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ERIN BURNETT OUTFRONT

Mitt Romney's Taxes; Oil Gamble?; African al Qaeda; Interview with Senator Robert Menendez

Aired July 16, 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, Mitt Romney's taxes. Both Republicans and Democrats are calling him to release them. So why hasn't he? I have a theory.

And a massive gamble for oil in the Arctic, do all the costs of drilling add up?

Plus new developments in the search for two girls who disappeared after leaving their grandmother's home -- let's go OUTFRONT.

I'm Erin Burnett and OUTFRONT tonight, it's time, Mitt, time to put them on the table. We all know what it is, your taxes. Here are the Romneys' tax returns. This is 2010 and it's very thick as you can see. All right here is 2010. This is estimated as you can see, my pink stickies (ph) are you know they're yellowed from the sun because we've had them out labeled ready to go for a long time. We're waiting for the other years.

And aside from killing trees in the case of Mitt Romney, there really isn't a need to hold back on releasing more. And I'm going to explain why in just a moment. But first today Mitt Romney made the case for non-disclosure again on FOX.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: John McCain ran for president and released two years of tax returns. John Kerry ran for president, you know his wife who has hundreds of millions of dollars, she never released her tax returns. Somehow this wasn't an issue.

(END VIDEO CLIP)

BURNETT: It is an issue for Mitt Romney. It is not his wife's money. And unlike John McCain, Romney's career has been in business, not politics. Mitt Romney is running on his business expertise. His tax returns are a relevant window in to his he conducts his business affairs. If he refuses to release them, it is because one, he had a lot more money in tax shelters in prior years than he does how.

Two, he did something shady. Or, three, he's stupid. Now Mitt Romney is not a stupid man. And if he did something shady, well he did it because if he did the IRS would already have found it. So let's assume it's number one. He had a lot of tax shelters, took advantage of every loophole known to man in the 72,536 page IRS tax code. That's fair and square. That is why the tax code is so long so people can take advantage of it. But here's our decent proposal. Release the returns. If there's a lot of tax shelters and some frankly incredibly low tax rates, significantly lower say than your 13.9 percent rate in 2010, Mitt, then say this. My tax rates were too low. I don't believe that passively invested money should be taxed lower than income other people earn by working.

I benefited from low rates on investment. That's not great policy and I'm going to change it. On day one -- by the way, three words everybody if you see his ad -- you know Mitt Romney likes to say on day one. I will end the carried interest loophole that personally saved me tens of millions of dollars at least. After all Americans know that this country needs major tax reform. Even tea partiers like Rand Paul and Mike Lee have said on this show that they would close some of the loopholes that benefit the wealthiest Americans.

And Mitt, you could use this as a chance to show how generous you are. Get ready for this everybody. It is true that Mitt Romney gave $7 million to charity in the two years that I held up. That's 2010 and 2011. Now that's 16.4 percent of his income. It is more than he paid in federal taxes. Now, keep this screen up because I want to show you this.

It's not like he sat there and hoarded the money he didn't pay to Uncle Sam. He gave enough away to make his rate well 31 percent. Greater than the 30 percent that President Barack Obama says should be the minimum rate for wealthy Americans. So if you look at it that way, Mitt's taxes seem to add up just fine. He could make the argument that's why he should seize the narrative. It isn't caving to Democrats to release them. Not only have many in his own party called on him to do it, which you'll hear in a moment, it also lets him take control of the conversation.

After all what's wrong with being known as one of the most generous people in the country? Joining us now is John Avlon, Michael Waldman, former adviser, speechwriter for Bill Clinton and Hogan Gidley Republican strategist. Great to see all of you and John, let me start with our "Strike Team" question, independent political analysts. We polled them and said is Mitt Romney hurting himself politically by only releasing his two years of tax returns. First you know the "Strike Team" poll, everybody 100 percent. You obviously voted. Why so certain?

JOHN AVLON, CNN CONTRIBUTOR: This isn't subtle. I mean the reality is left, right or center, unless you're on the Romney campaign payroll, I think you see that this is a bad decision to stonewall this. Because either you're going to keep on taking hits because it doesn't pass the common sense smell test or you're going to kill people with kindness, put it all out there and use it to pivot, to make a positive argument. Playing offense always beats playing defense. The fact is this doesn't add up for the Romney campaign politically at all.

BURNETT: All right, I promised to make the point here that this isn't just Democrats calling for this, so even Independents. It is Republicans and conservative. Take a listen.

(BEGIN VIDEO CLIP)

WILLIAM KRISTOL, EDITOR, THE WEEKLY STANDARD: He should release the tax returns tomorrow. It's crazy. You've got to release six, eight, 10 years of back tax returns. Take the hit for a day or two.

