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all business outside the united states. there are some provisions like the r & d credit and the production deduction that are part of u.s. tax law. you would then add some back in for state and local taxes. at the end you come up to 29%. >> i just am curious why it is that you would pay even with the overseas profits, you would still pay a higher effective tax rate than motion other corporations. >> we do think that is significant, especially considering 65% of our business is -- or more than 65% is outside of the united states. >> when and how often since 1999 has the internal revenue service cadetted caterpillar. >> we are under continual examination, the irs literally sits outside my office in that time frame we have closed '99, two 2001, 2002, 2003, 2004, five -- >> what haven't you closed, what year? >> the 2007 and later years are still under exam. >> they're still under examination. >> uh-huh. >> you are under constant auditing from the irs. >> yes, we are. >> and they have not claimed you were in violation of irs regulations? >> each year's return provides substantial information, including transfer pricing information, related to international businesses. they propose node adjustments. >> you heard that the phipps panel of -- first panel of witnesses said the irs wasn't doing their job. would you agree with that? >> well, they asked extensive questions about our business. we provided a lot of information to them. answered a lot of questions, reviewed our transfer pricing processes with them. i think they've been pretty diligent. >> maybe you could submit for the record the number of audits and the specific reasons for investigations by the irs that they gave when they i'd audited you. can you do that? >> certainly, senator. >> the caterpillar obviously can deliver replacement parts anywhere in the world in 24 hours or less. what role does the swiss subsidiary and its dealer network play in making the 24-hour replacement parts delivery possible? >> csarl plays a significant role in that. so csarl is administering dealer out that's you'd. they developed the dealer network, now administer the dealers. they're working regularly with dealers on how best to serve our customers around the world, which includes forecasting the needs of the customers, developing merchandizing, marketing programs, et cetera. >> the parts come from the united states or where? >> parts come from all over the world, specifically csarl does purchase 70% of their purchase finished parts from ute. they do get parts from other parts of the world also. >> i thank you. i thank the witnesses. thank you, mr. chairman. >> thank you very much, senator mccain. senator johnson. >> thank you, mr. chairman. just getting back to your relationship with the irs. mr. beran you said they're sitting outside your office. how many? on average? >> on average it's a half a dozen or so. they have a number of members assigned but they're in and out. >> so you closed out through 2006 and 2007. >> 2006. >> i they all just looking at 2007 now or looking at all the years in kind of compilation? >> they typically do two or three-year audit cycles. if they get behind they extend. >> in the closed out audits you said they looked at transfer pricing. that encompasses this entire relationship with csarl and -- because they proposed no adjustments, they've basically given their blessing to what you have done here from the statement of compliance with tax law. -- standpoint of compliance with tax law. >> that's the way i've taken it. there's extensive documents provided each year and they ask questions about it. >> miss legacy, in the scheme of things in terms of the expenses of caterpillar, what is your largest expense? labor? material? >> yeah. it would be the cost to build and make our products, yes. >> okay. and in that hierarchy of costs, where does the tax expense fall? >> it is not the primary driver of our costs. >> but it's a large cost center. correct? >> yes. >> certainly something that any response management team would take a look at managing just like you manage labor and material purchases. >> correct. >> there's nothing nefarious in trying to minimize the tax burden. >> no. absolutely not. >> you had a whistleblower say you didn't report 2 bridge of -- $2 billion of income tax to the united states. let's say legally or properly or improper, let's just stipulate you saved ourself $2 billion in tax expense by complying with the u.s. tax code. what did caterpillar do with that $2 million or any tax saving you enjoyed because of your compliance with the tax code? >> i'd like to say we did have a foamer employee, he did file an employment lawsuit. that was resolved, and all of his concerns were taken seriously, and all of the expert, both internally and externally, price waterhouse coopers found there to be no apart -- no merit in his concerns. regarding what we do with that, we continue to invest that in our business and that's why we've seen the growth we have in 1999 we were $20 billion. last year the sales were $56 billion. our exports and our u.s. business grew over that time period. >> you didn't stuff any kind of tax savings in a mattress or pillow case. you put that to use, growing your business. >> correct. >> creating jobs. >> correct. >> both domestically and overseas. >> exactly. >> so, do