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ERIN BURNETT OUTFRONT

All-Women Jury for Zimmerman Murder Trial; Stocks Plunge; Taliban Talks Over Prisoner Swap; Gandolfini's Death Underscores Heart Risks; Victim Tells Harrowing Story On Stand

Aired June 20, 2013 - 19:00   ET

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


ERIN BURNETT, CNN HOST: OUTFRONT next, the Dow has its worst day of the year, plummeting 350 points. Temporary, or the beginning of a major plunge?

And then the Taliban offering to release the only known American prisoner of war in exchange for five Gitmo detainees. Will President Obama make a deal and negotiate with terrorists?

Plus it appears "The Sopranos" star James Gandolfini died of a massive heart attack. Could his death have been prevented? How many of us are at risks right now that don't know it? Let's go OUTFRONT.

And good evening, everyone. I'm Erin Burnett. OUTFRONT tonight, we begin with breaking news, stocks plunge. Wall Street suffering its worst day of the year, the Dow down 353 points and if you look at the two-day drop, this one is a real jaw opener, 550 points. And that's about 4 percent in just two days.

Obviously that's a significant plunge and the reason for it is fear. Fear that all of the easy money Ben Bernanke has been plowing into the economy to prop it up to prevent a depression is going to start drying up.

Peter Kenny is the chief market strategist at Knight Capital Group. Peter, I guess the big question is, two days, nearly 4 percent. You know, that makes people afraid and it should make people afraid. But the question is, is this temporary or something that could get worse and worse?

PETER KENNY, CHIEF MARKET STRATEGIST, KNIGHT CAPITAL GROUP: It's a real wake-up call. I do think this is a short-term trend. Given that, we are in a period of volatility. Since Chairman Bernanke did mention tapering back in may, which is where we had our highs --

BURNETT: Meaning I'm going to eventually stop giving you this free money.

KENNY: Exactly. We've seen a lot of volatility in the market. More volatility than we've seen all year and sideways to lowered the last two days, significantly lower, this probably more work to do on the down side in the near term, but this is actually something that's needed. A pullback is needed. We need to get back to more compelling valuations in the indexes and stocks generally speaking. So it's not as if this is completely destructive. It's really more a question of longer term trend.

BURNETT: It's pruning. When you look five years ago when this whole -- they call it quantitative easing, but basically this free money that he's been throwing into the economy started, every time he says, maybe I'm going to stop, stocks tank. After you see QE1 everybody there that's the first bout of free money. When Ben Bernanke was going to stop markets fell 16 percent.

The same thing the second time around. They fell 18 percent. So, in a sense, we've been through this before. But this time could be different because every other time he gave in when the markets started plunging. This time he might say, forget it.

KENNY: Right. Well, this time there's a different narrative.

BURNETT: Right.

KENNY: The economic data that he has used as a way of justifying quantitative easing has actually improved very, very dramatically. The economy is actually getting substantially better whether it's housing, financials, GDP expansion, industrial manufacturing production, and employment numbers. The trends are positive and as a direct result it's more difficult for Chairman Bernanke to justify more stimulus.

BURNETT: So a stronger economy may be better for all of us but may be bad for some wealthy people on Wall Street. And that's OK. All right, thank you very much. Appreciate your time as always. All right, good to see you, Peter.

Our other top story tonight is negotiating with terrorists. The Taliban is offering to exchange the only known American prisoner of war in Afghanistan, Sergeant Bowe Bergdahl, for five detainees at Guantanamo. All right, it's one person for five people. Previous talks about a possible exchange stalled back in 2012.

I want to keep in mind here. The Taliban is classified by the United States as a quote/unquote "specially designated global terrorist entity." Many American officials have long maintained that the United States does not negotiate with terrorists. But the Obama administration says that peace talks between the U.S. and Taliban will likely be held in the next few days and they do expect the prisoner exchange to be on the table.

So will the president make a deal? Barbara Starr is at the Pentagon. Barbara, obviously, you know, when you think about this, this is a big moment for this country and a big decision. How likely is it that this prisoner exchange will happen in this negotiation?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, I don't think you're likely anytime soon to see a direct prisoner exchange, Erin. The U.S. does have a policy, we don't negotiate with terrorists, but except, of course, that is how wars end. You go to the negotiating table. That's how you end an insurgency like Afghanistan, that's why the U.S. is sitting down and talking to the Taliban. The U.S. wants Bergdahl back. The U.S. wants some peace brought to Afghanistan. The Taliban want their guys back and they want some measure of control somewhere in all of this. So there will be discussions. You might not call them negotiations, but the U.S. needs to get Bergdahl back and they need to get him back soon. With U.S. troops leaving Afghanistan at the end of next year, there's not going to be a lot of an ability to try and figure out where he is and how to get him back if this doesn't work -- Erin.

