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ANDERSON COOPER 360 DEGREES

IRS Scandal; American Spy Exposed?; Brothers Injured in Bombing Back Together; Angelina Jolie's Major Medical News

Aired May 14, 2013 - 20:00   ET

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


ANDERSON COOPER, CNN ANCHOR: Plus, Michelle Knight who's missing for 11 years, a prisoner inside Ariel Castro's house. No vigils were held for her. The world seemed to forget her. Tonight, her story is now coming into focus.

First, we have breaking news on the IRS scandal. Today, Attorney General Eric Holder announced the Justice Department is launching a criminal investigation into how the IRS deliberately targeted conservative groups who were applying for federal tax-exempt status.

Now CNN has gotten an advance copy of the inspector general's report on what was going on inside the IRS. Chief congressional correspondent Dana Bash is live on Capitol Hill.

Dana, you've got this copy of the report. What does it say? What stands out?

DANA BASH, CNN CHIEF CONGRESSIONAL CORRESPONDENT: Well, this is it. It's very lengthy but frankly, Anderson, what stands out most is that it describes what most people fear about the IRS actually happened. IRS agents targeted specific groups using what it calls inappropriate criteria, excessive scrutiny for these groups to determine whether or not they should get tax-exempt status and to make matters worse, what this report calls ineffective management at the IRS allowed this to go on for 18 months, knowing about it and not stopping it.

So that meant that a lot of these groups were just in limbo, they couldn't get this tax-exempt status for years and even as we speak some are still waiting because of what this describes as excessive scrutiny and lots of questions that probably shouldn't have been asked of them.

COOPER: Well, I mean, does it explain how this could possibly have happened? I mean if upper level managers knew about this stuff and I assume they knew it was inappropriate or -- I mean, are they incompetent that they didn't know that this was inappropriate, or did they just turned a blind eye?

BASH: It does not explain that but, you know, that is definitely, those are the questions that we are going to hear here on Capitol Hill and the first time we're going to actually see publicly the acting commissioner of the IRS, Steven Miller, testify on Friday. You can bet that that and many other questions are going to be asked of him because it doesn't fully explain it because it simply says that officials up to the senior level, relatively senior level, knew and even though they said that they stopped it, they didn't stop it. In fact, there still is in this IRS inspector general's report kind of a back and forth with the IRS about whether they fixed it as we speak.

COOPER: Yes. How are they -- if any -- how are they're going to keep their jobs, I have no idea.

Dana, we're going to have more on this shortly in the program. We'll talk to you again and also David Gergen.

We want to turn to the alleged spy plot and what it may mean for the Boston bombing investigation. Since the attack Russian intelligence officials have been cooperating with the U.S. as investigators try to learn more about the accused bombers, Tamerlan and Dzhokhar Tsarnaev. But today, well, a cold war flashback. Russian officials expelled a U.S. diplomat that they claim is an undercover CIA officer.

They said they caught him red-handed disguised in a blond wig trying to recruit a Russian security officer. They released this photograph. Russian officials said the man pinned on the ground is Ryan Fogle, he's listed as the third secretary in the political section of the U.S. embassy in Moscow. He was briefly detained before being ordered to leave the country. That's him there in the checked shirt. And this photograph shows his so-called spy arsenals that officials confiscated, including wigs, sunglasses, a compass and wads of cash.

U.S. officials have not commented publicly on any of this. But joining me now is CNN's Phil Black in Moscow and senior contributor and former CIA officer, Bob Baer.

So, Phil, what are the latest details?

PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: Well, Anderson, after being detained last night here in Moscow time, Ryan Fogle was, we are told, released back into the custody of U.S. embassy officials, and the expectation is now that he's been declared persona non grata he must leave the country imminently. We do not know when precisely. At the moment the U.S. embassy is maintaining that very distinct silence, still no comment whatsoever -- Anderson.

COOPER: Bob, what do you make of this? I mean, you're a former CIA officer. The letter, the wigs, a compass in Moscow? Does it make sense to you?

ROBERT BAER, CNN CONTRIBUTOR: It makes no sense at all, Anderson. You don't -- you don't carry a compass when you make a meeting in Moscow. You never carry a letter. Wigs are a waste of time. You just don't wear them. If you know who you're meeting, you know, it just doesn't matter what you look like.

It almost looks like this is a KGB -- they call it the FSB plant to embarrass the United States. But for me, that tells a bigger story is relations between Russian intelligence and the United States are very bad. That's the only reason they'd make this so public, put the pictures out so quickly, and attempt to embarrass the United States. I think this is a really unfortunate turn in relationships.

COOPER: I mean, there are certainly CIA officers and undercover ones working in embassies but aren't they usually actually declared to the host country?

BAER: No, not necessarily. You know, this -- you know, the Cold War has never been quite over, you know. As we know the Russians spy on the United States, we spy on Russia. It's just always been there. But it's the trade crap that bothers me. This doesn't look like a CIA operation to me or the whole thing was staged by the FSB simply to embarrass. There's something terribly wrong with this story and the fact that we're only getting out of Russia makes me, you know, doubtful of the facts.

