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ERIN BURNETT OUTFRONT

White House: Sony Attack "Serious National Security Matter"; Hackers Stole Passwords of Top Level Sony Employee; White House Won't Rule Out Castro Visit

Aired December 18, 2014 - 19:00   ET

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


ERIN BURNETT, CNN ANCHOR: OUTFRONT tonight, breaking news, the White House calling the Sony attack a serious national security matter but falling short of a formal response to Kim Jong-un. Did North Korea win?

Plus, the critical piece of the U.S. Cuba deal is the release of a spy in prison by Cuba for almost 20 years, a man that almost no one knew he existed, who is the mystery spy?

And as the death toll rises in terror attack on Children in Pakistan tonight, we have new video tracking the steps of the killers inside of that school. Let's go OUTFRONT.

Good evening. I'm Erin Burnett. And OUTFRONT tonight, the breaking news, the White House calls the crippling attack on Sony pictures, a quote, "serious national security matter." But today no formal response from the White House. One day after CNN reported that U.S. investigators concluded North Korean leaders ordered the attack. A statement from the administration blaming North Korea and laying out America's response was anticipated as early as today instead a White House spokesperson today didn't use the words North Korea in responding to questions about the attack, simply saying the investigation is ongoing.

(BEGIN VIDEO CLIP)

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: I'm not prepared to ascribe any accountability for this specific act or to describe who might have been the sophisticated actor that initiated it.

(END VIDEO CLIP)

BURNETT: And careful also to use the word "act" as opposed to using the word terror or war or anything like that. Could this mean the U.S. is about to blame other countries or third parties. Well, today Sony removing posters and ads for the movie "The Interview," a senior administration official is adamant the White House did not pressure Sony to pull the movie from theaters. In fact the White House actually said, officials won't even role out a presidential screening at the film at the White House.

Pamela Brown is OUTFRONT in the very latest. And Pamela, why no formal response from the White House? PAMELA BROWN, CNN JUSTICE CORRESPONDENT: Well, that could change

very quickly, Erin. In fact, we know right now U.S. officials are gearing up to respond publicly as early as tomorrow morning and to publicly shame North Korea for the attack. We expect a statement to include some of the evidence that allow the U.S. government to come to this in conclusion and this is in the wake of this extraordinary move by Sony not to release its controversial comedy "The Interview."

(BEGIN VIDEOTAPE)

BROWN (voice-over): Tonight the U.S. is preparing to publicly place the blame on North Korea for hacking Sony. But behind the scenes administration officials are still debating on how to respond to Kim Jong-un to regime. The attack led to Sony pulling the plug in the release of the interview which depicts North Korean leader being assassinated.

UNIDENTIFIED WOMAN: Take him out.

BROWN: Sony executives are calling the hack an act of terrorism. Law enforcement sources say, the blueprint of the current attack mimics a hack against South Korean banks and media organizations last year. Those attacks according to a South Korean government official are believed to have been carried out by North Korea secretive network of hackers known as Bureau 121.

JOE LOOMIS, CEO, CYBERSPONSE: Unit 121 is a highly sophisticated organization under the military branch of the People's Republic of North Korea. And what this group is designed to do, is to advance their cyber warfare capabilities.

BROWN: One possible response for the U.S., tougher sanctions. North Korea could be crippled if the U.S. goes after Chinese banks that do business with Pyongyang or the U.S. could flex its cyber muscles and launch a counter attack on North Korea's computer systems.

STEWART BAKER, FORMER NSA GENERAL COUNSEL: Right now the North Koreans feel they are winning. The only way that we will stop them is if they are persuaded that this is a bad idea and so we have got to react in a way that deters future attacks of this kind.

BROWN: There is also a legal option. Returning an indictment like the U.S. did against five Chinese military hackers earlier this year. But sources tell CNN there is not enough evidence yet to tie the Sony hack to specific individuals. As Washington scrambles to figure out an appropriate response. One former Homeland Security official warns this remarkable decision to pull the film is a serious mistake.

BAKER: There are a lot of countries that would like to sensor Americans and if we start giving into it, there won't be an end to it.

(END VIDEOTAPE)

BROWN: And Erin, expect when U.S. officials do come forward, with that announcement expected to be broad. It is unclear as of now if they're going to point out anyone in particular as far as individuals go. Because, after all, the investigation is still underway. Erin.

BURNETT: All right. Pam, thank you very much.

And we're also learning at this hour, a part of how this happened. Hackers apparently stole the password and credentials of a top level sonny employee. They used that to break into the company and attack it.

Evan Perez broke this story for us. And Evan, what more can you tell us? I mean, as we are trying to, you know, waiting for the administration to speak, you are getting pieces of exactly what happened here.