those tax savings -- we can quibble over who should have claimed those dollars. certainly had we taken them here in the federal government we would have spent it somewhere, but you actually spent it putting people to work. >> we put into it our business to grow our business, yes. >> what options -- let's say we were able to pass a law here and capture bigger share of caterpillar's income. what options would caterpillar have under that scenario if they texas burden just became too competitive and you constant compete with your global come pit temperatures. >> that's the key. it's really important we have a tax code that allows us to compete fairly in the global marketplace. we're not looking for a free lunch, but we are looking for the ability to compete fairly with companies inside and outside of the united states. >> can you just speak to the relative competitiveness of what you're paying tax-wise to your competitors, the ones mentioned earlier? name the -- >> again, we talked about volvo earlier in the hearing had a much lower effective tax rate. kimatsu -- >> can you give us the relative difference in tax rates? >> i don't have the exact tax rates. >> mr. beraan? >> it varies year by year depending on their mix of income just like us, but they now have a lower japanese statutory rate. but on top of that they now have a territorial system that allows them to earn money in lower tax environments and can move it wherever they can best employ it in theirs business. >> do you feel that caterpillar is at a competitive disadvantage because of the u.s. tax system, and can you be specific in terms of exactly what is the worst part of it? >> one of the worst parts is the international regime, which taxes much more foreign activity income than any of our competitor nations. so a business like csarl wouldn't -- virtually all of the competitor nations would not tax that business at all. back in their home country. you just pay the swiss tax. and then the complexity of the u.s. rules that cause us to have to do much greater effort to be able to move money across our foreign subsidiary, particularly back to the u.s. >> do you believe are are you specifically aware of any maybe large contracts you have lost and potentially believe it was because of our uncompetitive tax system? >> i couldn't say that we have lost contracts that way. it would probably come up more if we were looking to buy a company in a foreign competitor could bid more for the company. >> okay. so, puts you at a disadvantage in terms of activity. what total percentage of your sales is parts? >> i don't know. >> anybody on the panel know. >> we actually, senator, don't separate our parts business so we don't have a separate parts business. it's very integral to our products and our machine products. so it's our business model. >> i was just trying to get a little better feel for the howard-count issue that senator levin was talking about. i view -- this is just my assumption -- that csarl in geneva is kind of a headquarters with limited head count but you have people with other divisions, internationally, with direct reporting responsibility, they may not be called csarl but they are ethe directly reporting to csarl or there's a dotted line. >> that's a very correct assumption. we have a lot of key decisionmakers and a number of employees outside of the united states who do, as you just suggested. they understand our customers and understand the needs of our customers. work with our dealers on everything from financing to inventory management, to understand what the needs are to best serve the customers in that territory. >> i was trying to interpret the schedule that senator levin was talking not terms of head count. i guess my assumption is -- maybe it's not direct. maybe it wasn't answered because you were being very specific in terms of csarl, but there are thousands of employees that in some way, shape or form are reporting or certainly contributing to -- >> yes -- >> the activities of csarl. is that accurate? >> that's true. >> thank you for your testimony. thank you, mr. chairman. >> saying csarl has thousands of employees? >> again, there-- -- >> animal are you saying they have thousands of employees? >> again, if you're asking very specifically on the legal entity structure of csarl and has a number of subsid areas i know there -- subsidiaries i know there are thousands of employees doing the work of administering the dealers, manufacturing, filling machines, et cetera, that are part of csarl. >> i don't know -- part of? you say a lot of people communicate with csarl. are you actually saying -- we know how many employees caterpillar has. >> yes. >> how many employees does c done sarl? >> i don't have -- >> approximation number. do you've have an proximate number? >> no. let's look at exhibit 52. the agreement between cat pill larry and c cc csarl. very few employees reallottively and here's what -- >> mr. chairman, can we get the exhibit number? >> sure. okay. >> who is it that just spoke? >> steven ryan, counsel for the company. the witnesses -- >> i was just wondering since you spoke, for our reporter to know who it was. so at the back of this exhibit 52 is schedule 1. got a number 661 on it. schedule of services to be provided by caterpillar. this is a list of what they do. we got it? >> i have it clerics jew chez following, creating and translating