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Trump Slams Leaks and Media That Report Them; Trump Backs Away From Two-State Solution; Rex Tillerson in Germany for G-20 Summit; New Arrest in Death of Kim Jong-un's Half Brother; Aired 4:30-5a ET

Aired February 16, 2017 - 04:30   ET


[04:30:23] JOHN BERMAN, CNN ANCHOR: With the swirl of reports about Russian contacts with Trump campaign officials, some Republicans calling for an investigation. Not into the contacts, but in the who leaked that they happened.

ALISON KOSIK, CNN ANCHOR: The search for a new Labor secretary begins again. Andrew Puzder withdraws his name less than 24 hours before his hearing. We'll tell you who could be next in line.

BERMAN: And the president bucking decades of U.S. policy in the Middle East. Now saying that the two-state solution not the only possible answer.

Welcome back to EARLY START, everyone. I'm John Berman.

KOSIK: Good morning. I'm Alison Kosik. It's 30 minutes past the hour.

And lawmakers demands for answers this morning following a river of leaks that have proved embarrassing to the White House. But at least some lawmakers aren't focused on the substance of all the reports about the Trump campaign's communications with Russia, but rather on who is responsible for making the information public.

Two top House Republicans are demanding a probe of the intelligence leaks that led Michael Flynn to depart as National Security adviser. Jason Chaffetz, chairman of House Oversight Committee, and Bob Goodlatte, the Judiciary chairman. They've both written to the Justice Department's inspector general saying -- they're looking for an investigation into whether classified information was mishandled.

And they said, "We have serious concerns about the potential inadequate protection of classified information. federal laws and the Constitution, distinguished law enforcement investigation authorities from intelligence collection authorities for good reason. The release of classified national security information can, by definition, have grave effects on national security."

Chaffetz's call for this investigation comes just days after he said his Oversight Committee would not look into the circumstances that led to Flynn stepping down.

BERMAN: Now there are those on Capitol Hill both Democrats and Republicans calling for investigations. Senator Lindsey Graham, he wants a select committee. Chuck Grassley and Dianne Feinstein, the senior Republican and Democrat in the Senate Judiciary Committee, they have written to the Justice Department and FBI. They want an official briefing in two weeks along with transcripts of Flynn's call with the Russian ambassador.

They wrote, "Media reports raise substantial questions about the content and context of Mr. Flynn's discussions with Russian officials, the conclusions reached by the Justice Department, and the actions it took in response, as well as possible leaks of classified information by current and former government employees."

KOSIK: President Trump is also focused on leaks. He took direct aim at the Intelligence Community accusing it of leaking and the media for reporting those leaks during a news conference at the White House.

CNN's Jim Acosta was there and has the latest.

JIM ACOSTA, SENIOR WHITE HOUSE CORRESPONDENT: John and Alison, President Trump is defending his former National Security adviser Michael Flynn despite the fact that he just fired him this week. At a news conference with Israeli Prime Minister Benjamin Netanyahu, the president slammed the news media and leakers in the government for disclosing that Flynn lied about his calls with the Russian ambassador to the vice president.

Here's what the president had to say at that news conference.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: General Flynn is a wonderful man. I think he's been treated very, very unfairly by the media. As I call it, the fake media, in many cases.

From intelligence, papers are being leaked, things are being leaked. It's criminal action -- a criminal act, and it's been going on for a long time before me, but now it's really going on. And people are trying to cover up for a terrible loss that the Democrats had under Hillary Clinton.


ACOSTA: The president declined to answer questions from CNN about reports that Trump advisers were in contact with the Russians during the campaign and we're learning that Vice President Pence is focused on getting to the bottom of how he was misled. Pence was not informed about the matter for roughly two weeks after the president learned the Justice Department had questions about Flynn's actions -- John and Alison.