EVAN PEREZ, CNN CORRESPONDENT: That is right, Erin. The person whose credentials that they stole was a system administrator, somebody who had access to the entire commuter system. As one person told me, this person had keys to the entire building. And what the hackers did was steal the credentials, the computer sign ons passwords belonging to this employee which allowed them to roam the systems for a long longtime before they ever did anything. We know that there has been some suspicion Erin that perhaps this was an inside job. We are told by sources that there is no indication that that is what happened.

BURNETT: Right. We have certainly now have even more evidence pointing towards North Korea. Thank you very much, Evan.

And now, former House Speaker, republican Newt Gingrich and former State Department spokesman in the Obama administration, P.J. Crowley. All right. Good to have both of you with us. Appreciate you taking the time.

Newt, let me start with you. Obama administration officials you just heard were expected to respond to North Korea as early as today. We have heard nothing so far. We do believe the President will respond during his press conference directly tomorrow from his mouth. Is that okay that he will wait to do that?

NEWT GINGRICH, FORMER HOUSE SPEAKER: Well first of all, it has been 24 days since the attack. Nothing was done, nothing was said. I suspect Sony and the theater owners got very nervous at the failure to respond. I don't know what the President is going to say tomorrow, but frankly this whole idea that we have to track down individuals is nutty. This was a North Korean operation, the North Koreans are the only people that would gain from it, it is act of war by a state in order to coerce Americans and crippled an American company. They threatened to kill Americans who went to the movies. We have to react for a very simple reason. The entire world is watching to see what happens. If you engage in this kind of cyber-attack on the U.S. And if we don't effectively cause the North Koreans a great deal of pain and make it clear that it is not worth messing with us, we're going to have a lot of other players around the planet who think this is an open field to come and try to impose their will on Americans.

BURNETT: P.J., do you agree? P.J. CROWLEY, FORMER STATE DEPARTMENT SPOKESMAN: Well, I agree

that it is a serious issue and there needs to be a serious U.S. response. I don't agree with Newt that this is an act of war. It is an act of aggression.

BURNETT: What is the difference?

CROWLEY: I don't know that it is an act of terrorism either. It depends on who actually, you know, pulled the cyber trigger. It could be. But I agree with Newt that this was clearly state sponsored, either directly or indirectly and we have to find a way to respond, but I think we have to -- we have the ability to take our time. The response can be meaningful. It will probably be economic. And it should be designed to, you know, to get North Korea's leadership attention and have them pay a price and as Stewart Baker said in the set-up piece, try to find a way to make sure that they modify their behavior.

BURNETT: P.J., a lot of what you said there makes sense. But what I don't understand is the logic of -- you're saying it is state sponsored and then you're using the word aggression, how is that different than what Newt said that it is state sponsored and it's an act of war? What is the difference between war and aggression in your head?

CROWLEY: Well, it is complicated issue, Erin because we are still technically in a state of war, you know, with North Korea. It was never an armistice ending formally, the Korean War that said, we don't necessarily see this as a military solution. You know, the fact is that we've contained North Korea effectively over democratic and republican administrations, you know, for several decades. They do have nuclear weapons so we have to be careful and cautious in how to respond. I think covert action is probably more effective than overt action but ultimately we all, I think we all agree that sooner or later North Korea is going to implode by its own contradictions but if we escalate this, we actually risk taking a problem and making it worse.

BURNETT: All right. Newt, what is your response to that? Because it sounds like what you are saying is pretty much the opposite.

GINGRICH: Well, first of all, part of it is just nonsense. If a foreign country comes into your country and takes down a major corporation, makes it impossible to work in a normal way, steals five movies and then issues threats that it will kill American citizens if they go to a movie theater, that is pretty darn close to an act of war. And I'm not talking about legalisms here. I'm talking about the practical effect. If we don't respond in such a way that the entire world understands that North Korea is paying a terrible price. They should pay a price five or 10 or 15 times bigger than what they did. That doesn't mean you have to be stupid about it. One technique would be the use of our cyber capabilities. Go in and close down the country, close down its telephones, closed down its electricity and just make it quite clear that you mess with us, you'll going to be in a lot of pain. But if we don't do that, we're sending a signal to Iran, we're sending a signal to ISIS, we're sending a signal to Putin, Russia has a huge cyber capability, the Chinese already routinely steal from us and I think it is very dangerous to allow this thing to get escalated gradually until it becomes totally fine for foreigners to wander around America dictating to us what we are allowed to say and do.

BURNETT: All right. One of the most difficult situations in this country has been in a long time. Thanks both to you.

And next a defector tells CNN that North Korea has a vast network of hackers. They are called Warriors and their mission is attack on enemy states. We have a special report.

And the untold story of the U.S.-Cuba deal, the spy released by Cuba after nearly 20 years in prison. Pretty much no one knew who this guy was. We now do and we'll tell you.