BURNETT: Of course, it's a great point of frustration for the U.S. and a perceived failure by many that they're actually negotiating with the Taliban and not some other government entity. They hoped the Taliban would be over and no longer in existence. But obviously things have not panned out the way everybody expected. Barbara, Bergdahl has been held for four years, a very long time. What are the circumstances of his capture?

STARR: This is the thing that is still, after all this time, so murky. Of course, we will never know until Sergeant Bergdahl can speak up for himself and say what exactly happened. What we do know is a number of publications including "Rolling Stone" published some e-mails where it was said that Bergdahl wrote to his parents, said he was disillusioned with the war.

Clearly didn't enjoy, didn't like being part of military life, and for some reason four years ago he walked away from his base in Afghanistan. That has been the working theory all along, and he was very quickly kidnapped, picked up by insurgents. We don't know who he was in communication with that might have led him to walk away. That's what they think happened, but they have to wait and talk to him -- Erin.

BURNETT: Barbara Starr, thank you. And now OUTFRONT, CNN contributor and for White House press secretary for President George W. Bush, Ari Fleischer and CNN national security analyst and former CIA operative, Bob Baer. All right, good to see both of you as always.

Ari, the Taliban spokesperson said, look, this prisoner exchange is the first step in any peace talks between the Taliban and the United States. Let me just ask you this point blank, should the president be negotiating with a global terrorist entity?

ARI FLEISCHER, CNN CONTRIBUTOR: We do need to talk to the Taliban as far as the withdrawal process and as part of the process of bringing the Afghani society together once America is gone. We need to do it recognizing the governing state is not the Taliban. The governing state is Afghanistan's government.

Just a bit of a different issue, talking to them, yes. A direct exchange for hostages, of our hostage, a serviceman, in return for five prisoners at Guantanamo? No. Not as a direct matter. There are other ways of accomplish these things. It becomes part of the murky, tricky diplomatic world we all live in. As a direct exchange, no.

BURNETT: Bob, the Democratic Senator Robert Menendez, the chairman of the Senate Foreign Relations Committee told "The Hill" and I want to quote him. "I personally don't think we negotiate under these lines. For me it wouldn't be acceptable." Do you think this could be a step at all? And I understand Ari's point but, you know, murky negotiating, whatever words you want to put it around it, should it happen?

BOB BAER, CNN NATIONAL SECURITY ANALYST: Well, Erin, I think we have to look at it this way as the Taliban is not defeated. It's very much alive insurgency and they will be playing a role in Kabul when we leave next year. I think the earlier we start these talks with them whether it's over prisoners or other issues the better. This government I give it six months to last, the Karzai government. We have to deal with the facts on the ground and they're coming. We're going to be turning over large parts of Afghanistan to the Taliban. Let's talk to them.

BURNETT: Ari, I guess just for a lot of people watching has to be this kind of shock or frustration, but after all this, after more than a decade of war, we're saying, the United States is saying that they're going to be negotiating, doing business with, making deals with, again, not just the Taliban, but a group designated as global terrorist entity.

FLEISCHER: We're in uncharted territory here. We never had a previous war against the stateless state with the Taliban. They were toppled because the United States forging the alliance with the northern alliance and now it's the Karzai government. The Karzai government is weak, the Taliban have some elements of control in certain parts of the country.

And we have an interest in the United States and withdrawn to what will hopefully be an Afghanistan that doesn't create more terrorism for the United States. That's why there's going to be conversations with the Taliban that I think the United States Congress and the American people can support.

But you have to be careful about how direct and what we offer the Taliban in these talks. We can't undermine the democratically elected Afghani government that we hope will succeed President Karzai. So it is all part of the murky world how you deal with terrorists who have some level of control on the ground. None of this is a straight line. None of this is easy.

BURNETT: All right, thank you very much. Appreciate both of your time. Everyone, please, let us know what you think should happen in this case, whether the U.S. should make a deal of a soldier for five Guantanamo detainees.

Still to come, "The Sopranos" star James Gandolfini appears to have died from a massive heart attack. We're going to ask one of America's top heart surgeons if his death could have been prevented.

Plus dramatic testimony at the Whitey Bulger trial today, a woman who survived the deadly machine gun assault speaks out and shows the pictures.

And then former Yankees manager, Joe Torre's, daughter made the catch of a lifetime. The best her father has ever seen. An infant fell two stories and she saved it. She tells us about the amazing life-or- death moment.

An update on a story we brought you four months ago. You may remember this one, a woman's body was found in the water tank on top of a hotel, and tonight authorities say they know how she got there.

