trading kind of scheme and maybe what needs to be done is to anchor all these other interest rates to something like the Treasury bill rate which is set by the market, not by insider traders.

BURNETT: Right. I mean that sounds like a reform that makes sense. John let me ask you this key question, though, that seems to come from the fact that you have banks that are bigger than they were before the financial crisis, 50 percent of the U.S. economy and yet trades are happening at these banks the CEOs don't even know about. How much do we not know about our big banks?

JON COWAN, CO-FOUNDER AND PRESIDENT, THIRD WAY: Well, look the -- as you said, and I think it's absolutely right, banks are a central part of our economy and they do a lot of good. And we -- we can't ever forget that. But right now it's very clear that we don't know what's going on in certain portions of our financial sector. And what happened with Libor (ph) I think Stephen's dead on in this, is you have a real conflict of interest.

It's actually quite similar to the situation we had with the rating agencies back in the mid and late 2000's in which they were essentially self-regulating but they weren't doing it very well. So we don't exactly know what's going on right now in sectors of our banking system. But let's keep in mind banks and the financial sector play a crucial role in buying a house, insuring your life --

BURNETT: Right.

COWAN: -- sending your kid to college, and we can't actually even discuss or think about throwing the baby out with the bath water.

MOORE: You know, Erin that is a key point. Because, remember a year or two ago, when banks were doing very well, people said, what an outrage, they got these big -- you know they got these big bailouts, and now they're making these big profits, they're paying these CEOs money and then you know when we find a bank like JPMorgan that has these big losses, then we said, how could they have these big losses. We have to decide whether we want our banks to be a success or a failure. And I fall on the side that they are instrumental to our economy --

BURNETT: They are.

MOORE: -- that we want them to be successful and the question really is --

BURNETT: But they have to do -- OK we all agree --

(CROSSTALK)

BURNETT: But if you're out there watching -- but you get so frustrated that they do these trades or they're manipulating interest rates.

UNIDENTIFIED MALE: Right.

BURNETT: I mean you can't be doing that stuff and have people rooting for you and saying that we need you to be a success, right.

(CROSSTALK)

BURNETT: These guys have to shape up. Maybe they need to break up.

COWAN: You're totally right about that, Erin. But let's separate out the two issues because they're quite different. What happened to JPMorgan is there was some stuff going on. Trades they shouldn't have made. Dimon's acknowledged that. They made some serious mistakes, but the reason their stock went up today is twofold.

One, markets like certainty and now there's a number. And secondly, the bank still has a healthy balance sheet. That's very different than Libor (ph). Libor (ph) is terrible. It's a serious crisis. It's like fixing the point spread on the Super Bowl.

UNIDENTIFIED MALE: Right.

COWAN: That is quite different than mistakes or bad trades at banks and we need to keep them separate.

BURNETT: All right, well thanks --

(CROSSTALK)

MOORE: It's a crisis --

(CROSSTALK)

BURNETT: Final word, Steve.

MOORE: The reason it's a crisis it makes people think that the -- all of these markets are being manipulated by insiders --

BURNETT: That's right.

MOORE: And that's another thing I find very troubling. And folks, that's not the case in most cases, but I think in Libor (ph) it was the case. There was manipulation going on here.

BURNETT: (INAUDIBLE) that's right. I think we all agree we need a lot more transparency because if they were doing that then what about gasoline prices or everything else?

UNIDENTIFIED MALE: Yes.

BURNETT: I mean it puts in question the whole system. Thanks to both of you. We appreciate it.

UNIDENTIFIED MALE: Thank you.

BURNETT: And still OUTFRONT Mitt Romney gives an afternoon of surprise interviews. And you know it was -- in TV we could watch them all, so I watched every single one of them and he was sweating.

And then the Obama administration and Marco Rubio both agree that a valedictorian should be allowed to stay in the United States. So why is she being told otherwise by the United States government?

And George Zimmerman's attorney filed a motion in court that would have major, major implications on the trial.

(COMMERCIAL BREAK)

BURNETT: Our second story OUTRONT Mitt Romney fought back.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: But there's a difference between being a shareholder, an owner, if you will, and being a person who's running an entity. And I had no role whatsoever in managing Bain Capital after February of 1999 --

(END VIDEO CLIP)

BURNETT: Now we explained this last night said that Mitt Romney could have done a much better job yesterday in a press release by explaining it perhaps avoiding having to do a (INAUDIBLE) interviews where he had to sit and ruin a Friday afternoon. But he ended up having to do that. Responded to charges from several media outlets and the Obama campaign that he was part of Bain four years after he said he left. But listen to him earlier this week.

(BEGIN VIDEO CLIP)

ROMNEY: If you're responding, you're losing.