Plus, we'll take you inside the school where terrorists gunned down more than 130 school children in the worst act of terrorism ever in Pakistan. That is ahead.

(COMMERCIAL BREAK)

BURNETT: Breaking news, high level meetings at the White House and other federal agencies as the U.S. decides how to respond to the cyber-attack on Sony Pictures, the U.S.-based entertainment arm of Sony. The massive attack is believed to have been ordered by North Korean leaders and carried out by an elite group of the Kim Jong-un's million man army, they are handpicked, they are pampered, they are trained to wage cyberwar on North Korea's enemies. And tonight we are learning about the secretive unit from a former member.

Out Kyung Lah is OUTFRONT in Seoul South Korea. And Kyung, I mean, you have had incredible access, what have you been able to learn about these so-called cyber warriors?

KYUNG LAH, CNN NATIONAL CORRESPONDENT: The best way to think of them is exactly that. They are a secret army, their battleground though is cyber space. They are placed around the world. We don't know the exact number. But they have one common goal -- attack western interests.

(BEGIN VIDEOTAPE)

LAH (voice-over): North Korean soldiers, a Technicolor parading against the west. On state-run television, a near ridiculous bravado of the military. But there are unseen soldiers in Kim Jong-un cyberwar versus the west, they have no face and only known by a number Bureau 121.

(on camera): What is Bureau 121?

JANG SE-YUL, NORTH KOREAN DEFECTOR: (SPEAKING FOREIGN LANGUAGE)

LAH (voice-over): "They conduct the cyber-attacks against overseas and enemy states," says Jang Se-yul. Jang is a North Korean director. A former Pyongyang military computer systems worker now in South Korea, independently attempting to crumble an agency nearly impossible to chase.

Bureau 121, a shadow agency with an unknown number of the regime's hand-picked shadow agents placed in countries around the world. Jang believes there are approximately 1800 of them. Though he says the agents themselves don't know how many exist. We can't verify Jang's claims about the shadow group, but he says he's obtained from a current operative hundreds of financial files hacked from South Korean banks, complete with names and other bank account details.

(on camera): Is this the cyber war the real war for North Korea?

SE-YUL: (SPEAKING FOREIGN LANGUAGE)

LAH (voice-over): "Raising cyber agents is fairly cheap," he says. "The world has the wrong view of the North Korean state, with that incorrect world view, North Korea was able to increase the ability to launch cyber-attacks."

South Korea learned the hard way. Banks across the country last year were paralyzed. ATMs frozen for days. Media outlets went dark, servers jammed or white. North Korea denied it was the source of the hack, but in the wake of the attack, South Korea beefed up its own cyber forces declaring the online war as dangerous as Pyongyang's nuclear ambitions. North Korea exists from the land of over the top propaganda while expert say, it wages a parallel war in cyber space, led by a young man of the internet age ushering in a new face of the Korean conflict.

(END VIDEOTAPE)

LAH: Now, what North Korea really wants and we see it again and again with their nuclear provocations, they crave visibility. So this hack, this hack of Sony, a multinational corporation, it is certainly, Erin, given them visibility.

BURNETT: It certainly has. On that front they can score it as a huge success. Thank you very much, Kyung.

And OUTFRONT now, Mark Rosch, a cyber-security expert. Gordon Chang, author of "Nuclear Showdown: North Korea Takes On The World." And Bruce Klinger, a former CIA deputy division chief for Korea. Good to have all of you with us. I'm still recovering from that video. I hope all the viewers saw it. Kim Jong-un off the boat off the coast and people just running in the water willing to drown themselves. It does gives you the sense of the culture, Gordon. He is a God-like figure. It is something that does not exist anywhere else in the world in the world that we live in. In a country where most people have no internet at all, have never experienced the internet, where does Kim Jong-un find these people and train them to take down sophisticated systems of which they would have had no experience in their regular lives.

GORDON CHANG, AUTHOR, "NUCLEAR SHOWDOWN": Well, first of all, this is the cream of the crop of high school students in Math and Computer Science. They go to a special high school in Pyongyang and then they go on to elite colleges and they are trained by Russia and China in Russia and China. And the important thing about this Unit 121 is that many, if not most of its cyber warriors are based in Shenyang which is a city in China, about three hours or so away from North Korea.

BURNETT: So, are you saying there are North Koreans who are based in China or there are also perhaps Chinese who are working for North Korea?

CHANG: No. They are North Koreans who are working -- and they are probably working in conjunction with the Chinese. But the point is the Chinese know what is going on because they have this great fire wall. So they know everything that goes on in a computer terminal in China. So clearly China is complicit in all of this.

BURNETT: Which is a shocking statement, Bruce, and brings in into question what the United States can do and whether the United States is essentially of somewhat of a unik (ph) here.