service manuals. provides inventory ability management. provides parts customers services to dealers. processes dealer parts returns. maintains information systems. provides marketing consulting services to dealers. provides strategic planning and accounting services. now, for the u.s. warehouses, caterpillar -- again, csarl has no warehouses -- caterpillar agrees to manage and monitor inventory levels worldwide and perform expediting services, arrange for transportation of csarl parts, perform general warehousing services and provide warehousing facilities. perform inventory management services, and for all those services on the last page, caterpillar gets reimbursed its costs, plus 5% of those costs. so, basically, caterpillar agreed to keep running the program for csarl. csarl has 65 employees handling parts, could going to your charts no warehouses, no parts inventories, no forecasting or other software being administered from csarl. my question is would caterpillar perform all of these same services for a third party at cost plus a small service fee while giving up 85% of its profits? miss legacy, would you do that? >> yes. >> you would. >> your question -- >> you're offering to a third party -- >> i thought you asked me if i would -- >> i thought you were making an offer to a third party to buy all that. >> no. i was attempting to answer your question. so, first, you said csarl kept doing it was doing, and csarl and its predecessor company were in business since 1960, doing the work of supporting dealers and selling parts, marketing parts -- >> you are going into what csarl and i'm now telling you what your documents say caterpillar is doing. that's all. and i've read -- did i read it correctly? >> yes, you read the document correctly. >> okay. >> now, take a look at exhibit 18. 2012, caterpillar board of directors, minutes. look at the first line of the second paragraph. do you have it? exhibit 18. did you get it? >> i'm on exhibit 18. >> second paragraph, says, mr. larson, who is -- >> i don't see that in the document. >> okay. >> is this a board of directors meeting you have, the minutes? >> caterpillar board of directors minutes experts, starts with page 5? >> look at 1857 at the bottom. page eight. >> okay. >> larson -- you see that there? >> yes. >> next described the efforts to transform the part distribution business from a u.s. -- united states centric model -- 2012 -- efforts underway to transform the parts distribution business from a united states send trachemodle. so, -- centric model. so, february, 2012, a year ago, your parts distribution business is called united states centric. that's what was told to the board of directors. are you aware of that? >> no. i am reading those words on this page. i wasn't involved in this meeting so i don't know the context under which this discussion occurred. but i can tell you that our -- we have employees and parts being handled all around the world by a number of people, today and have for maybe years. >> i'm -- have for many years. >> i'm sure of that. that's not the question. the question is whether 8515 -- 85-15 is an appropriate split on the parts business. >> i'd like to respond -- >> well, let me keep asking the questions. mr. larson next described the efforts underway to transform the parts distribution machines from a united states centric model -- a year ago -- you're not aware of that discrimination the board of directors. is that correct? you're not aware of that by mr. larson. >> no. i was not a -- >> the this is the first you have seen that? >> if i've seen it, it's been simply for preparation for this hearing. >> now, -- there was a discussion here at the board meeting, according to the title, on parts growth and distribution facility footprint expansion. that was at the board meeting. did you to the that the board was going to be discussing that in february of 2012? >> i did not. >> now, let me ask you, mr. beran, information which has been provided to the subcommitee by caterpillar shows that 70% of all purchase finished replacement parts sold offshore were manufactured in the united states. that is a chart we're going to put up. that's exhibit 1-f, the same thing as the chart. i think miss legacy you used the same figure a moment ago. is that correct? >> yes. approximately 70% of -- >> purchased replace. parts sold offshore, manufactured in the united states. correct? >> yes. >> okay. which mr. beran -- >> by purchased, by suppliers. >> you agree with that, mr. beran? >> yes. >> how many purchased finished replacement parts are manufactured in switzerland? >> anyway rowing things down to switzerland does not describe -- >> i'm just asking you a question. you would ask yourself a different question. i'm asking you a question. how many parts are manufactured in switzerland. >> csarl manages to. >> cow answer my question, please? i'm not asking you what you think they've managed. i'm asking you a simple, direct question. >> they don't have any manufacturing -- >> thank you. >> in switzerland. >> what percentage of the -- how many warehouses does -- are there in switzerland? caterpillar warehouses, or csarl warehouses? do you know? >> number to my knowledge. >> do you know how many warehouses there are in the united states? cat pill already warehouse. >> i think we discussioned earlier, around 10. don't knoll the exact number. >> is it