UNIDENTIFIED MALE: First of all there's obviously something there because if there was nothing there, he would say have at it, so there is obviously something there that compromises what he said in the past about something, so that's -- but I think the bigger thing is it's arrogance.

UNIDENTIFIED MALE: If something is going to come out, get it out in a hurry.

(END VIDEO CLIP)

BURNETT: Hogan, what is he waiting for?

HOGAN GIDLEY, FMR. COMMUNICATIONS DIR. FOR RICK SANTORUM: That's a great question. Obviously you need to get out in front of these things early if there's something wrong with those tax returns as you mentioned in your open there, but I mean this is the message war, Erin. I mean obviously President Obama sees an opening here. He's taken advantage of it and he's hammering Mitt Romney on his Bain holdings. He is hammering Mitt Romney on not releasing his tax returns.

And focus groups, polling shows that's what he should do. He's obviously been very successful at it because we've been talking about this now for about a week. So clearly the Mitt Romney campaign is on its heels. Conversely for some reason Mitt Romney says you know what I'm hot going to listen to what the president wants and I'm going to hammer him on the economy. The problem is the voice, only voice being heard and being actually paid attention to right now seems to be the president. And Mitt Romney needs to hit back. Republicans want him to hit back and they want him to hit back with a pair of brass knuckles. I mean they want him to get after it and get after it hard and mean and it looks like right now he hasn't been doing that.

BURNETT: Michael Waldman, I mean why can't he come out? I mean I was you know just giving my -- the way I would handle it. But why not say look when you add up my charity and my federal taxes, it's more than President Barack Obama would have people pay. Now I may be wrong and maybe that's what the secret is in his past, but I highly doubt it. I believe Mitt Romney has been very generous to charity all the way through.

MICHAEL WALDMAN, BRENNAN CENTER FOR JUSTICE, NYU: The whole thing is rather weird because they had to know this was going to come up. They knew this one year ago, five years ago.

BURNETT: Right, he was running in 2008.

WALDMAN: Ten years ago -- BURNETT: He had to have been ready then to release a couple of years.

WALDMAN: What -- you have to assume this is not just some kind of rational cusp (ph) benefit analysis, but something where Mitt Romney himself as a personal matter feels his you know privacy as a wealthy person is being violated or something like that. And there's a reason in a way that we don't often elect people from this kind of background as president.

When Nelson Rockefeller was nominated to be the vice president, he went through an examination of his finances by Congress that was unprecedented. They looked at six years of his tax returns and that was because of this sort of special nature of nominating for vice president a Rockefeller. I think it would be hard for Romney even assuming of course I assume that everything was legal, but it's very much what's wrong with the tax code. It's not progressive. There are things available to some people that aren't available to other people.

BURNETT: Right. Which John brings me to the other problem, he's been so adamant I wouldn't change for example the rules on carried interest which is how he had a very low tax rate on money that was investment income essentially and even worse than that. He'd have to come out and say I would change the law so that people can't pay those low rates. He'd have to flip-flop.

AVLON: Well but or evolve as he has said on many other issues in the past --

BURNETT: Or evolve -- there's nothing wrong with evolving --

AVLON: No especially --

(CROSSTALK)

AVLON: Especially if it's counter to your self interests on the surface. That's what will make Independent voters take another look. If you say you know what, I did pay a lower rate and I think it's one more argument frankly why we need radical tax simplification in this country --

BURNETT: Right.

AVLON: President Obama campaigned on it. He didn't do it. I will.

BURNETT: And Hogan, one other thing. This is fun (ph). Brittany Harris (ph), our producer, looked at the Google trends today, how many people are looking for Romney tax returns over the past 10 days. It is pretty stunning. I mean it has spiked. I mean is this the kind of thing that when you look at it from a political operative point of view, you say look you just got to do something, you know you got to make this go away? The spike won't drop on its own?

GIDLEY: Right. Look, I mean he's going to get attacked. It's a political calculation. He's going to get attacked either "A" for not releasing his tax returns or "B" attacked for what's in them. Obviously they've made a choice that they're going to wait and just take the attacks for not releasing them. I think he needs to go ahead and do it obviously, but look I mean this is an issue that has plagued him for some time. Our campaign, the Rick Santorum campaign, we actually upped the ante and tried to release a lot more tax returns of Mitt Romney to try to draw him out so we could attack him on this as well.

So he didn't do it then. But this is a different game. This is the general election. The lights are brighter. The stakes are higher. And for some reason he doesn't want to release them and right now we've got to -- we've got to live with that as Republicans and defend him and hopefully it will come out in our favor in the end.

BURNETT: Quick final word.