(END VIDEO CLIP)

BURNETT: Oh, John Avlon, Michael Waldman and Reihan Salam. Michael Waldman, you know this is kind of like Mitt. He can't seem to get out of his own way sometimes. So he responded.

MICHAEL WALDMAN, BRENNAN CENTER FOR JUSTICE, NYU: When you're responding badly, you're losing. That's the second tier version of it. It really was not a very effective response I didn't think because it sounded like he was clinging to technicalities and saying, well, I owned the entity but no I wasn't managing Bain Capital, sounds sort of like no controlling legal authority or something like that. He should have from the perspective, my own perspective, not only as a lawyer but actually as a former campaign hand he should sit down and answer the questions at length. But he may not want to do that because that gets to the issue of his taxes and it's hard to do that without --

BURNETT: It's hard to separate those two things, John, but that was my argument yesterday. I mean --

JOHN AVLON, CNN CONTRIBUTOR: Yes.

BURNETT: I thought I was very frustrated. I said he needs to sit down and do one long interview and go through all the details --

(CROSSTALK)

BURNETT: Not five short interviews, which I watched everybody and I almost fell asleep because it was the same answer every single time. He kept talking about the Pinocchio's (ph), you know the rating --

AVLON: Right --

BURNETT: -- by the fact checkers of the statement, but anyway it was the same thing five times over.

AVLON: That's right and he didn't have the clear simple explanation for, as I think we got to last night that look, this was a way for him to keep his investments while he was no longer actively involved in management. It's not as simple and clear as it should be, but it's credible and that's the key point. Here's the big thing. The difference between the statement he made where he said if you're responding, you're losing, and today is that there has been a significant shift in personnel and strategy on the communications team and I think it's actually a good thing --

BURNETT: That was today, right --

AVLON: That was today.

(CROSSTALK)

AVLON: Two new people brought on --

BURNETT: Yes.

AVLON: -- and we see Kevin Madden (ph) who came on last week, all of a sudden, it is a shift in strategy. It's no longer if you're responding you're losing. It's let's get OUTFRONT. Let's play offense and even though it is a Friday afternoon, which is not the best time to play offense in the political cycle it's a shift in strategy and probably a good thing for the Romney -- BURNETT: Reihan, he said let's get out front. It's too bad that they didn't, but Reihan, do you think he did well in his response today or it was a sign of weakness to come out and respond in all these interviews on a Friday afternoon?

REIHAN SALAM, CNN CONTRIBUTOR: I think John actually makes a pretty good point and you've seen a personnel change and I think that when you have any campaign of this kind, it's incredibly high stakes, high pressure environment. And the key thing is are you adapting, so I think that Mitt Romney -- I don't think it was the strongest interview he's ever given, but I think that's part of the point. He has to do this. He has to do this more often. And one hopes from the perspective of the Romney campaign that he's going to get better each time he does it, so again this is the first time out of the gate. And if he's going to embrace a more out front strategy, then he's going to have to get smoother. He's going to have to get more polishes and have a more convincing and compelling story to tell.

BURNETT: Well, if you have an out front strategy Jim Acosta actually really pushed him on the issue of tax returns here on CNN and I wanted to play what Jim got him to say. Here is this.

(BEGIN VIDEO CLIP)

ROMNEY: I've already put out one year of tax returns. We'll put out the next year of tax returns as soon as the accountants have that ready. And that's what we're going to put out. I know there will always be calls for more. People always want to get more and you know we're putting out what is required, plus more that is not required. And those are the two years that people are going to have and that's all that's necessary for people to understand something about my finances.

(END VIDEO CLIP)

BURNETT: OK, made it very clear you're only getting two years.

UNIDENTIFIED MALE: That's right.

BURNETT: And by the way, I, everybody, have the tax returns, everything that we have. It is a big stack. But how many months does it take? The guy is running for president. It's been three months after tax day. Where are they?

AVLON: Yes and also there's a precedent actually set by his father of 12 years of tax returns to really put it all out there and it's a good strategy generally. You kill people with kindness. You put it all out there.

BURNETT: Yes.

AVLON: Rather than dragging the feet, two years, and it makes it look like they're hiding something.

WALDMAN: It's an endless mystery in campaigns and in government when you know you're going to have to do something. Why don't they just do it and get it over with? And assuming that they're being rational, that Mitt Romney is being rational, it's hard to avoid the thought that maybe they don't want people to see what's on the tax returns and they're willing to accept the pain of having to answer this question. This isn't going away because he gave this interview. You're going to hear this over and over until November.

BURNETT: Right.

WALDMAN: Your own father said anything less than 12 years is hiding something. Why aren't you going to release it? And, you know, sooner or later he might have to but it's a real mystery as to why he isn't.