true, mr. beran, that caterpillar has its largest parts house and manages the global part inventory in morton, illinois? the largest parts warehouse of caterpillar in morton, illinois. that's my question. >> morton as a very sizable facility. i think it's the largest -- >> thank you. >> but we have large ones in belgium, singapore -- >> not in switzerland. >> not in switzerland. all of them are owned by csarl of one of its subsidiaries. >> i understand. you say owns. csarl owns that? who owns csarl? >> csarl owns all -- excuse me? >> who owns csarl. >> ultimately owned by caterpillar inc. but every government in the world expects us to report by legal intent. >> so csarl is owned by caterpillar. >> that's correct. >> you say csarl owns the warehouses? >> csarl either owns the warehouses or owns the entity that owns them. >> who owns the entity that owns csarl? >> again, ultimately, caterpillar inc. >> are the names stewart -- and steven larson and barbara hodo -- are those names familiar you? >> i recognize those names. >> you know those names? >> die. >> do they work in the united states? do you know? >> cue read the his again. >> stewart levny ik, steve ven gosselin, steven larson, barbara hodel. >> yes, all of them work in the united states. >> are they key leaders caterpillar's parts business? >> they are key leaders but, again, keep in mind, we do not have a parts business. >> i'm sure. are they key leaders in the parts part of your business? >> they are key leaders of caterpillar. >> do they work heavily in the parts part of caterpillar, even though it's not signified at parts separately? >> they have, again, especially stu, would have multiple responsibilities that go well beyond parts but tom does have some responsibilities there also. >> how about steven gosselin? does he have significant -- >> he has significant overall product support responsibilities but, again -- >> does that include parts? >> yes. >> steven larson? >> steven larson has retired. >> barbara hodel? >> barb hodel works in our parts distribution area. >> does she work the the united states? >> yes, she does. >> okay. do you know how many parts, approximately, are warehoused in the united states? >> i do not. >> do you know, mr. beran? >> the number of parts -- >> approximately. within 100 million or so. warehoused in the united states. would you know, mr. perkins? >> no, i do not. >> how about within half a billion. >> i would say in total, i believe we have just under a million serviceable replacement parts. i do not know how many of those are stocked in the united states. >> would it surprise you to know that there's about a billion and a half parts no -- not types of parts but parts warehoused in the united states? >> i don't know that number. >> okay. it wasn't -- wouldn't surprise you or would surprise you. >> individual, so not part numbers but just individual numbers of parts? i frankly have no idea how many there might be housed in the you'd. >> okay. >> would you take a look, please, at exhibit 53. >> i don't have an exhibit 53 in my book. thank you. >> do you have it now? >> yes. >> okay. this is the value of -- i want to talk to you about the value of what was transferred to csarl as part of the license. and this is a pwc document that addresses that question. what intangible property will be transferred from cat inc. to csarl under the replacement parts license? under the replacement parts license. that's what we're talking about. replacement parts. not machines. replacement parts license. into, first, please note that the document talks about parts, not machines. and cosarl refers to what we have been calling csarl. here's here it what was transfer ted patents and designs, parts including patent elements, trademarks, parts sold under cat trademark, contracts, buying from suppliers. caterpillar already has screened. qualified. negotiated prices with. systems and procedures, cat proprietary log information. no how, methods, forecast, estimates. now, if you take a look at exhibit 51, if you would, page 2, under intellectual property. this was transferred. bill ledge property throughs but notice immigrant led to know how, processes, designs, specifications, engineering standards, trade secrets, inventions, pant tent applications, caterpillar production, customer lists, supplier lists, systems and more. so that -- the neck right -- economic rights to use that were transferred to your subsidiary in a tax haven. would you have transferred all of that anyone but a related party? now you have a chance to answer that question. miss legacy. >> keep in mind that, again, don't agree with your characterization of a tax haven -- >> you don't think switzerland is a tax haven? >> i don't know the definition of a tax haven. >> oh, okay. you said you disagreed with my definition. >> right. so i -- >> now you say you don't know what the defense mission. >> it's where we have done business and had a headquarters since 1960. >> it's a low-tax jurisdiction under your own documents and that was one of the purposes of the transfers, under your own documents to a low-tax jurisdiction. what's that it says. migrate profits to a low-tax jurisdiction. >> we have had headquarters in geneva since 1960 and found it to be a good base from which to grow our business outside of the united states. >> i'm sure -- >> which has been fairly effective. >> i'm sure