BERMAN: So you heard Jim report there that the vice president trying to get to the bottom of how he was kept in the dark for so long. The administration denies that report that the VP is still focused on the firing. An administration official tells CNN that the vice president has moved beyond the topic, calling any claims to the contrary false. Also a senior Republican source with knowledge of the investigation into Trump campaign contacts of Russian officials says it is likely General Flynn will be called to testify along with former director of National Intelligence James Clapper and former CIA director John Brennan.

It's the Senate Intelligence Committee that is mostly likely to hold these hearings and seek their testimony. Right now they have the broadest investigation into not just General Flynn's call with the Russian ambassador and what happened there, but also the ongoing contacts that we have reported between Trump campaign officials and also the Trump -- and Russian officials.

[04:35:08] Meantime, I should say, an intelligence spokesman says that Flynn's access to classified information has been suspended pending review. That's standard procedure when there are questions about someone the manner, you know, which we've seen with General Flynn, whether or not his statements have been fully honest with the administration and the public.

KOSIK: OK. The Trump administration looking for a new Labor secretary this morning. Andrew Puzder withdrawing his name just one day before his confirmation hearing. That decision comes amid growing concerns he would not be confirmed. GOP senators even asking the White House earlier in the day to pull his nomination as support deteriorated.

This is a blow to the administration, but also to Senate majority leader Mitch McConnell because he was Puzder's biggest cheerleader on Capitol Hill, saying he would be one of the best Labor secretaries in history. Well, that raised eyebrows because McConnell's wife held a position under George -- under President George W. Bush, and she's now Transportation secretary.

Despite his efforts, McConnell could not muster support. But Andrew Puzder also had quite a checkered past of his own as the CEO of the company that owns Hardee's and Carl's Jr. Decades ago, Puzder's ex- wife levied charges of domestic abuse against him, which she later dropped. She also appeared in disguise on Oprah Winfrey's TV show to talk about domestic violence.

His confirmation hearing was delayed five times and he revealed recently that he had hired a housekeeper who was undocumented. Now Puzder's company is facing numerous labor lawsuits as well and he's been a critic of Obamacare. He's also been critical of the $15 minimum wage and also the accuracy of the unemployment rate. So all that upset some Democrats.

Well, now the search is on for a new Labor secretary. Take a look at some of the candidates, look like they will be. Senior administration officials said the president already has a short list that includes, which you see there, former National Labor Relations board members Peter Kirsanow and Alexander Acosta, as well as former South Carolina Labor secretary Catherine Templeton.

BERMAN: The confirmation battle is not over for the president. His pick to head the EPA will not have the support of at least one Republican senator, Susan Collins of Maine. She's the first Republican to break race over Scott Pruitt's nomination. She says she has fundamentally different views from Pruitt when it comes to the EPA's role and mission.

Now despite Collins' no vote, Pruitt will likely still be confirmed as early as Friday as long as no more Republican support drifts away. And at 10:30 Eastern Time this morning, Congressman Mick Mulvaney is expected to be confirmed as the next White House Budget director. John McCain has issued his opposition but again if it is only Senator McCain, then Mulvaney will be confirmed.

KOSIK: OK. We could see the Trump administration trying to change the conversation today away from Russia and focusing possibly on a new executive order on immigration and travel. If that is the strategy, it is expected to come before the next court action on the president's halted travel ban at 2:00 Eastern this afternoon. And that's when attorneys for Washington state and Minnesota on one side and the Justice Department on the other file their briefs in Ninth -- in the Ninth Circuit. After those briefs are submitted, a decision will be made whether to rehear the case.

There is some support for the travel ban. The attorney general of Texas, Ken Paxton, filing a brief with the Ninth Circuit arguing for a fuller panel of judges to reconsider the case, arguing that the president has the authority to act based on public safety.

BERMAN: CNN has learned that the option of deploying conventional U.S. ground forces to Syria is on the table. The Pentagon might present that strategy to President Trump in the coming days. The goal is to speed up the fight against ISIS. The president has asked for new proposals to defeat ISIS by the end of the month. But Defense official tells CNN nothing has been finalized. Ultimately it is up to the president to make the call. They're just providing a menu of options. And in some cases new options.