COOPER: What about the fact that he was supposedly carrying $100,000 for a meeting, $1 million for a year, I guess. It seems a lot of money, no?

BAER: It's a lot of money and, you know, the other thing is the CIA doesn't recruit in Moscow. You don't just go meet somebody on a corner and say hey, why don't you spy for us? This is all done outside the country.

The FSB is very, very good and the CIA has had to match its trade craft to the Russians and this is why this doesn't make any sense, this story. You know, let's wait to hear more on it.

COOPER: Why would the Russians want to embarrass the U.S., though? I mean, allegedly they're cooperating at this point on the Boston bombing investigation.

BAER: Well, I think they're mad about the Boston investigation. You know, it's come out, the implication is that they helped us more, we could have stopped this thing, and the Russians are saying hey, wait a minute, we told you about this guy in Boston, it's your fault, so that hasn't gone all that well.

And there's also the question of Syria. Secretary of State Kerry was in Moscow last week and the Russians are very angry about Syria. They were attempting to overthrow Bashar al-Assad and, you know, they're coming back at us and you know, it's a strange way to do it, I think, but often they've done this in the past.

COOPER: Phil, there was this video released over Russian official talking to Ryan Fogle after he was taken in. What do you -- what do you know about it?

(CROSSTALK)

BAER: Well, that --

BLACK: Throughout this operation to detain --

COOPER: Sorry, go ahead, Phil. BLACK: Sorry. Throughout this operation to detain him -- throughout this operation to detain him, you could see the FSB cameras were rolling. They showed him initially on the streets there looking pretty unhappy in that shabby looking blond wig, then later inside in a room, he's being addressed or perhaps even dressed down by a Russian official who isn't identified, who is often off camera. He just -- we don't know who he was. But he accuses him of trying to recruit someone who to, quote, "is involved in the fight against terrorism in the North Caucuses.

He then goes on to express disbelief that he would try to do this, given that Presidents Obama and Putin have publicly pledged that their security services will work together more closely, more openly, in dealing with counterterrorism issues, particularly after the Boston marathon attack. Take a look.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE (Through Translator): At first we didn't believe that this could happen because we know perfectly well that recently the FSB is actively helping in the investigation of the bombing in Boston and on other information that presents a threat to the security of the United States of America.

We think under today's conditions when our countries are reaching a new level of relations, when the presidents of these two countries are trying to improve the climate of mutual understanding between the two governments, this citizen, in the name of the U.S. government, commits the most serious crime here in Moscow.

(END VIDEO CLIP)

BLACK: Anderson, an interesting thing about that tape, throughout it there was very little audio. It's been wiped. Apart from that one section where that one man is mounting that very angry case against Fogle. Hard to believe it's a coincidence.

COOPER: Yes. Phil Black, appreciate it. Bob Baer, as well. Obviously more to learn about this.

Now to Boston where four weeks ago, two explosions shattered hundreds of lives. Tonight, we've got an update on two of the bombing survivors. You may remember them. Paul Norden and his brother J.P., and they were standing near each other when the bombs went off. Their injuries were severe. Each brother lost a leg.

For weeks their families shuttled between the two hospitals where they were being treated. Paul and J.P., they come a long way. They've started rehab.

Jason Carroll sat down with them today.

(BEGIN VIDEOTAPE)

JASON CARROLL, CNN NATIONAL CORRESPONDENT (voice-over): Paul Norden and his brother J.P. have always been close. More than close. Inseparable.

J.P. NORDEN, BOMBING VICTIM: We're together six or seven times a day. We're just always together. All of our family --

PAUL NORDEN, BOMBING VICTIM: Even when we can't stand each other.

CARROLL: It's no wonder the two celebrated the Boston marathon together. They were on Boylston Street at the Forum Restaurant when the second bomb exploded. It was a horrific chaotic scene. The brothers, near death, rushed to separate hospitals.

LIZ NORDEN, VICTIMS' MOTHER: When it first happened, and each brother was asking for each brother, and knowing how sick one was at the time, and how heartbreaking it was --

UNIDENTIFIED FEMALE: Seeing him struggling with the breathing tube and all that, that's a bad day.

CARROLL: Doctors had to amputate the right leg of each brother. Between the two of them, they've had a dozen different operations. Hours felt like days while in intensive care.

P. NORDEN: Time like -- it's like stopped. It's like a nightmare. Like I feel like I'm going to wake up soon, but I don't know.

CARROLL: But during all that time, the hardest part wasn't losing a limb. It was still not being able to see each other.

That finally changed two weeks ago. The two are together for the next stage of their recovery at Spalding Rehabilitation Center. Their healing, far from over.

P. NORDEN: I have stitches right here and staples right there. And I have burns on my stomach and my back, and I had a nail come out of my face right here, and a couple BBs, a BB came out here.

J. NORDEN: I have a part of my muscle out right here, some more stuff, and then my leg was open from like here to here. So it's sore there. I didn't get a lot of the burns like them. I did get some -- you know, some nails and stuff out of here and I've had, you know, little BBs here and there. But I was fortunate.

