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Tax War; Campaign Attack Ads

Aired August 8, 2012 - 19:00   ET


ERIN BURNETT, HOST: OUTFRONT next two tax experts call out Mitt Romney saying decisions he made in business reveal something about his personal views on taxes and ethics. And the Obama campaign has jumped in, but does it add up?

And why was the shooter in the Oak Creek temple massacre in Wisconsin there in the first place? The FBI might have an idea.

And Madonna backs a band with a vulgar name. What does it have to do with freedom in Russia? Let's go OUTFRONT.

Good evening, everyone. I'm Erin Burnett. OUTFRONT tonight, tax war. Two respected experts wrote an op-ed today that the Obama campaign immediately seized on. It was enough to prompt them to send this e-mail to their troops, subject line Romney's role in tax shelter raises questions -- the reason? Well the op-ed written by two experts who recently wrote another article critical of Romney's personal tax strategies says that since Romney refuses to release his tax returns, his views on taxes are well revealed by what did he while on the Audit Committee of Marriott Corporation.

Now I'm going to explain exactly what happened in a moment, but first let's just lay out the key accusation. The authors say that quote "A key troubling public manifestation of Romney's apparent insensitivity to tax obligations is his role in Marriott International's abusive tax shelter activity." So does the accusation of insensitivity, translation, lack of ethics, add up?

Well Mitt Romney was the chief of the Audit Committee for Marriott for a while from 1993 to 1998. In that role, he would have been responsible for overseeing the company's tax returns. During his tenure, Marriott International was accused of using a tax scheme called "son of boss". Now we reached out to Marriott and are still awaiting their response. But in court documents, they have denied the claims.

Big shot tax attorneys and investment bankers love to give their complicated tax creations catchy names and this one, "son of boss", does sound like the mafia style shelter that it was. It was called "son of boss" and it set up various structures beneath other structures basically to move money around. It could turn a gain into a loss and of course that means it can offset gains and bottom line you don't pay taxes.

Now look the tax code is 7,300 pages long for a reason because if you can read them all, you can legally come up with ways to minimize your tax bill. But "son of boss" was over the line. The IRS took "son of boss" users to court and won and this is important because even though Marriott denies doing anything wrong, they had to pay up for what they did. Only in the IRS has gotten $3.2 billion in back taxes from more than 1,800 people who used "son of boss".

Marriott International was one of the biggest offenders, eventually paying more than 29 million in back taxes. Now that puts them really in the top. The biggest offender, according to the IRS, was one company, which paid $100 million. Now critics of "son of boss" actually include John McCain who called it a hoax and a scam back in 2004 and said, quote, "one of the greatest beneficiaries of this tax shelter, and that is all that it is, a tax shelter, is a very profitable hotel chain, Marriott."

And he's not alone in his criticism. We called in our tax "Strike Team" to get their view on this. Daniel Shavaro (ph), a professor at NYU told us that "son of boss" was "a truly abusive tax shelter, the most abusive in U.S. history." But he did note something really important. At the time, it was a bit more ambiguous because after all, when you think about the '90s everybody, these were the days of Enron's rise and Enron was the master of tax shelters.

Sure they all ended up being a joke and causing a massive crisis, but at the time, it looked like they worked. They were in vogue. So here is the bottom line. It is fair to hold Mitt Romney accountable for Marriott's use of an abusive tax shelter while he was the chairman of the Audit Committee. And it is fair to say that Romney knows a lot about what's right and wrong with tax shelters, as he himself says.


MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I don't pay more than are legally due and, frankly, if I had paid more than are legally due, I don't think I'd be qualified to become president.


BURNETT: All right. But here's our original question. Does the accusation add up that Romney's sign off on "son of boss" is a troubling public manifestation of Romney's apparent sensitivity to what is right. Does it add up to a personal ethical reflection? We asked the Romney campaign to come OUTFRONT tonight so they could answer these serious questions directly. They declined.

Joining me now is Steve Moore, the head of "The Wall Street Journal" Editorial Board and Judd Legum with the Center for American Progress and editor-in-chief of -- great to see both of you.


BURNETT: Judd, so let me start with you. Is it fair to take what happened while he was the head of the Audit Committee at Marriott, a terrible tax shelter which at the time may have been more ambiguous, and say this is a reflection of his personal ethics and his personal taxes?

