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NEW DAY

Cold War Over Computers; MERS Caught Shaking Hands; Will Front- Runner Be Allowed to Compete?; Karl Rove: Consider Hillary's Age

Aired May 19, 2014 - 08:00   ET

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


(BEGIN VIDEO CLIP)

CHRIS CUOMO, CNN ANCHOR: Breaking news, Chinese government employees charged with cyber espionage, hacking U.S. companies and stealing secrets. The new cold war over computers.

KATE BOLDUAN, CNN ANCHOR: New fears that the deadly MERS virus could now spread within the United States. An Illinois man contracted it by shaking hands. Now the CDC wants to test everyone he came in contact with. We have the very latest.

MICHAELA PEREIRA, CNN ANCHOR: By a nose, the horse with the rags-to- riches backstory one win away from the Triple Crown. But will he not be allowed to race because of a nasal strip? His owner joins us live.

CUOMO: Your NEW DAY continues right now.

(END VIDEO CLIP)

ANNOUNCER: This is NEW DAY with Chris Cuomo, Kate Bolduan, and Michaela Pereira.

BOLDUAN: Breaking news at this hour, major charges of cyber espionage for the very first time. Five Chinese state officials now face charges of hacking into U.S. companies and attempting, at least attempting to steal secrets, trade secrets. Justice reporter Evan Perez is here with the very latest. Details are really just coming in at this hour, Evan. So what more do we know about this very big deal?

EVAN PEREZ, CNN JUSTICE REPORTER: Right, this is a very big deal. This is -- we're talking about five Chinese military officials. They're attached to this part of the People's Liberation Army that's down in Shanghai and that specializes into hacking into U.S. companies to try to steal U.S. secrets, industrial secrets.

BOLDUAN: So what is -- is that the specifically the charge? What exactly are they charged with?

PEREZ: Well, it would be cyber espionage, which obviously is a crime here in the United States. And what we're talking about here and what the big concern is for the U.S., obviously U.S. jobs are at risk every time that somebody hacks into these companies and steals their secrets. I mean, we're talking millions of dollars and billions of dollars in damage to the U.S. economy. BOLDUAN: And we don't yet know what companies we're talking about, yes?

PEREZ: No. We haven't been told that. The Attorney General is having a press conference at 10:00 in which we're expecting to learn more.

BOLDUAN: So what more -- this isn't new. I mean, this is something that has been a concern of the administration for years, a concern on Capitol Hill. When I was covering Capitol Hill it was something I heard folks talking about. Why is this happening now? And also what does this have to do with Edward Snowden?

PEREZ: Well, this is an investigation that's been going on for a couple years. And, as you said, people have been voicing concern about Chinese hacking for years. Last year, after Edward Snowden made these disclosures about the NSA's cyber spying all over the world, the administration decided they had to put this thing on hold, simply because, obviously, it would be a little bit difficult for the U.S. to be accusing other countries of spying when obviously the NSA had been doing some of the same things. Obviously the difference is, the U.S. would say, is that the NSA is not trying to steal industrial secrets from other countries, which is what the Chinese are accused of doing.

BOLDUAN: And we'll be -- one of the questions that the Attorney General will be sure to be -- need to answer later today when he speaks on this for the very first time. No response yet from China on these charges.

PEREZ: No, they typically deny these things and say the U.S. is exaggerating the problem.

BOLDUAN: All right. Well, we'll see. Evan, thank you very much for bringing us breaking news this morning. A lot to follow up on this.

CUOMO: Health officials have identified a third case of Middle East Respiratory Syndrome, or MERS, here in America. But this one is different. It's the first case believed to be transmitted from person to person on U.S. soil. How? Well, through a close meeting and a handshake.

Senior medical correspondent Elizabeth Cohen is at the CNN Center with more. What do we know?

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Chris, what we know is that it's not just disturbing that this virus has spread on U.S. soil, but in particular how it spread.

