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EARLY START WITH JOHN BERMAN AND ZORAIDA SAMBOLIN

Report: "Systemic Failures" at State Department; Massive Winter Storm; Four More Funerals In Newtown Today; Tea Party Group Raffles Off Rifle; NRA Pledges "Meaningful Contributions"; Shares of Gunmakers Tumble

Aired December 19, 2012 - 06:00   ET

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


ZORAIDA SAMBOLIN, CNN ANCHOR: Blizzard warning. A major winter storm threatens to cripple travel from Colorado to the Great Lakes.

JOHN BERMAN, CNN ANCHOR: The U.S. State Department slammed. A new report details the failures leading up to the Benghazi attack.

SAMBOLIN: Silent no more. For the first time since Newtown, we are hearing from the NRA amid calls for new gun laws. Good morning. Welcome to EARLY START. I'm Zoraida Sambolin.

BERMAN: And I'm John Berman. Great to see you, everyone. It is 6:00 a.m. in the East. We're going to begin this morning with a blistering report that blames systemic failures at the State Department for the terrorist attack on the U.S. Consulate in Benghazi.

An independent review board concluding security at the facility was grossly inadequate and officials in Washington ignored repeated requests to beef up personnel there.

And in the aftermath of the tragedy that took the lives of four Americans, there was a lack of transparency, responsiveness and leadership at the senior levels.

We're joined now by foreign affairs reporter Elise Labott who is live from Washington this morning. Elise, what do you take from this?

ELISE LABOTT, CNN FOREIGN AFFAIRS REPORTER: John, it's a real sobering look at the events that led up to the attack on that Benghazi Consulate on September 11th. Some of the things that went wrong, basically that the management, of what they call the Diplomatic Security Bureau in charge of facility and personnel, security and the Near Eastern Affairs Bureau that oversees all of the Mideast policy bureaus, basically was inadequate to handle what happened.

They missed the warning signs, John. There were a lot of attacks in the recent days, leading up to the 9/11 attack on other targets, other western targets, and also that they just kind of didn't understand what they needed at this security post.

They were relying on a lot of local militias and poorly trained security personnel. Let me read a little to you from the report it says systemic failures and leadership and management deficiencies at senior levels within two bureaus of the State Department resulted in a special mission security posture that was inadequate for Benghazi and grossly inadequate to deal with the attack that took place.

John, I think there will be a lot of kind of gut checking at the State Department about how you operate in these high-threat posts. There -- definitely the State Department wants to stand up in some of these areas like Benghazi and other places and there is an acceptable risk, but you definitely need a kind of security posture that recognizes the deteriorating situation that's happening.

BERMAN: So the study, this report, found a lack of reed leadership and what they call management ability, but it also said they did not find reasonable cause to determine that any individual, U.S. government employee, breached his or her duty. Still, what is the State Department going to do now? What is their response to this?

LABOTT: Well, it says that no one, quote/unquote, "breached their duties," but it did go on to say that future reports should look at that in a kind of review process of management personnel to see if these people are really doing the job they could.

The report came out with 29 recommendations on how to increase security at these high-threat posts, how to deal with fire and safety issues, that ultimately was the thing that caused the death of Ambassador Stevens and Shawn Smith.

It was smoke inhalation, so they want to review those fire equipment, safety equipment and they also want some officials that can deal with this. Secretary of State Clinton sent a letter to various committees on the Hill when she presented this report. She is already working on implementing those recommendations -- John.

BERMAN: Of course, one of the letters was sent to Senator John Kerry, head of the Senate Foreign Relations Committee, who we all think is about to take her job. That's interesting in and of itself. Elise Labott in Washington, thanks very much.

SAMBOLIN: It's 4 minutes past the hour. A massive winter storm stretching from Colorado all the way to the upper Great Lakes. It's expected to cause dangerous blizzard or near-blizzard conditions today. It is also cold and stormy in the northwest.