JUDD LEGUM, CENTER FOR AMERICAN PROGRESS: Well I do think it's fair, Erin, and the reason why is that Mitt Romney has put his business career both in Bain and all the boards he served on, the various companies that he advised, really at the center of this campaign and with that, you have to take the good and you also have to take the bad. So I think the whole reason you are on a board of directors is to exercise your judgment and to be a good steward of the stockholders' money if it's a public company like in this case. And I think that absolutely this is something that he should be held responsible and really plays into the larger questions about both his personal finances and his conduct as a business executive.

BURNETT: It's interesting, Steve, that you know Marty Sullivan (ph), another tax expert on our "Strike Team" said many years before he even new Romney had anything to do with Marriott, Marriott had a reputation for aggressive tax planning, which is true. They had some synthetic fuel transactions, some bizarre things, so he comes in and he said the Audit Committee presides over these tax shelters. Is it fair?

STEPHEN MOORE, WSJ EDITORIAL BOARD: Well, you know first of all, I think it's very interesting that the Obama administration would accuse anybody of not paying their taxes. I mean let's not forget half of the cabinet that Obama appointed back in 2008 had tax problems including by the way the current treasury secretary.


MOORE: Look, I think this issue -- I have to say this, I think this issue for the left is what the birther issue was for the right. All of these unsubstantiated allegations about an issue that most people don't really care about. And this idea that somehow that he's guilty until proven innocent unless he releases his tax returns. It's really crucial --

BURNETT: But Steve, your own editorial page has said he should release the taxes.

MOORE: I think he probably should --

BURNETT: So does the "National Review". I mean it's not -- this comes from the right, these calls, too.

MOORE: No -- well that's because we think he should probably clear his name of this. But that's his personal prerogative whether he does or doesn't. But on this issue of the "son of boss" and Marriott, look, there's a big difference between tax evasion, which is a crime, and tax avoidance and tax shelters which are in many cases legal ways to lower your tax burden. That's something that millions of Americans do. They use legal means to lower their taxes so their liability is lower. And it appeared at the time as you even admitted that this was a legal tax shelter.

BURNETT: Yes. I mean that's -- I mean you know I don't know, but I know some people had indicated it might have been. So I wanted to be very fair about it. But Judd, how do you respond to that? I mean is it possible that Romney wouldn't have known, even though I mean certainly this is a man who is incredibly sophisticated in his understanding of taxes and tax law.

LEGUM: I think this goes beyond the very specific question of did Mitt Romney follow the law. I don't think anyone's accusing him of breaking the law, but there's a fundamental question that comes up in the context of a presidential election and that's do you trust this person and I think there are so many questions about his conduct that really can't be answered until we see his tax returns. How many people in America know that Mitt Romney has over $100 million in an IRA? How was he able to do that with the limits that are placed on everyone's personal retirement accounts?


LEGUM: And to compare this to the --

BURNETT: Which is --

LEGUM: -- the birther situation, the difference is despite the fact that those were absolutely outrageous made up charges that have no basis in reality Obama released his birth certificate two times.


MOORE: But so are these -- I mean so are these outrageous allegations. There's no proof of any wrongdoing. There never has been and the Senate majority leader went on the Senate floor and basically accused the Republican nominee for president as being a tax cheat. How is that at all different than the birther issue? There's no evidence of either of these things.


LEGUM: It's not an issue --

MOORE: (INAUDIBLE) allegations.

LEGUM: It's not an issue of whether you're a tax cheat or not, it's an issue of can you trust him, was he behaving ethically, was he behaving in a way that we expect from a potential president.

MOORE: But there is no evidence whatsoever that is he guilty of any of these things that groups like the Center for American Progress and the Obama campaign are accusing him of.

BURNETT: All right.

MOORE: They're saying did he it because he's not releasing his tax forms. That is his own prerogative and since when are you guilty until proven innocent --


BURNETT: We're going to -- we're going to hit pause on that. I will note though just for the record that the men who wrote this have written other op-eds critical of Mitt Romney on his taxes, but every single tax person we spoke to spoke highly of them and said that their reputation is pristine and the best that there is.

All right well still OUTFRONT the Obama campaign has dodged questions about the Super PAC ads slamming Mitt Romney. Well since we're going to hit one, we're going to hit the other. Is the president hiding behind a technicality? And Starbucks takes a step to some day eliminate cash, but you know what, that does not add up. And Gabby Douglas, America's gymnast darling in the Olympics, the color of her skin, how much does it matter?