CARROLL: Every day, three hours a day, the brothers do acute rehabilitation, relearning the basics like folding clothes.

P. NORDEN: He didn't do laundry at home, he shouldn't do it here.

CARROLL: Humor helps. Paul often has a smile that encourages J.P. Seemingly simple tasks such as getting up and down are now a challenge for him.

(On camera): Is it getting up or getting down that seems to be a challenge? J. NORDEN: My muscles out (INAUDIBLE) a little bit so the bending, the getting up or getting down. Both are pretty hard.

CARROLL (voice-over): Paul's left leg not as badly damaged as his brother's so he's ready for an obstacle course and more upper body exercises.

(On camera): How did this feel, this part of it?

P. NORDEN: It was the first time I did it. I'm exhausted.

CARROLL: How's he -- compared to how you see him now versus how he was when he first came to you --

UNIDENTIFIED FEMALE: There's a huge difference. Yes. When he first came, he was still learning even just his sense of balance, standing, let alone doing anything else while he's standing.

CARROLL (voice-over): Today, the brothers say is a good day. But there are still difficult ones for them and their loved ones, especially with thinking about the suspects responsible for the bombing.

KELLY CASTINE, VICTIM'S GIRLFRIEND: I'm very angry. J.P. really hasn't, you know, elaborated on his anger or feelings about them and rightfully so. They're cowards and why do we want to give them the time of day. But I'm mad. I'm extremely mad. Nobody deserves this.

J. NORDEN: I think now I'm just one in front of the other, I'm just going forward. That's it. That's how I want to, you know, believe that it's going to happen.

CARROLL: Paul and J.P. aren't dwelling on the bombing that took their legs. This is their new normal and they'll get through it together.

(END VIDEOTAPE)

COOPER: Jason joins me now.

So what's the prognosis for their recovery?

CARROLL: Well, prognosis is good so far. Paul is doing so well, in fact, Anderson, he might be released from the rehabilitation center as soon as this Thursday. Both of them are really looking at several more months of occupational therapy but in terms of being fitted for their first prosthetic, we're told if all goes as planned, that could happen within a matter of weeks.

COOPER: Wow. Well, that's certainly great news. Jason, appreciate it.

Tomorrow we're going to be back in Boston for the one-month anniversary of the marathon bombings. We'll be broadcasting from there. We have much more on the investigation and the survivors tomorrow. Let me know what you think. Follow me on Twitter right now @Andersoncooper.

Just ahead, in this hour, actress Angelina Jolie is an advocate for a lot of causes, never one so personal. Her decision to have a preventative double mastectomy. She shared the news publicly.

Also we have more on our breaking news. We've obtained an early copy of the Treasury inspector general's report on the IRS scandal, lays out how the agency inappropriately targeted conservative and Tea Party groups. We'll check in again with Dana Bash and David Gergen on Capitol Hill.

(COMMERCIAL BREAK)

COOPER: Well, you may have heard about Angelina Jolie's brave and unexpected announcement today that she recently had a double mastectomy, not because she has cancer but it's a way to prevent it.

In an op-ed published in the "New York Times," Jolie revealed that she has a genetic mutation that greatly increases her risk for breast cancer and ovarian cancer. Incredibly personal information, obviously, that she chose to make public.

(BEGIN VIDEOTAPE)

COOPER (voice-over): Hers is one of the most recognizable faces in the world. As well known for her beauty as she is for her acting, the 37-year-old Angelina Jolie is a very public figure who has been fighting a private battle for the past three months. A battle against the same cancer that took her mother's life when she was 56 years old.

"I carry a faulty gene," Jolie writes in the "New York Times," "which sharply increases my risk of developing breast cancer and ovarian cancer."

Jolie's mother died in 2007 after a 7 1/2 year battle with ovarian cancer. Doctors tested Jolie and determined she has an 87 percent chance of developing breast cancer and a 50 percent chance of ovarian cancer.

She writes, "Once I knew that this was my reality, I decided to be proactive to minimize the risk as much as I could. I made a decision to have a preventative double mastectomy. I started with the breasts as my risk of breast cancer is higher than my risk of ovarian cancer, and the surgery is more complex."

It was a three-step process for Jolie who had reconstructive surgery after her breast tissue was removed.

"On a personal note, I do not feel any less of a woman," Jolie writes. "I feel empowered that I made a strong choice that in no way diminishes my femininity."

Beyond movies and magazine covers, Jolie is also a humanitarian and has visited refugee camps all over the world for the United Nations. Jolie continued on her work despite her surgeries. In March, right after her second surgery, she took this trip to eastern Congo with Channel 4 News to bring attention to sexual violence in war zones. The next month, she showed up on the red carpet wearing a long black cape.

She writes, "I wanted to write this to tell other women that the decision to have a mastectomy was not easy but it is one I'm very happy that I made. I can tell my children that they don't need to fear they will lose me to breast cancer."

