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ANDERSON COOPER 360 DEGREES

Interview With Oklahoma Congressman Tom Cole; Tax Facts; Interview With Kentucky Senator Rand Paul

Aired November 28, 2012 - 22:00   ET

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


WOLF BLITZER, CNN ANCHOR: It's 10:00 p.m. here on the East Coast.

We begin the way Anderson does every night, "Keeping Them Honest," not choosing sides or playing political favorites. There's plenty of that on the other cable news channels. We're interested in facts. They do exist, and our goal is to show them to you honestly.

So, tonight, the facts about taxes that a majority of Americans established on Election Day and an even big majority endorsed in recent polling in recent polling. The nation's leading conservative newspaper is now on board. And most recently so is a leading Republican lawmaker. They now agree with the president who wants to let taxes go up on income more than a quarter million dollars a year.

If Mr. Obama and the Democrats get their way, doing a deal to raise just those rates would avoid the fiscal cliff, where all Bush era tax cuts on all tax brackets expire at the end of the year. That scenario, the election, popular opinion and more certainly give President Obama a lot of clout right now.

And now you can agree or disagree with the president's policy. That's for you to decide. Republican Congressmen Tom Cole of Oklahoma happens to disagree strongly. At the same time, though, he recognizes the political reality that all tax cuts will expire on January 1 and no one wants to raise taxes on what would amount to 98 percent of all taxpayers.

(BEGIN VIDEO CLIP)

REP. TOM COLE (R), OKLAHOMA: In my view, we all agree that we're not going to raise taxes on people that make less than $250,000. We should just take them out of this discussion right now, continue to fight against any rate increases, continue to try to work honestly for a much bigger deal.

(END VIDEO CLIP)

BLITZER: Congressman Cole joins us shortly. He's a rock-ribbed conservative, a former chairman of the National Republican Congressional Committee, and he's no longer a lone voice in the wilderness.

The staunchly conservative editorial page of "The Wall Street Journal" is on board as well. I'm quoting now. "The fact is that Republicans face a new political reality on taxes. President Obama's reelection means that taxes for upper income earners are going up one way or another. The question is how Republicans should handle this reality."

Congressman Cole, as you heard, and a number of other conservative, they believe they should give this one to the president, not because they want to, but because they have to. Republican leaders, though, they disagree.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: I told Tom earlier in our conference meeting that I disagreed with him. It will hurt small businesses. It will hurt our economy. That is why this is not the right approach.

(END VIDEO CLIP)

BLITZER: Now, you can agree or disagree with that position. However, "Keeping Them Honest," House Speaker John Boehner and other top Republicans have been trying to justify it in part by playing down the fact that President Obama and Democrats got a significant boost from voters.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: In politics, there is always a temptation among those who win office to think that they have a mandate to do what they will.

REP. PAUL RYAN (R), WISCONSIN: I don't think so because they also reelected the House Republicans. So whether people intended or not, we have got a divided government.

BOEHNER: The American people have also made clear that there is no mandate for raising tax rates.

(END VIDEO CLIP)

BLITZER: "Keeping Them Honest," President Obama campaigned and won on letting taxes go up for the top earners, so his victory throws a little cold water on that claim.

Democrats gained seats in the Senate and the House and recent CNN/ORC polling shows more than two in three support tax hikes for the wealthy. It's a reality that Republicans will be grappling with from now until New Year's Day.

Joining us now, Congressman Tom Cole from Oklahoma. He's a Republican.

Congressman, thanks very much for joining us.

REP. TOM COLE (R), OKLAHOMA: Wolf, thank you.

BLITZER: Your proposal that Republican lawmakers should agree with Democrats, extend the tax breaks for those making $250,000 or less, before the end of the year, deal with these tax rates for the wealthiest later, that's an idea that a lot of Republicans are resisting. What has been the reaction? What kind of pushback are you getting?

COLE: I think the reaction is mixed. Some support it. Some don't. Some have more questions about it.

But, look, I think the issue is really pretty simple. I don't believe in raising tax rates on anybody. I think it's bad for the economy, bad for job creation, ultimately, by slowing down growth cuts revenue, and I think the president needs to come to the table with real spending restraint and real, frankly, entitlement reform.

Having said that, if we agree that taxes shouldn't go up on 98 percent of the people, shouldn't we take that now and get that set aside, make sure that they know their taxes aren't going up? I think they will actually listen to us and we will win the argument in the other areas. But putting people at risk when we agree their taxes shouldn't go up is something in my opinion we shouldn't do.