Alexandra Steele is in the weather center in Atlanta. She is breaking it all down, following it for us. What can you tell us, Alexandra?

ALEXANDRA STEELE, AMS METEOROLOGIST: Good morning to you, Zoraida. Good morning, everyone. Well, you know, a powerful winter storm is going to unfold during the next 48 hours. It is going to begin this morning in Denver, Colorado. Snow has not started there, but it will about 8:00 or 9:00 local time.

And then kind of just roll out. Here's that train kind of like a carpet, it will unleash a band of very heavy snow driven by some very strong winds, so the snow, we'll see about 1 to 3 in Denver, Colorado, winding up tonight. Tonight and tomorrow from Omaha right along this I-80 corridor, 6 to 12 inches and then into Des Moines, blizzard warnings for you, 6 to 12 inches of snow, 50-mile-per-hour winds. And then works its way in Chicago, 2 to 4 inches, winding down there tomorrow night.

So that's how kind of will all unfold and you can see the path. All the computer models certainly have a consensus on this. Here's the timeline this morning, watch it wind up from Colorado to Kansas and as we head from overnight tonight into tomorrow, you can see north of Chicago, Milwaukee, Madison gets into it.

And there's that I-80 Corridor and then Thursday morning, Thursday morning to Thursday night, you can see Chicago changes over from rain to snow, and you can see how tight the pressure gradient is, that means winds will be incredibly strong.

So it is small. It is powerful and we'll see it really with the snow and then the winds be very impactful. There is the spread of it the next three days. You will see the snow, Colorado to the upper Midwest and then, guys, another storm hot on its heels to the Pacific Northwest that will be the Christmas snowmaker.

BERMAN: You are so angry this is going to Chicago. You are taking this personally.

SAMBOLIN: I am taking it personally because a lot of people leaving on the 21st traveling for the holidays and this is going to directly impact them like you said 48 hours so --

BERMAN: By a lot of people, she means her.

STEELE: By a lot of people, she means me.

SAMBOLIN: See I'm not alone. A lot of us are traveling for the holidays. Thank you for the heads up and the warning that we're going spend a lot of time at the airport. We appreciate it.

BERMAN: So we've been talking about a lot of this weather. The northwest has seen a lot of weather. Take a look at the sheer force of a mudslide in Everett, Washington. This knocked out seven passing railroad cars right off the tracks.

The video shot by a local long shoreman who heard rumbling sounds at the location for hours. The 75-foot mudslide knocked out Amtrak in the service, but it has resumed. It was caused by an oversaturated 100-foot cliff that engineers were planning to check, get this, right after the 66-car train passed through.

SAMBOLIN: Timing is everything, right?

All right, with 13 days left to get a deal done, it looks like House Speaker John Boehner and President Obama are crawling toward a fiscal cliff compromise. In Boehner's latest counteroffer, he is agreeing to tax hikes on families earning $1 million and up as well as sweeping spending cuts to domestic and defense programs. The White House immediately rejected it, claiming it could never get to through the Senate. The president's proposal would raise taxes on families earning $400,000 a year and higher. That's up from the $250,000 he initially proposed while cutting $930 billion in spending.

So in the next half hour, we'll talk about the fiscal cliff and what it will take to get a deal done with Republican Congressman Paul Brown of Georgia.

BERMAN: A third day of funerals in Newtown, Connecticut today. Four more victims will be laid to rest, hero teacher, Victoria Soto, and three of the slain children, Daniel Barden, Caroline Previdi and Charlotte Bacon.

With the community still in mourning, students in Newtown returned to class yesterday. Everyone but the Sandy Hook kids who will return after winter break to a school in a neighboring town.

CNN's Sandra Endo was there for the first day back.

(BEGIN VIDEOTAPE)

SANDRA ENDO, CNN CORRESPONDENT (voice-over): The first day back to school in Newtown, children returning to classes Tuesday and the painful reminder of those who could not. On the bus ride to school, grief was a constant reminder.