you said that take a look again at exhibit 7. benefits. migrates profits from cat inc. to low tax marketing company. that's not irrelevant that it was a low tax marketing company, or is it irrelevant? that's your own document. read it to you three times. exhibit 7, pain three at the end, benefit: migrate profits from cat inc. to low tax marketing companies. >> this is a pwc document, i believe. i certainly would agree that the tax rate in switzerland is much lower than the tax rate in the united states. >> okay. take -- so, you use words, too, don't you, low-tax countries? don't you ever use those words? doesn't caterpillar use those same words? yes or no? >> we don't use the word "tax haven pay pay. >> how about low tax and high tax? >> countries that are lower tax and others. >> how about low tax. look at exhibit 17. at the bottom, 5979. this is a -- got cat number at the bottom? you see it? page -- i think it may be page 6. you see that? >> starting at -- >> tax drivers. >> right. >> see that in that oval at the right, losses in high-tax rate countries, profits in low? do you see that? >> i do see that. >> okay. my question is, would you have transferred all that, all of that was in the licensing agreement to anybody but a related party? >> again, to answer that question, keep in mind that everything that we have done has been at an arm's length standard. so -- >> well, that's my question. will you sell that to an unrelated party? give a license to unrelated party? that's my question. >> that would require a business decision based on the economics of the situation. i can't simply answer that. >> you can't answer that, no? >> no, i cannot. >> okay. i think you wouldn't answer that no. but you can't answer it no because nobody in their right mind would sell to an unrelated party what caterpillar transferred in that license agreement for nothing. >> i think -- >> no company will do that. >> again, it wasn't for nothing, of course -- >> well, nothing -- they kept 15% of the profits and transferred 85% of the profits in the future but no consideration for the transfer. >> again, if you look at the 15% number, if you consider csarl -- i don't think it gives a total pick pure. if of if your sailor's total lines business about is 30 and then you add on the service fees and subpart f insuring it's actually more than half of the income from csarl that incurs u.s. tax rates. >> misquestion -- my question to you is do you think any company, any company, would transfer with no conversation what was in that license? would you -- are you not able to answer that? i think every corporate executive in the world would answer that but you in front of this subcommittee. there's no way you would transfer that to an unrelated company. is that not true. >> keep in mind -- >> okay. you can't answer that. you can't give a yes or no answer to that. >> i'm trying to answer your question. >> are you able to give a yes or no answer to that question? >> i cannot give a yes or no answer to that question without understanding the full situation and the economics of what you're talking about. >> i'm talking about the license that was given to csarl. >> right. a license given too csarl and csarl is the organization that developed the dealer network and continued to work with the -- >> had development the dieter network? caterpillar never developed -- >> c charl's red sedes are so company was in business -- >> of course, i'm not saying they didn't help develop a dealer networks but according to your transfer documents the major developer was caterpillar. i'm not saying csarl didn't help develop a network. of course they do. >> the predecessor company to csarl developed deal ever network off another the united states -- >> they helped to develop but caterpillar was the major development of markets everywhere. according to your transfer documents which i've read before. >> again, i don't agree with the statement. >> all right. are patents, trademarks, know how, crown jewels of the company? >> those are very important, yes. >> they were transferred to csarl, the economic rights to those? is that not true? >> again, there is a -- there was a license agreement -- >> i'm just asking you if it's true. >> my colleague, mr. beran, may be able to talk more precisely about what specifically was -- >> i read it to him before. i read the patentses, trademarks, okay? i read that all to you. >> what was transfer walled the right to use them? >> of course. >> caterpillar did not give them up. they continued to receive compensation for the utilizeddation of those. >> you're just talking about the parts profits they retained. >> the patents wore relate- -- were related not just to the parts -- >> automatic talking about patents relating to parts. come on. >> the patents were related to design and parts. >> that's what we're talking about. that's what the strategy related to was parts. >> it's an overall license nor entirety over the business. >> including the parts. >> parts are an integral element of our -- >> that's why i say including the parts. >> -- product strategy. >> that's why i say including the parts. >> yes. >> and the parts strategy, the tax distract related to parts. >> it related to the overall business. we were align hogue the product managers and other managers of the company ran the business. >> i understand what you're repeating but aim