BLITZER: Speaker Boehner earlier today told House Republicans they need to stick to their position that tax rates should remain frozen, tax rates. I guess they believe, and a lot of Republicans say if you do what you are suggesting, you will lose a lot of leverage as far as entitlement cuts or other spending cuts are concerned. How do you respond to that?

COLE: Well, I respect that point of view. I don't agree with it. Frankly, I don't think you ever use the American people as a hostage in a negotiating type situation, and I think at the end, this is really the leverage for the Democrats, not the Republicans in this.

Again, my advice was given privately at a whip meeting. I was asked what I thought, asked again a couple of weeks later. My position hasn't changed. Somebody leaked it. So, again, I'm happy to talk about it because that's just my point of view.

At the end of the day, the speaker is going to negotiate this deal with the president and it will be a tough deal. He will come back and ask for support. I have supported him every time he's asked to us make a tough vote. I'm sure I did will do that again. And I have a lot of confidence in him as a negotiator. But again when I'm asked my opinion as to what we should do with 98 percent of the American people, I would say let's protect them and continue the fight.

BLITZER: Is this an idea you are totally committed to and you're ready to fight for it in spite of this pushback you are getting from members of your own party, including Grover Norquist, who always puts forward that no new tax pledge.

COLE: I admire Grover Norquist. I think he's done a lot of good. I signed that pledge. I'm honored to do it. I don't think in this case we would breaking it by making what are temporary tax cuts permanent. I think we would be doing the right thing. I want to make all of them permanent, quite frankly.

This is really a debate about political tactics. It's not a difference over political theology. In the end, all Republicans want to make sure we don't increase taxes. That's where we differ with the Democrats. But if there is a place we can again get 80 percent of the Bush tax cuts for 98 percent of the American people made permanent, I think we should do that. Then I think we continue to fight for the rest.

BLITZER: I spoke to Grover Norquist yesterday. He opposes anything along the lines of allowing debate to go forward next year over the 2 percent and 3 percent, the richest Americans, those making $250,000 a year. He wants it all part of the same package. You obviously disagree with him.

COLE: Well, look, Grover Norquist is my friend. And we talk, you know, political strategy in politics. This is my position. It was given in private, when it was asked. It was leaked by somebody. Again, that's fine. I'm not going to say one thing to you that is different than I would say to my own constituents in rural Oklahoma.

This is what I tell them if they say, Congressman, what do you think we ought to do? But I'm one voice. I'm not king of the universe. I support the speaker. I recognize he's the speaker. I support my conference. They're trying to do the right thing. And I think, in this case, the Democrats and the president are trying to use the tax issue.

Instead, they ought to be coming to the table with real spending cuts, real entitlement reform and real compromise proposals. So far, they haven't done it.

BLITZER: Congressman Tom Cole, thanks very much for joining us.

COLE: Wolf, thank you.

BLITZER: Joining us now, Republican Senator Rand Paul of Kentucky.

Senator, thanks for coming in.

Let's get to the so-called fiscal cliff. The president has set a goal, as you know, $4 trillion in debt reduction over the next decade. Are there any specific ways of reaching that figure that both of you might agree on?

SEN. RAND PAUL (R), KENTUCKY: Well, you know, one compromise I can agree with Democrats on is that we need to cut some military spending. So I think the compromise is conservatives like myself who think national defense is very important should compromise on military spending and the liberals should compromise on entitlements and on social welfare spending.

I think that compromise could get to some spending cuts.

BLITZER: Here is the question, though. Both sides are going to have to compromise on this. Beyond defense spending, is there any other compromise that you could see you supporting?

PAUL: It mostly has to be to me on the spending side. We used to spend about 20 percent of GDP. We're now spending 25 percent of GDP. Federal spending has gone up at an alarming rate in the last four years.

When people come to me and say we just have to raise taxes on rich people, one there, is not enough money. Two, you often find that when you raise rates, you get less revenue. Sometimes you find when you lower rates, you get more revenue.

BLITZER: What do you make of your fellow Republican Tom Cole's proposal that Republican lawmakers should extend the tax rates for those making $250,000 a year or less, that's about 98 percent of Americans, before the end of this year and deal with tax rates for the wealthiest Americans at a later date?

PAUL: Once you separate them out, there's not a lot of sympathy among the public for rich people. They say, oh, let's get those rich people. But the public often doesn't realize, the rich people are already paying all of the income tax.

The top 1 percent pay almost half of the income tax, so when the president says it's bad to raise taxed on everyone, that would be Taxmageddon. And I want to raise it on 40 percent of the nation's income? I think that's a mistake.

If it's bad to raise taxed on everyone, it's also bad to raise taxes on 40 percent of the nation's income. It's better to leave that money in the hands of those who earned it. Leave it in Kentucky. Leave it in the private sector.