ALEX QUIMBY, 11-YEAR-OLD STUDENT: I noticed it was like quiet so -- because people were like thinking about the tragedy that happened.

ENDO: At schools, teachers and students spent time to reflect.

QUIMBY: They just talked about how things will get better than they are now. I felt safe because when your teachers talk to you and comfort you about what happened.

ENDO: For students at Sandy Hook Elementary, the next time they return to class will be in the New Year. Newtown superintendent says teachers and students need more time to deal with the trauma and get used to the new space in a neighboring town. State and local officials had no estimates on attendance for the first day back at school. Returning to a routine was key for everyone.

MELANIE DROHAN, MOTHER OF NEWTOWN STUDENT: You don't want this to affect you forever. You want to be brave and get back to things normal as possible. We realize we have to go on, but it's very, very hard and hard to think about what happened.

ENDO: Police, grievance counselors, and comfort dogs on hand at schools to help students adjust perhaps the new normal now in Newtown.

(END VIDEOTAPE)

ENDO: Now, the goal is to make sure kids return to a sense of normalcy, but for students returning to class yesterday, it was anything but a regular school day -- Zoraida, John. BERMAN: All right, Sandra Endo in Newtown. Thanks very much.

SAMBOLIN: Gun rights advocates upping the ante. Coming up, the group that's raffling off an assault rifle.

BERMAN: And new developments this morning at the White House about new gun legislation in the federal level. New developments just in. We're going to live to Washington, straight ahead.

(COMMERCIAL BREAK)

SAMBOLIN: Welcome back to EARLY START. It's 12 minutes past the hour. Well, we're seeing a shift in the polls on gun control after the Sandy Hook tragedy, many gun rights supporters are actually doubling down.

Listen to this, a Tea Party chapter in the mountains of North Carolina, which is raffling off a rifle. The Ashfield Tea Party posted an announcement about this raffle on Monday.

That's the day of the first funeral in Newtown, which the group is calling "The Great Gun Giveaway." The $20 tickets for a chance to win an AR-15 rifle with two 30 round magazines, the same style and caliber gun, just a different brand.

In many other places, momentum is growing to do something about guns. The White House just announcing steps the president is taking and a new push for gun control. It comes as we're hearing from the NRA for the first time since the Newtown shooting.

CNN's Dan Lothian is live in our Washington Bureau. So tell us about these new developments, Dan.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right. It is a new development. The White House later this morning, the president will be making an announcement that Vice President Biden will be heading up new interagency effort to come up with policies to address the issue of gun violence.

The president will be making this announcement in the White House briefing room, will be joined by Vice President Biden, White House aides saying that the president will be talking more about process rather than any specific policies.

But nonetheless, Zoraida, this is another effort by the president, by the White House to show action in the wake of that shooting.

SAMBOLIN: Dan, emotions are running high right now. What is the reaction right now from gun rights supporters?

LOTHIAN: Well, you know, you are hearing it on both sides. There are those who are pushing for tougher gun laws, but also there are those gun owner who say they want to make sure that their rights are protected. Take a listen.

(BEGIN VIDEO CLIP) LARRY PRATT, EXECUTIVE DIRECTOR, GUN OWNERS OF AMERICA: In the very places that have been sought out by monsters such the murder of these adults and children, we're saying, no, we don't want you to be able to defend yourself.

It's better that you just sit there and wait to be killed. And we find that morally incomprehensible and deeply disturbing that the desire to defend life has been so cast aside and to whatever political correctness views guns as the ultimate evil. Evil is in our hearts, not in the guns.

(END VIDEO CLIP)

LOTHIAN: Some strong emotions there.

Now, the National Rifle Association, which has been largely silent, releasing a statement saying its membership was heartbroken and shocked, and that, quote, "Out of respect for the families, and as a matter of common decency, we have given time for mourning, prayer and a full investigation of the facts before commenting. The NRA is prepared to offer meaningful contributions to help make sure this never happens again."

And, by the way, Zoraida, the NRA is planning a major news conference right here in Washington on Friday.