BRUCE KLINGER, FORMER CIA DEPUTY DIVISION CHIEF FOR KOREA: Well, we have to start first with the caveat, as we don't have an official U.S. statement yet that North Korea is behind it, although the media reports indicate that it is growing closer and closer to that conclusion. If North Korea is behind it, there are a number of things we can do. This attack does fulfill the legal obligations of an act of terror. We could put the North Korea back on this state's sponsored in a terrorism list along with other actions that North Korea has done in the past, which all qualify as terrorist acts. Also, there's a number of additional sanctions that the U.S. can implement despite the misperception North Korea is the most heavily sanction country in the world. It's simply not true. The U.S. has imposed stronger sanctions on Iran, Burma, Syria, we actually have three times as many as Zimbabwe entities on the U.S. sanctions as we have North Korean entities.

BURNETT: Wow! I think that would shock a lot of people watching. You're right because the perception is exactly as you've explained it.

Mark, this Bureau 121 or this secretive units that North Korea may have, are they capable of what happened to Sony, which again was threatening the physical lives of Americans, it was sending a company back to the dark ages, they can't even pay people and it was actually physically destroying a lot of computers and information.

MARK ROSCH, FORMER JUSTICE DEPARTMENT PROSECUTOR FOR CYBER CRIMES: Yes. They certainly are capable of it. You know, with a degree of training and experience and tools, a lot of which you can find even on the internet, you are able to actually physically break into the networks and the most amazing thing about the Sony attack was not only were they able to get in and get super user or root privileges, essentially to take over everything.

BURNETT: Yes. ROSCH: They were able to steal millions of documents and destroy

records. So these types of skills are available in every country in the world pretty much.

BURNETT: So, Gordon, how many of these kids are there? You're say that they are picking them in North Korea, in high school and putting them in a special school in Pyongyang. How many of them are there and how surprised were you to hear that one of the defectors, he said he was a defector, he says there is someone who is currently a cyber-warrior in North Korea who is leaking him information.

CHANG: That really is extraordinary. In Unit 121, the range goes from that 1800 we've seen up to 5900. But we got to remember that Unit 121 is only one of many cyber-warrior units, they are under two big large organizational umbrellas so they are scattered all throughout the regime and that means, yes, we are very interested in 121 but we should also be interested in Lab 110 which is a sister organization and many of the others as well.

BURNETT: And how many people do you think total they have doing this.

CHANG: This we don't know. And I would really love to have the answer to that question. But, you know, there's clearly about 10,000 or so, when you add up all the organizations with unit spread throughout the entire regime.

BURNETT: So, Bruce, being the former CIA for the division for Korea, what is your view of how Kim Jong-un sees the situation right now? Does he see it as a win? The movie isn't going to be in theaters? The movie isn't going to be on DVD's. Sony has completely caved. Obviously we're waiting for the U.S. response. But if the U.S. doesn't do something immediately, is he just, hey, I'm a total winner, am I now emboldened?

KLINGER: I think there is both a tactical objective and a more strategic objective for this attack as well as the overall cyber- effort. North Korea responds very forcefully to any -- what they perceive as an insult to their leadership, not only this but previously they've threatened South Korean media organizations and the National Defense Council of North Korea made very specific threats even identifying the geographic coordinates of the South Korean media headquarters. So they responded very forcefully to that. So this would be seen as a win because they prevented this movie which they see is very insulting to their leadership. More strategically, the asymmetric warfare capabilities that cyber-attacks provide, it adds to the other domains of military, the air space, ground and air. So they see cyber as one of the legitimate domains of any kind of operations against the United States and South Korea so this is really is a way of furthering their goals of developing that capability.

BURNETT: All right. Thanks very much to all of you. And certainly asymmetric you have a country with almost nothing in terms of money attacking a company that's even bigger winning, what does that say for the concept of war around the world. Next, critical part of the U.S.-Cuba deal was the release of a

U.S. spying prison for nearly 20 years. This is not Alan Gross everybody, this is a mystery man and we are going to tell you about it.

Plus, the horrific attack that killed 132 children inside of their school. Today, CNN went inside of that school and we're going to show it to you.

(COMMERCIAL BREAK)

BURNETT: After a more than 50-year diplomatic standoff, the White House now saying a visit by the Cuban president to the United States is not out of the question. Wow! President Obama's decision eases travel restrictions for more Americans to visit the Caribbean countries only 90 miles from Florida, what tourists would find is the nation looking forward but frozen in time. It is sort of like North Korea in some ways, it is been that off limits. Patrick Oppmann is there, he's OUTFRONT in Havana tonight.