BLITZER: Because I understand you don't want to raise the tax rates on anyone, rich or middle class or anyone, but what about capping deductions, eliminating loopholes, stuff like that? Are you open to that?

PAUL: Yes, if it's for tax reform. And that's why it's not going to happen in this.

If we were to lower rates -- see, for example, I think you could lower the top rate from 35 percent to 33 percent, and actually get more revenue and get rid of some of the deductions at the same time. But I'm not going to vet to bring more revenue to Washington. I want less money coming to Washington, less money spent up here and that's how you get the economy to grow.

We are not going to have more economic growth if we send more money to Washington. We will have less economic growth.

BLITZER: If all the Republicans hold firm to that position you just spelled out in significant detail, there is not going to be a deal between now and December 31, and all Americans, for all practical purposes, middle class, rich, they will all see their tax rates going up starting January 1. How are you going to feel about that? PAUL: Well, the thing is, last year we did make a deal. The president came forward, when you have sluggish mechanic growth, and it was about 2 percent, he says raising taxes is a bad idea.

We have economic growth less than 2 percent now. Why would raising taxes now be a good idea? If it was a bad idea last year, it's still a bad idea, and I think while I do think there is room for compromise, I don't think one person doesn't gets to define where the compromise is.

BLITZER: Senator, the administration, the president who was reelected, impressive Electoral College win, he got a majority of the vote, won by several million votes, he ran on the notion of raising taxes on the wealthiest Americans. I suspect he's probably going to hold pretty firm on that, but we will see what happens over the next three, four weeks, because that clock is ticking. Anything you want to leave us with?

PAUL: No, but as long as we're spending money on robot squirrels, don't raise any taxes.

BLITZER: Yes, OK.

Hey, senator, thanks very much.

Guys, let us know what you think. You can follow us on Twitter @AC360.

Up next, we have got another twist in the administration's attempt other explain what happened the night four Americans died in Libya and their attempt to explain their explanation. A potential nominee for secretary of state caught up in the controversy may have sunk a little bit deeper today.

(COMMERCIAL BREAK)

BLITZER: "Keeping Them Honest" now on the Libya tragedy and the Obama's blurry account of it after the fact.

Four Americans died that night and there are plenty of unanswered questions about what went wrong. For now, though, most of the attention is focused on the messaging afterwards.

Another scorching day today for one of the chief messengers, the U.N. Ambassador Susan Rice, who President Obama might try to make the secretary of state. Just a day after a rocky session with Senators John McCain, Lindsey Graham, Kelly Ayotte, she met this morning with another Republican Senator, Susan Collins of Maine.

(BEGIN VIDEO CLIP)

SEN. SUSAN COLLINS (R), MAINE: I continue to be troubled by the fact that the U.N. ambassador decided to play what was essentially a political role at the height of a contentious presidential election campaign by agreeing to go on the Sunday shows to present the administration's position. (END VIDEO CLIP)

BLITZER: This is what she's talking about, one of several appearances Ambassador Rice made five days after the consulate killings.

(BEGIN VIDEO CLIP)

SUSAN RICE, UNITED STATES AMBASSADOR TO THE UNITED NATIONS: Our current assessment is that what happened in Benghazi was, in fact, initially a spontaneous reaction to what had just transpired hours before in Cairo. What we think then transpired in Benghazi is that opportunistic extremist elements came to the consulate as this was unfolding.

(END VIDEO CLIP)

BLITZER: Notice the phrase extremist elements. We have since learned that Ambassador Rice was speaking from talking points edited to remove any names to local jihadist groups, including a local al Qaeda affiliate.

Recall the former CIA Director David Petraeus recently told Congress the intelligence community made the edit. Then yesterday while accompanying Ambassador Rice on the Hill, the acting CIA director, Michael Morell, told senators the FBI was responsible and then later CIA officials contacted senators and said the acting director misspoke and it was actually the CIA that changed the talking points.

As we said last night, it's a bit of a mess and a real headache for President Obama who defended Susan Rice today, but did not mention Libya.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: All right, guys, thank you. Want to get back to work.

(CROSSTALK)

OBAMA: Thank you so much, guys.

QUESTION: Can you talk about it at all?

OBAMA: Susan Rice is extraordinary. Couldn't be prouder of the job that she's done.

(APPLAUSE)

(END VIDEO CLIP)

BLITZER: Here to talk about it, the former CIA officer Reuel Gerecht. He's a senior fellow at the Foundation for the Defense Of Democracies. Also joining us, our national security contributor Fran Townsend. She was President George W. Bush's homeland security adviser, currently serves on the CIA's External Advisory Committee.