BURNETT: Our second story, OUTFRONT, the Obama campaign is dodging blame for something very nasty. Two top aides to the president dodged questions today over inaccuracies in an ad from a Super PAC supporting the president. Here's the ad again.


UNIDENTIFIED MALE, POLITICAL AD: When Mitt Romney and Bain closed the plant, I lost my health care and my family lost their health care and a short time after that my wife became ill.


BURNETT: The ad blames Mitt Romney for a woman's cancer-related death. Now, we want to say again what we said last night. The facts on this ad don't even add up. The woman who sadly died was covered by her own employer as her primary coverage, not even by her husband's insurance. So the whole premise here is wrong. But when asked about the ad today, White House Press Secretary Jay Carney told reporters quote "I still haven't seen the ad. I've read about it. I don't speak for a third-party group."

Obama campaign spokeswoman Jen Psaki doubled down. Quote "We have no involvement with any ads that are done by Priorities USA." All right, Priorities USA is the Super PAC that paid for this ad. Now, Super PACs are not allowed by law to coordinate with campaigns. And Bill Burton, head of Priorities USA, denies any coordination.


BILL BURTON, SENIOR STRATEGIST, PRIORITIES USA: The campaign is doing what the campaign is doing and -- but to suggest that we would be mixing those two I think is a distortion of what the campaign finance laws are and what would possibly even happen here.


BURNETT: OK, here's the rub, though. Bill Burton, the man you saw there, and the president are tight. Bill Burton served as President Obama's national press secretary during his first presidential campaign and then when he won as deputy press secretary in the Obama White House, a job that he left to start Priorities USA. Bill Burton knows the president's ethics very well and it is fair to hold him up to this standard.

Any ad that Bill Burton runs, he knows the president would personally support. The president cannot hide behind a Super PAC on an ad as nasty as this one when that Super PAC is run by a friend and longtime deputy.

Jamal Simmons, Reihan Salam and John Avlon join me now. John let me start with this. OK, the law prohibits technically you know --


BURNETT: -- the coordinating between Super PAC and the campaigns. Jen Psaki, who I mentioned, one of the operatives who said we have nothing to do with Priorities USA, Brianna Keilar, our CNN colleague, reports that Joe Soptic, the man you see in the ad there, everyone, told his personal story on an Obama campaign call in May, a campaign call that the Deputy Campaign Manager Stephanie Cutter was on. The campaign has asked Soptic to appear at rallies in battleground states. So how did Bill Burton hear about Mr. Soptic?

AVLON: This just shows how fundamentally screwed up the Super PAC laws are. Anything that's technically public information can be used and the campaigns and the Super PACs both take a wink and a nod look at this on both sides of the aisle. But technically there is no coordination and the Super PACs realize that they have the ability, the license, the plausible deniability and they can do things that a campaign doesn't. And just like in the Obama camp there are these overlapping relationships that go way back, that's true on the Republican side of the aisle.


AVLON: So what they say is look that's public information. It's been out there. And so there is -- this is part of the problem of the political campaign finance world we're in right now. And it's prevalent on both sides and it's leading directly to these ugly ads.

BURNETT: Yes. Jamal, I mean isn't it fair to say that one should expect Bill Burton to run an ad that he thinks that Barack Obama would personally be all right with?


BURNETT: Why not?

SIMMONS: That's the whole -- because that's the whole construct of Citizens United is that you are transferring power from elected officials and their staffs to these unnamed, un-sourced, un-whatever groups and people like Bill Burton is a friend of mine, but you give Bill Burton the power to make a decision about what a campaign ought to be about. You give Foster Friess or one of the Republican guys who is spending money, you give them the power to make a decision instead of giving that power to the politician who is the person that we're going to hold accountable. And that's the reason why John is right. We've got to change these laws. BURNETT: Well yes, right, because Reihan, I come back to this personal thing. I know Bill Burton as well. I mean it doesn't seem that personally this is the right thing to do. And personally you should hold him to that standard, although everyone is going to then go point at the law. Well if I -- the law says this, so if I don't run a nasty ad, the guy over at Mitt Romney's Super PAC who is friends of Mitt Romney will run a nasty one.

REIHAN SALAM, CNN CONTRIBUTOR: Well Erin, I think that it's important to understand the partisan mindset and the mindset is that it's really, really important to defeat the candidate of the other side and so that means that even if this ad is somewhat misleading, that's OK.

BURNETT: Who cares?