(BEGIN VIDEOTAPE)

COHEN (voice-over): The first two cases in the United States were people who got infected in Saudi Arabia and then got on a plane and came here. Those cases were reported in Indiana and Florida. Now, health officials say an Illinois man who had a business meeting with the Indiana patient has also tested positive for MERS. UNIDENTIFIED MALE: This potential person that is maybe the third case that was transmitted had just basically business transactions with this individual. So no unique travel history of their own and no travel history since.

COHEN: The CDC says during a meeting on April 25th the two men were sitting within six feet of each other talking. The only physical contact they had was shaking hands. The next day, they had another meeting, this one shorter. This was a week before the Indiana patient was confirmed to have MERS.

A CDC doctor says the Illinois man was never really sick, but now the CDC wants to test people he came in contact with, because even without symptoms, it's possible he could have spread the deadly MERS virus.

(END VIDEOTAPE)

COHEN (on camera): Now, health authorities have been saying MERS spreads through prolonged and through close contact. Well, you know, for example, people who might live in your household with you. Well, what's happened now sort of makes some people question that. Maybe it doesn't need to be all that prolonged or all that close, but it is important to keep in mind that this patient did not get sick, which is leading some to think, well, maybe this virus spreads more easily than we thought but maybe it's also less deadly than we thought. Michaela?

PEREIRA: That's the part that makes it particularly mystifying, that that person wasn't even feeling sick. Elizabeth Cohen, I'm sure we'll be talking about this a whole lot today. Thanks so much.

Let's take a look at more of your headlines right now. Russia is saying its military drills near Ukraine have come to an end with President Putin ordering forces to return to their bases. But NATO says it has no evidence yet that what the Kremlin is saying is true.

It's time to break it all down with the latest from Matthew Chance. He's live in Moscow. Matthew?

MATTHEW CHANCE, CNN CORRESPONDENT: Michaela, thanks very much. Well, it is absolutely crucial, the presence of these 40,000 Russian troops on the border with Ukraine, because they pose a threat to the territorial integrity of Ukraine. They're there as a sort of threat that they could invade, they could move into eastern Ukraine because of the security situation there. So the fact that Vladimir Putin has said this, that he's ordered the troops back to the barracks, could be an important step towards military deescalation in the region.

The problem is he has said this three times before, three times. Each of those times, the western military alliance, NATO, has said they've seen no substantial military movement. Including on this time, they haven't seen anything happen. They haven't seen any troops move back to their barracks. But it's a process. As I say, it could mark a major step towards deescalation, so they're watching this very, very closely indeed. Michaela.

PEREIRA: Yes, Matthew, as you said, what is being said and what is being done, two very different things. Thank you for the latest there.

South Korea's president is promising major changes promised after a ferry disaster that left hundreds dead. Park Geun-hye broke down in tears while apologizing for the disaster and what she called the failed operation rescue, a rescue operation. She said the government will dissolve the Coast Guard, now transferring duties to other departments.

New concerns that the Libyan government may be close to losing control. You can hear the gunfire there. Armed gunmen stormed the parliament in Tripoli Sunday demanding that lawmakers turn over power. That, the culmination of a deadly weekend where fighting in Tripoli and Benghazi left at least two people dead and dozens more injured. The government insists it is still in charge.

General Motors in a little bit of hot water again after it was revealed the company gave employees a list of words not to use when documenting safety issues. Among the terms or words on the list -- "Defect, grisly, death trap, widow maker, Hindenburg, Kevorkianesque and rolling sarcophagus." These details became public in a document released after the government fined GM $35 million for not reporting a deadly mechanical flaw.

CUOMO: Rolling sarcophagus.

PEREIRA: Yes.

CUOMO: I did not believe that that memo was real when it first came out.

PEREIRA: And one has to wonder --

CUOMO: They say it's real. And if it is, I mean, I get -- it's interesting, the irony, that we're going to tell you not to say these things that are --

PEREIRA: Yet those things are.