Fran, you have been at the White House when a nominee or potential nominee is in trouble with members of Congress. You know what a high-stakes meeting this was yesterday between Ambassador Rice and three of her harshest Senate critics. Usually, a lot of preparation goes into a meeting like this, and that makes it all the more surprising to me, and I'm sure to you, that the acting CIA director, Michael Morell, would stumble so badly, first saying the FBI changed those public talking points and then having a CIA official call the senators back six hours later, and say it was actually the CIA that took out the references to al Qaeda.

Even if it was an innocent mistake, it just sort of adds fuel to the fire, doesn't it?

FRANCES TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: That's right, Wolf. And, look, you know, this was -- the event took place on September 11.

Mistakes in the early days, the first few days, are understandable because of the fog of war and conflicting reports. You can sort of excuse that. But this far later, it's really unfortunate. Mike Morell, the acting director of the CIA, he had been Senate- confirmed as the deputy prior to this, he's a career officer, very well-respected.

I imagine he is furious at having made the mistake, and having been given bad information. But there really is no excuse for it across the administration, this late in the game, for -- these meetings were so critically important -- to be making those kinds of mistakes now.

BLITZER: And, Raul, you say it's not an insignificant mistake that Mike Morell made.

REUEL MARC GERECHT, MIDDLE EAST EXPERT: No. I mean, I don't think so.

I mean, the administration got itself into a lot of trouble, particularly Ambassador Rice got herself into a lot of unnecessary trouble. by just being so assertive on television and denying the possibility that you have an organized terrorist attack in Benghazi.

I think the narratives of Cairo got conflated with the narratives in Benghazi. And if Ambassador Rice and others in the administration had just been a little less determined to say that this well-known video now was behind it all, I think this problem never would have happened.

BLITZER: Reuel, as for the talking points that were used by Ambassador Rice, subject, as you know, of great, great contention still, there are still a number of unanswered questions. As a former CIA officer, you say her performance raises a red flag, that officials are supposed to analyze this information for themselves, but isn't there a danger in having a political appointee like a U.S. ambassador in a sense freelancing when sensitive classified material is concerned?

GERECHT: No, I don't really think so.

I think Ambassador Rice could have easily have said that we may have had an organized terrorist group that may have been affiliated with al Qaeda behind the attack in Benghazi. I don't think it would have been compromising of any sensitive information.

I think the administration has used that as an excuse. You know, America has a lot of overclassification, there's no doubt about it. But that's one reason we have adults in senior positions, is that they are supposed to be able to handle this. I don't really think it would have been all that difficult for her to give a somewhat more nuanced discussion of what really transpired in Benghazi.

BLITZER: Fran, you have dealt with classified and unclassified talking points when you served over at the White House. You agree with Reuel?

TOWNSEND: Well, normally, Wolf, before a Sunday show, what happens is the communicators and those who have drafted the talking points, in this case perhaps the intelligence community, will prepare the individual who is going out on the Sunday shows, especially when they are going to do multiple shows, to make sure they understand where the lines are.

We don't know if that happened here. If it didn't, it certainly should have. It leads to what Reuel was saying, that you learn how to make a more nuanced argument so that you don't cross classification lines, but you don't speak inaccurately.

Frankly, Wolf, this was just poorly handled. Clearly, the talking points were poorly coordinated, and she went out there, making it sound crystal-clear, and I think she was both poorly served and then she didn't really use the talking points she was given in the way that she might have, to get to Reuel's point.

BLITZER: Fran, have you been to Libya, and you were there in fact just before the terrorist attack on the U.S. Consulate in Benghazi. You were warning that al Qaeda was gaining a foothold in Libya. What do you make of the reason as to why those direct references to al Qaeda were deleted?

TOWNSEND: You know, it's not -- oftentimes, Wolf, these talking points went to multiple agencies, probably a dozen agencies and dozens of people touched them and nobody ever took final responsibility for the clearing of them. It's sort of a typical bureaucratic fumble as far as I'm concerned.

The more frustrating thing to me is the fact that what we're not talking about. While we continue to talk about the talking point, what's been lost is what you say. Prior to this event, it was clear that terrorists were gaining a foothold in Eastern Libya, and why wasn't more done to prevent the attack, to give them the security that they needed a that Benghazi consulate?

The substance of this is sort of lost I think in the debate about the talking points and that's the far more important issue to me.

BLITZER: Fran Townsend, Reuel Marc Gerecht, guys, thanks very much for joining us.

TOWNSEND: Thanks, Wolf.

GERECHT: Pleasure.