(END VIDEOTAPE)

COOPER: Well, Zoraida Sambolin, co-anchor of CNN's "EARLY START", was diagnosed with breast cancer just five weeks ago. With a very early form of breast cancer, she hasn't been tested for the breast cancer mutation but she's decided like Angelina Jolie to have a double mastectomy. She hadn't shared her news with colleagues or the public until this morning and says that Jolie's openness empowered her to go public about her own decision.

Zoraida joins me now, along with chief medical correspondent, Dr. Sanjay Gupta.

Sanjay, Angelina Jolie's surgery was preventative. She didn't have breast cancer. She had a genetic mutation. How common is a double mastectomy in cases like hers?

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Well, it's becoming increasingly common, Anderson, no question about it. As the testing has certainly gotten more sophisticated and typically the scenario is that you go through genetic counseling first so you have some idea when you get the test results back what they're going to mean, and then when the test results come back, you go through it again, as well as psychological counseling.

If the -- if the decision is to go ahead and do the operation to remove both breasts, it's usually done fairly quickly, you know, within a -- within a month or so. But there are other options. Some people may say look, I'm going to just be more vigilant about getting studies to look at the breasts and see if anything -- any cancer is developing. Some people may go on to medication to try and delay onset of cancer.

But one thing that's worth pointing out is even since I trained, Anderson, is that the reconstructive techniques surrounding this are so much better so if someone goes to sleep under general anesthesia knowing that they're going to have the mastectomy, but then they wake up with the reconstruction already done. So it's changed a lot -- Anderson.

COOPER: Interesting.

Zoraida, Angelina Jolie's announcement prompted you to make your own revelation today. Explain the process for that.

ZORAIDA SAMBOLIN, CO-ANCHOR, CNN'S EARLY START: Well, you know, I saw that our lead story was going to be this op-ed piece that she wrote, and I read it, and she dealt with some things that I had really been struggling with.

One of the big questions was, how am I going to talk about this? You know, I'm on the air every day, I'm going to be going out for awhile, I have chosen to have a double mastectomy, and she dealt with a couple of key things that were critical for me. I also have two kids, I have a 9-year-old daughter and a 14-year-old boy, and in large part, my decision was made for them. Because I want to be here for them and I want them to have me also. I want to see them grow up.

And then, you know, I had -- I had some real struggles with the whole issue of femininity and sexuality, and she talked about that this morning, and I felt like she gave me a voice, and she gave me an opportunity that I wouldn't have had otherwise to actually begin this dialogue.

COOPER: Talk to me about that, because the -- you're getting married. I know your fiance has been very involved all along since your diagnosis.

SAMBOLIN: Yes.

COOPER: That -- what was that conversation like?

SAMBOLIN: Oh, my gosh. One of the most difficult conversations and also one of the easiest, because he's the first person I called, and he said we're in this together and we're going to conquer this together. But then, you know, there were the doctor visits and then there was the news, and then there was understanding, this monumental decision that had to be made, and you know, he's been in it every step of the way. He travels a lot and completely changed his schedule so that he could be there.

He's done research so that he could figure out how to help me with the bandages and the drains that have to happen, and then we talked about, you know, this really touchy subject about how do you deal with this major change, and is it going to be OK with you? And how I feel about it and there have been some very graphic and very difficult conversations.

We've looked at a lot of pictures and, you know, we've talked it out and I think at the end of the day, what it's going to do is bring us closer together, not just the two of us, but the entire family.

COOPER: What was your decision making process in terms of having the surgery?

SAMBOLIN: I -- you know, I have this cancer diagnosis, it's an early form of breast cancer in my left breast. It's called DCIS

COOPER: Did this come as a complete surprise to you?

SAMBOLIN: No, actually before I started here two years ago at CNN, I had a breast cancer scare and I had a lumpectomy and it was benign. And I was so grateful for it but at that time they said to me at this stage of the game we think it's when, not if. And so I've always been waiting on this hot seat for this news that could perhaps happen so I wasn't so shocked. It's still difficult to hear that.

But, you know, as I was looking at my specific situation and I got diagnosed with this first form of breast cancer, and then they did an MRI, and that changed everything for me, because the MRI on my left breast showed another area that now makes it a very sizeable area, and it makes sense to have a mastectomy. And then it lit up on the right side and, Sanjay, I would imagine, can tell you, you know, what this all means.

But, you know, it was a possibility of cancer there and the possibility of multiple biopsies and I couldn't sleep at night anymore, Anderson. All I could -- I had this reel playing in my head of what could potentially happen and what could potentially be the outcome, and I just couldn't take it anymore. And I thought at the end of the day I need to make this decision for me and I was so grateful that I could make the decision. That I -- I could decide what my healthcare outcome was going to be.

COOPER: And, Sanjay, the test, and Angelina Jolie made this point, that the test to find out if you have a gene -- the gene for this, it's very expensive. Insurance companies don't often cover it.

GUPTA: Yes, they -- some insurance companies will cover it if you are considered high risk. That's how a lot of these insurance companies sort of decide things, so if you have a strong family history, if you've had other cancers that may be something that may be related but that may change as well.