WALDMAN: Mitt Romney wants to make the election a referendum on the state of the economy. Barack Obama wants to make the election a referendum on who is going to benefit from the way we fix the economy. This whole issue is very hard for Romney to make a winner for him.

BURNETT: Well (INAUDIBLE) all I'm going to say everybody is it has got to add up to this. The guy was running for president in 2008. (INAUDIBLE) he was ready for two years of tax returns then and that he was running for four years, so he could do at least six. Even if he did it something bad it's got to be more than six years ago. I think that adds up.

Still OUTFRONT a massive gamble for oil in the Arctic. We went OUTFRONT to find out if the cost of that drilling adds up.

And an international banking scandal could be spreading to this country. A criminal case could be on the horizon.

And new sex abuse accusations tonight against Jerry Sandusky and they stand out from the prior ones.

(COMMERCIAL BREAK)

BURNETT: Our second story OUTFRONT, a massive gamble for oil in the Arctic off to a bad start. One of Shell's oil rigs headed up to Alaska's North Slope broke free of its moorings over the weekend. It could have grounded. Now at this point, it doesn't appear that there is damage. They're still investigating.

But it raises a red flag for environmentalists. If Shell can't manage the ships in a protected port, how could they do it on an open sea where conditions are expected to be far, far worse. This is the Arctic, 20-foot waves are probably the least of its problems. Tonight Miguel Marquez looks at the other side of the Arctic gamble, not the billions that Shell has invested, but what happens to the environment if something does go terribly wrong.

(BEGIN VIDEOTAPE)

MIGUEL MARQUEZ, CNN CORRESPONDENT (voice-over): For millions of nesting birds, for seals, walruses, whales and countless sea animals, the Arctic is the cradle of life. A short but intense summer with 24- hour sunshine. In the winter, another world. A place of subzero temperatures, ferocious winds and a frozen landscape. Yet this harsh but delicate place is changing. Look at this from NASA ice covering the North Pole in 1980 compared to 2012. The North Pole is melting, opening new opportunities.

(on camera): I am standing on an iceberg in the middle of the Arctic. It must be several hundred tons and what's amazing is I can feel the entire structure move as the water comes underneath it. The Nuevo (ph) Eskimos have more than 100 words to describe ice and they had it for a reason. Ice, not only now in the summer, but certainly in the winter, is a way of life.

(voice-over): That way of life headed for change. The Arctic now open for summer shipping and some predictions say by mid century, shipping year-round will be common place. Enter Shell and its plan to prospect for oil offshore here. If they find what they think is down there, it will spark a race to drill increasing the possibility of a spill.

UNIDENTIFIED FEMALE: There is absolutely no world experience that tells us that we could address and clean up a spill in the unforgiving waters in the Arctic.

MARQUEZ: In the Gulf's Deepwater Horizon only about a third of the oil was physically recovered, burned, or dispersed in Alaska's Exxon Valdez disaster. Less than 10 percent of the oil was recovered and cleaning up a spill in this hostile place would be a very tall order. The plan in shallow waters, less than 200 feet, drilling wells up to 8,000 feet below the seabed, then lowering sophisticated equipment into the holes to determine just how much oil is down there. No plans to actually bring oil up.

(on camera): You think there's a gold mine under the Arctic?

UNIDENTIFIED MALE: We're enthused about what we see, but you know our enthusiasm is tempered until we drill.

MARQUEZ (voice-over): To drill here Shell has equipped itself with an armada (ph) of oil clean up collection and processing ships, planes and helicopters just in case of a spill. The company has also worked with Eskimo clans. Edward Etta (ph) is former mayor of (INAUDIBLE). He ran on the slogan "hell no" to offshore drilling, but then he took office.

UNIDENTIFIED MALE: In my heart of hearts today, I still oppose offshore. But during my term, I realized one important thing. The responsibility of a mayor's.

MARQUEZ: Responsibility to compromise for jobs, tax revenues, even cleaning the streets. Bob Reiss, author of "The Eskimo and the Oil Man", about the decision to drill offshore in the Arctic says the plan is all about compromise from Biro (ph) all the way to the White House. BOB REISS, AUTHOR, "THE ESKIMO AND THE OIL MAN": Compromise means you don't let people drill in some places and you do let them drill in other places. And I think that that's what the president's done here and the Department of Interior has been pretty thorough in going over Shell's plan.

MARQUEZ: But Reiss admits no matter how stringent the rules and oversight from Washington, at the end of the day, no one can legislate perfection.

(END VIDEOTAPE)

BURNETT: Miguel is here with me now. So Miguel, when we talk about this oil rig that you know broke loose of its mooring so close to shore, has that changed Shell's plans? And then you talked about it's going to cost them $20 billion --

MARQUEZ: Yes. No, it hasn't. They put underwater vehicles down there to see if there was any damage to the hull. They said that there are not. They're going to have divers come in this Friday to check out the hull, as well, just to make doubly sure that it's fine. But they intend to full steam ahead. First week of August, Shell expects to be drilling there if they get all of their permits approved by then.