BLITZER: Rebel fighters in Syria are claiming a major victory. They say they have shot down three regime military aircraft in the past 24 hours, including a MiG fighter jet. If it's true, the regime may be taking hits from its own weapons. CNN's Arwa Damon on the scene. She joins us next.

(COMMERCIAL BREAK)

BLITZER: In Syria, new signs tonight that the regime is now being battered with its own weapons. Opposition fighters say they have shot down three Syrian military aircraft in the past 24 hours.

Here is what CNN's Arwa Damon and her team found at the site of one of the crashes. Rebels claim that's the wreckage of a MiG fighter jet they brought down. This was in Aleppo Province in northern Syria, by the way. CNN shot that video.

This one was posted online by rebels. It shows a helicopter they claim they shot down with a missile. It appears to take a direct hit. There it is. CNN can't verify the video's authenticity. Until now, the rebels haven't had the firepower to pull off attacks like these. But in recent weeks they have captured a number of government air bases.

Arwa Damon has visited one of them in Aleppo and saw for herself the weapon caches the rebels have seized, including surface-to-air missiles they have.

Arwa Damon joins us now.

Arwa, opposition fighters claim they shot down three Syrian military aircraft over the past 24 hours. You went to the scene of the one of the crashes today. Tell our viewers what you saw,

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: In the past 24 hours, this was certainly a pretty dramatic development, Wolf, given that one of the main complaints that opposition fighters have had is that they do not have the capabilities to take on the Assad regime's airpower.

We went to the scene of where a fighter jet was downed earlier. We saw the burnt wreckage, spanning quite a distance and being picked through by villagers, young and old alike, rejoicing in the fact that they were finally able to see something that had caused them so many nightmares because of the jets pounding, the helicopters pounding the various villages, towns and cities nonstop, now being -- becoming trophies of war that they were proudly showing off. We saw children on the back of a tractor, making off with a sizable tangled lump of metal. We spoke to one man who said that he was an eyewitness to everything. He said he was picking olives. The crash happened in the middle of an olive grove. He saw the plane being hit, the two pilots ejecting. He says at that point, everyone fanned out looking for the pilots, and he said that they managed to find one of them unconscious with a head injury, and they are actually looking for the second pilot right now.

BLITZER: You also, Arwa, went to a former Syrian air force base, a headquarters, if you will, that was seized by the rebels where heavy weapons were confiscated. What did the opposition fighters tell you there?

DAMON: Well, it is exactly because of the seizure of this base that they're telling us that they were to bring down the jet and that they were able to bring down the two other aircraft, with two helicopters.

This base is massive. I mean, it spans as far as the eye can see. There was an incredibly intense battle that took place there for 24 hours. But that is after the rebels had actually laid siege to the base for two entire months.

They managed to clear all the villages around the base of Assad loyalists, of Assad fighters. They then positioned snipers around the base, preventing -- they were telling us -- regime helicopters from bringing in resupplies and bringing in food. They were forced to try to air-drop supplies to this unit that was trying to keep a grip on the base. But oftentimes, they would miss their target and the supplies would actually end up on rebel hands.

So when they thought that their enemy was weak enough, that is when they finally moved in. And they are telling us that they captured a treasure trove of weaponry from this location. Heavy machine guns, AK-47s. But most importantly of all, Wolf, was the anti-aircraft missiles. They're telling us that they found hundreds of them, even though they're not all functioning. In fact, there's video posted to YouTube right after the assault took place, just showing stacks of metal boxes, stacks of Soviet-era anti-aircraft missiles.

And so while at this point, the regime does still have the military advantage, simply because of the sheer size of its arsenal, many are telling us that right now the balance is beginning to ever so slightly shift.

BLITZER: Is there a sense, though, hard sense -- and you're there on the ground in northern Syria, that one of the sides, the regime or the opposition, has the upper hand right now where you are in northern Syria?

DAMON: The rebels are slowly, slowly gaining ground, but at this point in time, the regime still does have the advantage of its air power. It still does have the advantage of its military arsenal. And Wolf, there's been one scene that's been resonating for our entire trip on this date from all of the fighters, from all of the activists we've been talking to, and that is that the longer Assad stays in power, the greater the strength is going to grow of the extremists that have managed to infiltrate themselves on the fringes of the opposition, an element of al Qaeda, as well.

BLITZER: Very disturbing development. Arwa, stay safe over there. Thank you.

Could be the largest case of Medicare fraud ever. A dialysis company accused of throwing away medicine worth hundreds of millions of dollars, with taxpayers putting the bill. "Keeping Them Honest," next.

(COMMERCIAL BREAK)

BLITZER: Texas authorities take steps to seize the polygamist ranch used by followers of the sect leader Warren Jeffs. Why they're making the move when 360 continues.

