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EARLY START

Special Election of Ohio 12th Too Close to Call; Star Witness Grilled; Firefighters Gain Ground; Musk Stuns Wall Street; Pompeo to Meet with Kim Jong Un?. Aired 4:30-5a ET

Aired August 8, 2018 - 04:30   ET

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


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(BEGIN VIDEO CLIP)

[04:30:32] TROY BALDERSON (R), OHIO CONGRESSIONAL CANDIDATE: I'd like to thank President Trump.

(CHEERS AND APPLAUSE)

CHRISTINE ROMANS, CNN ANCHOR: The Republican candidate declares victory. The president takes credit. But the numbers show Ohio's special election is still too close to call.

PHIL MATTINGLY, CNN ANCHOR: Paul Manafort's lawyers grill the prosecution's star witness, painting Rick Gates as a cheater and a thief who can't be trusted.

ROMANS: Firefighters gain some ground on the largest wildfire in California history, but the battle far from over.

MATTINGLY: Tesla boss Elon Musk stuns Wall Street with a public declaration of his private ambitions.

Welcome back to EARLY START. I'm Phil Mattingly.

ROMANS: I'm Christine Romans. It is 31 minutes past the hour. Nice to have you here.

Phil, let's begin with the elections last night.

If Ohio's 12th district is any indication, a blue wave may be coming in November. In a special election that many considered a bellwether for the midterms, the race between Republican Troy Balderson and Democrat Danny O'Connor is too close to call this morning.

Now, it's an encouraging outcome for Democrats in a deep red district, no matter how this plays out. There are still more than 8,000 outstanding provisional and absentee ballots that could take days to count. Balderson currently leads O'Connor by less than one percentage point, less than 2,000 votes. The candidates, both candidates spoke last night, O'Connor refusing to concede, Balderson quick to claim victory.

(BEGIN VIDEO CLIP) BALDERSON: I'd like to thank President Trump.

(CHEERS AND APPLAUSE)

America is on the right path and we're going to keep it going that way. Over the next three months, I'm going to do everything I can to keep America great again.

DANNY O'CONNOR (D), OHIO CONGRESSIONAL CANDIDATE: Because we see division and discord tearing apart our country. We must remember that each and every one of us are God's children and that all of us need to be treated with dignity and respect. And I think we could use a lot more of that spirit in Washington these days.

(END VIDEO CLIP)

ROMANS: President Trump taking time out from his working vacation to declare Balderson the winner and take credit for it, even though the outcome is still not official here.

The president tweeting: When I decided to go to Ohio for Troy Balderson, he was down in early voting, 64-36. That was not good. After my speech Saturday night, there was a big turn for the better. Now, Troy wins a big victory in a tough time of the year for voting. He will win big in November.

MATTINGLY: That's not how early voting works.

All right. Several other primaries to tell you about, including another race too close to call. We're looking at you, Johnson County, Kansas. Secretary of State Kris Kobach, a hardliner on immigration who received President Trump's endorsement, locked in a very tight race with Governor Jeff Colyer. The official result could be announced later today, Johnson County.

And in Missouri, CNN projects Attorney General Josh Hawley is predicted to be winner for the Republican primary for Senate. Republicans are hoping he can unseat Democrat Claire McCaskill in November.

In Michigan gubernatorial primary, CNN projects State Attorney General Bill Schuette will be the Republican candidate in November, another Trump endorsement. Former state legislative leader Gretchen Whitmer will be the Democratic candidate.

And CNN projects John James, another Trump-endorsed candidate, has captured the GOP nomination for U.S. Senate in Michigan. James is an African-American Iraq War vet who was endorsed by the president. He will face Democrat Debbie Stabenow in November.

ROMANS: All right. Former Trump campaign chairman Paul Manafort's longtime right-hand man back on the witness stand today. Manafort's defense lawyers expected to pick up where they left off yesterday, trying to undermine Rick Gates' credibility in the eyes of this jury.

Gates admitted to a host of transgressions, but so far, Manafort's defense team has not done much to pin the bank and tax fraud their client is charged with on Gates alone. That part of their cross examination may come today.