PATRICK OPPMANN, CNN INTERNATIONAL CORRESPONDENT: There are actually two Cubans. And this is the one that most visitors don't see. It's a pretty grim place, you can see buildings are collapsing all around me, people are just hanging on. Part of that is due to the long time U.S. economic sanctions. Part of that is frankly due to the Cuban government's inability to manage their own economy. So, you talk to people to hear they only make it about $20 a month. It is not nearly enough to get by but it is what they have. They have of course old cars that have been passed down for generations and they keep running. They look like they could fall apart at any time and some of them do. So when you talk to people really impoverished neighborhoods like this one. I mean, talk to them about what improved U.S.-Cuban economic relations with them, we talk about how they don't just want to improve their economic situations, they needed to.

(BEGIN VIDEO CLIP)

UNIDENTIFIED WOMAN (through a translator): You try to make things better so you have more. We have enough, but more would be better.

(END VIDEO CLIP)

OPPMANN: And this is the other Cuba, the one that's for international visitors who come to Cuba with hard currency to spend. You can see the streets are fixed, the walls are painted and the buildings are not falling down. Is Cuba ready for all of these changes? It doesn't appear so. But they are welcoming them all the same.

BURNETT: Patrick, you know, one thing that everyone has been talking about on the lighter side of this is Cuban cigars. You know, now they are going to get their Cuban cigars, now they're going to be allowed. But my understanding from what you are saying is that the Cubans already can't meet the demand for tourists? Wait. You got one right there. OPPMANN: This is yours, Erin. I'm saving it for you. As soon

as we know it is 100 percent legal. I'm making a joke. But it is illustrative of a larger problem here. They want more tourism. They desperately want American tourism but they don't have the infrastructure, they don't have enough rental cars, they don't have enough hotel room and even this, the famous Cuban cigar, there are shortages. They don't pay Cuban tobacco workers nearly enough. And so they don't produce enough leaves and then all of a sudden during certain times of the year you have trouble finding certain brands of cigar and people come here and say, why is it that I can find this cigar more easily in Spain or Canada than in Cuba? And these are just some of the crazy things that happen here because of the way that the government runs basically still a centralized communist form of running an economy. And so there are times when you run out of sugar, coffee and even Cuban cigars. These are the problems they're going to have to find a way to overcome if they are going to deal with the onslaught of Americans.

BURNETT: Which, of course, is exactly what it would be, 90 miles off the coast of Miami, with all that unspoiled beach.

All right. Thank you so much, Patrick. Just fascinating.

And I am going to take him up on that being my cigar.

Well, a Cuban who spied for the United States is now on American soil.

All right. This is an amazing story, because this guy served nearly two decades in prison in Cuba for spying on his own country. He was the American intelligence agent released for three Cuban agents. He was released. So, there was three of them for one of him in this exchange on Wednesday.

Now, we only saw the very public homecoming of Alan Gross. You know who he is -- the American government contractor who spent five years in a jail in Cuba. But this man, this mystery intelligence agent, officials have yet to release his name. And very few people actually knew this man existed, let alone his sacrifice to the United States, and apparently he was one incredibly important spy.

Joe Johns is OUTFRONT.

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT (voice-over): Alan Gross released from jail after five years was in the spotlight. But at the same time, a high-valued U.S. spy called by some an "American treasure" also gained his freedom in the prisoner swap with Cuba and has been brought to the United States.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: One of the most important intelligence agents that the United States has ever had in Cuba, and who has been imprisoned for nearly two decades.

JOHNS: U.S. officials refused to release the spy's name but sources inside of the government and out tell CNN his name is Rolando Sarraff Trujillo. These are believed to be pictures of him, now in his early 50s. The Cuban national worked on encrypted communications for Cuban intelligence assets, but he was secretly working for the CIA. He was discovered and convicted of espionage in Cuba in 1995.

U.S. officials said his work was instrumental in identifying three Cuban spies. He was also said to have provided information to uncover the so-called Cuban five, cases made U.S. authorities made years after Trujillo went to prison.

COL. CEDRIC LEIGHTON, FORMER AIR FORCE INTELLIGENCE OFFICER: From a counter intelligence perspective, what you want to do is you want to get as many spies and people they are working for them as possible, and that's why you can take a very long time, even after their -- the spy was incarcerated initially by Cuba.

JOHNS: Human rights activists said Trujillo was held at one point in the same lockup that housed Alan Gross. This maximum security Villa Marista Prison outside of Havana. He had long been identified publicly as a political prisoner in Cuba.

CHRIS SIMMONS, FORMER DIA SPECIALIST: Well, it was part of a three-member CIA operation. And in the mid '90s, something went wrong with the CIA mission and one of the members was -- came under the attention of Cuban counter intelligence. They tried to do an emergency extraction of all three members, and for reasons I do not know, Roly was unable to get out of the country and was arrested.