(COMMERCIAL BREAK)

BLITZER: Tonight, we're "Keeping Them Honest" with an example of just how much money can be made treating sick Americans. I

In downtown Denver, a company called DaVita just moved into this brand-new $101 million office tower, complete with fountains, gardens, even a suspended sky gondola inside for private meetings. So what DaVita do? It runs 2,000 dialysis clinics across the United States, and that has added up to a $7 billion business.

A dialysis empire runs by a guy who dresses like one of the Three Musketeers, lives by his company's slogan, "All for one and one for all," and in company staff meetings leads his employees, who he calls villagers, in cheers.

(BEGIN VIDEO CLIP)

KENT THIRY, CEO, DAVITA: DaVita! It's so good to get out of that CEO costume and back into my regular clothes.

(END VIDEO CLIP)

BLITZER: Kent Thiry is his name, and with an estimated $15 million a year, "The Wall Street Journal" says he's the best- compensated CEO in Colorado. So why should you care? Because most of his company's revenue comes from a single source. Taxpayers.

More than 2/3 of DaVita's revenue comes from Medicare and Medicaid payments, which is why the allegations you're about to hear about how DaVita has been billing the federal government are so alarming. If the allegations are true, the company threw away hundreds of millions of dollars of medicine, and you paid for it. It could be the largest case of Medicare fraud in U.S. history.

Here's Drew Griffin.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Looks good.

DREW GRIFFIN, CNN CORRESPONDENT: It was just by chance Dr. Alon Vainer, a medical director at Dallas' clinics in Georgia, was discussing clinic procedures with one of the nurses, Daniel Barber. And the two say they saw something they believed was very wrong. Medicine, lots of it, was being tossed in the trash. And the clinic workers were being told to do it.

DR. ALON VAINER, FILED LAWSUIT AGAINST DAVITA: When we sat down and we started talking about it, and getting into details, we actually realized exactly what's going on.

GRIFFIN: The alleged waste was being carried out on a massive scale, and the nurse and doctor say they knew almost immediately just why. They claim it was a way for their company, DaVita, to defraud the government, overbill Medicare and Medicaid, and make a fortune.

(on camera) We're talking about a huge amount of money.

VAINER: We're talking about -- is hundreds of millions, easily. Off -- of the profits of this company, direct from those schemes. Only from those two drugs. Hundreds of millions of dollars.

GRIFFIN (voice-over): And because we're talking about defrauding Medicaid and Medicare, that's hundreds of millions that you, the taxpayer, paid for.

Vainer and Barber say the alleged fraud schemes they discovered were going on at the company's clinics all across the country, more than 1,800 of them. With tens of thousands of patients. Multiply the numbers, the waste, and the billing? Dr. Alon Vainer says it was all a deliberate strategy.

VAINER: Absolutely. Because just a scheme in order to fraudulently increase and maximize and boost the Medicare revenue. Medicare payments therefore fraudulently increase our revenue.

GRIFFIN: Here's how Dr. Vainer says DaVita instructed its nurses to administer a 100-milligram dose of iron called Venofer.

VAINER: This is Venofer. It's iron.

GRIFFIN (on camera): And how much is this? I mean, how many...

VAINER: A hundred milligrams. So, for example, if a patient would require this dose once per week, you'd administer 100 milligrams, waste nothing. And charge for 100 milligrams. What DaVita did, out of this one vial they gave 50 milligrams out of this vial, where it go? Trash? Twenty-five, 75 to the trash. Twenty-five again, 75 to the trash. So essentially, two whole vials -- you had one vial that could have been given without waste. .

GRIFFIN (voice-over): The more vials DaVita used, the more DaVita was able to bill the government.

Vainer and Barber claim they tried to call attention to the massive waste and tried to get it stopped. But they say they were basically told to stop causing trouble themselves and continue following the company's protocols.

DANIEL BARBER, FILED LAWSUIT AGAINST DAVITA: That's what upset me the most, and that's when I went to Dr. Vainer, and I said, "Dr. Vainer, I can't do that."

GRIFFIN: Barber says he quit his job and left the clinic, rather than continue where fraud was going on. Dr. Vainer claims the company punished him for speaking out.

VAINER: Of course, once they found out, they did not renew my medical directorship or my practice, where three physicians now practice. And it was a significant loss of revenue.

GRIFFIN: Today, both men have filed a whistleblower lawsuit under the U.S. False claims Act on behalf of the U.S. government, charging DaVita with massive Medicare fraud. They stand to make millions if DaVita is found guilty.

DaVita's CEO wouldn't talk, but the company's attorney, Kim Rivera, did.