The test is about $4,000 so it's by no means cheap and that plays a role in people's decision making as well. Under the Affordable Care Act, that may change. So preventive tests which this is considered one of them, again, the breast cancer genetic diagnosis, it should be covered. There may be some insurance companies that will be still grandfathered in and not be forced to do this, but yes, I think cost absolutely has played a role so far in this -- Anderson.

COOPER: Are you -- are you scared?

SAMBOLIN: Yes. I mean, you know, I say that at the beginning I was really scared, and I was in a really dark place, because I allowed myself to go to worse-case scenario and so -- and when I was told that I had breast cancer, I was driving to pick up my son from school and so I had to really kind of compose myself and gather myself because I didn't want him to know. That night, I let myself feel.

I talked to the doctor, he talked to me about all these different options, and that was my darkest hour. That was my moment of oh, my gosh, what is worst-case scenario here, and it took me to a really, really bad place. Since then, I will say that a couple of really great things happened. One is right here at CNN.

You know, there's a woman here who works for the medical team and I reached out to her and she helped me immediately come up with a plan and she told me, you know, we're going to conquer this. You're strong and this is not going to be a problem and you need to treat it for what it is and move forward and have, you know, a lot of forward thinking.

COOPER: And you've told your kids subsequently. I know you said you didn't want your son to know.

SAMBOLIN: I did.

COOPER: He's 14?

SAMBOLIN: He's 14. I didn't want him to know at the time because I wanted to kind of figure out, how do you do that, and I had this really great conversation with him. I picked up this book, called "Breast Cancer for Dummies," and I used that as kind of a starting off point and I asked him, I said, when you think of breast cancer, you know, what does that bring to mind? And he said a fight. And I thought thank god, right?

COOPER: Yes.

SAMBOLIN: Because that's exactly the way I need to look at this. This is a fight and we're going to conquer it, and I walked him through this book, actually it has a wonderful explanation of exactly the different types of breast cancer, what are your options. I told him what was going to happen and I allowed him to process all the information. At the end of the day he's 14 years old, he's still scared, but it allowed him to really deal with this and we've talked about it a lot.

My 9-year-old daughter, on the other hand, you know, as a woman, you know, my initial reaction was what have I done, right, what have I done. And I know that I haven't done anything but I was so worried about her and what does her future hold. So I was over-thinking everything. How am I going to tell her?

COOPER: And worried that she would be worried about her own health and your health.

SAMBOLIN: Absolutely because she identifies with me. You know?

COOPER: Right.

SAMBOLIN: She identifies her femininity. She identifies with me and I am her role model and her example, and so I thought she's instantly going to think this is going to be me. And it wasn't. I asked her what she thought about breast cancer and she said to me that she thought about she knew that people lost their hair and she knew that people got sick.

And I told her well, I'm not going to lose my hair and I'm not going to get sick. I'm going to be gone for a little while, I'm going to come back and everything is going to be OK. And she moved on. And that was the greatest gift she could have given me.

COOPER: We wish you the best. Thank you so much for being on.

SAMBOLIN: No, I appreciate the opportunity. Thank you.

COOPER: Thanks.

Sanjay, thank you.

Of course, we wish Angelina Jolie and her family the best as well.

Up next, our breaking news. New information on the IRS scandal. How the agency targeted conservative groups. What's in the new inspector general's report. We have the latest in a live report from Dana Bash on Capitol Hill.

Also, she's been called the forgotten victim. Michelle Knight rescued after more than a decade locked up in that Cleveland home. Turns out she dealt with more than her share of troubles before the kidnapping. We'll explain, ahead.

(COMMERCIAL BREAK)

COOPER: Welcome back. More on our breaking news now, the growing scandal at the IRS, a new report released tonight from the treasury inspector general shows the agency deliberately targeted conservative groups. The report comes just hours after the Justice Department announced its launching a criminal investigation into the matter.

In a statement tonight, the IRS responded to the inspector general's report, saying it's required to determine whether organizations political activities are permissible, but acknowledge taking inappropriate shortcuts.

Dana Bash is back with us along with senior political analyst David Gergen. So, Dana, what can you tell us about this separate investigation, criminal investigation announced today out of the Justice Department?

DANA BASH, CNN CHIEF CONGRESSIONAL CORRESPONDENT: It was really a surprise by the attorney general who really sort of tumbled out of his mouth as part of a larger press conference. What he said is that the justice department, the FBI, they are looking into whether any laws were broken.

He said obviously this is outrageous, unacceptable. He went a little bit into the specifics, saying that they're looking into whether anything in Title 18 was broken. Title 18 is really the overall criminal code. So it sounds like they're not really even sure if laws were broken.

But the fact that these IRS agents are now going to have to deal with, you know, depending on who they are, a slap on the wrist, maybe being fired, and now they're going to have to probably lawyer up, get lawyers. It certainly takes this investigation and this problem to a whole new level.

COOPER: David, I understand, you know, IRS looking into new groups to see if, what kind of tax-exempt status they should have but only looking at conservative groups and delaying them, I mean, what do you make of this?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: I think this controversy has now mushroomed into a big league scandal.

COOPER: You think it's justified?