(CROSSTALK)

PEREIRA: Look at how many deaths have been -

BOLDUAN: Rolling -- yes, that is confusing.

CUOMO: Rolling sarcophagus.

BOLDUAN: Crews are making headway on the wildfires burning in California. Cooler temperatures, calmer winds helping in the battle to temper the flames. But officials say the threat is not over yet.

Our meteorologist Indra Petersons is live in Escondido, California, just north of San Diego of course with the very latest. Indra?

INDRA PETERSONS, AMS METEOROLOGIST: Yes, it's so tough this morning. We're standing here in one of the hardest hit areas. This is the Harmony Grove Spiritual Community area where they used to have about 30 structures here. This morning, this 117-year-old community, only has about five of these structures left. So many of these residents were only given about an hour to evacuate on Wednesday, to grab all the belongings they could. They had to wait about four days to see what the status of their homes were.

And it's very easy to see this morning all the destruction that is here. I keep trying, I keep searching the rubble here to find something that I can recognize. And really it's almost impossible. That is how hot these flames were.

Looks like to me this might have been a garage. I see maybe a chandelier here in the distance. And really that's about it. I can't find any of the comforts of home. I can't find any of the frames, I can't find any plates, maybe just some mailboxes over here to the side.

This is what they're dealing with this morning. So sad. I did hear just not too far away from here, there's actually a koi pond and that's really all that survived from this unbelievable blaze. And the concern is, this is so early, guys, for the fire season. If you're in southern California, you know fire season doesn't peak until about the fall, so around October and November. Unfortunately, this is when it's May gray, when you have the humidity, that's when these fires broke out. And the concern is this is going to be the story as we go all throughout the summer and eventually with the fall again next season. Guys.

CUOMO: Well, it's good to have you out there monitoring it, Indra. And obviously we'll have to monitor it going forward. Thanks for joining us this morning. Let us know what you see out there.

We'll take a little break on NEW DAY. More on that big merger, AT&T and DirecTV. AT&T says it's going to mean better service, but it could also send prices skyrocketing. We're going to show you the numbers.

Bolduan: Also ahead, Hillary Clinton's health still a hot topic in the 2016 discussion. Karl Rove doubling down on his comments targeting her health. Plus, new insight about who could potentially, potentially, be a Republican opponent. We're going to discuss ahead.

(COMMERCIAL BREAK)

BOLDUAN: A big shift could be on the way for millions of DirecTV subscribers, thanks to a merger in the works that could reshape the industry and, many fear, eat into your wallet even further. AT&T has agreed to pay nearly $50 billion to acquire the satellite TV giant. The company says it will offer better content on more platforms for viewers.

So what does that mean in terms of price for you? Chief business correspondent Christine Romans is here and has the details. Christine?

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Good morning, Kate. One thing is clear, what we've been paying to watch TV has been going up for several years now and the number of providers is going down.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): Nearly $50 billion. That's the hefty price tag AT&T agreed to pay for DirecTV, America's largest satellite TV provider.

This deal just the latest in a wave of media consolidation. Comcast revealed its plans to buy Time Warner Cable for $45 billion in February. And Sprint parent company Softbank has been expressing its interest in sealing a deal with T-Mobile. The inevitable concern -- these new Internet and video powerhouses could take more control over

MICHAEL WEINBERG, PUBLIC KNOWLEDGE: With debt consolidation and that reduction of competition, we see fewer things happening and prices mostly going up for consumers and subscribers.

ROMANS: Potentially good for consumers, AT&T and DirecTV say the acquisition could mean new bundles that would bring TV and internet options across all of your screens, even those in cars and airplanes. The fate of this new alliance rests in the hands of the FCC.

WIENBERG: The federal communications commission has a role to look at all these mergers, both individually and against the landscape that they're operating with, and say are these mergers in the public interest.

(END VIDEO CLIP)

ROMANS (on-camera): If both deals pass, regulators AT&T and Comcast would control nearly two-thirds of the U.S. pay TV market. Comcast declined comment on AT&T's announcement. Kate, Chris?