BURNETT: Why you would take that pain.

WALDMAN: Yes.

BURNETT: Reihan, what's your take on that? Why only two years?

SALAM: On the tax returns, I mean I think the basic idea is that he's trying to train the media and to sort of be very clear that I'm not going to give anything more than this, so let's just move on from this and it's not clear that that's actually going to work because frankly I think that a lot of folks are bored by just talking about unemployment and the weak state of the economy and they'd much rather talk about something like this because it allows them to deep dive into it. It's very stimulating. It's a window into a lot of the ways that the economy has changed.

BURNETT: Yes.

SALAM: It's going to be fodder for a lot of stories, so I think that you know it's not clear whether or not they made the right bet. I personally think that it's pretty sensible of Romney and the Romney campaign to want to keep the focus on the economy and on unemployment but, again, they don't necessarily determine what the media is going to want from them.

BURNETT: Right, and plus you know they may want that and it may make sense, John, but when people have an exception to something --

(CROSSTALK)

BURNETT: -- they're going to let it go.

(CROSSTALK)

AVLON: That's right. You know part of the strategy they've been using to date, the media, is saying, we're not going to talk to the media. We're only going to do things on our terms. Reihan used the phrase you know "train the media". Well the thing is we're not domesticated pets or circus animals --

(CROSSTALK)

BURNETT: No, but we are sort of like cats. UNIDENTIFIED MALE: Are we like cats?

BURNETT: Yes --

(CROSSTALK)

BURNETT: You know I like cats and dogs --

(CROSSTALK)

BURNETT: -- and all the bad ways about cats.

UNIDENTIFIED MALE: I don't --

UNIDENTIFIED MALE: I may have to work on that metaphor.

BURNETT: Scratch, ignore what authority tells you to do.

(LAUGHTER)

BURNETT: All right. Thanks to all three of you. We appreciate it.

OUTFRONT next, a special report from Miguel Marquez, "Cold Wars". Shell Oil one step closer to a multibillion-dollar plan to drill off the coast of Alaska. Does the risk of it add up?

And why nerds rule, bringing one city to bended knee. You stay classy, San Diego.

(COMMERCIAL BREAK)

BURNETT: The week when nerds rule. The world is finally here -- actually I think nerds rule the world all the time, but this is very particular. The doors at Comic-Con are open and what started as a small comic book convention in 1970 is now a monstrous four-day event that showcases the best in comic, sci-fi, film and TV. And this is a pretty amazing set of numbers everybody. Every year 130,000 fans -- see -- descend upon the San Diego Convention Center in costume, many of them, as you see, for seminars, signings and sneak previews, even some of our bronies are there.

And sure a lot of people make fun of the attendees but they do not see the cold hard truth. Comic-Con is a financial powerhouse, which brings us to tonight's number, $162 million. According to the San Diego Convention and Visitor's Bureau that's the amount of money that Comic-Con generates in San Diego every single year. In addition to the tickets and the merchandise at the convention, you've got hotels, restaurants, grocery stores, airports, all benefiting from that extra 100,000 people.

All told, the convention generates $3 million in tax revenues a year, which obviously is crucial for any city in financially destitute California. How important? Last year when the Comic-Con organizers threatened to move the event to a different city, San Diego offered up to half a million dollars in tax money to subsidize the event and it worked. The nerds have got San Diego by the codpiece (ph). It has been announced that Comic-Con will remain a San Diego event through 2015.

Up next, two men charged with conspiracy to smuggle items into Iran, nuclear items. And why George Zimmerman's lawyer wants the judge in the case removed and will he succeed?

(COMMERCIAL BREAK)

BURNETT: Welcome back to the second half of OUTFRONT. We start with stories we care about where we focus on our own reporting from the front lines. Well it was a great day for the market. Stock soared by more than a percent. The Dow is up by more than 200 points, best day of the month so far and ending a six-day losing streak. The reason was JPMorgan better than expected numbers. They earned money despite that huge nearly $6 billion trading loss. At the same time there was scandal over whether banks are manipulating the key interest rate called Libor to which mortgages and credit cards are linked.

New memos and e-mails show that Tim Geithner, who at the time was the president of the New York Federal Reserve, thought something was amiss with this rate as far back as 2008. In a memo he wrote about ways to prevent banks from manipulating Libor rates. He said among other things they could establish a credible reporting procedure and eliminate an incentive to misreport interest rates. It looks like that fell on deaf ears.

Visa, MasterCard and banks that issue credit cards, including Bank of America and JPMorgan have agreed to a $7.25 billion settlement with merchants. In statements Visa said it agreed to pay $4.4 billion; MasterCard will pay about 800 million. Both companies will also reduce their swipe fees for a period of time. Now retailers had accused those credit card companies of basically fixing the fee that they charge for processing credit and debit card payments.