BURNETT: So you know I saw those wildlife pictures that you were showing you know and you think about the awful pictures we also remember from the "Exxon Valdez" and then of course there was BP and the worst oil spill ever now in the U.S. of course with the Macondo well. What is Shell's contingency plan for what they say something you can't -- you can't 100 percent --

MARQUEZ: You can't, but they have -- look, I've looked at a lot of these things and I've read a heck of a lot about this last several weeks and they have gone to enormous lengths. They have 15 ships going up there with these two rigs that are dedicated solely to the collection and processing of oil. They have planes and helicopters that can spray dispersants. If worse comes to worse and the oil is out there in the open sea, they also they can burn it off much more readily in the Arctic as well because it hangs together in that cold water, so they have a lot of plans in place. They have a lot of gear in place. The one big question is whether it will be tested.

BURNETT: All right. Well Miguel thank you very much. Miguel of course is doing an extended series for us here on oil in the Arctic OUTFRONT. You're going to see the next installment of his special report tomorrow night, "Cold Wars, "The Fight for Arctic Oil" right here OUTFRONT.

Ahead OUTFRONT tonight, what U.S. Special Forces are doing to stop the threat of al Qaeda, which is now rising again.

And seven minutes of terror. It sounds like a horror movie, but it's actually NASA's latest PR push.

(COMMERCIAL BREAK) BURNETT: Our third story OUTFRONT, U.S. Special Forces, civil war, and a rising Islamist insurgency which includes al Qaeda. No, it's not Afghanistan. This is the situation in the African nation of Mali and it could be America's next big problem. The Obama administration is tight lipped about U.S. involvement in Mali, but three U.S. Army commandos were killed in a mysterious car crash in Mali's capital this spring and there are reports of a growing CIA presence nearby.

RAND Political Scientist Seth Jones is OutFront tonight. Seth good to see you and appreciate your taking the time. How substantial is al Qaeda's foothold at this point?

SETH JONES, RAND SENIOR POLITICAL SCIENTIST: Well I would say al Qaeda's foothold is substantial in the sense that it is using Mali as a sanctuary. It's involved in training forces both in Mali and others in the region including Boko Hiram from Nigeria, training them. It provides explosive devices, training them in counterterrorism techniques. So it is a rising concern and should be a rising concern for not just the U.S., but a range of European governments.

BURNETT: And Seth, you know we've been hearing so much about al Qaeda being on the verge of strategic defeat or you know really vanquished, things like the killing of Osama bin Laden being a real part of that and some of those successful killings in Yemen. Do you think that this changes that argument?

JONES: Well I think it -- there's no question it changes this argument. I mean what we've seen across aspects of North Africa and then the Horn is weakening government. That's exactly what's happened in Mali. Al Qaeda has tried to push into the governance vacuum and establish some areas of sanctuary that it's trying to expand using local allies. In the case of Mali it is using organizations like (INAUDIBLE) as a local group to establish broader sanctuary.

BURNETT: Right. And so President Obama has called for increased use of Special Forces as part of his strategy. You know David Sanger had done that -- you know his entire book on the president trying to have a light footprint what he wants foreign policy in this country to be. But there was this report of the three commandos -- "Washington Post" reported on it -- who were found dead. They were in a car with three supposedly Moroccan prostitutes in Mali. Does that add up to you?

JONES: Well U.S. Special Operations Forces have been involved in training Malian forces over the last decade and more. Training them in search and seizure, counter terrorist operations, intelligence surveillance and recognizance. So the idea that U.S. Special Operations and other units in an area that has an al Qaeda foothold would be involved in training is certainly probable.

BURNETT: Are there U.S. Special Operations forces and commandos in there now?

JONES: Well, I would say the first and most important aspect in Mali for both U.S. Special Operations and intelligence units is understanding the picture in Mali and that means collection of intelligence. How big is the al Qaeda footprint? What are they doing? Are they planning overseas attacks from there? Are they planning regional attacks?

The second issue on training, it's unclear how much training is going on by the U.S., but I would say it is an identified hot spot. So I think the subject of question now at the White House and in Special Operations command is what's the near term strategy for training security forces in Mali.

BURNETT: All right. Well Seth, thanks very much. Appreciate your taking the time tonight.

JONES: Thanks Erin.

BURNETT: And on Thursday, we go OUTFRONT to Africa, our first stop will be Rwanda where I'll have an exclusive interview with former president Bill Clinton in a country he calls his personal failure. That is Thursday night.