(COMMERCIAL BREAK)

BURNETT: Our second story, OUTFRONT, what killed James Gandolfini? Tonight as we wait for the autopsy results on the 51-year-old actor, we understand from the information that we have he died of a heart attack while vacationing in Rome right after dinner. Now it's still not known whether he had a history of heart problems or anything he was aware of.

But the truth is a lot of people don't experience any warning signs at all, 42 percent of women who had a heart attack never had chest pain. A third of men also never had chest pain. Obviously a lot of people who do don't recognize it for what it is.

OUTFRONT tonight, Dr. Wayne Isom, he's performed heart surgery on Larry King, Regis Philbin and David Letterman. Well, I'm so glad to talk to you as I think everyone watching has had some personal experience and these heart attacks so often just steal someone from you when you have no preparation for it. People who are eating dinner right now, how do you know how concerned they should be about their risk? Mr. Gandolfini had had dinner and went home to the hotel and --

DR. WAYNE ISOM, HEART SURGEON FOR KING, LETTERMAN, PHILBIN: Well, I don't think that dinner did it. It's the dippers beforehand that probably did it and it takes years. It's not just you eat a steak and it stops up your vessels.

BURNETT: Right.

ISOM: It probably started, if he had that, I don't know. It probably started when he was 20.

BURNETT: And then it builds up. What causes it to snap?

ISOM: Well, ordinarily what happens, if that's what he had, is you have a narrowing in the vessels sort of like a rusty pipe gets stopped up. We have fancy names. We call it coronary atherosclerosis, but it's essentially that. And then a clot a lot of times will develop right on it and that blocks the vessel and then after there's no blood supply to the muscle.

BURNETT: So Gandolfini was 51 years old, who is so young when we think of other people. Tim Russert, another person who seemed so young. Most people who have heart disease are older, 85 percent of them from our understanding over 65. For men the average age for a first heart attack is 66. So how common is it for someone who is younger to have a heart attack like this?

ISOM: I think we've made inroads into this. 30, 40 years ago, the mean age of men being operated was 52. The mean age of women is 56. The mean age now of the women, men are 79. Women are 81. We've slowed it down. We haven't eliminated it.

BURNETT: Right. Gandolfini's ex-wife in papers related to a divorce filing had mentioned he had serious issues with drugs and alcohol. Now obviously we don't know if that's true. This is just what she had said in papers. How much of a role do those things play, does alcohol play?

ISOM: Well, I think the thing -- you hear conflicting reports and data that if you have two or three drinks a day, you have less coronary disease. If you have two glasses of red wine, you don't have coronary disease. But if you're drinking a lot, no matter what, it's hard to eat properly and not gain weight so if you're drinking a lot and eating properly, you're going to gain weight, and that's a risk.

BURNETT: It's the weight gain, all right. David letterman, Regis Philbin, Larry King, all people on whom you have performed heart surgery, none of them are overweight. In fact, they're all very thin people. Regis Philbin is at the gym all the time. I want to play what they had to say about their surgery.

(BEGIN VIDEOTAPE)

LARRY KING: I had a heart attack in February. I was smoking all the way over to the hospital.

ANDERSON COOPER, HOST, CNN'S "AC 360": You were smoking on your way to the hospital?

KING: Correct.

COOPER: Did you know you were having a heart attack?

KING: No.

REGIS PHILBIN: I had been feeling chest pains, you know, and a shortness of breath and all those little symptoms that you hear about. So I called the doctor, decided to take some tests and it was their conclusion that I should have a bypass.

DAVID LETTERMAN: I went in there for one of those angiograms and they said, well, you're not going anywhere. You're really pretty badly blocked.

(END VIDEOTAPE)

BURNETT: These people are all thin. A lot of people think you have to be overweight like James Gandolfini but, no. Just because you're thin, you could have this?

ISOM: Two things, they all had a history of smoking pretty heavily at one time. Actually David had had stopped several years before, but I think you pay a price. His was cigars and the other risk factor is a family history. Larry's father dropped dead in his early 40s. He went to work and didn't come back. David's father, I think, had some coronary disease. I don't recall about Regis.

BURNETT: You have to look at your family.

ISOM: Genetics, too.

BURNETT: Family matters.

ISOM: Did you have a mother or daddy or a brother or sister who has had coronary disease?

BURNETT: All right, Dr. Isom, thank you very much for taking the time. We appreciate it. It just makes people feel so afraid because of what he just said. Someone can go to work and never come home.

Still to come, explosive testimony at the Whitey Bulger trial, a woman who survived a deadly machine gun assault takes a stand. There are pictures of exactly what happened to her that night.