Well there are new satellite images tonight that show more activity at a North Korea nuclear facility. The image was obtained by CNN security clearance blog and this picture that you're looking at was taken on June 24th. So what you are seeing is basically construction evolving at the Yangon Lightwater (ph) reactor. An analyst from IHS James (ph) looked at this and told our security team that they think the image shows new components have been added to the reactor building, including a traveling crane which I think you can see there on the side that would likely assist in mounting a reactor dome.

Well, an Uzbek national living in Alabama has been sentenced to 15.5 years in prison for threatening to kill President Obama. He had faced a sentence of up to 30 years. Ulugbek Kadirov pleaded guilty in February. He's already served one year in prison. His lawyer, Lance Bell (ph), told OUTRONT that, considering the charges, they're happy with the outcome. And Kadirov looks forward to serving his time and being reunited with his family in Uzbekistan. Some might be shocked that you could get such a short sentence for claiming to assassinate the president of the United States.

Well, it's been 344 days since the U.S. lost its top credit rating. What are we doing to get back?

Well, consumer sentiment hits its lowest level of the year and the sentiment number everybody is based on two things. One is how you feel about how your current situation is economically. And the other is how you feel about your future situation.

The future is really all that matters because it's directly correlated with how much you spend, how much you hire. In short, it's all that matters.

An economist we spoke with today said that number was the weakest part of today's overall headline. And that's a bad sign.

Well, our third story OUTFRONT: two men indicted on charges of trying to obtain nuclear materials from the United States and export them to Iran. Intelligence correspondent Suzanne Kelly has the details. She joins me tonight.

And, Suzanne, what exactly were they smuggling and who were these men?

SUZANNE KELLY, CNN INTELLIGENCE CORRESPONDENT: Lathes and nickel wire, aluminum alloy rods, mass spectrometers, vacuum pumps perhaps -- obviously, the most disturbing, radioactive source materials, Erin. This indictment lays out fascinating detail about just how these suspects allegedly planned to actually find these materials in the U.S., take them through the Philippines, and then get them into Iran.

Now, according to prosecutors, they were trying to set up sort of a front business in the Philippines in order to do this. And then they were trying to get an undercover agent to help them get these things into Iran. Now, Parviz Khaki is a citizen of Iran. And Zongcheng Yi is a resident of China. Both of them filtering all of this through the Philippines.

And once again, the end game was essentially to get these material, get their hands on them from the U.S., have them shipped to the Philippines and then work their way into Iran nuclear materials, Erin.

BURNETT: So, Suzanne, when you look at this -- I mean, it's a complicated scheme. Do you know how common these sorts of efforts are, I mean, to basically set up a front company, anything to try to transit nuclear materials from -- I mean, it's pretty amazing this time it was from the U.S., from the U.S. or elsewhere into Iran?

KELLY: It didn't really make sense but we got more detail on this, Erin, from the assistant attorney general for national security, Lisa Monaco, who warned that Iranian procurement networks continue to target U.S. and Western companies for technology acquisition by using fraud, front companies and middlemen in nations around the globe.

Now, this was an Immigration and Customs Enforcement investigation. And ICE Director John Morton described this particular case as a complex conspiracy to deliver nuclear materials to Iran and a significant threat to national security. BURNETT: Final key question, Suzanne, did any of this material get into Iran in this case?

KELLY: Great question. A law enforcement source tells CNN officials aren't in the position to say whether all those materials made it through. According to the indictment, we know the lathes and the nickel alloy did make it in. But as far as those radioactive source materials, the ones that are the most dangerous, officials cannot say right now whether or not those made it into Iran.

BURNETT: Amazing. All right. Well, Suzanne Kelly, thank you very much, reporting there.

And now our fourth story OUTFRONT. Tonight, nearly two dozen ships are headed to the icy waters off the Arctic in search of treasure. Shell Oil has bet billions and billions that there is a bonanza of oil offshore of Alaska's North Slope. At stake is a gold rush between companies and countries to drill in the Arctic. You know, literally, who owns it, who can own the oil underneath it.

This is an incredibly harsh place, though, to operate. There are huge risks. It's amazingly expensive.

Miguel Marquez went to far northern Alaska. It's a major series for us which begins tonight to see if all this adds up.

(BEGIN VIDEOTAPE)

MIGUEL MARQUEZ, CNN CORRESPONDENT: It is a massive gamble. If it pays, Shell Oil will reap the benefit of being the first to establish a new market for oil in one of the harshest climates on earth.

PETE SLAIBY, SHELL ALASKA, V.P.: We will be drilling these wells like they are the most complex, most difficult wells we've drilled in company history.