GERGEN: Yes. Well, we now have from the inspector general had a chance to within the government look at it and say it's serious. The attorney general is saying he's going to launch a criminal investigation. That says there are signals this is very serious. I think that this criminal investigation is very likely to lead to a lot of pressure from Republicans to appoint a special prosecutor.

The law permits the attorney general to do that when there's a conflict of interest between what the attorney general's trying -- between his department and another department. We've seen plenty of those in the past. But as you know, special prosecutors give a long life to a scandal. There can be weeks of inquiries of one thing or another, months, indeed, and I think it comes at a particularly bad time for the Obama administration.

COOPER: Do you see this just Republicans asking for this or Democrats as well? I mean, I don't see why this should be a partisan issue --

GERGEN: It's not.

COOPER: -- if the IRS is going after one group over another.

GERGEN: It was notable that a number of Democrats today, especially in the political consultant group, were calling for some sort of independent probe. They realize, look, if there's going to be pressure, why don't you give into the pressure now and go the independent route. But I will tell you, I was there when we called for a special prosecutor in the Clinton administration, and it led to -- it led to Ken Starr. These things can suddenly take on a rogue quality that you're not expecting, and really be very damaging.

COOPER: Dana, it's fascinating, you have this on top of the Department of Justice looking into the Associated Press getting phone records, which obviously is a different kind of thing, but it certainly raises a lot of questions about what's going on in the Obama White House, how much they knew. The administration is saying they knew nothing about this IRS scandal at all, correct?

BASH: That's right. They said that Jay Carney, the White House spokesman, said the counsel's office found out a few weeks ago that the inspector general was doing this investigation at all but you're absolutely right. What this does is feed into an already existing huge problem with the American people. That is that they simply don't trust the government.

That's obviously the basis for this country. But it has really gotten so much worse recently and the fact that you have these two issues, you have the government effectively spying on and taking records from journalists, and then of course, the IRS, which has never had the greatest reputation in the world. It's definitely a double whammy.

COOPER: And already this administration is actually going after more classified leaks than basically all recent administrations combined.

GERGEN: That's right. I don't fault them so much on that, and I must say in their defense, none of these scandals so far or these controversies have touched the president directly. In the past the big scandals have surrounded the president himself. And that I think is a positive thing for the administration.

But I do think it's not just a question of -- and as Dana says, it's feeding into each other when you've got this issue now with the IRS. You've got Benghazi, which is out there. You've got the AP stuff and there are Republicans who believe that Kathleen Sebelius as secretary of HHS going around asking for money from corporations to fund Obama care.

When these are the very corporations that she's overseeing in a regulatory way, that that has all sorts of scandal implications so I think, especially in a slow news time, you know, it's not a big news time politically but it's a precious moment for the Obama administration. A lot depends on what happens the next few weeks for him, for his whole second term.

BASH: Anderson, just one point I want to make, though, about this whole political question. One thing that the inspector general report does say is that they have found that there was no influence outside the IRS, meaning nobody at the White House said you should target these Tea Party groups.

COOPER: But it's still not clear who came up with this idea, who came up with it, no one is standing up and taking the responsibility at this point, right, Dana?

BASH: Not only that, the inspector general says that they simply can't figure out who came up with it. They know that -- they think it was what they call first line low level management, but they don't know who came up with it.

COOPER: There are no fingerprints on this, ridiculous. Dana Bash, appreciate it and David Gergen, more to find out. No doubt.

Up next, more breaking news, new information about the Cleveland kidnapping victims and how they were allegedly treated by their captor plus what we learned about Castro's first alleged victim, Michelle Knight and why it seems no one was looking for her.

(COMMERCIAL BREAK)

COOPER: We have new details out of Cleveland tonight on the condition of the women rescued after years of being locked up inside a Cleveland home of Ariel Castro. A Reuters report citing two sources with direct knowledge says when they were found, two of the women were suffering from severe malnutrition and injuries including hearing loss along with joint and muscle damage, and will require long-term therapy.

According to Reuters sources, Gina DeJesus and Michelle Knight were in worse shape than Amanda Berry. The report goes on to compare the conditions of the home to a prison war camp, saying the women were restrained in duct tape in quote, "stress positions" for long periods that caused bed sores and other injuries.

Randi Kaye is live in Cleveland with more -- Randi.

RANDI KAYE, CNN INVESTIGATIVE CORRESPONDENT: Anderson, we are learning more about that tonight. We're also learning more about Ariel Castro and his daily routine and his time in jail. We were able to get our hands on the jail log, which is a snapshot of his daily life. He is on a suicide watch so the guards have to mark his behavior every 10 minutes.

It's pretty mundane stuff, but they actually mark things like when he's eating, when he's bathing, when he's making a Kool-Aid, when he's napping. We also saw a couple entries that really caught our eyes, including a couple times where he's been marked as walking around his jail cell naked.

He's also been reprimanded for using some loose string that he got from the mat in his cell to floss his teeth. But most of the time, he's alone. He's not allowed to mingle with other prisoners so he has a lot of time to think about what he's accused of, a lot of time to think about these women who were allegedly kept in his home all these years, including Michelle Knight, who we are also learning more about today.