SALAM: If you throw up a cloud of dust --


SALAM: -- and that's the key thing and actually the (INAUDIBLE) right now is does the push back against this ad, does finding out that this gentleman had appeared in Obama campaign appearances, et cetera, does that actually make a difference or does that information even get out there enough or does it only matter to have the ad out there in the first place and makes the impression and --

BURNETT: The ad, by the way, John has not even run, you know and part of me I think about this because, I mean yes you know personally I have a moral point of view about it, but it hasn't even run. And we're running it because I have a moral point of view about it and yet you know we're kind of adding to the problem.

AVLON: That's right and this is all by design. That kind of earned media is more valuable even than paid media, look there is actually unlimited money in the cycle right now, but there's limited television time. So it all becomes a game about how to get past those limits. And both campaigns do it and that race to the bottom, the more outrageous the ad, the more negative the ad, not only can it drive down the opponent's negatives, but it can also gain free TV time. So it's all part of the very cynical game that the Super PAC economy has created in American politics today.

SIMMONS: And Erin, let me just say this --


SIMMONS: -- before we go. You know Mitt Romney launched an ad that the president's allies believe is completely false on this welfare attack, completely false.


SIMMONS: And you know what the Obama people realized, is that you can't -- there's no referee in national politics. Nobody is going to say oh 10-yard penalty and you know change of possession. Nobody is going to say that --

BURNETT: This is -- this is Mitt Romney saying that Obama took out work from welfare.


BURNETT: Right, that's what you're referring to?

SIMMONS: Absolutely --


SIMMONS: -- and so in a campaign what you do is you don't wait for somebody to come in and call foul. You hit back. You counter punch and I think that's what happened today from Priorities. They counter punched with this ad yesterday. They counter punched with this ad and that's why people are reacting to it. They didn't wait for somebody else to call it. And frankly in politics that's your only option. You can't sit around and wait.

AVLON: And with the FEC deadlocked 3-3, there's not going to be any decisions on these gray areas until after the election is long in the rear view mirror. That's yet another problem.

BURNETT: Right. Reihan, final word, obviously the Romney ad we did -- when we looked through it is saying welfare to work, that didn't add up either. I mean both sides are --

SALAM: I think there are definitely legitimate concerns about what's happening to welfare to work and but I think that you know granted whenever you're presenting this kind of advertisement, these are very complex issues. You're trying to distill them in an accessible simple way that really connects with people emotionally and that's very tricky territory regardless of the side you're on.

BURNETT: All right, which I know John doesn't agree, we are out of time but thanks very much Reihan, John, Jamal.

OUTFRONT next, Starbucks wants to change the way you pay for coffee. We can explain (INAUDIBLE). And a story we brought you last night on OUTFRONT exploding, a British bank, Iran and the F-bomb.


BURNETT: So Starbucks is investing $25 million in mobile payment company Square. The company is best known for its square credit card reader. Basically it plugs into a smart phone -- you see it being demoed right here. It was popular with small business owners and at flea market booths, you know places that could only take cash, but now they were able to actually process a credit card anyplace that they could get you know get wireless reception. So that was a really great innovation.

Square has now launched a phone app that links your credit card to your Square account. Now all you have to do is touch the app and you pay. That sounds pretty cool, right? So you go to Starbucks, latte, cream, wham, bam, but no. The number is $470,600,000,000. That is how much the value of currency in circulation in this country has increased since the year 2000. That is an 83 percent jump.

Now some of you may freak out and say this is why we're going to have an inflation crisis, but that's not where I'm going with this. Dollars are typically used when you make those smaller transactions like buying a latte at Starbucks. According to a preliminary Federal Reserve study on how people pay for things, 67 percent of all transactions that were $10 and below are paid for right now using cash. So new technology is great, but for now cash is still king.

Still OUTFRONT new details on the murderer in the Oak Creek temple massacre and how he died. And later, Madonna and the trial of a rock group jailed in Russia for defying Vladimir Putin.


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

Well, tonight, the NYPD has returned to search a Manhattan basement in the ongoing investigation into the disappearance of Eton Patz, who disappeared in 1979. They first searched the basement in April. And our Susan Candiotti reports that police removed several bags of evidence from the building tonight.

In May, Pedro Hernandez was arrested in connection with the case. He allegedly confessed to murdering Eton, telling police he strangled him. Fernandez has been undergoing psychiatric evaluation and was arraigned on second-degree murder charges.

The Obama administration has apparently sweetened a proposed prisoner swap in order to revive peace talks with the Taliban. A senior U.S. official tells OUTFRONT's Elise Labott under the proposal, the U.S. would transfer five Taliban prisoners to Qatar first and then there would be an exchange where a U.S. soldier being held by the Taliban would be released.