For the first time in decades, the U.S. is ready to consider alternatives to a two-state solution in the Middle East. We are live in Jerusalem with more on what is a very major policy shift.



[04:43:24] TRUMP: I am looking at two-state and one-state and I like the one that both parties like. I'm very happy with the one that both parties like. I can live with either one. I thought for a while the two-state looked like it may be the easier of the two. But honestly, if Bibi and if the Palestinians -- if Israel and the Palestinians are happy, I'm happy with the one they like the best.


BERMAN: President Trump backing away from decades of U.S. policy in the Middle East, saying that he would not insist on a two-state solution to resolve the Israeli-Palestinian conflict. That big shift came at a news conference before meeting with Israeli Prime Minister Benjamin Netanyahu. Now in the conference, the president did urge the Israeli prime minister to curb settlement construction.

What's the reaction in Israel to all of this, this morning? CNN's Oren Liebermann live in Jerusalem for us right now.

At least some factions within Netanyahu's ruling coalition have been pushing for an end to the two-state solution -- Oren.

OREN LIEBERMANN, CNN CORRESPONDENT: And John, it's exactly the domestic political pressure that Netanyahu was undergoing into the meeting. The two leaders were asked that question. Do you support a two-state solution? We just heard President Trump's non-committal answer, essentially saying look, whatever both sides agreed to, I'm absolutely fine, whereas Netanyahu when asked the same question refused to commit to a two-state solution. He said that term is more a label. He doesn't want to talk about labels. He wants to talk about substance.

That's exactly what Netanyahu's right-wing government wants to hear. Shortly after that press conference many of them said that presser -- they called it a new era, and said it marks the end of a Palestinian state.

[04:45:02] They are calling for more settlement construction. Some even calling for annexation of parts or all of the West Bank. They're effectively ignoring where that line where Trump said he'd like to see some of the construction halted for a bit so he can work on peace. They'll put pressure on Netanyahu to keep constructing in the settlements.

That line, however, that line where Trump said settlement constructions should stop for a bit is the line Palestinian leadership is seizing upon here, saying, that's what Israel needs to do. Palestinians are ready to begin negotiations for a two-state if Israel is willing and ready to stop settlement construction.

They've effectively ignored the part where Trump said whatever two- state, one-state, I'm fine with whatever the parties agreed to. Palestinians making it very clear they support a two-state solution, an Israeli state and a Palestinian state.

What's clear following this presser is that Trump's Middle East policy is not yet formulated and certainly not yet clear, not yet concise. He's taking input. We've learned we know already from Arab diplomats, he certainly just took input from Prime Minister Netanyahu, but hasn't articulated what it is -- what Middle East policy the Trump administration will be pursuing here.

BERMAN: No. And it is very, very complicated. And taking a stand at some point probably necessary.

Oren Liebermann for us. Thanks so much.

KOSIK: President Trump seems to have settled on a strategy for avoiding tough questions at his press briefings. He is refusing to call on reporters from the large traditional media outlets. At Wednesday's news conference and other events with the Israeli prime minister, Mr. Trump only called on reporters from seemingly more sympathetic outlets, the Christian Broadcasting Network and Town Hall.

CNN reporters at these events tried to ask the president questions about the Trump campaign's ties to Russia only to be ignored.


ACOSTA: Mr. President, are you answering questions about your associates' contact with the Russians during your campaign?

SARA MURRAY, CNN POLITICS REPORTER: Do you have any comment on the report that there was contact between your senior advisers and suspected Russian operatives during your presidential campaign, Mr. Trump? President Trump, no comment on that?


KOSIK: Well, this seems to have been the trend all week. On Monday, standing beside the Canadian prime minister, Trump only called on outlets considered favorable to the White House.

BERMAN: And again, the White House tries to control its message. It calls on who it wants to call on. And to an extent, it's happened in the past, although never like this. I mean, past President George W. Bush, President Obama, they have been calling the AP, "Washington Post," "New York Times," ABC, NBC.