COOPER: That image of him walking around naked flossing his teeth in his jail cell, not an image I need to have in my mind, Randi. But do we know anything about where Michelle Knight is and what's next for her? She had been in the hospital for a long time and reportedly hadn't seen her family.

KAYE: Right. Michelle Knight was in the hospital for quite some time, and it's very difficult to learn a lot about her. She was the first woman taken. She was 21 at the time. We've talked to some of her friends and relatives, not many of them want to go on camera, but here's what we were able to learn.

(BEGIN VIDEOTAPE)

KAYE (voice-over): She was the first to be taken, on a breezy summer day in August 2002. Michelle Knight was 21.

BRENDA DINICKLE, MICHELLE KNIGHT'S COUSIN: Michelle told my niece that she was going to use the pay phone and that she would come back to my sister's house, which she didn't. That was the last time Michelle was seen.

KAYE: That day, Michelle was offered a ride home from Ariel Castro, but instead, he took her to his home. For 11 years, she was held captive in his house, trapped like a caged animal, beaten, raped and mentally abused. It seems the longer Michelle was missing, the more invisible she became.

(on camera): When you say the name Amanda or Gina in this neighborhood, everybody knows who you're talking about. But nobody knows the name Michelle. Nobody knows who she was. Why is that?

UNIDENTIFIED FEMALE: It's like we forgot about Michelle. It's like did she ever come back home or whatever happened to Michelle. After that kind of stuff dies down, you don't think about it anymore. Nobody ever wondered about Michelle Knight anymore. We just figured she just went on about her life.

KAYE (voice-over): People here forgot about Michelle in part because the Cleveland police removed her name from the FBI's missing persons' data base. Just 15 months after she vanished. At the time, she was locked away in Castro's home. The FBI has said it couldn't find her mother and was unable to confirm Michelle was still missing.

Michelle was an adult at the time, too, another reason why authorities, even her family, thought she may have just wandered off. Michelle's broken family didn't help spotlight her case, either. In fact, her own brother didn't even know she had been abducted.

(on camera): Before she was kidnapped, according to the Cleveland "Plain Dealer," Michelle spent most of her life here on the city's west side. Those were happier days when she fed apples to the neighbor's pony and helped her mom in the vegetable garden. Michelle reportedly dreamed of becoming a veterinarian. Back then, she had a nickname, too, Shorty.

(voice-over): Life got messy about four years before her abduction, when she got pregnant. Michelle dropped out of school to have her baby, but lost custody of the toddler after her own mother's abusive boyfriend injured the child. Why Michelle was taken is anybody's guess.

But she may have had it the worst during her years inside Ariel Castro's house. According to the police report, Knight told officers Castro got her pregnant, too. She said he starved her for at least two weeks then he repeatedly punched her in the stomach until she miscarried.

But when Amanda Berry was pregnant, Castro turned to Michelle to deliver the baby. Michelle told investigators Castro threatened to kill her if the baby died. When the baby stopped breathing at one point, Michelle did CPR, likely saving both their lives. Michelle's mother says she wants to reunite with her daughter, but was stonewalled at the hospital where Michelle was recovering.

BARBARA KNIGHT, MICHELLE KNIGHT'S MOTHER: I'm thrilled and all I want to do is hug her and say I love you.

KAYE: Her mother's lawyer told reporters Michelle has quote, "lived through hell." Then referring to her mother, said it was hell for her, too. Now 32, nobody is asking any more what happened to Michelle Knight. We all finally know the horrible truth.

(END VIDEOTAPE)

COOPER: How is she doing, do we know?

KAYE: Well, Anderson, the woman that we interviewed today told us that she's doing OK. She's a good friend of the DeJesus family and apparently, Gina DeJesus and Michelle Knight really bonded in captivity. They're like sisters and the DeJesus family's apparently asking her to live with them and offering her to live with them.

But she has a tough road ahead. She'll need facial reconstructive surgery after all the beatings that she allegedly took in the home of Ariel Castro. She also has hearing loss, which is part of what Reuters was reporting tonight, citing those two sources with direct knowledge of what happened inside that home.

Reuters also reporting that both Michelle Knight and Gina DeJesus appeared gaunt when they left that home, they had bed sores as if they had been in that same position for long periods of time. They were also reporting there were not only chains, but dog leashes hanging from the ceiling of the basement and you remember that these women had told police that Ariel Castro had chained them up in the basement.

COOPER: Still so horrible. Randi, appreciate it. Thank you very much.

More breaking news tonight, an Army sergeant at Fort Hood accused of abusive sexual contact. We'll get details now breaking from Barbara Starr ahead.

We'll also go to the White House for more on the early breaking news. President Obama has just released a statement about the Treasury Department's report on the IRS scandal.

(COMMERCIAL BREAK)

COOPER: Breaking news tonight, President Obama has just released a statement about the Treasury Department's report on the IRS scandal. Chief White House correspondent Jessica Yellin joins us now. What does the statement say, Jessica?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Hi, Anderson. President Obama has said that he now has, this is in a paper statement, I now have the opportunity to review the Treasury Department watch dog report on its investigation and he says the report's findings are in his view quote, "intolerable and inexcusable."