Now, Qatar has played an important role, but they've presented some serious obstacles to the dealings with al Qaeda, as well.


UNIDENTIFIED MALE (through translator): Qatar is intervening directly in the financing and material of the Islamists in Azawad. Qatar is sending it directly and basically to the mujahedin and al Qaeda. And we think this is blatant support of the Islamists.


BURNETT: That was one of the leaders, of course, for the fighters fighting al Qaeda based in northern Mali. Officials stressed that if a deal is worked out in a prisoner swap, it would be done in accordance with U.S. law, but of course questions remain over whether Qatar is a friend of the United States. Billionaire Sheldon Adelson who said he'd spend $100 million on the American election bankrolling Newt Gingrich, and now spending on Mitt Romney, has filed a $60 million lawsuit against the National Jewish Democratic Council. He's suing for libel, claiming the organization said that he approved of prostitution at his casino in Macau.

Now, he's trying to sue the Democratic Congressional Campaign Committee for making similar accusations. The DCCC eventually apologized and retracted all of its statement. But not this time, in a statement, the National Jewish Democratic Council says, quote, "We will not be bullied into submission and we will not be silenced by power."

We follow the smartphone battles closely on the show, as you know, and android phones are dominating right now. We learned today that Android accounted for 68 percent of the global smartphone market in the second quarter. A big reason for that dominance is Samsung, which uses Android. According to research firm IDC, Apple controls only 17 percent of the market and Research in Motion maker of the be loved that I still use only controls less than 5 percent. But it's a great 5 percent.

All right. It's been 370 days since this country lost its top credit rating. What are we doing to get it back?

Well, a development tonight on LIBOR. A U.S. judge has suspended new lawsuits that claim that banks manipulated the key interest rate used to set American mortgages and credit card rates. The judge wants to see how related cases that have already been filed are sorted out. This could be a big and major development in this story in terms of a reprieve.

Now our third story OUTFRONT: New developments in the Wisconsin temple shooting.

The FBI says that Wade Michael Page was killed by a self- inflicted gunshot wound to the head and not by a shot fired by police. And we are learning more about Page's history tonight. His former girlfriend, Misty Cook, has now been arrested for an unrelated weapons charge but police say she also has links to white supremacist groups.

Ted Rowlands is OUTFRONT again tonight on the investigation.


TED ROWLANDS, CNN CORRESPONDENT (voice-over): Investigators believe it's possible the only reason Wade Page was in Wisconsin was this woman, 31-year-old Misty Cook. Within hours of the shooting, the FBI interviewed Cook first at this restaurant where she worked as a waitress less than a mile from the temple, then again in her upstairs apartment in the back of this home.

UNIDENTIFIED FEMALE: She was cooperative. The police officers while there observed a weapon and they arrested her for felon in possession. ROWLANDS: The arrest investigators say was unrelated to the temple shooting. But Cook, like her ex-boyfriend Page, appears to have a history with white supremacist groups. That's her wearing a Volksfront T-shirt, an organization the Anti-Defamation League, which provided these photos to CNN, classifies as a hate group.

In this photo, Cook and others have their middle finger up. But look at the person at the end of the table. He seems to be giving a Nazi salute.

Cook also, according to the Anti-Defamation League, posted messages on a hate site in which she repeatedly uses the "N" word and other offensive language. This one from 2009 says, "I've been a member of the WP, white power movement, for eight years." Another, from the same time period encourages people to, quote, "become an asset to the white community."

UNIDENTIFIED MALE: We will as appropriate make a decision about whether she will be charged with anything. Right now, that matter is also clearly under investigation.

ROWLANDS: There was no answer at Cook's door Wednesday. Our requests for an interview have gone unanswered.

But in an e-mail to the "Milwaukee Journal-Sentinel," she said, quote, "If could I say something to ease the pain of the victims and their families, I would gladly do so. Unfortunately, words do not begin to heal the pain they are going through."

A possible connection between hate groups and the temple shooting is part of the FBI's investigation, but there's nothing at this point connecting anything or anybody except Page to the shooting.

UNIDENTIFIED FEMALE: Misty has been very cooperative and we do not believe she had anything to do with this. I'm not going to say we're ruling out anything. We're still investigating and we're trying to be very fair about -- we don't believe she had anything to do with it.