(on camera) The allegation is pretty simple, that DaVita was being paid to throw away medicine and came up with schemes, as the plaintiffs call it, grids to maximize profits, in terms of throwing away waste. What is DaVita's response?

KIM RIVERA, ATTORNEY FOR DAVITA: Well, that's just wrong. If you look at the facts of the case, first of all, the doctors make dosing decisions.

When you look at what the practices were, the decisions were being made by doctors, based on what was in the best interests of their patients.

And they took into account a variety of things. You can't just look at, you know, one issue. You have to look at things like infection control, what the patient's going to do, how the patient will do with particular doses. And so during that entire time, what we did, what the doctors did, was appropriate.

GRIFFIN: But other companies, including DaVita's main competitor, used smaller vials, smaller combinations, limiting what was thrown away.

DaVita only reiterated to us its decision to throw away medicine was for sound clinical reasons and never to increase wastage. Attorneys Lin Wood and Marlan Wilbanks, who claim DaVita made as much as $800 million overbilling the government, say that defense won't hold up in court.

LIN WOOD, PLAINTIFFS' ATTORNEY: It's not just the taxpayers that are the victims here. It's the health -system.

MARLAN WILBANKS, PLAINTIFFS' ATTORNEY: It doesn't take a graduate degree to understand what's going on here. This is just dishonesty.

GRIFFIN: DaVita denies that and vows to fight this case in a Georgia court. But earlier this year in Texas, though denying it did anything wrong, DaVita settled a similar case for $55 million.

Pat Burns, with the watchdog group Taxpayers Against Fraud, says the bigger problem is even if the company gets caught cheating government, the company executives never seem to face any punishment. Fines are paid, business continues as usual.

PAT BURNS, TAXPAYERS AGAINST FRAUD: The way it's set up right now is, if the fraud is not caught, then taxpayers foot the bill. If the fraud is caught, stockholders foot the bill.

GRIFFIN: Burns and others have been arguing for much harsher treatment when companies are caught defrauding the federal government. He points to record billion-dollar fines, particularly in the pharmaceutical business, that are paid but executives don't get punished, and the companies continue to do business with the government.

In fact, one of DaVita's defenses to CNN is that the federal government itself has declined to charge the company with wrongdoing, even after reviewing the fraud allegations.

RIVERA: The government has come in and thoroughly investigated what the allegations are, and in both cases, the government decided to drop it and move on.

GRIFFIN: The U.S. attorney did decline to prosecute the case but says the decision should not be construed as a statement about the merits of the case.

BURNS: The U.S. Department of Justice simply doesn't have the people.

GRIFFIN: Pat Burns says the short-staffed U.S. Department of Justice declines to join lawsuits all the time. Instead, allowing private citizens, who hire private lawyers, to essentially prosecute for the government.

Which brings us back to one doctor and one nurse, who stand to make millions if those allegations of fraud are proven true. The biggest winners, though, in their lawsuit would be taxpayers. The U.S. government will recover the bulk of whatever they win. They and others like them, are essentially the U.S. taxpayers' deputies in the fight against health care fraud.

(on camera) Are you surprised that you guys have to defend the U.S. taxpayer? And not the U.S. government knocking on this door?

BARBER: I'm not surprised. It is not easy to come up, come forward and stand up and tell the truth. But it's the right thing to do.

GRIFFIN: Their case, set for trial later this year.

(END VIDEOTAPE)

BLITZER: Drew Griffin joins us now.

Drew, is there a chance DaVita just settles this case like the one they settled in Texas and then just put all these allegations behind them, continue to do business with the government?

GRIFFIN: The attorney for DaVita couldn't rule that out, Wolf, but insists this time the company is going to fight the allegations, and as for continuing to do business with the government, that is the bread and butter of DaVita's $7 billion business. More than two- thirds of the company's revenue comes from treating patients on Medicare and Medicaid, because DaVita needs the government, Wolf, and will most likely do everything it can to make sure it has that contract in place so it keeps working.

BLITZER: Yet, even with all that money at stake, Drew, and so much fraud being alleged, here, why isn't the government's own lawyers taking up the case? Is DaVita right in saying that is proof there is no case?

GRIFFIN: Well, it is a fair question to ask. Where are the government's lawyers? And I don't know the answer.

The U.S. attorney here in Georgia would be the one to push this case. Congress has set aside more than $600 million specifically to prosecute health-care fraud, but the U.S. attorney based in Atlanta has decided not to intervene.

Does that mean that she thinks that this is a bad case? She wouldn't answer our calls. All we can tell you is, in a letter, the U.S. attorney's office stated its lack of prosecution should have no bearing on the merits of the case. And a reminder, Wolf, if these two guys win, the doctor and the nurse win, whatever settlement they do get, the biggest winner of that settlement is going to be the federal government.