Plus, Paula Deen is in very hot water over racist comments she reportedly made years ago. So is that OK? If you made them years ago, are you capable of changing, or is this a completely unacceptable thing?

And jury selection in the George Zimmerman trial. It is done today. We'll tell you what we are learning now about the people who will decide his fate.

(COMMERCIAL BREAK)

BURNETT: Our third story, OUTFRONT, a hit job caught on camera. So today in the trial of mob boss Whitey Bulger one woman told her story, and she showed photos of surviving the machine gun assault in this car. The attack you're looking at, you can see how the window is totally shot out by a machine gun. The driver of the Mercedes she was in was killed. Multiple gunshot wounds from the attack left her boyfriend hospitalized until he died in 2001.

Bulger is on trial for a total of 19 murders. OUTFRONT tonight, "Boston Globe" reporter Milton Valencia who has been in the courtroom listening to what's happening. When you look at those pictures, it makes this, takes this out of the realm of television and into the realm of reality that this happened, it was a horrific murder. How did she describe what happened?

MILTON VALENCIA, REPORTER, "THE BOSTON GLOBE": I think really she brought this, as you said, to reality. She brought this trial to reality. She told me later that she didn't want people to think this was a circus or a joke, that people need to realize innocent people were being killed and she really brought this reality, the sense of humanity into the courtroom for the first time.

You know, we've heard of the hitman, John Martorano, who slaughtered 20 people, but we heard including from her direct testimony from those people who were affected by this and it was so poignant, so emotional, it literally had two jurors in tears. The courtroom was gassed. I was gassed. You all know Bulger the myth. We saw his victims today in the courtroom.

BURNETT: When you talk about the jurors being in tears, that obviously says so much. Bulger was there. He was in the courtroom. He was watching this. He was listening. Jurors are in tears. You say that you were emotionally affected. What did he do? How did he respond?

VALENCIA: He was solemn, staring forward, as he has always been. He it tends to -- some of the bookmakers who he allegedly extorted in the past, he tries to stare them down, he's looked out into the crowd before. When he has certain people on the stand he doesn't want to pay attention to or can't pay attention to, he stares forward. We didn't see any emotion from him that we saw from others, two jurors crying, victims, victims' families in the courtroom having to look away when those photos are shown.

BURNETT: and they are looking at photos and things that remind them of wounds that are deep and have been there for a long time. And I know you wrote an article today, Milton, the survivor of that 1973 shooting, the woman who was testifying said she was on the fence. She told you. She wasn't sure whether she wanted to testify, but she decided to because she was looking at the testimonies of his former associates.

So cold she wanted to put the victim's face on it. I'll quote her. "I realized after reading the way the press was covering it all, I realized it was a three-wing circus for the bad guys. Someone has to say innocent people were killed and it's not a joke." Did you sense any doubt in the courtroom about Bulger's guilt?

VALENCIA: Bulger has long been associated with this story. His own cohorts have put him there. His lawyers have pointed out she could not name him as being there, but there's been a lot of history here, a lot of testimony, and she really brought it to the personal level, that reality level.

BURNETT: Thank you very much.

And still to come, jury selection for the George Zimmerman trial finished. We are learning about the six people who will decide the fate of the man who shot and killed Trayvon Martin. We have those details.

Plus a shocking revelation in the NSA leaking scandal tonight. Hundreds of government workers, hundreds, including Edward Snowden, passed their background checks with the help of an outside company. And it gets even more sorted than that. We'll explain.

The woman's body found in a water tank on top of a hotel four months ago that we reported on, police tonight now know how it got there.

(COMMERCIAL BREAK)

ERIN BURNETT, CNN ANCHOR: Welcome back to the second half of OUTFRONT. We start the second half with stories where we focus on reporting from the front lines. We want to begin with an investigation under way to determine the cause of an explosion at a fireworks plant that killed two people today. Black smoke emerged from this roof of one of the facility's two buildings, thick smoke. It's near Montreal.

Fireworks shot from one building to the other, about half a football field away. It was so severe that residents had to be evacuated nearby. They still don't know whether the facility house consumer or professional fireworks.

Julie Hackman (ph) of the American Pyrotechnics Association tells OUTFRONT that can affect the type of explosion and the fire that ensues.

Well, OUTFRONT update on the story of the young woman who was found in a Los Angeles hotel water tank earlier this year. A lieutenant with the county coroner's investigation unit tells us the death of 21-year- old Canadian tourist Elisa Lam has been ruled an accident due to drowning. As we reported in February, it wasn't until a maintenance worker at the Cecil Hotel was looking into complaints about the hotel's water, that her decomposing body was found. The official also suggested Lam's bipolar disorder was a factor.