More now from CNN's Jessica Schneider.

(BEGIN VIDEOTAPE)

JESSICA SCHNEIDER, CNN CORRESPONDENT: Christine and Phil, Paul Manafort's lawyers went on the attack against Rick Gates on Tuesday. They hammered him with questions that even led Gates to admit on the stand that he had an extramarital affair a decade ago.

But when attorneys accused him of using Paul Manafort's money to fund his so-called secret life, Gates pushed back, saying the money actually came from bonuses. Now, of course, the defense team is doing everything they can to attack the integrity of Paul Manafort's former right-hand man. Gates said he had made some mistakes, but he insisted to the jury that he is now telling the truth.

And the defense team really wants to establish that Rick Gates was the one who developed that financial scheme to hide money from the U.S. government, not Paul Manafort. Paul Manafort's lawyer even asked the direct question of Gates, did you develop a scheme?

[04:35:04] And then Gates responded, no, I just added some numbers to some reports.

But really, prosecutors have gone to great lengths to show that it was, in fact, Manafort in charge. At the end of Gates' direct examination, prosecutors were painstaking to show the process where Manafort asked Gates on occasion how to add information to a PDF document, and when Gates said that when he got the document back, Manafort had actually changed some of the numbers, falsifying some of their financial reports.

Of course, Rick Gates was a close associate to Paul Manafort for 12 years, but now he's flipped, he pleaded guilty, and he's telling all he knows to prosecutors. So, it will be interesting when he is back on the stand for more cross examination this morning -- Christine and Phil.

(END VIDEOTAPE)

MATTINGLY: That's right, another big day today. Thanks, Jessica Schneider in Alexandria.

Now, along those lines, legal woes there actually multiplying for Michael Cohen. "The Wall Street Journal" reporting President Trump's former lawyer and fixer is now under investigation for tax fraud. Sources tell "The Journal" the federal prosecutor in Manhattan is looking into whether Cohen underreported income from his taxi medallion business. The taxi licenses yielded hundreds of thousands of dollars over the last five years.

"The Wall Street Journal" also reporting federal investigators are looking into possible fraud against the bank that financed Cohen's taxi medallion business. Cohen has not been charged with a crime and "The Journal" reports he previously denied any wrongdoing.

ROMANS: Firefighters struggling to contain the largest wildfire in California history. At this point, the Mendocino Complex Fire has scorched nearly 293,000 acres, 75 homes have been destroyed. The fire only 34 percent contained. Firefighters are up against hot, dry, windy conditions.

Our Stephanie Elam has the latest from Mendocino.

(BEGIN VIDEOTAPE)

STEPHANIE ELAM, CNN CORRESPONDENT: Christine and Phil, we are standing in the midst of some of the devastation from the Mendocino Complex Fire, which is actually two fires that started about the same time, burning near each other here.

And you can see how hot this fire got. The devastation here, even in this rural community, you can see that it has really ravaged some of the properties that are here.

And just to give you an idea of how bad the fire season has been, if you go down just a couple of blocks from where we are, there's another building that's burned down. You might think it's from this fire. It's actually from a different one. All in all right now, there are some 17 fires that are burning in the state.

And just to give you an idea of how bad this fire season has been with this one being the largest fire in state history at this point, some 550,000 acres of land that had been burned in the last three weeks because of wildfires.

And, Phil and Christine, fire season is far from over here.

(END VIDEOTAPE)

ROMANS: All right. Stephanie, thank you for that.

President Trump claiming without evidence California's environmental regulations have worsened the fires raging there. The president tweeting this: California wildfires are being magnified by the bad environmental laws which aren't allowing massive amounts of readily available water to be properly utilized. It is being diverted into the Pacific Ocean.

All right. State and federal officials and wildlife experts say the claims are simply false. They say there is plenty of water to fight the flames. There is a debate in California on how much water should go to cities and how much to farmland, but officials say water is simply not being deliberated flushed into the ocean.

Where the president got that idea, not even the White House can say. While his tweets sometimes correspond to segments on Fox News, that doesn't seem to be the case.