And OUTFRONT next calls for criminal charges over an international banking scandal and new developments in the search for two missing girls in Iowa.

(COMMERCIAL BREAK)

BURNETT: We start the second half of our show with stories that we care about, where we focus on our reporting from the frontlines.

Well, the FDA has approved a drug for the prevention of HIV/AIDS. The drug is called Truvada. It's for adults who don't have HIV but are at risk of getting the disease. Truvada has been used for those already infected to help control it. Doctors warn that the drug should be taken alone but in combination with other things, certain safe sex practices, for example.

The AIDS Healthcare Foundation calls the FDA's approval reckless, saying it's going to step back years of HIV prevention effort. And one reason the group is so upset is that while the FDA recommends a negative HIV test before someone begins taking the drug, the agency doesn't actually require it.

Well, Secretary of State Hillary Clinton is visiting Israel to discuss the new leadership in Egypt as well as problems with Iran. Another topic will be Syria. She sat down with CNN's Elise Labott and told her why Bashar al Assad is still in power.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, SECRETARY OF STATE: As long as he has Iran in his corner, which he does, and as long as he has Russia uncertain about whether or not to side against him in anymore dramatic way than it already has, he feels like he can keep going. And that's the message we want to reverse.

(END VIDEO CLIP) BURNETT: The secretary also said she wants the rest of the world to put pressure on Russia so that the U.N. Security Council can impose tougher sanctions on the Syrian regime.

Well, Abu Dhabi has started exporting oil from a pipeline that bypasses the Strait of Hormuz. It's pretty incredible. It's worked on for a while and it's important because Iran, of course, has threatened to shut down that strait. Through which about 40 percent of the world's oil goes through.

The world Energy Information Administration says it's the world's most important oil checkpoint, 1.5 million barrels of oil a day go through it. That's a far cry from the 17 million barrels that go through the strait each day, but the pipeline provides the UAE with an out in the event the strait is closed.

And look, you got a 1.5 million here, 1.5 million there can really start to add up.

Well, Senate investigators believe HSBC failed to prevent billions of dollars worth of money transfers linked to drug cartels and terrorist groups. The Senate's permanent committee on investigation says that over the past decade, HSBC failed to review thousands of suspicious transactions, some of them involved Iran.

(BEGIN VIDEO CLIP)

SEN. CARL LEVIN (D), MICHIGAN: Two HSBC affiliates concealed thousands of transactions involving Iran. An outside audit found HSBC affiliates from 2001 to 2007 sent 25,000 Iranian transactions worth $19 billion through HBUS and other U.S. banks. Links to Iran were concealed in 85 percent of those transactions.

(END VIDEO CLIP)

BURNETT: In a statement, HSBC acknowledges that it sometimes failed to meet regulators standards and insists that it has stepped up its compliance efforts.

Well, it's been 347 days since America lost its top credit rating. What are we doing to get it back? Well, retail sales fell half a percent in June. Economists had hoped for an increase. Unfortunately, they got the third decline in a row. The last time a triple month decline happened was in late 2008. That was in the height of the financial crisis.

And now, our fourth story OUTFRONT: the global interest rate- rigging scandal has gained even more traction here in the United States. So far at least two states, New York and Connecticut, are looking into whether banks worked together to effect the LIBOR rate.

Now, let me hit pause for a quick second here because I think it's worth emphasizing how important LIBOR is. It is an interest rate at the core of our entire economy. It's really not wrong to say that if you can't trust LIBOR, you can't trust anything in banking. And that is because LIBOR is the interest rate to which credit cards, adjustable rate mortgages, student loans, even money companies borrow, any debt as interest rates fluctuates basically is based on LIBOR.

And LIBOR is sent by banks who report on a regular basis the rates that they're willing to lend to each other. So it's not based on the rates they actually lend to each other, but on the rates that they say they would. And that's the really crucial distinction, because it is in that say they would where they are able to manipulate the rate.

But given it's at the center of the world economy, the rate around which all of our lives to manipulate it would be terribly violating. But it has happened. And as the Justice Department reportedly build as criminal case, on the other side of the Atlantic, regulators told British lawmakers about the culture of corruption at one of the manipulating banks, Barclays.

(BEGIN VIDEO CLIP)

ADAIR TURNER, CHAIRMAN, FINANCIAL SERVICES AUTHORITY: We were beginning to think there was a cultural tendency to be always on one side, always to be pushing the limits.

(END VIDEO CLIP)

BURNETT: Banks pushing limits is not anything new. We've seen it again and again. Of course, you even had the loss at JPMorgan last week.

But Washington has tried to reform the banking system. Still, it has been 726 days since the financial reform bill called Dodd-Frank was signed into law. You may love that or you may hate it. But the fact is this. We still don't know what will be in all of the 848 pages.