And a terrifying sight. So apparently a baby crawled out after window onto a New York apartment fire escape and then went into freefall. So that would be the end of the baby, right? No, because there was a miracle. Luckily one person watching in disbelief was Cristina Torre, a schoolteacher and the daughter of the former New York Yankees manager Joe.

She caught and saved the 1-year-old. Here she describes the moment he bounced off an awning and into her arms.

(BEGIN VIDEO CLIP)

CRISTINA TORRE, RESCUED FALLING BABY: Honestly, I did not feel his weight. It was effortless and was very surprised, because I wasn't sure about that. But he felt light as a feather and I just, you know, it was easy to hold him and, again, I just think -- I kicked into gear and whatever forces behind me, it just made sure I did what needed to be done.

(END VIDEO CLIP)

BURNETT: Wow. Talk about the catch of her life. The parents of the baby, meanwhile, are expected to be charged with child endangerment.

Well, it's been 686 days since the U.S. lost its top credit rating. What are we doing to get it back? Well, median home prices were up in May, are up 15 percent year over year.

That's making the National Association of Realtors chief economist nervous another housing bubble is brewing. He says prices are going up too fast and home building isn't keeping up to balance things out.

And now, our fourth story OUTFRONT: after nine days of questioning, an all-female jury has been selected for the George Zimmerman murder trial. You heard me right, all female.

And let's just break this down. This is how prosecutors and defense lawyers describe the six-person jury. You have five women who are white, one who is black and Hispanic. That means a total of six. Of the alternates, two are men and two are women. All of the alternates are white.

The racial makeup of the jury, everyone has said it's crucial because the case sparked a national debate on racial profiling. Zimmerman admitted to shooting unarmed teen Trayvon Martin last year, but he pleaded not guilty. Zimmerman, who is Hispanic, says he shot the black teen in self-defense.

OUTFRONT tonight, Paul Callan and Sunny Hostin, both CNN legal analysts.

Thanks very much to both of you.

Let me get to this issue, because on two levels, I can't wait to see what you think. First of all, that everybody is white. Almost everybody is white, and the lack of gender diversity.

So, let's start with gender diversity.

SUNNY HOSTIN, CNN LEGAL ANALYST: Yes.

BURNETT: On the main jury, we've got all women.

HOSTIN: All women. For me, it's unusual. I mean, when I prosecuted cases, I never had an occasion to have an all-female jury.

But I actually think it's going to be very interesting for this case, because clearly women don't leave their gender at the door of the jury room. They take it to the jury room all of their propensities.

I have found -- and studies bear this out -- that female jurors are very cooperative in the jury room. There's a lot of give and take in the discussion. And so I think that will be crucial for a case like this that has to involve that discussion.

I also think what's fascinating about it is five of the six women are mothers, and this is -- the victim is a teenager, a child. And I suspect that will also take -- be part of the discussion in the jury room. I think -- I don't know if Paul agrees with me or not, I think that female jurors are partial and very sensitive when the victim is a child.

BURNETT: So what does that mean? Does that mean that the defense -- I feel where you're leading me here. But what does this mean?

PAUL CALLAN, CNN LEGAL ANALYST: It means a couple of interesting things. The first interesting thing I think is that, you know, we're not allowed to knock people off a jury because of their gender, all right? It's unconstitutional and yet what is the first question we ask?

(CROSSTALK)

CALLAN: How about all women on the jury, what does that mean? OK. And I think what we're finding as we look at this, women are kind of hard to predict.

I'll tell you something, I was running this by -- I'm sorry, ladies.

BURNETT: That's only a man can say.

CALLAN: I ran this by three prosecutors today. They were all men and they all said women, when we have all women juries, we're terrified because they're much less predictable than male juries. That was the male stereotype on this.

My take on it when I look at occupations and other factors, three of these women have guns in the family. They have permits. They have family friends who have guns. And, also, you know, they have kids. So, will it help one side or the other?

The final thing on the racial question --

BURNETT: Yes, I want to ask about that because what about the fact that you've got one black and Hispanic woman. Five whites, and on the alternates, everybody is white.

CALLAN: Sure, we've been looking at this case through racial lenses since it first broke, and I think the fact that there are Caucasians predominating on the jury probably will go in Zimmerman's corner. I say that because I think that African-Americans when they see Trayvon Martin, they see their own child. And I think they would come into the case having are more of a sympathy saying that he was stereotyped and killed just because he was dressing like another normal black kid.

And I'm not so sure that Caucasian mothers will say the same thing, but they may. Time will tell.

BURNETT: Do you think there's any merit to that?