MARQUEZ: The plan to sink two exploration wells into Arctic waters. One in the Beaufort Sea, the other in the Chukchi. The wells won't bring up oil, but a design to confirm what Shell believes is down there, at least 26 billion barrels of black gold, enough to supply 10 percent of America's energy needs.

ROB REISS, AUTHOR, "THE ESKIMO AND THE OIL MAN": If Shell really hits something this summer, then I think things will heat up more.

MARQUEZ (on camera): It's going to be a gold rush for oil?

REISS: And it will be an undersea gold rush for oil.

MARQUEZ (voice-over): But some of the native people who live here, the Inuit Eskimos, fear if n the oil starts to flow, their way of life could be threatened.

ABAGAIL NASHUPUQ, POINT HOPE ALASKA RESIDENT: Our subsistence for the winter, it all comes from the ocean, the fish and the whale. It's going to ruin our ocean.

MARQUEZ: Abagail Nashupuq has lived in this tiny Eskimo community of Point Hope her entire life. She's doing what she's done for years. Preparing a seal skin to be made into winter boots or mutlooks as they call them here.

NASHUPUQ: When you're 79 years old, you don't look like a young lady, but you have to keep working on these skins.

MARQUEZ: She, like everyone else here, uses every bit of the animal. Same goes for walruses and especially whales. The people here still get by mostly like they've done for thousands of years, surviving the brutal winter by hunting whales and other sea animals during the short, but intense, summer.

The winter here, a much different story. The winds can blow at hurricane strength. The ice can move like a freight train, weighing a million tons -- an unforgiving and rapidly changing climate.

(on camera): This is the point of Point Hope. It separates the Bering Sea there from the Chukchi Sea there, about 90 miles that way, that's where Shell hopes to drill this summer.

But if you look out this way towards the Bering Sea, we've just been here for a few minutes. And in that short time, the weather has changed enormously.

(voice-over): It's a story we've heard before -- tradition and culture threatened by change, modern life and necessity. This time, the stakes couldn't be higher. Oil that could help power an American boom pitted against the way of life for people living on the edge.

(END VIDEOTAPE)

BURNETT: And Miguel is here with me tonight. So, Shell is saying, look, go ahead and do this. It's been -- it's tens of thousands of jobs. It's a lot of money for the local population.

Are people, great, let's go, or no?

MARQUEZ: Well, some of them are. Barrow -- the borough of Barrow, big area in northwestern slope of Alaska, and Barrow itself, that town, population about 10,000. They're all for it. There's eight towns in this borough. Some of them are for it.

Point Hope, though, really holds on to its culture. It's very ,very concerned about what will happen if a spill happens and those tide brings the oil back to their shores.

BURNETT: Fifty-five thousand to 100,00 jobs, Shell says. Is that --

(CROSSTALK)

MARQUEZ: If what is down there what they think is down there, it would be massive. And it wouldn't just be Shell jobs. It would be a lot of other companies rushing in there as well.

BURNETT: All right. So, now, this is part of a major series you worked on. You spent a lot of time up there looking into the story. So, what are some other stories you have out there?

MARQUEZ: We're going to look at the technology that Shell is using. We're going to look at the impact on the ecosystem. This is a very harsh place but incredibly fragile at the same time. We're going to look at the impact on the Eskimos.

Essentially, the big thing is how if Shell finds what they think is down there, how are they going to get it out?

BURNETT: Yes.

MARQUEZ: It's going to be an unbelievable 10 or 20 years.

The other thing that's amazing is they're in for $4.5 billion now. Before they even withdraw a drop of oil, they will have spent between $10 billion and $20 billion.

BURNETT: That's incredible.

MARQUEZ: Incredible.

BURNETT: Wow, it really is. All right. Well, thanks very much to Miguel. We're going to have that special series all next week OUTFRONT.

And now, new developments tonight in the case against George Zimmerman. Defense attorney Mark O'Mara has filed a motion to disqualify the judge. Kenneth Lester is his name and Mark O'Mara says he's biased against Zimmerman. He said this after he made what O'Mara is called gratuitous and disparaging remarks in his bail order last week.

Including and I quote, "Under any definition, the defendant has flouted the system." And, I quote again, "The defendant has tried to manipulate the system when he has been presented the opportunity to do so." Those and other remarks are what the defense says will prevent Zimmerman from getting a fair trial.

CNN legal analyst Mark NeJame is OUTFRONT.

Mark, do those statements, flouted the system and manipulating the system, do you agree with Mark O'Mara, that those are gratuitous and disparaging? Or are those fair ways to describe someone who when asked if he had money said no and he really did have money?