BURNETT: All right. Ted is with me tonight OUTFRONT from Oak Creek.

And, Ted, how were they able to figure out what happened in those last minutes when they're now saying Wade Michael Page killed himself?

ROWLANDS: Killed himself, yes, Erin. We were led to believe that he was killed by that second officer who arrived on scene and shot him. Well, now they say they've looked at some dash cam video from the patrol car of that second officer and they say it clearly shows that the officer shoots the victim, in this case the shooter, in the abdomen, but then as he gets down on the ground, he shoots himself in the head. They say they're not sure if the officer's shot would have been fatal, but the shooter did cause his own death. BURNETT: All right. Well, I know it's still hard to figure out what happened, but luckily they have that video to figure it out. Our Ted Rowlands, of course, has been investigating the story for OUTFRONT.

And OUTFRONT now, a man who got an up close look at Wade Page. Pete Simi was conducting research on white supremacist groups back in the year 2001 when he was first introduced to page. He stayed frequently at page's home, says that he listened to neo-Nazi bands with him. He's now a professor of criminology at the University of Nebraska.

I really appreciate your taking the time, Pete.

So tell me how this happened. I know this was over a period of a couple of years that you had a chance to interact with him and talk to him, right?

PETE SIMI, CRIMINOLOGIST, UNIV. OF NEBRASKA-OMAHA: Yes, correct. I started conducting field work with members of white supremacist groups this 1997 and by about 1999, 2000, I started focusing on southern California and one of my main contacts ended up happening to be Page's house mate. So, I met Page through this other research contacts.

BURNETT: And was he receptive? I mean, clearly, you spent a lot of time with him. I mean, you know, how do you approach someone like him and say, well, hey, I want to talk to you because I want to learn about hate groups?

SIMI: Well, his house mate was already willing, you know, research subject and I had already established the relationship with his house mate. And when I first met Page, he immediately was very approachable and very willing to have me around.

Some of the folks that I met through Page's house mate became apprehensive when they found out that I was doing research, but Page was not one of those. He actually seemed to really enjoy having me around as far as the talk about his beliefs and seemed pretty open with sharing his ideas about how he saw the word.

BURNETT: So, what were those? What were those beliefs and ideas that he shared with you that still you remember? Or perhaps in the fast few ideas have come to the forefront of your own mind again?

SIMI: Sure. By the time I met him, he seemed pretty fully indoctrinated into neo-Nazi ideology, neo-Nazi ideas. At that point, he was vehemently anti-Semitic. He talked about the Jewish conspiracy to control the world.

He was very anti-black. He felt that whites were constantly victimized and were on the short end of the stick of how society, you know, is organized. He felt that whites were on the verge of extinction and that basically by being involved in the white power movement, he was standing up for his people and trying to prevent the extinction of his race. BURNETT: So when you talk to someone like him at the time -- I mean, you know, we've now heard that he's been tracked since the year 2000 by groups that track people who are in hate groups. You're saying you spoke to him back then. Was there anything at the time that stood out to you as this person could be violent? I mean, a lot of people watching, they just heard those things and say, well, those things are violent by their nature.

SIMI: Yes. You know, it's -- when you're involved in a world, the world of white supremacy, you do a lot of things that from the outside appear as red flags. And in fact, you know, the ideas of white supremacy are filled with aggressive ideas. Violence is certainly at the forefront of that world, because of their belief that the white race is on the verge of extinction, they feel that violence is a necessary defense mechanism, that violence is essentially a form of self-defense.

And so, you know, he was very committed to those ideas. He was beginning to tattoo his body with symbols of Nazism. He was involved in the music scene by the time I met him and playing in music shows and going to music shows and going to events. So, yes, he was heavily involved.

But as far as to say that he seemed a lot different than other individuals involved in these groups or appeared more threatening, I didn't see it at the time, absolutely not. I thought he seemed pretty typical in many ways.

BURNETT: Which is either sobering or frightening, depending on how you see it. Pete, thanks very much.

And still ahead, a twist in a story we have been following involving a British bank and the F word directed at the United States of America.

And in Russia, where that Madonna is touring, showing support for a female rock group jailed for defying Vladimir Putin. Today, a surprising outburst in the courtroom.


BURNETT: Our fourth story OUTFRONT: standard charter. That's the British bank whose executive allegedly said bleeping Americans, and then went on to make thousands of deals with Iran, allegedly totaling about $250 billion.