BLITZER: Drew Griffin reporting for us. Drew, thanks very much for that report. We'll continue to monitor it, see what happens.

Fifty-seven years after Albert Einstein's death, the world is now getting a look at 14 recently-discovered photographs of his brain. For neurosurgeons like our own Dr. Sanjay Gupta, it's a gift, a window into genius. Sanjay joins us. That's next.

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BLITZER: Let's face it. We all knew deep down that Albert Einstein's brain was different from ours. But now, new research published in the journal "Brain" literally shows that those differences are serious and how they might explain Einstein's genius. The paper includes 14 recently-discovered photographs of Einstein's cerebral cortex. That's the outside of his brain. They were taken shortly after his death in 1955.

Fast forward to 2012. You can imagine the interest these images hold for our chief medical correspondent, the neurosurgeon, Sanjay Gupta.

Sanjay Gupta joins us now.

Sanjay, what can you tell about a brain just by looking at it from the outside?

SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Well, Wolf, take a look at some of the images over here and pay close attention to the convolutions, the ridges and the valleys, if you will, of the brain.

This is something that develops as the brain develops and can even change as someone goes through their life. What we notice in Einstein's brain, in particular, is that there are a lot of convolutions, and compared to other brains of people his age at the time that he died, more convolutions than normal. More ridges, more valleys.

And that's important, Wolf, because you have more surface area to the brain then. More surface area means more neurons, and what's really fascinating, Wolf, is that that alone doesn't indicate that someone is going to necessarily be more intelligent. But what it means probably more likely is they have the capacity for it.

BLITZER: How else does Einstein's brain, Sanjay, differ from most people's?

GUPTA: Keep in mind, it's hard to know exactly what these differences mean. But take a look at this image in particular, Wolf. You see a split in the brain there, in that frontal lobe. And that's unusual. We don't know exactly for sure what that means. But we do know that part of the brain is responsible for executive decision making. It's responsible for judgment. It's responsible for actually getting tasks done.

So someone -- if they're a great thinker but never act on those thoughts, never actually deliver on those thoughts, and maybe the world would have never known.

Also, just one more image really quick, Wolf. What you're looking at here is the parietal lobes. You're looking from the back of the brain now. There's a purple area and a turquoise area on both sides. Notice that they're different right to left. Everyone has a little bit of variation, but in Einstein, it was quite different.

And on one side, on the right side there, that's an area of the brain that's responsible for spatial relations, for taking abstract ideas, perhaps, and putting them together. That's -- that's the area of the brain where that's done. And in Einstein's case, it was quite large compared to other brains that were examined. BLITZER: Fascinating stuff. Sanjay, is there anything about Einstein's brain that has implications for mere mortals like us?

GUPTA: I thought about that a lot, as well. And I think the one thing -- the one thing I think is really interesting is this idea that are you born with it or do you develop it? It's the nature/nurture question. And you can ask the same thing when it comes to Einstein's brain.

You know, I'll tell you what. If you look at this one image again over here and you look specifically in the middle of the brain, on that left side, you see sort of an upside-down horseshoe area, Wolf. That's an area that's responsible for your motor control, for example. And in this case, somebody who has really fine dexterity, for example, would have a developed area of the brain there.

We know Einstein was a musician. he played the violin. And here's why that's so important, is that you -- he couldn't have been born with that. That was something that he developed. He became a progressively better musician. That part of his brain actually changes. It's the most remarkable thing.

BLITZER: Yes. And Sanjay, all of our viewers should know, is himself a neurosurgeon. So he has a lot of experience with brains. Sanjay, thanks very much.

GUPTA: Thank you, Wolf. Any time.

BLITZER: Also very, very smart guy.

Let's get the latest on some other stories we're following right now. Isha Sesay has a "360 Bulletin" -- Isha.

ISHA SESAY, HLN ANCHOR: Wolf, the New York nanny charged with murder in the killings of two children has pleaded not guilty. Yoselyn Ortega is accused of fatally stabbing the little girl and boy. Police say when their mother came home, she found her children dead, and she saw Ortega stabbed herself with a kitchen knife.

A 360 follow on polygamist sect leader Warren Jeffs, who is serving a life sentence on sexual assault charges. The Texas attorney general's office has started legal proceedings to seize the ranch where prosecutors say Jeffs and others sexually abused children.

And the record-breaking $550 million Powerball drawing tonight, the odds of winning, one in 175 million. Wolf is back right after this.

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BLITZER: That does it for this edition of 360. Thanks for watching. "ERIN BURNETT OUTFRONT" starts now