He says that the federal government must conduct itself in a way that's worthy of the public's trust and that's especially true of the IRS. The statement goes on to say that he has directed Secretary Liu, his treasury secretary, the IRS falls within the Treasury Department.

Directed Treasury Secretary Liu to hold those responsible for these failures accountable and to make sure that each of the inspector general's recommendations are implemented quickly so that such conduct never happens again. He goes on to say regardless of how this conduct was allowed to take place, the bottom line, is it was wrong.

Now, Anderson, in all, there were nine recommendations made by the inspector general. The IRS accepted seven of them and has not accepted two. The president's calling on them to accept all nine. Bottom line, he is now saying effectively this is now Treasury Secretary Jack Liu's problem.

I reached out to a number of Republicans who are involved in the hearings that are proceeding, the investigation that is going to take place now on Capitol Hill, I asked is this enough to satisfy Republican critics. One Republican involved replied in a word, no -- Anderson.

COOPER: All right, Jessica, appreciate it.

Another breaking story we're following, the Army has announced that a sergeant first class who had been assigned to a sexual harassment and assault response and prevention program at Fort Hood is himself under investigation for alleged sexual assault. CNN's Pentagon correspondent Barbara Starr joins me by phone. Barbara, what have you learned?

BARBARA STARR, CNN PENTAGON CORRESPONDENT (via telephone): Well, Anderson, it could not be more embarrassing for the military. This is a sergeant first class at Fort Hood, Texas. He is under investigation now for pandering, possible suggestion of prostitution activity there, abusive sexual contact, assault and maltreatment of subordinates.

As a sergeant first class he would have been in a midgrade enlisted position working in the office at Fort Hood on the battalion for equal opportunity issues, that sort of thing. This just could not come at a more difficult time for the Pentagon.

Just last week, a lieutenant colonel in the Air Force at the Pentagon who works in sexual prevention office, he also arrested by the local police for sexual battery. Secretary of Defense Hagel has said this has to stop. He has a number of initiatives, but every one of these cases becomes a growing embarrassment and a growing scandal.

And of course, it's not just these two cases. There are a number of these every week across the military, across the country and really becoming a growing problem for the Pentagon.

COOPER: So are they still investigating this guy now for Fort Hood?

STARR: Yes, they just announced it a short time ago tonight that he was under investigation, removed from his duties and in fact, a signal of just how serious it may be for this person, the Army Criminal Investigation Command, the CID, now investigating the allegations against him. So this suggests very strongly a potential criminal case.

COOPER: Wow. We'll continue to follow it. Barbara Starr, appreciate it.

A lot more happening tonight, Isha is here with the "360 Bulletin" -- Isha.

ISHA SESAY, CNN CORRESPONDENT: Anderson, word tonight Philadelphia abortion doctor and convicted murderer, Kermit Gosnell struck a deal with prosecutors to avoid the death penalty. Yesterday, jurors found Gosnell guilty on a string of charges, including three counts of first degree murder. Today, the D.A.'s Office says Gosnell agreed to waive all appeals in exchange for life in prison without the possibility for parole.

We have a "360 Follow," a New York woman is indicted on charges she ran a charity scam by posing as a Sandy Hook shooting victim. She is charged with scheming to defraud and identity theft.

The legal age for consuming alcohol before getting behind the wheel could soon get much stricter. The National Transportation Safety Board is recommending all 50 states lower the threshold of blood alcohol content from 0.08 to 0.05.

Anderson, Prince Harry visiting the Jersey Shore for a first-hand look at the damage left by Superstorm Sandy. He received a personal tour from Governor Chris Christie that included time for some of the famous boardwalk games. The ladies have been loving their Prince Harry.

COOPER: Do we know how long is he here for? It's wrapping up, right?

SESAY: It's wrapping up, but you can rest assured he's not going to Vegas.

COOPER: Probably not. He's already been there, done that.

SESAY: He's been there, done that, shown it.

COOPER: Yes. All right, Isha, thanks very much. We'll be right back.

(COMMERCIAL BREAK)

COOPER: Welcome back. We had a lot of breaking news tonight. Just want to give you a quick recap of the latest. President Obama reacting to the Treasury Department's report on the IRS scandal, saying I directed Secretary Liu to hold those responsible for these failures accountable. And to make sure that each of the inspector general's recommendations are implemented quickly so that such conduct never happens again.

Also, news out of Fort Hood, the U.S. Army announcing that a sergeant first class who had been assigned to the sexual harassment program in fort hood is now himself under investigation for pandering, abusive sexual conduct, assault and maltreatment of subordinates.

We ran out of time for the "Ridiculist." That does it for us. We will be in Boston tomorrow night for an update on the month anniversary of the Boston bombings. We'll check in with a lot of the people we met who were injured and see how their rehab is going. We'll be back one hour from now, 10:00 p.m. Eastern. Thanks for watching. "PIERS MORGAN LIVE" starts now.