HOSTIN: I certainly think that as people we identify with those that are part of our experience, that look like we do. But I reject the notion that a white female juror cannot sympathize with a black teenager. I mean, I reject that notion. I think that regardless of race, these jurors will be able to listen to the evidence and go back into that jury room and in a collaborative way, come up with a verdict.

CALLAN: I agree with that as well. In the end, they will. But I do think that that's -- they're going to work -- the defense is going to work this idea that the white jurors are going to say, wow, he had a hoodie on and he was dressed like a gangster and Zimmerman must have been afraid. They'll get more mileage with a Caucasian jury, I think it will be rejected by an African American jury --

(CROSSTALK)

BURNETT: I just think this is fascinating. Thanks to both of you. I think this is not what anyone expected, which is what you love, which it just makes it even more complicated, you know, looking at the human mind.

HOSTIN: Opening statements on Monday.

BURNETT: All right. And you -- obviously, we'll be talking to you then. Thanks to both of you.

And a private company has been caught fudging background checks for hundreds of government workers. This may be one of those stories that falls into the category of shocking but not surprising. Including former NSA contractor Edward Snowden.

Many of the employees in question including Snowden had access to sensitive national security intelligence and a Senate hearing was held today to determine how this widespread fraud that could have impacted the safety of this country has gone unnoticed for so long.

CNN's Chris Lawrence is OUTFRONT.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Nothing but the truth --

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT (voice-over): A congressional hearing produced a stunning admission. A private contracting firm may not have done a thorough background check on admitted leaker Edward Snowden.

SEN. JON TESTER (D), MONTANA: Are there any concerns that Mr. Snowden's background investigation by USIS may not have been carried out in appropriate or thorough manner?

PATRICK MCFARLAND, INSPECTOR GEN., OFFICE OF PERSONNEL MGMT.: Yes, we do believe that there may be some problems.

LAWRENCE: The company in question is now under investigation for repeatedly failing to conduct quality background checks.

SEN. CLAIRE MCCASKILL (D), MISSOURI: Do you believe you're catching most of the fraud, Mr. McFarland, or do you believe there's more?

MCFARLAND: I believe there may be considerably more.

LAWRENCE: Alarming when you consider at least 18 employees have been convicted of falsifying background checks. In one case a record searcher faked 1,600 credit checks she never completed. Even worse, this woman's own background check to get her job had been faked by another investigator, someone convicted in a separate case.

The inspector general calls it --

MCFARLAND: A clear threat to national security. If a background investigation is not conducted properly, all other steps taken when issuing a security clearance are called into question.

JOHN HAMRE, CSIS: The background investigation process is broken.

LAWRENCE: Former Defense Department official John Hamre filled out a standard government form to renew his top-secret clearance. What shocked him was the investigator spent hours asking the most basic questions.

HAMRE: Is your wife really Julie? Is your -- did you really go to school at Augustana College? Did you really live at this address?

I mean, I was -- they simply read the form to me, and I simply said it was true.

LAWRENCE: Hamre says with the personal information available online, a computer could do the same background check for $100.

HAMRE: And, instead, we're spending $4,000 to have people conduct rather -- conduct investigations that aren't revealing anything.

(END VIDEOTAPE)

BURNETT: And, Chris, it's amazing when you hear this. I mean, like I said, in the category of shocking but not surprising, but truly shocking. What is the root of the problem? Funding problem? Staffing problem or something else?

LAWRENCE: It depends on who you listen to, Erin. The inspector general says their resources are woefully inadequate and that they simply don't have enough to do, the kind of oversight that a program this important requires.

But bottom line, this is a billion dollar a year program that has never had an audit. And John Hamre says it's more about the procedures. He says computers could do about 90 percent of this work and money saved could be freed up to let the people go out in the field and do the really deep personal digging that the computers can't do, and that would lead to much more thorough investigations.

BURNETT: All right. Thank you very much, Chris. So, just unbelievable.

Still to come, Paula Deen is in hot water over racist comments that she made years ago. Here is the question, isolated incident or part of a bigger problem? Even if it is an isolated incident, is there any tolerance? Should it be zero tolerance for that?

And the rest of the world thinks Americans are a bunch of needy lades (ph) . Truth hurts, huh? It's France that can help us.

(COMMERCIAL BREAK)

BURNETT: We're back with tonight's "Outer Circle" where we reach out to our sources round the world. Tonight we go to China where the government is eager to flex its muscles in space. This time, the Chinese astronaut shows off by teaching a physics lesson from a space module.