Now, the bank claims that there was no attempt to circumvent sanctions. It says sure some of the transactions broke U.S. sanctions, but hey, it was only about $14 million, nowhere near that big number.

They say this was clearly wrong and we're sorry that they happened. That's what the CEO said today.

But this is not the first time a British bank has got ten in trouble with its American ally. In July, a Senate panel accused HSBC of by passing sanctions by laundering money from Mexican drug cartels with financial ties to Iran and Saudi Arabia.

So how is this affecting our relationship with our closest ally?

Elise Labott is in Washington tonight. She's been covering the story.

So, Elise, what's the British government's response to this? I mean, this isn't just a little bank. This is a huge bank and the most important policy issue for the United States right now.

ELISE LABOTT, CNN FOREIGN AFFAIRS CORRESPONDENT: That's right, and one of the most important foreign policy issues for Britain, Erin. I spoke to some British diplomats today and the official line out of London is that this is very concerning, that they're going to be looking closely not just at what the investigation reveals, but also what Standard Charter's explanation of what eventually comes out of it.

But in their very British way, this is their way of saying they're very embarrassed because as we know, this is the U.S. and the British have been working very closely on really effective sanctions, really tightening the financial squeeze on Iran. So what the British are saying is, listen, this is not a case like China or some other country that's willfully looking other way while their banks do business with Iran and other rogue nations.

They're really saying that we're not going to be looking the other way and we'll be taking this very seriously, looking to the Treasury Department, we obtained a letter this morning, Treasury Department letter to British, seeking their clarifications on sanctions. And they're going to be working very closely together on it.

BURNETT: All right. Well, we will see. It's pretty amazing how it all went down, as Elise has been reporting, sort of I got put up by one organization in the U.S. The other wasn't ready. We've now caused an international scandal. It was front page headlines in the U.S. and around the world this morning.

And now our fifth story OUTFRONT: Madonna's show of solidarity with a Russian punk band on trial for hooliganism at her concert in Moscow last night.


MADONNA: I think that these three girls, Masha, Katia, Nadia, yes.


MADDOW: I think that they have done something courageous. I think they have paid the price for this act. And I pray for their freedom.



BURNETT: If prosecutors have their way, members of the band Pussy Riot will go to jail for three years just for showing up in Moscow's biggest cathedral in February where they -- as you can see -- performed an anti-government protest song. The three women spoke in court today for the last time. They called their trial medieval and a fraud.

Miriam Elder is a Moscow correspondent for Britain's "Guardian" newspaper. I spoke with her a short time ago. She was in courtroom, one of the few journalists, and I asked what she saw.


MIRIAM ELDER, MOSCOW CORRESPONDENT, THE GUARDIAN: Well, today we had the closing arguments in the trial of Pussy Riot and the three women each gave their closing statements. Since there is a widespread understanding inside Russia that it's a political decision that will decide the verdict rather than any other sort of exercise of justice, they used it as a chance to make these vast statements, these manifestos about the political situation in Russia today.

BURNETT: And what was the reaction in the courtroom? It was a little surprising, right?\

ELDER: Yes. Every time that one of the women finished speaking, all, the Russian journalists in the room began applauding and the courtroom was absolutely packed. The judge wasn't happy, but they just kept on clapping.

BURNETT: What's your view of the sentence might be? Will it be the three year that's been reported? Will they have to serve it? What will happen?

ELDER: There's a pretty clear understanding here that it will be a guilty verdict. As for the sentence, that's been thrown into a bit of doubt. Everybody expected the verdict to come tomorrow and the fact that it's going to come in a week's time indicates that there is uncertainty about what should be done with these women.

BURNETT: All right. Thanks so much. And, of course, Miriam has been covering this from inside the courtroom.

Let's bring Phil Black now, who's been covering the story from Moscow.

Phil, I know you would have wanted to be in the courtroom, but you weren't and there's reason for that. What was it?

PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: The media, beyond the small few number of print journalists, have largely been excluded for much of the proceedings that have taken place over the last week. The defense teams believe that these proceedings have not been fair, have not been legal, have not been just in any way.

I'm not suggesting that restricting the media access is necessarily an example of the illegality, but it certainly shows that it was not a thoroughly open process.

BURNETT: What's been the reaction among people in Russia to this case? How high profile is it?

BLACK: It's extremely high profile, Erin. And it's a very division one, too. It's divided into three camps.

Those who passionately align themselves with the Russian Orthodox Church who feel the church and their faith have been offended by this and they want to see these women sent to prison for a period of time.