MATTINGLY: Never a dull moment. Last night, President Trump hosted an informal dinner for some of the

country's top business leaders at his Bedminster golf club. The president and first lady welcoming more than two dozen CEOs and their spouses, including the heads of Pepsi, Fiat Chrysler, FedEx, and Boeing.

(BEGIN VIDEO CLIP)

MELANIA TRUMP, FIRST LADY: Welcome to Bedminster. It's great to have you here. And we're looking for a great discussion tonight and I just want to thank the president for doing an incredible job and for all of your help.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The policies of the other administration would have been more regulation and much higher taxes. And what you're witnessing now could never have happened. And growth has taken us out of a lot of problems that have been caused, and you're going to see super growth soon when it's all said, when it's working like a fine-tuned machine. You're going to see some real growth.

(END VIDEO CLIP)

MATTINGLY: Now, last night's guest list also included the heads of much smaller companies, those who have been loyal Trump supporters over the last two years.

ROMANS: All right. Elon Musk may remove Tesla from the scrutiny of Wall Street, taking it private in what would be the biggest buyout in history. Musk stunned investors with a casually worded tweet yesterday, writing that he is considering taking Tesla private. He already secured funding.

Musk did not say where he got the funds, but going private would cost about $71 billion, by far the largest buyout ever. Musk faces intense pressure to turn debt-laden Tesla into a profitable carmaker, but Tesla's burned through crash while struggling to produce the first mass-market car, the Model 3.

So, Musk told employees that going private is the best path forward, adding that being subject to wild swings in their stock price is a distraction and going private removes incentives to attack Tesla.

[04:40:05] Musk often complains about short sellers, investors who profit when Tesla's stock drops. Musk's tweet sent Tesla's stock up 9 percent before trading was halted. It later resumed, closing up 11 percent. You know, he is not the typical CEO that very carefully tries to say nothing to investors, you know --

MATTINGLY: That'd be an understatement.

ROMANS: Yes.

MATTINGLY: Remember when they used to halt stocks before the news was actually made? Also, hey, let's make them great again.

All right. Iowa college student Mollie Tibbetts now missing for three weeks. Coming up, why her father believes she's still alive.

ROMANS: And why Secretary of State Mike Pompeo may be headed back to Pyongyang. A live report after this.

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MATTINGLY: The White House is offering to send Secretary of State Mike Pompeo back to Pyongyang for a meeting with Kim Jong-un in response to a letter sent by the North Korean leader to President Trump.

[04:45:02] National security adviser John Bolton not ruling out a second summit between the two men, but first, he wants to see less rhetoric and more action when it comes to denuclearization from the Kim regime.

Let's go live to Hong Kong and bring in CNN's Will Ripley.

Will, there's a lot of back-and-forth -- meetings, who might be in the meetings, what North Korea's actually doing. What's your sense right now of where things stand?

WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT: I think the bottom line, if you listen to what the North Koreans are saying, you listen to what the Trump administration is saying, keeping things open to another meeting between Kim Jong-un and President Trump, something my source told me earlier this week the North Koreans want as well, and they think there's a strong possibility there will be a second Trump/Kim summit this year.

The reason for this is that the North Koreans feel that they can carve out the best deal directly with President Trump. I mean, North Korea's foreign minister over the weekend blasted the State Department, said that the unilateral demands to give up nukes, no sanctions relief until all the nukes are out of the country, that's a nonstarter for the North Koreans. They said this is old thinking. This isn't going to build confidence.

Now, critics would say that North Korea hasn't taken any meaningful steps yet towards denuclearization, so why should they be awarded with a second summit? But the North Koreans, while criticizing the State Department and what they call internal strife in domestic politics in the U.S., they continue to praise President Trump and say his vision set forth with their leader, Kim Jong-un, is, you know, forward thinking and this other type of stuff that U.S. Secretary of State Mike Pompeo brought when visiting Pyongyang was the old mindset in the United States.