reading document after document after document relates parts, parts, parts. that tax strategy reef lated -- related to parts, digs not? that's my question. >> the -- >> did the parts strategy relate to parts? >> it related to parts. >> didn't reef late -- related to parts. did you ever see any parts related in the documents i've read? >> well, senator, if you select documents prepared by people from our logistics business, they will prim marrily talk about parts. >> and you have documents with you've that say what was transferred was something other than parts? >> again, csarl is an integrated entrepreneur -- >> i know. you're talk being threat documents we got. i'm just asking you do you have any other documents? >> i didn't brake any documents. frsh. >> take a look at exhibit 7. >> i'm just going back to this one more time. this was the proposal that you accepted and implemented for this tax strapping in switzerland. recharacterize marketing company income. recharacterize, mind you -- to achieve tax deferral. look what it said down here? what is left out? out of the chain? >> i'm still -- >> you're having trouble finding -- >> i'm on -- at the bottom. 4619. >> no. 4618. >> okay. >> see where it says, remove caterpillar inc. from the chain of title passage for purchased finished parties. >> yes. >> that's the strategy. i'm going to read it to you because this is the strategy. to remove caterpillar, itching, from the claim of title passage for purchased finished parts. okay? i don't know -- >> but i believe -- >> i understand there was more than that. i'm just talking being the tax strategy. >> again, the tax strategy was established to follow the business strategy. csarl was set up an an integrity it entrepreneur and included manufacturing facilities and other things. >> let's -- mr. perkins, if you take a look at exhibit 34, this is a depression that you provided under oath in 2002 about the tax strategy developed by pricewaterhouse for caterpillar involving csarl and the nonu.s. -- when you were asked the in the deposition was there business advantage for caterpillar inc. to have this arrangement -- meaning csarl -- put in place other than the avoidance or deferral of income taxation at higher rates, close quote? you responded under oath: no, there was not. was that truthful? >> mr. chairman, at the time that i gave that deposition in the employment lawsuit is a couple years after retired in terms of the response to that specific question, that is a true statement, but i would like to have the opportunity to clarify what -- i did not say at that time the activities that associated with the removal of cat inc. from the supply chain did in fact have significant business activities accompanying it. when i responded to this question, i responded negatively, but the point is, i -- >> i know what the point is now. i'm asking, was it true when you said -- was it true that when you said to the question, was there any business advantage to caterpillar to have this arrangement put in place other than the avoidance -- avoidance -- or deferral of income taxation at higher rates? your answer, no, there was. no my simple question to you -- and i know what you'd like to say now but my simple question to you is: was that true when you said it? >> when i responded, i'm responding from a tax viewpoint, and i look at things from financial impact, certainly from a legal intent standpoint there was a financial advantage, but legal entity changes are transparent to our business units. and so any after-tax benefit generated creating a financial advantage to the enterprise, that was not reflected on the business unit's performance. >> question: what was the benefit to caterpillar, inc. to have csarl purchase finished replacement parts instead of having cat pill already inc. buy them and sell them to csarl? your answer: it would alter the character of the income from csarl from includable deemed distribution income to the united states. was that true? >> again, from -- >> i'm just asking you, was your answer true? just, yes, it was. >> question. -- same depression -- the advantage to caterpillar inc. would be that it would pay less federal income tax. answer: yes. was that true when you said it? >> yes. >> mr. beran, are csarl's financial results included within caterpillar's u.s. consolidated financial statement? >> yes, they are. >> are any csarl losses that might come to pass ultimately then be reflected in that financial statement? >> they would in the financial statements. not necessarily reflected in the u.s. tax returns. >> of course. but in that financial statement they would be included. >> in the -- in our con ol' -- afternoon kole dated -- >> consolidated financial statements, yes. >> and csarl's losses are in the consolidated caterpillar as the parent financial statement. please take a look, if you would, to -- exhibit 17. [inaudible conversations] [inaudible conversations] >> on page 5984, under -- says cash management crossover cash buildup in geneva. there's a cash buildup in geneva? you see that page? >> yes. >> okay. caterpillar definition crossover occurs when offshore cash no longer can be accessed in the u.s. without increptal -- incremental u.s. tax costs. fliers you bring that cash to the united states you have to pay tacks on it and even for credit for tacks paid in geneva it indicates you would have to pay 