BERMAN: And whatnot. You know, at a certain point, you've got to face the music. You've got to face the tough questions and have some answers.

KOSIK: Maybe surprising, it could help the story go away if he starts answering the questions.

BERMAN: Indeed.

KOSIK: All right. The stock market sitting at an all-time high yet again this morning. But it just accomplished something Wall Street hasn't seen in 25 years. I'm going to tell you what that is next.


[04:51:57] BERMAN: With growing scrutiny over the Trump campaign's contacts with Russia during the campaign, newly minted secretary of State Rex Tillerson, he holds his first meeting with his Russian counterpart, Sergey Lavrov, there in Germany for a meeting of the G-20 Summit. And this is really Rex Tillerson's first turn in the international spotlight. A lot of people will be watching what happens in these meetings.

Let's go live to Germany, bring in international diplomatic editor Nic Robertson.

Nic, what are they expected to discuss?

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Things of common interest. That's what the State Department has been telling us, John. That will include issues like ISIS. We certainly heard President Trump saying that he believes Russia's President Putin can help the United States tackle ISIS. So there will be discussions about that. Working together on counterterrorism. Both countries clearly feel the threat from terrorists the same way. So there will be cooperation there.

But it won't all be about agreements. Certainly there are so many issues between the countries right now that's bothering the Kremlin. Ukraine is one of them. You know, one of the messages that Secretary of State Tillerson is bringing here to his international counterpart is his support for the international -- rather for the transatlantic alliance. And that means support for the European position on Russia's involvement in Ukraine and its annexation of Crimea.

What he says is -- you know, what the European position is, is that Russia must meet the terms of the Minsk agreement before sanctions can be lifted. The United States' position goes beyond that and says that Russian troops might get out of Crimea. And that's something that Sergey Lavrov, his Foreign Ministry in the Kremlin, pushed back on it in the last 24 hours. That will be an issue of contention.

So while there's points where the two countries want to cooperate, there is a lot of misunderstanding at the moment. The Kremlin and the Foreign Ministry in Moscow have been complaining that they don't know the point people at the State Department to talk to on many of the issues. There's concerns in the Kremlin, obviously, with the departure of National Security adviser Michael Flynn. The close fly- bys of aircraft and missile launches, all of this on the table. And this is only one tiny part of Rex Tillerson's day, John.

BERMAN: I mean, to open up the channels for communication, that will happen today perhaps.

Nic Robertson for us in Germany, thanks so much.

KOSIK: The future of U.S. funding for NATO could hang in the balance hinging on whether NATO allies decide to pay up. Defense Secretary James Mattis echoing the president's tone at a Brussels meeting with NATO defense ministers. While Mattis said members must be willing to pull their weight.

Defense Secretary James Mattis echoing the president's tone at the Brussels meeting with NATO defense ministers. While reaffirming U.S. support for the alliance, Mattis said members must be willing to pull their weight.


JAMES MATTIS, U.S. DEFENSE SECRETARY: It's a fair demand that all who benefit from the best defense in the world carry their proportionate share of the necessary cost to defend freedom. And we should never forget that ultimately it is freedom that we defend here at NATO.


KOSIK: The NATO secretary-general says the message from Secretary Mattis is fair and they need to do a better job of burden sharing. BERMAN: All right. This story is just getting stranger and stranger.

A new suspect has been arrested in connection with the death of North Korean leader Kim Jong-un's half brother.

[04:55:06] Just one of the many details emerging overnight in this investigation. Want to go to CNN's Saima Mohsin live for us in Kuala Lumpur.

Saima, what's the very latest on this?

SAIMA MOHSIN, CNN CORRESPONDENT: John, you are right. This is an extraordinarily international murder misery story now and it's been moving at quite a fast pace since we last spoke. Two arrests as you say, one woman, a Vietnamese passport holder. She's remanded in custody. And then this afternoon, an Indonesian woman arrested, too.

Now Malaysian officials have actually confirmed to CNN that the passport she holds is genuine and she is a Malaysian citizen. They are trying to reach out to authorities here to get contact with her. And so the Indonesian authorities are in touch with the Malaysian authorities.