I asked Nic Robertson why this is such a big deal for China.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Erin, another first for China in space. Wang Yaping, the only female astronaut, teaching 60 million Chinese schoolchildren in their classrooms about gravity, surface tension of water in space, about gyroscopic in space, about how you weigh things in space, all designed to energize these young children to think about space, think about science in the future, and encourage the people in China to support this costly space mission.

This is just one of many steps. China planning a bigger space station in the future but still lagging behind the United States, lagging behind Russia in their space development and, of course, wanting to catch up. They carry the dreams, the space dreams of the nation, the Chinese president told them, Erin.

(END VIDEO CLIP)

BURNETT: Thanks very much to Nic.

Paula Deen cooks up a mess as a celebrity chef famous for her Southern cooking is in hot water admitting to using racial slurs in a court deposition last month. Deen is currently being sued by the former general manager for Savannah, Georgia, restaurant. And according to the lawsuit, Lisa Jackson claims Deen not only use it had on several occasions but wanted to have of a, quote/unquote, "true Southern wedding" with an all-black wait staff at her brother's 2007 ceremony.

This has one of Deen's biggest backers starting to distance itself. In a statement, the Food Network, which airs three of Deen's shows says it "does not tolerate any form of discrimination and is a strong proponent of diversity and inclusion. We will continue to monitor her situation."

All right. So should the network cut ties to Paula Deen or not?

OUTFRONT, radio show host and comedian Stephanie Miller, Dean Obeidallah and CNN contributor Reihan Salam.

OK, great to see you.

Stephanie, let me start with you. Deen's camp released a statement saying she doesn't find it acceptable to use the "N" word and they say, quote, "she was speaking largely about a time in American history quite different than today."

I obviously don't know what she meant when she said that. But just from what you know, should the Food Network wait or should had he terminate her?

STEPHANIE MILLER, RADIO TALK SHOW HOST: Erin, I think this is a little bit too big of a PR problem to get back from. I don't know if you were on twitter yesterday but it exploded with people renaming all of Paula Deen's dishes racist names, and et cetera. I mean, for someone who doesn't tolerate the use of the "N" word, she reportedly tolerated it quite a bit including I think talking about hiring a bunch of tap dancing little "N" words for her brother's wedding or something like that.

I mean, literally when I read this on the air today my co-host had those spring time for Hitler faces. I mean, It is beyond outrageously racist what she is reported to have said.

BURNETT: So, Dean, let me ask you. I mean, obviously, we don't have all the facts here, right? We know what we know.

But Paula Deen claims she used the "N" word but stopped after the 1980s.

All right. People change but she is a public figure. I mean, if she ever used it at all, is it acceptable she have a high-profile job like that? Or should they wait?

DEAN OBEIDALLAH, COMEDIAN: First of all, her use of the word is despicable. She admitted to using it in the 1980s. I'm not defending her words. What I'm saying is, let's not have a knee-jerk reaction, she should be fired today. Let's see the facts come out.

And the beauty is they will, because of the public outcry, others will come forward perhaps and say she used it more recently. The last time she used it 30 years ago?

People can evolve. And I think we should applaud people to evolve, to be better people. You shouldn't be sentenced for sins from 30 years ago and never able to wipe the slate clean. So, anyone comes forward and verifies this, more people say a week ago or a year ago, gone. No one else, then I think you have to sit and wait.

(CROSSTALK)

BURNETT: And, Reihan, let me ask you about the other thing we said, though, the lawsuit does mention and, again, this is from an employee who is suing her for some sort of harassment or discrimination. She's making this allegation. But she says Deen wanted to organize a true Southern wedding with an all black wait staff wearing white shirts and black pants and is alleged to have said, "You know, in the Shirley Temple days, they used to tap dance around. Now that would be a true Southern wedding, wouldn't it?

Again, allegations. Party allegedly never too place.

But, you know, Dean saying, in the 1980s, using the N-word, you may change. This obviously was in 2007. So, does that change anything?

REIHAN SALAM, CNN CONTRIBUTOR: You know, again, there is no way to know. It's he said/she said situation and that makes me nervous.

I think Stephanie's point, about the fact that she's become a laughingstock, one thing to keep in mind is that the folks, hipsters on Twitter, who are making of fun her, that's not her core audience. Those aren't the folks who are watching her Food Network shows. She doesn't necessarily have to worry about that.

But I think that, you know, I mean, there are generational issues, I think it's a real concern and I think it is something that's going to impact your audience eventually. The reason I would want to fire her, Erin --

BURNETT: Yes.

SALAM: -- is her use of sugar and carbs which I think is crazy. I think she's killing people. I think it's very dangerous. And she's (INAUDIBLE) people's health. So, I'm very torn about this because on other hand, I think Dean is right. You know, actually, give her the benefit of the doubt, who knows, let's see if anyone else comes forward and give her time. But on the other hand, these foods are poison.