MARK NEJAME, CNN LEGAL ANALYST: I think it's a fair comment from a court who's evaluating the evidence, one can agree or disagree. But you can't throw a judge off every time you disagree with him because basically you'd have half the judges thrown off at any given time, because somebody typically is going to be on the other side.

The fact is, is that, you know, the question will be did the judge go too far to suggest that he's in fact, might be biased? I don't think the judge is biased at all.

However, in order for the defense to claim that, down the line in the event there's an appeal, you have to first raise it. So, if it's not raised in this forum, then it's forever waived. So, I think the defense has no option if they truly believe in a good faith believe what they've alleged, and I believe that's their position --

BURNETT: And, Mark, you know this judge personally, right?

NEJAME: I know the judge. I know the defense lawyer. Yes, I know them all, for a long time.

BURNETT: So you believe when you look at this person, Mr. Lester, his integrity, the way he would handle this, you think he's fair?

NEJAME: I think he's without re reproach. I think he did go pretty far in that order. And I think that's the basis of the defense motion, that they're claiming that the judge went further than he needed to go. He could have simply granted the bond and moved on. But the judge interpreted a lot of things. Basically, he said that he believed Zimmerman was going to flee because of the dishonesty he associated with the moneys that were obviously in a fund that were not disclosed to the court.

So the judge took some leaps there. But I think that's within his right to do so.

BURNETT: So who decides? So, you know, Mark O'Mara makes this motion. But who decides whether the judge stays or goes?

NEJAME: The judge.

BURNETT: The judge?

NEJAME: There's already one recuse, you may remember that Recksiedler, the wife my law partner, first got off the case.

BURNETT: Yes.

NEJAME: You basically get one free bite of the apple. The second one, the judge basically has to agree with the motion. And if the judge doesn't agree, then the remedy for the defense is to take it to an appellate court on a petition for a writ of prohibition and go to the appellate court, which here is in Daytona. My partner Eric Barker assisted me on this to get this ready for you all.

But basically, they will make a determination whether the judge is -- they'll be looking at the facts to see if the judge in fact shows bias.

BURNETT: Right./

NEJAME: There's an assumption of correctness in the judge's order. So, it's hard to overturn. BURNETT: So, let's just -- OK, sorry. So, let's just say the judge remains on this case. And now the -- George Zimmerman's attorney is asked to be removed. Doesn't this put George Zimmerman's entire case, entire trial, put him at a disadvantage? The judge, if he doesn't already dislike him would, even if he didn't want to be biased, he obviously would have reason to be, even if kind of in the back of his mind --

NEJAME: You know, I don't think so. You know, we all -- we can fight against each other. We can be in trial against each other for a week and we can be duking it out and then go out to dinner with each other. It's just the way you're set up when you do this. And none of this is personal.

So I didn't hear any -- I didn't see any personal attacks on the judge. I simply said what I heard and what I read is basically that there was a suggestion that in light of the judge's ruling that they believe there's bias.

They filed their motion. It wasn't a personal attack. It was a legal motion that suggested that the judge was biased.

But no, I don't think they'll be anything lingering. This judge I think calls it down the middle. He's done that. He's known for that for his entire career.

BURNETT: Right.

NEJAME: And I don't think it's going to impact it one way or another.

BURNETT: Hey, Mark. Thank you.

NEJAME: My pleasure.

BURNETT: And OUTFRONT next, immigration officials make a move that seems to defy both the Obama administration and Marco Rubio. So what's going on here?

And this one -- if you're superstitious about black cats or Friday the 13th, you could be losing money.

(COMMERCIAL BREAK)

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

And we begin tonight in Syria, where American officials tell CNN they believe Syria has been moving some chemical weapons stockpiles in the past few days. The news comes just a day after reports of a new massacre in central Syria which opposition leaders say make yesterday the bloodiest day of fighting since the uprising began.

Mohammed Jamjoom is following the story and I asked him how Syrians are reacting.

(BEGIN VIDEO CLIP)

MOHAMMED JAMJOOM, CNN CORRESPONDENT: Erin, opposition activists are blaming the Syrian government for what they're calling a massacre that happened in the village to Tremseh in Hama province on Thursday. They say that hundreds of people were killed in that village on Thursday, that it was the deadliest single day in Syria since the uprising began 16 months ago.

Now, on Friday, outrage in Syria wasn't just being directed towards the Syrian government. We heard reports of many demonstrations happening across the country and in many of those demonstration, activists were calling for the removal of Kofi Annan as the special envoy to Syria.

They are outraged. They say that neither the U.N. observer mission, nor Kofi Annan, or his six points peace plan have been able to effectively do anything to stop the bloodshed, the violence and the continued crackdown that's been going on in Syria -- Erin.