There are also members of the church who feel mercy for them, who believe that they have already served a punishment and they deserve to be released.

But then there are those who back the women, those who oppose the government here and those who feel very strongly and choosing to prosecute these women, the government, the system has inadvertently done them a favor, by highlight what they believe are many of the things that are wrong with the government, with the judicial system in this country.

BURNETT: And it is amazing. No doubt, as we say, maybe the name Pussy Riot itself got a lot of people around the world paying attention to this in a way that other things may not have. I mean, you're talking about some video to someone who's been an opposition leader to Vladimir Putin, did the video of debugging his apartment or something like that, right? That would have gotten attention were it not for something like the Pussy Riot trial.

BLACK: It certainly helps. There's no doubt about this. The Pussy Riot women have become very much an international figurehead for the opposition movement.

Here, the blogger, the man that you're talking, Alexei Navalny, is a prominent opposition leader here. I interviewed him a few months ago in that office and we talked at the time about the possibility of him being targeted by surveillance, by bugs within the office. And he was pretty sure he was being watched and listened to in that way.

Now, we've seen him pulled a bug from the offices in which he works, where he targets corruption and campaigns against the government.

BURNETT: And a final word then, Phil, what is your take? Is it getting -- I mean, Vladimir Putin has tried to do certain things to indicate that he's more open that he used to be to criticism, although not nearly as open as anyone in the international community or opposition leaders would find acceptable. But has he moved at all? Or has he moved maybe even in the other direction?

BLACK: Well, just before he returned to the presidency, one of the big questions I and the other people were asking, talking about at the time was how will Putin respond to the new opposition movement, the unprecedented sight of tens of thousands of people led by people like Alexei Navalny on the streets of Moscow and other cities? Since he has returned to the presidency, we're seeing the prosecutions of Pussy Riot.

Now, the charges against Alexei Navalny and other significant opposition figures as well and a raft of legislation that's been passed through the Duma, the parliament of this country, all of which make it a little bit harder for the opposition to work, giving it less room to breathe.


BURNETT: All right. Next, Gabby Douglas challenges all of us to think about race.


BURNETT: So, last Thursday, Gabby Douglas made it into the history books. The 16-year-old took to the Olympic podium, the first black woman -- she's 16 -- woman, girl, to win gold in the all-around gymnastics competition. Now, it was amazing to watch her.

Instead of the moment being celebrated on its own, there's been an onslaught of commotion surrounding Gabby's race. Included in this conversation is buzz about Gabby's hair, which really does not dignify debate. The woman is focused on performing the crazy flips, twists and jumps to perfection shouldn't be worried about her hair. I even like how gymnastics girls wear makeup, but that's a separate issue.

Commenting on her hair is irrelevant and stupid -- so stupid that it seems her teammates may have worn their hair to look like hers in solidarity.

But does talk about her hair merit a discussion about racial politics? There's a simple question of political correctness, which is not so simple as it turns out. Is she black or African-American, something a CNN iReporter took issue with this week.


BYRON THOMAS, IREPORTER: Why can't all black American athletes represent only one country? And that country they are representing is the United States of America.


BURNETT: Now, it is terrific that Gabby is a leader and role model for other black girls to follow. Are we taking something away from her wonderful moment by qualifying it that way? Shouldn't she just be a role model for all young people? You know, young girls, black, white or any other color? That really seems to be the bottom line here?

I mean, it's very interesting because race is important to Americans, but not in the simple ways of are you black or white anyway? We don't actually seem to know who we are. According to research released today by the Census Bureau, the Census box known as, quote, "some other race" is a big hit. And there is a Census box called "some other race". Maybe you checked it because the Census Bureau thought almost no one would check that box, because they give you so many choices.

But in the 2010 Census, it turned out to be the third biggest group which is pretty incredible. Clearly, a lot of people think their identity is more complex than checking a box like African- American/black which is the title in the Census Bureau form for that race.

So here's to hoping that Gabby Douglas goes down as the gymnast with the great smile. I mean, that's really the thing about her that stood out to me, that smile that is just enormous and overwhelming that makes you smile, too. She inspires young girls to excel. So, let's not put her in a box based on her race where the race becomes the chief qualifier for her achievement. Well, she's amazing because she's the first black gymnast to win. Who cares, right, what race she is?

Anyway, here's hoping she's someone who is a symbol of achievement for whether you're black, white or anything else.

Thanks so much as always for watching.

"ANDERSON COOPER 360" starts right now.