So, yes, it passed and we still don't know what's in it. There are a lot of blanks still to be filled in because the lobbyists are still fighting over, you know, what number will go on what line. So far this year, they've spent about $16 million on lobbying. The biggest spenders according to OpenSecrets.org are Wells Fargo, JPMorgan, and Citigroup.

OUTFRONT tonight, New Jersey's Democratic Senator Robert Menendez one of 12 senators calling on the Justice Department to look into the LIBOR scandal.

Good to see you, Senator.

SEN. ROBERT MENENDEZ (D), NEW JERSEY: Good to be with you, Erin.

BURNETT: I tried to explain why this LIBOR scandal is so important, but obviously you feel it is, too. Do you think that there was manipulation by American banks?

MENENDEZ: Well, we don't know for sure, but we do know published reports have a list of over a dozen banks, two from the United States, that are supposedly under review by the Justice Department. And that's why, you know, I wanted to along with several of my other colleagues to urge Attorney General Holder to pursue this vigorously because LIBOR is at the very basis of our global economic system. And insofar as the effect on consumers, the effect on investors, the effect on pension fund, all of this is affected.

So from your mortgage that may be adjusted because LIBOR goes up, if you have an adjustable rate mortgage, to credit cards, to your money market funds, all of these are at the core of making decisions that affect our financial wellbeing.

So we need the Justice Department to pursue this vigorously.

BURNETT: Right. Of course, it makes complete sense. The one thing I want to ask you about this, of course, is that in the instances we'd seen LIBOR manipulation, at least in the case of Barclays, it was at the height of the financial crisis, they say they were under pressure from regulators to manipulate it. But my point is, they manipulated the lower. They wanted it to look like they landed a lower rate so that they look like they were a stronger bank.

So if anything, the manipulation that we've seen so far would have resulted in lower rates for mortgages, student loan, companies, everybody else. So I'm not saying that just justifies it, but it's kind of interesting, right? Actually, it ends up helping us.

MENENDEZ: Well, a couple of things about that, Erin. Number one is those rates got shifted because there were other times in which their traders at he's very banks wanted to move where LIBOR was in order to protect their investment positions. So sometimes it might have been lower to show that, in fact, there was safety and soundness or you could be secure with that institution. Other times it went up, and if you got caught when it went up in order to protect the trading positions of the very same banking institution, then you got hurt.

BURNETT: OK. Well, well-said.

So, one other question. A lot of people are skeptical. They say all right, this LIBOR manipulation, if it happened, it was widespread, it's clearly criminal and a big problem.

But then they say, but why have we not seen more prosecutions, whether it be the people at the top of Lehman Brothers or MF Global. No one's gone to jail.

MENENDEZ: Well, I think we should be actively pursuing prosecutions in any of those cases where we not only have civil procedures but criminal procedures. We need to make it very clear that you cannot manipulate the nation's financial system and do it with impunity, because that undercuts the very essence of everybody's wellbeing -- from pension funds that are making investments thinking that, you know, LIBOR is at a certain rate, to money market funds, to individuals as they're affected in their consumer interests, just the entire spectrum.

BURNETT: Yes.

MENENDEZ: So by prosecuting individuals when we could make a case criminally, in addition to the civil penalties, I'm seeking those criminal prosecutions from the government because I think that send as very clear message.

BURNETT: And one final question. Obviously, Barclays so far paying half a billion in fines. It's a British bank. They've admitted to manipulating LIBOR. It could be American banks.

But then there's HSBC also not an American bank came out today as we just reported. It could be Iran certainly was Mexican drug cartels launder money in and out of United States. It was numbers apparently that stood out like hockey sticks, let and right.

MENENDEZ: Yes.

BURNETT: So are we treating foreign banks more easily than American banks? Why is it that foreign banks keep coming up?

MENENDEZ: Well, it seems that the foreign banks, although many of those foreign banks are clearly operating here in the United States, as well. And I think in the particular case that you just spoke about a few minutes ago, that bank is the U.S. subsidiary or the U.S. bank of that foreign country.

The bottom line is, as someone who was a sponsor of the sanctions on the central bank of Iran, it makes me incredibly concerned because at the end of the day, our ability to stop terrorism, our ability in the case of Iran from seeking nuclear weapons, is dependent upon the financial institutions taking the reports and publicly making sure that they are following the law and can informing us so that he can with have flows of money that ultimately circumvent the sanctions and laws that we have pursued in order to stop either nuclear weapons or stop terrorism.

BURNETT: All right. Senator Menendez, thank you very much. Appreciate your time tonight.