SAMBOLIN: Maybe to discuss those meaningful contributions and exactly what they are.

Dan Lothian, live for us at the White House -- we really appreciate it.

You know, I have to add, there is a group, a woman who has this web- based group of Connecticut mothers, 5,000 women strong, 40 of them were Newtown moms and they say they will not leave this fight alone, they will not rest until those assault rifles are banned.

BERMAN: It does give them new chapter and new momentum, that is for sure.

It is 16 minutes after the hour right now. We have other news going on, let's go to Christine Romans with the headlines.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Good morning, again, you two. A review board is blasting the State Department this morning, blaming systemic failures in Washington for the deadly attack at the U.S. consulate in Benghazi, Libya. The report finding security in Benghazi was grossly inadequate, and there was a lack of transparency, responsiveness and leadership at the senior levels afterward.

The feds have decided not to file cyberstalking charges against Paula Broadwell. She's the woman in the middle of the sex scandal that brought down CIA Director David Petraeus. The FBI became aware of Petraeus affair with Broadwell after learning she sent harassing e- mails to Tampa socialite Jill Kelley, warning her to stay away from Petraeus.

For the second day in the row, health care workers giving polio vaccinations in Pakistan were shot dead. Officials say at least three were killed today, five were murdered yesterday. A few months ago, the Pakistani Taliban banned polio vaccinations as long as the U.S. continues its drone campaign. Pakistan is one of three countries where polio has not been eradicated, the others are Nigeria and Afghanistan.

Thousands of fans expected to gather today to celebrate the life of Mexican-American singer Jenni Rivera. A memorial will be held this morning at Gibson Amphitheater in Los Angeles. To prevent out-of- control crowds, a limited number of tickets are made available to the public yesterday. They sold out, you guys, in about an hour.

Rivera and six other people died in a plane crash in Mexico earlier this month.

All right. A rugrat who stole Christmas. Police in central Florida believe an 8-year-old girl is responsible for stealing packages left on doorsteps. Neighbors in Claremont, Florida, annoyed that they weren't getting their packages, set up a sting to catch a thief and they were awfully surprised to find out who it was -- a little 8-year- old girl. And now, they're asking for an apology from the girl and her parents.

SAMBOLIN: Wait, wait, wait, wait, wait. Was she sent to do it, or did she do this on her own?

ROMANS: Unclear, but packages have been disappearing. Packages have delivered and disappearing, and the neighbors started talking about it, set up a little sting.

BERMAN: I think it's safe to say this goes in the naughty column.

ROMANS: Yes, lump of coal for the little girl.

Also, Silvio Berlusconi getting hitched.

BERMAN: On the subject of lump of coal.

ROMANS: The 76-year-old former prime minister of Italy announcing he is engaged to a 28-year-old woman. This is while his sex for hire trial continues in Milan. Berlusconi is also flirting with the idea of another run for prime minister.

BERMAN: That must have been some engagement ring, right?

ROMANS: That guy, he's got --

BERMAN: The guy may want to be prime minister, forgetting all of his other problems, Europe, the financial sector, is terrified of that.

ROMANS: Silvio Berlusconi, the gift that keeps on giving.

SAMBOLIN: Oh my goodness. ROMANS: John is trying to make this very serious. I appreciate you bringing it back to the financial crisis.

SAMBOLIN: But no, no, no. We were focused on something different.

BERMAN: You mean the sex for hire trial? And the proposal during the sex for hire trial? Like I said, it's a tough proposal.

(LAUGHTER)

SAMBOLIN: All right. Nineteen minutes past the hour.

Main Street might be seeing a run for guns in some places, but Wall Street, oh my gosh, it is the absolute opposite. We're going to have a look at that, coming up.

(COMMERCIAL BREAK)

SAMBOLIN: Good morning, New York. Bring a cup of coffee over to the TV, chat for a while.

BERMAN: Two, two cups of coffee.