CUOMO: All right, thank you Christine.

Let's break down the deal.

We have Craig Moffett, senior research analyst at MoffettNathanson Research. You are widely renowned with how you understand this space. So let's start with the up and down for AT&T. Why is this good? Why is there risk?

CRAIG MOFFETT, MOFFETTNATHANSON: Well, I think the good is this is a company that pays a very large dividend. And unfortunately, they're cushion in cash flow beyond that dividend is not very good. And so, they're looking for access to more cash. This deals brings them that, so it helps stabilize the dividend.

The challenge is it's hard to find the strategic rational in this deal.

CUOMO: Explain that.

MOFFETT: Well, 10 years ago when they first started looking at buying a satellite operator, satellite was still in its ascendancy. And you could make a good case that there was a real business benefit here. Now AT&T, about seven years ago, got into the TV business themselves. That covers about 25 percent of the country. And satellite is just starting to decline. It seems a very odd time to try to tether a satellite business to a phone company today.

CUOMO: So it sounds like a short-term strategy to you?

MOFFETT: Well, it certainly a cash generative strategy. The hard part is, how do you really make hay out of this combination? And is there something strategically that's different than what these two companies could do apart?

CUOMO: Because the future is really second and third screens, complete integration of content. AT&T had that already without satellite. So the question is, is it taking a step backwards and thinking it's going to go forward?

MOFFETT: That's right. I mean, remember people were saying a long time ago that the cable industry was dead. As it turns out, cable is actually gaining background.

And the reason is they have a two-way infrastructure. That is, you can interact, you can watch what you want when you want to watch it with a real two-way digital infrastructure. Satellite isn't that. Satellite is a pure one-way broadcast distribution model that seems out of step with the way people are watching television today.

CUOMO: Now, the big concern is this is going to cost me more money because you're going to have fewer people controlling it. Now while it is true, you have Cox, Charter, Dish, Verizon and others, how much of the market will they control? And is there a real concern about prices?

MOFFETT: Well, there's two questions about pricing. One is that in about 25 percent of the country where AT&T today offers television service, you're reducing the number of competitors from four to three. And that typically would have an upward bias to pricing.

They've promised to use national prices so that prices that are set in the parts of the market where competition will discipline pricing as a way to make sure that they don't gain any market power there. That's a sort of soft (ph) to regulators if you will.

CUOMO: But does it work? I mean, can a Cox, can a Dish, can these other people really compete once you get these mergers with Comcast and now AT&T?

MOFFETT: Well, so that's a different question. The other question is with the sheer scale of these two companies, will they have such an advantage in negotiating programming agreements, that is, the content that they buy from Disney and Viacom and Time Warner, will they have such a large advantage that they really get better rates and that other companies, therefore, are materially disadvantaged, companies like Cox, like charter? And that's a real question. And the Department of Justice will look at that carefully.

CUOMO: Remind me of the deal that happened, the merger where our prices wound up going down in this business.

MOFFETT: Well, that's -- that's right. I mean, typically these things have an upward bias to pricing. In this case, though, I don't think this is really about trying to take a competitor out of the market. As I said, it does happen in 25 percent of the market, but that's not really what this transaction is about.

And I think the Department of Justice will view it the same way as well, that there will be scrutiny and there will be some concern about that 25 percent of the market. But in the rest of the country, they're going to be trying to figure out what does this do? Does this actually give AT&T the ability to offer consumers something they otherwise wouldn't be able to get?

CUOMO: So it's not designed to stick it to us in terms of higher rates, but it's not necessarily going to make it cheaper for us. It may give us more for our money, though.

MOFFETT: That's exactly right.

CUOMO: At best.

MOFFETT: That's exactly right.

CUOMO: If everything goes perfect and they follow through on every promise.