(END VIDEOTAPE)

JOHNS: As part of the trade for Gross and Trujillo, three of the so-called Cuban Five. They returned home last night. U.S. officials say they can only disclose pieces of the spy story. He gave U.S. critical information and paid for it with two decades of confinement -- Erin.

BURNETT: That is incredible. And I guess there are who would say, at least the United States finally delivered, did not forget him and has brought him to the U.S.

Joe Johns, thank you very much.

And this is a fascinating story. Joining me now OUTFRONT, CNN counterterrorism analyst Phil Mudd.

Phil, this guy, a Cuban working for the CIA, presumably tonight, he's on American soil for the first time. What do you think will happen to him?

PHIL MUDD, CNN COUNTERTERRORISM ANALYST: I think the first thing we've got to do is I know they're not releasing his name. I'm not sure if this is for security purposes, but if I'm back at the CIA, you have a responsibility to this individual who not only brought us information about Cuban spies in America, but who wasted 20 years of his life in prison to make sure he is in a place where he is comfortable, to make sure he has a future life, to make sure, frankly, he's out of the eyes of the U.S. media.

You've got to sit down and say, hey, you're going to transition to not only a new life, but a new world. There is a huge resettlement responsibility that lies in the hands of American government right now.

BURNETT: So, this is something where they could, so you are saying new life. I mean, theoretically change his name, change everything, so that he would be anonymous?

MUDD: That's right. And give him an entire new -- an entire new way to live. Where is his family? Where is he going to live? Where is he going to find a house? How is going to assimilate into American culture? Which is fundamentally different than Cuba.

We are asking him to change not only the venue, not only where he lives but how he lives.

BURNETT: Now, this guy, you are saying, was so important to the United States, you referred to him earlier when you were talking to us, as a million dollar baby. What does that mean?

MUDD: What it means is if you are trying to chase spies at the CIA, at the Defense Intelligence Agency, at the National Security Agency, take two scenarios, Erin. The first is you are looking around, who has suspicious financial activity in their bank account. I used to have to file financial reports about my financial activity for example. Who is making trips overseas? Who's downloading information they shouldn't be downloading?

That is a really inefficient way to find a spy. There is an alternative and this man represents that alternative. Can you recruit somebody from a hostile security service, Russian, Iranian, Chinese, in this case Cuban? And can that person save you a lot of time and a lot of money by saying, if you look here, you're going to find somebody who has gone bad.

BURNETT: And so, he did that.

All right. Now, obviously, he was a Cuban spying for the United States in Cuba.

MUDD: Yes.

BURNETT: There are people no doubt trying to do that in the United States right now from other countries. Is that true? Are there a lot of them, human beings still spying in the U.S. for other countries?

MUDD: Heck, I would say there is more than ever. And the reason is simple, if you look at what we have to offer in this country in terms of business or corporate advantage to a foreign country, in Silicon Valley, at universities across America that are doing high- tech defense research for the Pentagon, in the past, in James Bond movies, you went out of embassies to try to recruit diplomats, traditional spy on spy stuff. In 2014, I don't want to just find atomic secrets, I want to find

secrets from Sony Pictures, I want to find secrets from Silicon Valley, I want to find secrets from a high-tech university that's doing unclassified research that will eventually become classified.

So, instead of just embassies, you've got students, you've got professors. It is a brave new world in the land of spying.

BURNETT: That was pretty incredible. Brave new world in the world of spying and more spies from other countries in the U.S. than ever. Pretty incredible.

Phil Mudd, thank you.

MUDD: Thank you.

BURNETT: And OUTFRONT next, airstrikes killing top ISIS leaders. We have the details of that operation, next.

Plus, a horrific terror attack in which 132 school children were slaughtered. Our cameras today inside that school. Our Nic Robertson actually went in, a courageous thing to do. We're gong to show it to you.

(COMMERCIAL BREAK)

BURNETT: Breaking news tonight: a senior U.S. military official tells CNN that airstrikes, U.S. airstrikes, have killed three high- level ISIS leaders. A Pentagon spokesman said the deaths of senior leaders degrade ISIS's ability to control and gain more territory in Iraq. Of course, degrade is one of the words in the mission statement for this war.

Jim Sciutto is OUTFRONT.

Jim, let me ask you -- what do you know about the ISIS leaders? And I would presume by saying, three ISIS leaders, al-Baghdadi is clearly not among them?

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: He is not among them. But these were senior leaders, and this is a win for the U.S., one of them was al Baghdadi's deputy commander in Iraq, another was his military commander throughout Iraq, and another one was his commander or emir in Mosul, an ISIS stronghold in the North, the city taken from Iraqi forces earlier this year as ISIS forces swept into Iraq.

So, it is a win. They weren't all in one struck. This is in several strikes going back to mid-November. But they've been able to confirm it now.