SAMBOLIN: Two cups of coffee, because it's going to take a while.

Minding your business this morning: U.S. stock futures pointing to a higher opening for the markets. And yesterday was a very big day for stocks.

BERMAN: Yes, a really big one. Christine Romans here to talk about the markets, plus, a new warning about America's credit rating.

ROMANS: That's right. You know, Fitch just out in a few moments ago with a warning that the European crisis is still a very big problem.

Also, Fitch says it has identified the U.S. fiscal cliff as the biggest near term threat to the world economy. Its baseline assumption is that the fiscal cliff will get fixed, we won't go over. But they said if we do, that would be something that they would have to reexamine America's credit rating. The fiscal cliff, the biggest threat they say to the world economy. So, that's Fitch.

But, mostly, you got markets thinking that it's going to get fixed. And markets are doing well -- look at the Dow yesterday. I mean, you got the Dow well above 13,000 now. In fact, this is one of the best years for the Dow since 1950. It's up more than 9 percent for the year so far, on track to be one of the best years ever.

Sorry if you missed it. A lot of individual hedge fund investors really afraid of things like the fiscal cliff this year, companies sitting on the sidelines, not investing in new technologies or jobs. And so, you got hedge funds and individual investors pulling money out of the market, even as the market has been going higher.

Speaking of pulling money out of the market, yesterday, investors were running scared from gunmakers. I want to show a couple of these stocks. They're down double digits over the past couple of days.

Smith & Wesson yesterday was down 11 percent. Sturm and Ruger, also down. Cabela's, by the way, it's a hunting and sporting goods store, it was down 10 percent as well.

We're talking about how some of the big major retailers are assessing their advertising and sales of some of the semi automatic assault rifles. I want to see if we can look at those gun stocks, though, over the past year, because they have had a terrific year.

They have -- you look at Smith & Wesson, I think it's up 78 percent. So far this year, they are profitable. They make an awful lot of money. We know Cerberus, the private equity fund that owns Bushmaster, the group of companies that own Bushmaster, going to get out of that business, but it has been very, very profitable.

And over the past few years, the highest -- I guess the fastest growing part of this business is the semiautomatic assault rifles and these high-capacity magazines for ammunition. So those have been a fast-growing part of the business, very profitable.

SAMBOLIN: Do you have a dollar amount on profits?

ROMANS: Well, you look at something like Smith & Wesson. They had a record sales in the second quarter. You look at something like Bushmaster, the company Bushmaster, Freedom Group which owns that and a couple, $200 million and a quarter billion in profit last year.

So it's profitable. I can tell you, gun sales are up. You are seeing anecdotally, and you're seeing the numbers, gun sales are up.

But these stocks really got hammered, the feeling on Wall Street, could there be a shift? Is this somehow different? This gun violence episode, will this result in some kind of tightening of laws that will make those fast-growing parts of the business slow down a bit?

SAMBOLIN: That's why gun sales are up because people are worried there will be changes in the law and so, they're getting their guns.

ROMANS: And there are also people who, quite frankly, who are worried -- they're trying to protect themselves, you know? That's the -- when you are in -- this is such an interesting industry, because you make something.

Usually, companies spend millions trying to make sure their product doesn't hurt someone. This is an industry that make as a product that can be used to kill someone. And in this case, a very big public relations problem.

BERMAN: What's the one thing we need to know about our money?

ROMANS: Gas prices are near two-year lows. Gas prices, guys, are down 27 days straight. Today's national average, $3.23 a gallon. Got a big storm coming in, so all of you people who are driving, you will pay less for gas. Be careful out there.

BERMAN: A very good Christmas present.

SAMBOLIN: Yes, I like to end on a positive note there.

Thank you, Christine.

ROMANS: You're welcome.

BERMAN: All right. It is 26 minutes after the hour.

And jail break in the Windy City. Coming up, what a couple of convicted bank robbers used to bust out of their cells.

SAMBOLIN: I didn't hear about this.

(COMMERCIAL BREAK)