And we go how to Iowa where the FBI is stepping up the search for two missing girls. The FBI flying in specially trained search dogs hoping that they lead officials to 8-year-old Elizabeth Collins and 10-year-old Lyric Cook. The cousins disappeared on Friday after they left their grandmother's house to ride bikes. Authorities found their bikes and a purse near a lake that is now being drained.

Dave Franzman with CNN affiliate KCRG has been covering the story from the beginning and he is OUTFRONT tonight.

Now, Dave, thanks for taking the time.

So in addition to bringing in the FBI dogs, they've also released a more recent photo from Lyric from just a few weeks ago. She was wearing glasses. Officers, obviously, I know are stopping cars where you are, vehicles and trucks.

What else are they doing? Where else are they looking for these girls?

DAVE FRANZMAN, KCRG REPORTER: Well, they're looking anyplace that they conceivably think there might be some clue to find.

Let's start with the lake first. We're here at Meyers Lake that you see find us here. And notice where the greenery is, the water just a few hours ago was up to the part that has the green growing plants there. And it has dropped that much.

The lake is draining away at the rate of about three inches an hour. And it's not a very deep lake, at least in most spots. They're thinking within two days they may have a good majority of it drained and that way they would be able to make absolutely sure that the two girls are not in the lake.

Now, we've spoken with firefighters and rescuers who say they really doubt it because they have used drag lines throughout the entire five-acre lake here and they're 99 percent sure there is nothing to find here.

But again, this is the area where the search began because this is where, as you mentioned, those bicycles, that purse, on the other side of the lake behind us here, that's where they were found. There's a trail behind there. That's where the last evidence about the girls appeared and that was again on Friday when they found out.

And there have been literally 1,000 volunteer as day that have combed the area, 12 square miles, the entire city of Evansdale, about 5,000 people, they've practically gone every home's backyard, at least cursory inspection. Not found a thing since Friday.

So it's a very frustrating kind of situation here.

Now, as far as stopping the automobiles, that was something that they did probably for about an hour and a half to two hours today. They actually were passing out some of the missing flyers. You saw some of the photographs on those. They were then questioning the drivers.

We even saw some of them open trunks and do some searching, especially on some of the trucks. They wouldn't tell us exactly if there's anything in particular that led them to do this, or this was just something they were going to try. But again, the effort still continuing but without the 1,000 a day volunteers who've been combing the area.

BURNETT: All right. Well, thanks very much to you, Dave. I appreciate your time and we'll keep following the story. It's very strange obviously what could happen to those girls.

OUTFRONT next, an American warship opened fire off the coast of Dubai today. And details of new sex abuse accusations against Jerry Sandusky.

(COMMERCIAL BREAK)

BURNETT: So, in just a few weeks, NASA is going to try to land the rover Curiosity on the surface of Mars, and NASA is really pushing to promote this landing. They came out with this video which describes, quote, "seven minutes of terror" -- the seven minutes it will take to land the Curiosity. There's some tense music, heavy drum beats, dramatic animation, sort of like something out of Hollywood.

In fact, NASA has even gone so far as to create an Xbox live game to hype up the landings. Looks like the live rover landing launch. There you go. Players can land the Curiosity basically using body movements and then you are scored on how well you complete the three major phases of the landing. So this is the curiosity coming down. You get the point.

NASA has to do these things, though, in real life and they have to -- well, do all this stuff to get to you care about them and about space again, which is what brings me to our number tonight. That is $300 million and it's the number of dollars slated to be cut from NASA's planetary science funding under President Obama's 2013 budget. That's a 20 percent cut.

And for Mars exploration, it's worse. The president's budget cuts program funding for that by 38 percent. So in order for NASA to try to get more funding, they want to have this big P.R. push, this crazy seven minutes of terror, the games and gimmicks, to get people excited about paying for space again.

Of course, God forbid they find life. Then we have to share it with everybody else.

All right. Now to tonight's "Outer Circle", we reached out to sources around the world.

And tonight, we begin in the Persian Gulf where an American naval ship fired on a boat near the Dubai port of Jebel Ali, killing somebody.

Barbara Starr is following the story. And I asked her why the Navy opened fire.

(BEGIN VIDEO CLIP)

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Erin, a U.S. Navy supply ship in the Persian Gulf fired on a small boat apparently killing one person and wounding three others when this small boat came too close to the U.S. Navy ship. Navy officials, Pentagon officials tell us that it may have been fishermen on board but in those busy and tense waters of the Persian Gulf, when a small boat approaches a U.S. Navy ship and does not obey the signals to stay away and keeps coming, that they really have no choice but eventually, if they have to, to use lethal force to stop it -- Erin.

(END VIDEO CLIP)

BURNETT: All right, thanks to Barbara.