BURNETT: I was going to ask you, were they altogether? Because you are talking about geographically different individuals. How did the U.S. confirm they have been killed? I mean, I know there was -- you know, earlier, that rumor about al Baghdadi, and no one was able to confirm it. So, what did they know? SCIUTTO: That's right. And they took their time. It took a

number of weeks for some of them to confirm 100 percent. They did this by intercepting is communications on the ground. But I'd also make this point, Erin, on the front end. This is a sign of better U.S. intelligence on the ground, because if you can track these guys down and kill them from the air, it's a sign that they are moving forward in what had been really a black hole in these areas, after U.S. troops moved out and never a presence in Syria. The fact they can get them now shows some improvement in their intel gathering on the ground.

BURNETT: Jim Sciutto, thank you very much with the breaking news.

And now, the death toll in the brutal massacre of children and their teachers by the Taliban at a school in Pakistan has now risen. It's now 148 dead. This as a shocking new images revealed a horror that unfolded when terrorists burst into classrooms and open fire. We will warn you, this report is graphic.

Our Nic Robertson is there. He was able to go into the school today and here is what he saw.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: This is where the Taliban got into the school. They cut the barbed while at the top of the wall, scaled it using bamboo ladders and another team got in down here and then they took off towards the main buildings.

They burst into here, the main auditorium. They split into two teams. It was full of children here taking classes.

SADEEL AHMED, VICTIM (through translator): They shot me as soon as they came in. We tried to run. I was shot in my shoulder. The people who came, they had no sense of humanity in them.

ROBERTSON: So many of the children were hiding underneath these benches, a class was going, a brigadier was giving a lesson in first aid. The dummy, the apparatus, left where he fell.

And this is when things got really bad. The army says that the children fled for the door over here and the door here, 100 of them were gunned down as they were trying to escape, cold-blooded murder.

Everywhere you walk here, blood splatters are all over the ground. The Taliban not satisfied with their killing downstairs, come up here to the computer lab, and one look inside this room and you can see immediately what's happened. Children gunned down while they are just typing at their computers.

Classroom after classroom, a pair of glasses sitting here, child's pencils and pens lying on the floor, torn pieces of school work. This child was just writing in his lessons. And here on the board where the teacher would have been standing, bullet holes and then the place where the teacher fell. And this is where the final showdown took place. The

administration brought one of the attackers blowing up his suicide vest here, shrapnel marks the wall. Little pock marks from the ball bearings inside of his suicide vest.

And over here, rubble on the floor. Another suicide bomber had blown himself up. Chaos, devastation.

The principal's office down here. She's killed.

And right at the end of the corridor, the last suicide bomber blows himself up. The deputy principal hides in there. She survived. And this here is what is left of the last attacker.

(END VIDEOTAPE)

BURNETT: Nic, I could hear in your voice covering that, that it was incredibly difficult as a human being for you to be in there, as a father, even though you have covered conflicts around the world. What was it like to be in that school?

ROBERTSON: You know, we went in and we were shown around by an army officer. He told us what happened, walked us through. And I'm thinking about, OK, how am I going to explain this and tell this. But you are trying not to -- not to feel impacted by what you are seeing, by all of the bloodshed.

And you just realize looking at it, that all of the children who died there, there are parents who live not far away who are in pain, who are suffering, and many of these parents are army officers, whose duty it is to protect the country and here they haven't been able to save their children.

But it was when I got into the computer lab and I just saw -- they had been sitting there at their computers and it just hit you. You know, there are families whose lives are absolutely torn apart and who are in pain and agony. And you can't escape that feeling in there, Erin.

BURNETT: I can't even comprehend what it would have been like to be there, because seeing the pictures and seeing that blood is devastating enough. Thank you so much, Nic.

As we said, it was a courageous thing to go in there.

Next, Uber, the car service company is suspending operations in Portland, Oregon. More drivers are facing a string of charges including assault and rape. We have a special report, next.

And huge gains on Wall Street today. We're going to tell you the surprising company whose stocks soared above all of the rest for the year, ahead.

(COMMERCIAL BREAK)

BURNETT: Boston police charge a driver with rape, kidnapping and assault for an alleged attack on a woman who used the company's app to call for a ride.

Tonight, Uber announced it suspended its operations in Portland, Oregon, for three months. This is the latest in the series of troubles for a company that's grown from a local San Francisco start- up to a global business in just a few years.

Dan Simon is OUTFRONT with the money and power of Uber.

(BEGIN VIDEOTAPE)

DAN SIMON, CNN CORRESPONDENT (voice-over): As thousands attempted to flee downtown Sydney during the deadly hostage crisis, Uber found itself in the headlines again and not for good reason.