(END VIDEO CLIP)

BURNETT: Thanks, Mohammed Jamjoom.

Now Beijing where China announced its economy is only growing at 7.6 percent. Now, you may say, well, that's really, really fast. Well, it is. But he problem is, it's not for China. And right now, as goes China goes the world.

Gordon Chang, author of "The Coming Collapse of China", tells me the growth is even worse than the official number indicates.

Stan Grant is in Beijing and he tells us why China's bad news is so bad for us.

(BEGIN VIDEO CLIP)

STAN GRANT, CNN SENIOR INTERNATIONAL CORRESPONDENT: Erin, the lowest growth in three years. This is not just going to be a worry for China. This is going to send a bit of a shiver through the rest of the world as well. We've seen the U.S., and Europe, other big markets affected by the global financial crisis. China has remained one of the real bright spots, the real engine of growth for the world economy.

Now, there are signs China's growth engines are starting to peter out. It's no longer exporting as much. It can't continue to rely on endless investment. Somehow, they have to get people here spending. They have to find ways to boost consumption.

And all of this happening as it tries to engineer a steady transition of power at the top of the communist party. There are real worries here. Not just for the economy but for social stability as well -- Erin.

(END VIDEO CLIP)

BURNETT: And thanks to Stan.

And now, let's check in with Soledad. She's on "A.C. 360" tonight.

Hey, Soledad.

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

Breaking news ahead on "360" tonight. In a lengthy interview on CNN, Governor Mitt Romney fires back about when he left Bain Capital, alleging the Obama campaign is using attack politics to divert attention from the issues, saying it's beneath the president's dignity. Interestingly, Governor Romney was asked whether he swift boated, referring to those attacks back on 2004 presidential campaign on John Kerry's military record. Romney sidestepped the question this evening. We're going to talk with Jim Acosta, Gloria Borger, Paul Begala, Ari Fleischer.

Also ahead, the incredible courage of a teenager who survived an alligator attack.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I got a breath of air and he drug me back down, he done a death roll and broke all the bones in my arm. So then I took my feet and put it on his mouth to try and break my arm off because I knew it's either going to be the arm or my life.

(END VIDEO CLIP)

O'BRIEN: More of those terrifying moments underwater and how his quick thinking once he got back on shore was able to save his life.

Those stories and the slaughter in Syria, likely the deadliest day since the uprising began. All that ahead right at the top of the hour -- Erin.

BURNETT: All right, Soledad, see you in just a few moments.

And now our fifth story OUTFRONT: Two sisters in Miami facing possible deportation tonight after the Department of Homeland Security wants their case thrown out of court.

Daniela and Diana Pelaez came to the U.S. as toddlers and have been living in America ever since. Daniela became the face of the DREAM Act back in March when the high school valedictorian was almost deported back to her native Colombia.

The Florida Senator Marco Rubio intervened on her behalf. And President Obama, of course, announced last month that he wouldn't deport high school graduates who are in the country illegally.

But Daniela and her sister earned a two-year reprieve from deportation. Now it appears the Department of Homeland Security wants their appeal to stay in the country thrown out.

Daniela and her attorney Nera Shefer are OUTFRONT tonight.

Appreciate both of you taking the time.

Daniela, let me start with you. The letter from Homeland Security -- obviously I have here, the first page of it, talking about you and your sister Diana. The headline "In Removal Proceedings."

What was your reaction when you got this? Did you even understand what it meant at first?

DANIELA PELAEZ, CAME TO THE U.S. AT AGE 4: At first I had no idea what it meant. And then I had coincidentally been with my lawyer at the same time and she was able to explain to me how they were in opposition to our appeal.

BURNETT: And so explain to me, Nera, if you could "opposition to the appeal." I mean, I've been trying to put this -- I mean, does this mean simply the DHS would deport Daniela and Diana?

NERA SHEFER, IMMIGRATION ATTORNEY FOR DANIELA PELAEZ: Well, not immediately. The two-year reprieve that they won from ICE, which is another agency of the Department of Homeland Security, stands, it remains intact. So, they still have here until March 2014. The problem is that the Department of Homeland Security, through its chief counsel locally in Miami, moved to request to the Board of Immigration Appeals that their appeal be dismissed.

Basically, they're protesting the deportation order entered by the immigration judge remains, that they affirm the decision of the immigration judge. And they oppose to the relief.

So that's where we stand -- meaning that in two years from now, when the reprieve expires, they will have to leave.

BURNETT: OK. So this -- basically what this means is in two years, you're done. You got this and you're going to have to leave.

All right. So let me just give some context to viewers, because obviously, this does fly in the face of the president's highly public defense of people exactly like Daniela. And here's what the president had to say.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Effective immediately, the Department of Homeland Security is taking steps to lift the shadow of deportation from these young people. Over the next few months, eligible individuals who do not present a risk to national security or public safety will be able to request temporary relief from deportation proceedings.