MOFFETT: And -- and there are a lot of promises here. And that's -- that's the concern from consumer groups, is they're looking at this transaction, they're looking at the Comcast transaction, they're looking at the proposed transaction between Sprint and T-Mobile, which, by the way, really would reduce the number of competitors everywhere. Each one of them is analytically completely different. But -- but broadly speaking, the gestalt you get from all this is media consolidation. It's got to be that.

CUOMO: All right, Craig, thank you very much. Appreciate it. It's really interesting, you know, the bigger it gets and all the possibilities are getting bigger, the number of players getting smaller. Kate?

BOLDUAN: Coming up next on NEW DAY, Hillary Clinton's health now a bigger question than whether or not she's even going to run. And is there such a thing as being too inevitable? The discussion ahead.

And by a nose, or at least a nose strip. Could the best chance to win the Triple Crown in years be over before they even hit the track? One of the owners of California Chrome is joining us ahead.

(COMMERCIAL BREAK)

PEREIRA: Time for the five things to know for your new day. At number one, breaking news, the U.S. has now filed criminal charges against five Chinese military officers, accusing them of using cyber espionage to steal U.S. trade secrets. It's the first ever crackdown of its kind. A third case of MERS, Middle East Respiratory Syndrome, in the U.S. raising worries about how easily this illness can be transmitted. The patient contracted MERS through a meeting and handshake.

AT&T will pay nearly $50 billion to acquire DirecTV. AT$T says it will allow for better content, but the deal does raise questions about mega companies controlling so many subscribers.

South Korea's president is furious over the ferry disaster that killed hundreds of students. She plans to dismantle the country's coast guard and is promising to reorganize her government.

At number five yep, that's Michael Jackson, at least a hologram of him on the stage at the Billboard Music Awards. Justin Timberlake took home the biggest award of the night, top artist.

JUSTIN TIMBERLAKE, SINGER: I'm really surprised.

PEREIRA: We're not.

We're always updating those five things to know. So be sure to go to newdaycnn.com for the very latest. Kate?

BOLDUAN: You read my mind. Thanks, Michaela.

Hillary Clinton not in the presidential running yet, but some Republicans certainly acting like she may be. Karl Rove is among those doubling down on whether she is fit to serve. Listen.

(BEGIN VIDEO CLIP)

KARL ROVE, FORMER WHITE HOUSE DEPUTY CHIEF OF STAFF: I'm not questioning her health. What I'm questioning is, is whether or not it's a done deal that she's running. And she would not be human if she were not -- if she did not take this into consideration. She'll be 69 at the time of the 2016 election. If she gets elected and serves two terms, she'll be 77.

(END VIDEO CLIP)

BOLDUAN: Some Democrats laughing those comments off. But they're also urging some caution, concerns her front-runner status could hurt her in the long run this time again.

Joining us to discuss, CNN political commentators Marc Lamont Hill and Will Cain.

Marc, the host of (inaudible) will -- is a columnist for "The Blaze" on the right. Good morning, guys.

So, Mr. Will Cain.

WILL CAIN, THE BLAZE: Ma'am.

(LAUGHTER)

BOLDUAN: That's the funniest thing I've heard all day. Karl Rove, "I am not questioning her health." What? Can he have it both ways?

CAIN: Yeah, he was. No. He was questioning her health. That being said, he didn't say she had brain damage.

BOLDUAN: True. That was a headline.

CAIN: That was a "New York Post" headline.

(LAUGHTER)

MARC LAMONT HILL, CNN POLITICAL ANALYST: Yes he did. He didn't say she had brain damage. He said she was wearing glasses that someone would wear if they had brain damage.

CAIN: No, traumatic brain injury. Words matter.

LAMONT HILL: Traumatic brain injury. That's brain damage.

CAIN: I think that Karl Rove brought up a totally legitimate issue. And that is, one, she did have a serious health incident, and Bill Clinton confirmed that. It took six months to recover from a concussion.