As car demands surged, the service used in more than 250 cities around the world charged passengers four times the normal rate with Uber's controversial surge-pricing. The company soon apologized and began offering free rides, but the damage was done.

It's the latest in a string of high profile mishaps for Uber whose high speed growth from a few employees no-name company to an international juggernaut has led to a series of troubling issues -- everything from price gouging and privacy invasion, to allegations of assault and rape.

In Boston, authorities just announced that an Uber driver was charged with rape and kidnapping. Police say the victim was driven to a secluded location where the driver beat and sexually assaulted her. The company in a statement calling the crime despicable. "Uber has been working closely with law enforcement and will continue to do everything we can to assist their investigation."

And in New Delhi, a driver accused of a similar crime, that as the company stresses that safety is the number one priority and that it is working on security enhancements.

But there had been other recent issues. In San Francisco, the company's hometown and in Los Angeles, a lawsuit filed by the D.A. accuses the company in part of misleading customers about driver background checks. In Portland, Madrid, and Bangkok, Uber has been ordered to cease operations amid allegations it wasn't complying with local laws. In Paris, a court has banned its lower cost service Uber pop after the taxi industry protested, all this for a company that just launched four years ago and is now valued at more than $40 billion.

(on camera): As an entrepreneur, did you think you'd be running a car service?

TRAVIS KALANICK, CEO & CO-FOUNDER, UBER: Absolutely not.

SIMON (voice-over): That's Uber CEO Travis Kalanick back in the early days, explaining to me the original vision behind the company.

KALANICK: It was me, my cofounder and our 100 friends to be able to push a button and an S-class Mercedes rolls up, and that was it, right? But everybody wanted it. All of our friends wanted it and their friends wanted it, so we just opened it up.

SIMON: Uber doesn't actually employ its drivers. Instead, it serves as a technology middleman connecting them to passengers. Its evaluation has surpassed companies like Delta and Hertz but, of course, the press coverage hasn't been so friendly.

SARAH LACY, SILICON VALLEY BLOGGER: It was terrifying.

SIMON: Just last month, a senior Uber executive said at a private dinner that Uber should pay a million dollars to hire opposition researchers that dig up dirt on journalists writing negative pieces.

Silicon Valley blogger, Sarah Lacy, one of the apparent targets of the scheme.

LACY: I've covered powerful tech companies for a long time and powerful moguls for a long time. And I've never heard a plan like that detailed before.

SIMON: Uber's Kalanick later tweeted that the executive's comments were terrible and do not represent the company.

(on camera): Can these PR problems bring down the company?

THILO KOSLOWSKI, TRANSPORATION ANALYST, GARTNER: They could if they continue to get out of control and more of them and the company doesn't address them. So, this Robin Hood type value proposition might turn into a Darth Vader if they're not careful enough about how quickly these things get out of control.

SIMON: Uber has likened its struggles to a political campaign, which is why it hired David Plouffe who helped mastermind President Obama's election in 2008. Part of Plouffe's job, to get Uber in cities where the powerful taxi industry has been successful in keeping them out.

In a recent blog post, Uber CEO writes, "Acknowledging mistakes and learning from them are the first steps." Kalanick trying to save the image of a company born from a simple idea.

KALANICK: We just want a button to push on our phone and get a ride. And that's an aspiration and a functionality that I think millions of people in cities across the country and around the world want.

(END VIDEOTAPE)

SIMON: One transportation analyst I spoke who closely studies this industry says security and safety are clearly the two biggest issues confronting Uber, he says the company should invest in new technologies like an SOS button within the app that passengers could punch in the event of trouble. Indeed, Uber says it is working on security upgrades that should come out in the New Year -- Erin.

BURNETT: All right. Thank you very much, Dan. Pretty amazing. Next, the stock market with its biggest one-day gain in a year.

So, here's the thing -- guess the biggest performing stock of 2014? Don't cheat. The answer is next.

(COMMERCIAL BREAK)

BURNETT: It was a huge day for the stock market. The Dow up 421 points. That's its best one-day gain in more than three years. This is because the Fed indicated it's not in any rush to raise interest rates. The NASDAQ and S&P, as you can see, also up and they were up by more than 2 percent.

It was a huge year for the Dow. There were some big drops in the summer and fall, but the market recovered, and that's what's significant. It's going to end the year upmost likely, right now more than 7 percent.

So, what worked? Health care and utilities. That's where you made the most money. Keep it simple. But up more than 20 percent. And the single best stock for the year, this is what we asked you to guess. And I guess it's kind of related to energy.

Number one performer for the S&P 500: Southwest Airlines more than doubling. It's a gain of 116 percent. If you had shares, you love this year.

Thanks so much for joining us. Be sure you DVR our show so you can watch OUTFRONT anytime.

Anderson starts now.