Now, we go to Syria where fighting intensified today. The Red Cross announced the spread of violence means that the entire country they say formally is now in civil war. Ivan Watson has been following the story and told me what this new fighting in Damascus means. (BEGIN VIDEO CLIP)

IVAN WATSON, CNN INTERNATIONAL CORRESPONDENT: Erin, ferocious gun battles have been raging in the heart of the Syrian capital for nearly two days now according to eyewitness testimony, as well as numerous videos filmed by opposition activists and rebel cameramen as well who have even been live streaming over the Internet pitched battles between gunmen and the forces of the Syrian President Bashar al Assad.

In some of these cases, the fighters using machine guns and rocket propelled grenade launchers that jam as they go up against armored Syrian tanks. This is a sign that the rebels are feeling more confident than ever that the government's control of the capital is being challenged more than ever in nearly 16 months.

The circle is tightening around the Syrian regime -- Erin.

(END VIDEO CLIP)

BURNETT: Thanks to our Ivan Watson.

Now, our fifth story OUTFRONT: new accusations against Jerry Sandusky. CNN today learning three men are now accusing the former Penn State assistant football coach of sexually abusing them in the early 1970s and 1980s. Now, obviously, this is years and years before the crimes for which he was convicted last month.

CNN contributor Sara Ganim broke the story today and she joins me tonight from Harrisburg with the details.

Sara, good to see you. And you've been reporting that these accusers would have been young boys at the time of the alleged abuse, as you reported, in the '70s and '80s. Do they have connections to Penn State or Second Mile?

SARA GANIM, CNN CONTRIBUTOR: Erin, that's a great question I would love to know the answer to it. But right now, the details about these three men and their allegations are very thin. All we really know is that they've come forward in some way. They're telling their story.

Police are aware of them. We don't know if they've testified before the grand jury. We don't even know if they were interviewed by police. But police are aware of them and we're not sure if police can really use them if the statute of limitations has run out, because we don't know exactly how old they were or how old they are now.

In Pennsylvania, the law for the statute of limitations has to do with the age of the accuser when they come forward. And so, because we don't know their age at this point, we don't know if criminal or civil charges could be brought in any of their cases. Two of them say they were abused in the 1970s, one in the late 1980s. In the 1970s, Jerry Sandusky would have been in his late 20s.

BURNETT: And, Sara, just a follow-up to that, at the trial, his defense attorney, Joe Amendola la said his closing argument was based on the premise there had not been accusations against Jerry Sandusky as a younger man. He said, and I'm quoting, "After all these years when Jerry Sandusky is in his mid-50s, Jerry decides to become a pedophile. Does that make sense to anybody?"

What do you think this does to Jerry Sandusky from this point, another trial and appeal?

GANIM: Well, Erin, you know, I don't think it's that big of an appeal issue. You know, he's been convicted. He will go for sentencing.

When he goes for sentencing in September, he's looking at a de facto life sentence. He's looking at hundreds of years in jail. And so, whether or not this really has an affect on the criminal case is iffy.

But where I think it might have an impact is if these people come forward and say they've spoken about this, they've reached out during these decades long ago, if they talked to officials, if they reported this to police in any fashion -- if any of those things turn out to be true, that could be where the impact is. But as far as -- we don't even know if the age he is going to be pursuing more charges in Jerry Sandusky's criminal case.

BURNETT: All right. Sara, thank you very much. Of course, Sara Ganim breaking that story today.

Well, Yahoo! has picked a new CEO. We're going to tell you who it was and why it was so surprising. OUTFRONT next.

(COMMERCIAL BREAK)

BURNETT: Big news in the tech world today. Google's Marissa Mayer defecting to take the top spot at Yahoo -- the CEO job. It surprised a lot of people, pretty much everybody, because Mayer was very big at Google. She was the 20th employee there and she was its first female engineer.

Her most recent job was running Google Maps and the look and feel frankly of the entire Google universe online.

This was a very fast courtship. Mayer said she was only approached by the job in mid-June and others had turned it down before. She had guts to take it, because sure, she's respected. But she's taking a job that just the other day I heard one major media mogul say he'd rather die than take, because Yahoo! is in trouble. Its market share in search, its stock is down more than 40 percent over the past five years. Google shares are up over that time.

Now, nobody knows whether Marissa can turn it around or not. But here's what I know about Marissa Mayer personally. She and I did a magazine shoot together about a year ago. She was gracious, she was down to earth and she was a woman who enjoyed style.

So, with all this debate over whether women can have it all or can't have it all, all of that buzz anywhere, whether they need to act like men, Marissa is a woman who is smart, strong and feminine. She's only one of 20 women CEOs now in the Fortune 500. She's absurdly young, only 37. In short she's a role model to celebrate. Let's hope she succeeds.

Thanks for watching.

"A.C. 360" starts now.