And second, is her age. Health is a legitimate issue to bring it up. Look, we bring it up with our male presidential candidates. We brought it up with John McCain. We brought it up with Bob Dole. Why is Hillary exempt from this? As he said, 69 when she's inaugurated. Totally legitimate.

LAMONT HILL: Here's my frustration with that. Number one, Karl Rove didn't seem to have that concern when he engineered -- was the architect of a presidential campaign for Dick Cheney, who was strapped to a machine for eight years.

And then the other thing is, the patron saint of Republicanism is Ronald Reagan, maybe the oldest president in the history of the world.

CAIN: But it's not a disqualifier. It means you can ask the questions. You should ask the questions. Nobody is saying you can't serve if you're 70 years old. But if you are, we should ask questions about your health.

BOLDUAN: Should Hillary Clinton be surprised at all that this is going to come her way?

LAMONT HILL: The Clintons are not surprised at anything. And they were ready for this. They've answered -- hopefully we can move on. But the long -- because she's a front-runner and she's entered the race by proxy so early, she's going to take all the hits that no one else does.

BOLDUN: Is it more of a timing thing? Do you think this -- OK, two questions. More of a timing thing, do you think this is going to backfire against Republicans? Even -- I don't know why Karl Rove keeps talking about it. That's one of my questions.

Number two, is it a timing thing? She hasn't gotten into the race. Why are we talking about her health?

CAIN: OK, two things. First of all, she's running a presidential campaign. It's just a shadow presidential campaign. Every time she's criticized, she can back behind the curtain of, "I'm not even running. These Republicans are so crazy." Right now she's clearly the Democratic presidential front-runner of -- of this campaign. What was your second question?

BOLDUAN: I don't remember. Timing.

(LAUGHTER)

LAMONT HILL: Shadow campaign. I love the language. Shadow campaign, it sounds so --

BOLDUAN: Why bring it up, and is it going to backfire?

CAIN: Is it going to backfire? Marc thinks it's going to backfire. We talked about this in the green room. You think that it's going to make Republicans look mean. I don't. I think it's legitimate, and most rational Americans know it's legitimate to ask these questions.

LAMONT HILL: It's so funny because Republicans bristled when the Dick Cheney questions kept coming up. They said, oh my gosh, the guy's heart is fine, right? Everyone made -- everyone made an issue of people asking. Now suddenly it's fair game. And look, I agree, it is fair game. It's the hypocrisy that people are frustrated with.

BOLDUAN: So it is fair game in the end.

(CROSSTALK)

CAIN: It's fair game. It took a while to get here.

LAMONT HILL: I was there from the beginning. I'm saying -- I'm pointing to the hypocrisy. But once we ask it, let's leave it alone. The problem is, Republicans will double down on this, and they'll keep doubling down on it. And that's what's going to make them look mean, insensitive, and ultimately sexist.

BOLDUAN: Then why are you even worrying about it? Because that might help you.

LAMONT HILL: I'm happy. I hope they keep talking about this.

BOLDUAN: This is you happy? You need to breathe.

(LAUGHTER)

LAMONT HILL: It's Will. He does this to me.

(LAUGHTER)

BOLDUAN: OK, another thing on -- on the Hillary Clinton. Deval Patrick, Massachusetts governor coming out to say that he's a little concerned that she's a little too inevitable. Do you think that's a real concern?

LAMONT HILL: No. No, I think that was a reasonable concern in 2008 because there was a, pardon the expression, dark horse who could win. There's no one right now who can win.

CAIN: It's a problem, Kate. Because watch this. Who is your second choice?

LAMONT HILL: No one. That's the point.

CAIN: I think that shows the problem of her inevitability.

BOLDUAN: Realistically --

LAMONT HILL: How -- how is that a problem?

CAIN: Because if, by chance, for whatever reason, Hillary Clinton decides not to run, you better have an answer to that question I just asked you.

BOLDUAN: What can Hillary Clinton do --

(CROSSTALK)

BOLDUAN: What can Hillary Clinton do about that? Is it her fault that people are talking about her as the front-runner?