So, they're banking on another sit-down with Kim and Trump, thinking that Kim can get some sort of a deal, a more substantive deal out of Trump that's going to be favorable for the North Koreans, and they're wanting it to happen potentially before the midterm elections, because they know that President Trump would like to point to North Korea as a win. If the deal were to fall apart between now and then, it could potentially hurt President Trump politically. The North Koreans know that. So then you think about, okay, so, where, when might this meeting

happen? There is the United Nations General Assembly next month in New York. A lot of world leaders fly in for that. Could Kim Jong-un be one of them? And could he meet with president Trump somewhere, maybe Trump Tower?

Unthinkable a couple years ago, but this is 2018, Phil. You just never know.

MATTINGLY: About as good as you can put it. Singapore felt like we were in a sprint. Last couple weeks makes it feel like this is a marathon. Either way, Will Ripley will be participating in both.

Will in Hong Kong, thank you very much.

ROMANS: Make sure your laces are tied, Will.

Vice President Mike Pence heads to the Pentagon on Thursday to discuss the future of the U.S. military in space. President Trump has been calling for the development of a space force. Pence's arrival is expected to coincide with the release of a Pentagon report to Congress that contains recommendations for space components. It is not expected to call for the establishment of a separate space force military branch. That would require action by Congress.

MATTINGLY: Investigators are trying to identify the remains of a boy found during a search of a new Mexico compound where 11 children were found living in filthy conditions. Those children ranging in age from 1 to 15 were turned over to state child welfare workers.

CNN's Scott McLean has the latest from Taos, New Mexico.

(BEGIN VIDEOTAPE)

SCOTT MCLEAN, CNN CORRESPONDENT: Christine, Phil, last week, police raided this property in a remote part of northern New Mexico and they found 11 children living in these conditions, in absolute squalor inside of a filthy trailer that's buried on the other side of this tarp. There's no power here, no water here.

And when sheriff's deputies arrived, there was also very little food. Those children were malnourished. It was a sad scene, for sure. But it wasn't until Monday when police discovered the true horror. They found the body of a small child.

That body has yet to be identified, but one of the five adults here that police arrested and charged was already wanted on a warrant in Georgia after disappearing with his then 3-year-old son, Abdul Ghani Wahhaj (ph) late last year. That boy has serious medical issues. His mother said he couldn't walk, has seizures, and needed constant medical attention.

Now, the actual owners of this property say that they saw that boy earlier this year. And this spring, they realized that the father was wanted in Georgia after searching his name online. They said they called police as soon as they realized the connection, but it was months before law enforcement actually showed up just a few days ago.

TANYA BADGER, COMPOUND LAND OWNER: I can't sleep. I can't -- it's awful! What if he's still there? What if he was there at some point and the cops could have went in and, you know, maybe they would have found him.

MCLEAN: Now, the local sheriff here says his hands were tied. Even though the rightful property owners, Jason and Tanya Badger, gave him permission to search here, he said that the law simply did not allow it.

That is not sitting well with the Badgers, though. Tanya actually showed up here after the news broke that that body had been found to lay down flowers in memory of the boy that she says was failed by bureaucracy. It's not clear when that child died, but the Badgers, they are haunted by the idea that he might have been saved -- Christine, Phil.

(END VIDEOTAPE)

ROMANS: All right.

[04:50:00] Thank you for that.

The reward for a missing Iowa college student is now over $300,000. Mollie Tibbetts' father says he believes his daughter is still alive.

(BEGIN VIDEO CLIP)

ROB TIBBETTS, FATHER OF MISSING COLLEGE STUDENT: I think the longer this goes on, the absence of finding her, that she could be someplace where we can still get her back.

(END VIDEO CLIP)

ROMANS: Rob Tibbetts says he believes his daughter may have gone willingly with someone she knew. His daughter was last seen jogging three weeks ago.

Wayne Cheney (ph), who lives near the search area, has been questioned by the FBI. He told "The Des Moines Register" he has refused to take a polygraph, saying, "I have nothing to hide." He has not been charged in connection with the case. Mollie's father, Rob, will join us on CNN's "NEW DAY" at 7:30 a.m. Eastern Time.

MATTINGLY: All right. The city of Chicago is now vowing to put hundreds of additional police officers on the streets. That move coming after 66 people were shot over the weekend, 12 people died. Chicago's police chief says 430 officers are being put on street duty, while 200 more will be on patrol over the weekend. Some officers will have their hours extended or their vacations canceled. Officials say others are also being reassigned from other duties.