And you'll remember that it was South Korean intelligence officials that had told us originally in this National Security Council meeting that they did believe two Asian women were involved in this attack.

The body still lies at the mortuary behind me, John. They won't take it away just yet. But we understand the North Korean embassy here in Kuala Lumpur has asked for that to be handed over. The Malaysians say they will do that but not until an autopsy is completed -- John, Alison.

BERMAN: I get that feeling this is not the last twist and turn in this story. Saima Mohsin for us in Kuala Lumpur, thanks so much.

KOSIK: All right. Let's get a check on CNN Money Stream this morning. All the turmoil in Washington, not bothering Wall Street apparently. The Dow and Nasdaq and the S&P 500 all soaring to record highs on Wednesday. And get this, that marks the fifth straight day of all-time highs. And the first time all three of the major averages have achieved that feat since January of 1992. Take that set and put it in your pocket. That's according to FactSet.

The gains over the streak are about 2.5 percent. Nearly doubling the totals for the entire year in just five days. But the stock market may struggle a bit to make it six in a row. Looks like futures are down right now. But the losses are still slim.

BERMAN: Sell, sell. Sorry.


KOSIK: You're giving investment advice?

BERMAN: No, no.

KOSIK: On my last day on this show?

BERMAN: I shouldn't do that. I shouldn't do that. That was rash.

KOSIK: Stock markets in Europe are moving lower but shares in Asia they finished with gains overnight.

One of the big factors fueling the stock market rally is President Trump's promise of tax reform. But in a meeting with retail CEOs Trump says one company may not like the outcome.


TRUMP: We are going to simplify very greatly the tax code. It's too complicated. In fact H&R Block probably won't be too happy. That one business that might not be happy with what we're doing. Other than H&R Block, I think people are going to love it.


KOSIK: Trump has previously said the tax code would be so simple after he is done with it, that it would put tax preparers out of business. But the CEO of H&R Block recently told Christine Romans that he supports a simpler tax code.


WILLIAM COBB, CEO, H&R BLOCK: The president's right. We should reform the tax code. I think that there are ways that we can streamline the tax code. A simple example I often give, there's five different definitions of a child in the tax code, and frankly we have to train our people on this -- on those different --


COBB: Yes.

ROMANS: Five different definitions of a child?

COBB: Yes, and small -- the burden on small businesses is even higher than on individuals. I think there are some commonsense solutions to that.


KOSIK: All right. The point here I think is possibly that Trump is obviously trying to make a simpler tax code, stream line the tax return itself and maybe you can even do it yourself. It's something that businesses are relishing, consumers are relishing, too.

BERMAN: Yes, you talk to investors. It's simple why the markets are going up. They like the idea of tax cuts. No matter where they come from. They like the idea of regulatory reform wherever it comes from. What they don't like is turmoil. So what you see is depending on how high the level of turmoil. They get a little bit jittery also. When you get a sense that the White House isn't focused on things like tax cuts and regulatory reform. KOSIK: Putting it off, putting it off.

BERMAN: Putting it off. They get a little bit nervous also. So I think that seems to be index lately.

EARLY START continues right now.

All right. The swirl of stories surrounding the White House about Trump campaign contacts with Russian officials during the campaign. Now calls for investigations from Congress, but not necessarily into the substance, but leaking of the information.

KOSIK: The White House looking for a new nominee to head the Labor Department. Andrew Puzder has withdrawn amid falling Republican support. Who's it going to be?

BERMAN: A big, big shift in U.S. policy. The president of the United States now says he will not insist on a two-state solution as an answer for peace in the Middle East. How is that being received in Israel?

Good morning, everyone. Welcome to EARLY START. I'm John Berman.

KOSIK: Good morning. I'm Alison Kosik. It's Thursday, February 16th. It's 5:00 a.m. in the East. And lawmakers' demands for answers are growing this morning following a river of leaks that have proved embarrassing and damaging to the White House.