OBEIDALLAH: She's killed more people than al Qaeda --

SALAM: That's -- I --

OBEIDALLAH: A hyperbole.

(CROSSTALK)

BURNETT: Let me go to final word to you, Stephanie, though, if she came out and said I want to explain to you my version of what happened and here is why I'm sorry, here's why I'm changed -- a true, heartfelt, in depth explanation, would you feel differently?

MILLER: Well, you know, perhaps. I mean, look, my colleague Dr. Laura learned this the hard way. You can say it as many times as you want, you have a First Amendment right. And people have the right to decide how they feel about that.

I just love that Reihan is more concerned about the white sugar than the words for black people. But that's OK, I understand.

BURNETT: All right. We have to leave it there. But thank you.

Reihan, I will promise that Reihan will get the last word tomorrow night. Is it fair?

OBEIDALLAH: Yes.

BURNETT: Says Dean.

All right. Thanks to all of you.

Every night we take a look outside the day's stop stories for something we call the OUTFRONT "Outtake."

Paris, you know, famous for everything wonderful, people having wine on the street, museums, monuments, restaurants, churches, one of the world's most visited cities with 29 million tourists going there, all of this despite the fact people in Paris do have a reputation for being, shall I say, a vicissitude (ph), but they are trying to change. Local tourism officials have created a booklet which includes greetings, spending habits and customs from people around the world and giving it to taxi drivers, waiters, hotel managers and sales people across the city. They are trying to reform themselves. I mean, you've got to give them credit.

It's not just the French. In 2008, in time of the Beijing Olympics, the Chinese government began a campaign to help the citizens behave better, too, try to teach Chinese citizens to refrain from spitting, cutting in line, littering and clearing throats loudly, so as not to annoy tourists. It was an effective idea. Recently, one of our producers, a Chinese-American was in China and a woman apologized for cutting in line, saying, I need to mind my manners. It seemed it was working.

Maybe it's the time the U.S. copied France and China, because as much as these programs say about the behavior of the host nations, they speak volumes about the guests. According to the Paris handbook, the four things American tourists are in need of are: quick service, constant attention, reassurance when it comes to price, and fluency in English.

Basically, United States, us Americans are impatient, needy, cheap, and unwilling to learn another language and you think the French are rude? As important as it is to be a good host, it is actually important to be a good guest, which is something to all remember as we head on vacation or welcome visitors, including those French here at home.

Still to come, the Nobel Prize winning, amazing idea and what America's broken health system can learn from him.

(COMMERCIAL BREAK)

BURNETT: Noble Peace Prize winner Muhammad Yunus is no stranger to innovative ideas. He's the founder of the Grameen Bank, a bank in Bangladesh that won the 2006 Peace Prize for reducing poverty.

Tonight, he has a new idea that he says can fix something a lot of people think isn't fixable, the American health care system.

(BEGIN VIDEOTAPE)

BURNETT (voice-over): Muhammad Yunus thinks America should be more like Bangladesh.

MUHAMMAD YUNUS, NOBEL PEACE PRIZE RECIPIENT: Your system is not a functioning health care system. One of the things that we did in our tiny small way in Bangladesh, because of the frustrations we have gone through, we created our own system.

BURNETT: Amazingly, many Bangladeshi live on less than $2 a day, yet Yunus says the government has shown it's possible to provide basic healthcare.

YUNUS: Look, we have covered everything, doctors and surgeons and land, building, equipment, everything is covered.

BURNETT: In Bangladesh, the cost of basic health care is about $3 per person per year compared to $8,680 per person per year in the U.S.

The magic formula, Yunus says the clinics are able to cover 93 percent of the costs by selling very inexpensive policies and then asking patients to pay a small fee at the point of service. They also sell pharmaceuticals and diagnostic services.

And Yunus is testing his idea in America.

(on camera): How do you make that work? You're explaining it. It sounds perfect, but $3 a year, that's nothing.

YUNUS: Forget about the $3 part. In Bangladesh it makes sense. Here it doesn't make that much sense.

BURNETT: What would be the equivalent here, just generally?

YUNUS: In New York City, we're asking for $10 per week.

BURNETT: Ten dollars a week, OK.

YUNUS: Ten dollars a week per person than the primary healthcare is there, insurance.

BURNETT: For that $10 a week, the clinic in America will have health coaches, nurse practitioners, a social worker and one doctor on staff. If it works, it's an idea many Americans will welcome.

YUNUS: The idea is to bring healthcare to people. The idea to keep people happy, healthy so they remain healthy.

BURNETT: "A.C. 360" starts right now.