ROMANS: All right. Disney is taking on streaming services like Netflix. CEO Bob Iger laying out the high-stakes plan.

CNNMoney next.

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[04:56:01] MATTINGLY: So, you think you're having a bad day at work? An air-to-air missile accidentally launched over Estonia. A search is under way to find the missile, which is believed to have landed perhaps 25 miles north of Tartu. A Spanish fighter jet accidentally fired the missile during an air policing mission. Estonia's he prime minister called the incident extremely regrettable and called the NATO air mission over the Baltic country necessary to Estonia's national security.

ROMANS: China says it successfully tested its first hypersonic aircraft.

It's a big first step forward in aerospace technology that could intensify pressure on the U.S. military. The waverider uses shock waves in the air generated by its own flight to soar faster than five times the speed of sound. Experts say it can carry nuclear warheads and that its speed and unpredictable trajectory make it nearly impossible for any antimissile defense systems to intercept it.

MATTINGLY: You guys are going to try to make me do it again, aren't you?

ROMANS: Please.

MATTINGLY: I sing once an hour. That's in my contract officially. If it isn't, I'm putting it in there.

All right, here's the story of the winning bidder. Imagine that with music. We now know HGTV is the new owner of "The Brady Bunch" house. The chief executive of the company's parent company, Discovery, said the house in North Hollywood will be restored to all its 1970s glory.

The house was listed at a starting price of almost $1.9 million. Former 'N Sync band member Lance Bass took to social media this week to express his disappointment at losing out on the house, but it seems all is now forgiven, with Bass tweeting, in part: Kudos, HGTV. I know you will do the right thing with the house. That was always my biggest worry. I can smile again.

ROMANS: $1.9 mill in Los Angeles.

MATTINGLY: Or $1.9 mill in Ohio, where I'm from, would buy you like 12 to 15 houses.

ROMANS: I know!

All right, let's get a check on CNNMoney this morning. Global stocks taking off on trade fears, mostly higher overnight thanks to earnings.

On Wall Street, the S&P 500 closed just shy of a record high. It is less than 0.5 percent away from its January record-high close. Second-quarter earnings are strong. Profit growth the biggest in years. But the season is not over yet. Today, you'll hear from 21st Century

Fox and CVS. Tesla the big stock story yesterday. The stock jumped 11 percent after CEO Elon Musk says he may take Tesla private. More on that later.

ROMANS: Disney's gearing up to take on streaming services. For years, Disney faced tough competition from companies like Netflix. Yesterday, CEO Bob Iger laid out Disney's high-stakes plan to fight back.

First, Disney will rely on its own streaming platforms, including Hulu and the recently launched ESPN plus. It also plans to debut a family- friendly service next year featuring content from Pixar, Marvel, Disney, and "Star Wars." Second, it will use new content from Fox on those platforms. Disney plans to buy Fox's entertainment assets for $71 billion, including its movie studio and TV channels.

Snapchat lost users for the first time ever but made nearly twice as much money as last year. Snap's revenue soared 44 percent, but it lost 3 million daily users. Snap blamed a rocky redesign of its app, but it's not the only social media company to see a slowdown. Shares of Facebook and Twitter both fell after reporting slowing user growth. Facebook lost more than $100 billion in value in one day, a record for a U.S. company.

Remember Facebook said it was going to put privacy first, and that would mean it would have to spend big.

MATTINGLY: I'm sorry I didn't sing. I feel bad now.

ROMANS: We'll put it on Twitter anyway.

EARLY START continues right now.

(BEGIN VIDEO CLIP)

BALDERSON: I'd like to thank President Trump.

(CHEERS AND APPLAUSE)

ROMANS: The Republican candidate declares victory. The president takes credit, but the numbers show Ohio's special election still too close to call.

MATTINGLY: Paul Manafort's lawyers grilled the prosecution's star witness, painting Rick Gates as a cheater and a chief who can't be trusted.

ROMANS: Firefighters gained some ground in the largest wildfire in California history, but the battle is far from over.