(END VDIEO CLIP)

BURNETT: Now, Daniela, obviously, you have temporary relief, just those two years. But do you feel the president is being hypocritical, saying that while his DHS sends you a letter saying as soon as your two years are over, you're done, you're out?

PELAEZ: Exactly. That's the root of my frustration and my anger. Because here you have the president, who is your boss, telling you not to -- not to interfere in any way with the legal proceedings of kids like myself, and yet the DHS local office did something completely opposite of what your boss just been saying.

BURNETT: Right. So, the question is, does he really mean what he's saying?

Near, let me bring in David Leopold. He's an immigration attorney. We called him because we're trying to understand the situation. David was the former president of the American Immigration Lawyer Association.

So, David, we called DHS. They refused to comment on Daniela's case, saying go call Immigration and Customs, saying, look, there's been no action taken. So, they sort of are trying to punt on the whole situation.

But explain to me this. How can DHS send this letter, given what the president has said?

DAVID LEOPOLD, FMR. PRESIDENT, AMERICAN IMMIGRATION LAWYERS ASSOCIATION: Erin, what they've done is they've filed a brief.

Let me tell you something, Daniela is very lucky. She's an outstanding woman from everything I can see. And she's exactly the type of person that the president is protecting with the policy that he announced last month.

I'm not sure I understand what she's complaining about and what her attorney's upset about. There is nothing that I've seen, nothing that I've read, which indicates that she's going to be out of the country in two years. Quite to the contrary, she's the first one. She got granted the reprieve in March. She's the first one probably in the country to get this.

So they ought to be applauding President Obama and this great initiative.

BURNETT: All right, Nera, Nera, please respond.

SHEFER: Of course, of course. And I disagree.

Basically what's happening here is there's contradictions between what the president said and what the agencies of the Department of Homeland Security are doing. Clearly, the chief counsel in Miami is going against what the president said. They're basically saying in that brief, we are opposing to any relief that these sisters are seeking.

Board of appeals don't even look at --

LEOPOLD: Erin, that's absolutely not true. That's absolutely not true. SHEFER: Oh, yes it is, you haven't read the brief.

LEOPOLD: With all due respect, with all due respect, what's going on here is you've got a legal position. That's not going to change. You know, a lot of folks say the president needs to follow the law. And the president is following the law. The government is following the law.

SHEFER: We, I'm sorry --

LEOPOLD: Wait a minute --

(CROSSTALK)

BURNETT: -- saying I'm not going to kick people out of the country if they're good citizens and graduate from high school. Now they're saying in two years she has to leave.

LEOPOLD: They're not saying that though.

SHEFER: That's exactly the problem, Erin.

LEOPOLD: They're not saying that.

SHEFER: Because this say policy and it's not a law. It's not been implemented correctly.

LEOPOLD: You know what we need, Erin --

SHEFER: There is a broken chain of communication in the department of homeland security, because they have to implement the policy the way the president is saying.

BURNETT: OK.

SHEFER: Prosecutory discretion--

LEOPOLD: Actually, actually there's not a broken chain of communication. There's a good chain of communication.

SHEFER: That's your opinion.

LEOPOLD: She got deferred action two months ago. Let me finish, first. She got deferred action two months ago. She's in a great position.

She's going to go to Dartmouth in the fall. She's not going to get deported in two years.

And let me tell you something -- I think what we need in this country right now is we need community leadership. We need people to explain what this policy really is. We don't need fear-mongering. And that's what's going on here tonight unfortunately.

Is outstanding as Daniela is, she's not being well served by doing this. And I think what we need to do is explain to our communities exactly what the president has done.

This is a bold initiative. A lot of young folks are going to benefit from this. The best and the brightest folks just like Daniela.

BURNETT: OK.

LEOPOLD: And I think the president ought to be applauded tonight.

SHEFER: I would like to add something.

BURNETT: All right, Nera, you can add and then I want to ask something to Daniela.

SHEFER: Yes. The law doesn't say that the Department of Homeland Security has to file a brief, requesting the board of appeals to affirm the decision of the immigration judge. They could have chosen to let her fight for her case and they did not.

BURNETT: And, Daniela, you're still heading to college in the fall, right?

PELAEZ: Yes, as of now, yes.

LEOPOLD: She'll be in college in the fall. She's going to have a great future.

BURNETT: I appreciate --

SHEFER: Yes, and then after two years, she's going to have to go back.

LEOPOLD: Not the case.

BURNETT: Thanks to all three of you. We have to leave it here. Everyone have a wonderful weekend.