25% on the cash temp bottom it says you are working to, quote, develop tax efficient repatriation strategies, and then on page 12, it lists some of those strategies, with a goal of repatriating $3 billion. talks about loans, tax efficient dividends, prepaying royalties and goods prepayment. did you work on those strategies, do you know, miss legacy? >> i was not there at that time. i think i can shed some light on this general topic. we are, again, about a 56 -- >> i'm not talking about at that time. have you continued to work -- put it in the present -- on the tax strategies. >> we have approximately $3.5 billion offshore at this point, outside of the united states. and that is available for general corporate use, and can be repatriated without significant additional u.s. tax. most of that money is outside of the united states because it is needed to run our businesses outside the united states. again, 65% of our $56 billion in sales and revenues comes from outside of the united states. >> and how much, if repatriated, would be subject to tax here? >> because of previously taxed information, transactions already taxed the u.s. rate, the substantially -- a substantial sum can be returned significant amounts can be returned, nearly all of that without any substantial income tax. >> is there any part of that which you'd have to pay a tax on? u.s. tax? >> there might be some very minor but very insignificant. it's available for general corporate use and could be brought back to the united states without any additional significant tax burden in the united states. >> what does this mean tax efficient we patriation strategies. i would can't you just bring it back to the united states? >> i believe this is a 2010 document, and i am not exactly sure of the situation back in 2010 with cash, but again, i'm telling you that today -- i know you have situations of companies that you have talked to that have significant amounts of cash outside the united states that can't be repate treated but we're not d -- repatriated so but we're not one of those companies. >> how much did you have in cash. >> we have 3.5 billion in cash. >> you could repatriate all of that without u.s. tax -- >> it is available for general corporate use and that cash could come back without significant additional u.s. tax there may be some small amounts there. >> that's what i -- you answered the question. [inaudible conversations] >> i made reference before to documents written in the 1970s which said that cat inc. had the largest role with regard to market and dealer development. do you agree with that? these were caterpillar documents. i've read them before today and you were here, i believe. exhibit 4-a if you want to look at it again. >> exhibit 4-a? this is a pricewaterhouse document. >> yes. the same thing was said in 1996, '95, '94, '97. >> right. that was stated by pricewaterhouse, again -- >> correct. i'm just asking you, said cat inc. has the largest role with extraordinary market and dealer develops, gives the reasons, acknowledge or says the marketing companies also have major responsibility for market development. in fact this is their primary responsibility. that's what they do. but it says that the largest role with regard to market and dealer development is cat inc. do you agree with that statement? that's what i'm asking. >> senator, at that time the u.s. market was over half the world. so by definition it would have the largest responsibility related to that. >> again, as we have said, cosa had the -- the predecessor company to csarl to develop that network outside of the united states. >> by the way, this says, it has the largest role with regard to that for three reasons. the third is, continues to be involved in the development and oversight of worldwide marketing programs and approaches. did you agree with that statement? >> could you point me to they page you're on? >> the same page. >> okay. thank you. >> number three, continues to be involved in the development -- of worldwide marketing programs and approaches. >> i would say most of the specific marketing programs and discounting and merchandizing programs that happened outside of the united states are driven by csarl today. >> okay. [inaudible question] conversation [inaudible conversations] [inaudible conversations] >> i understand, miss legacy, a dealer cannot be add or dropped from the caterpillar network or significantly change its territory without permission from caterpillar executives in the united states. is that correct? >> we have 178 deleads around the world and i do not know that for a fact. that seems reasonable to me but i do not know that for a fact. we have very -- >> the other two witnesses know if that's true? >> i do not. >> okay. >> neither do i. >> okay. >> we have very little attrition in our dealer network around the world so that would not happen frequently. >> that i know. i'm just saying it's my understand that a dealer can't beakedded or dropped from the caterpillar network or significantly change it's territory without permission from caterpillar executives in the u.s. and you have no rope not to believe that. >> no reason not to believe that. i don't-door. >> that's what was told to us by caterpillar. >> okay. >> in february, caterpillar launched a major effort to toughen oversight of dealers around the world. are you familiar with that, miss legacy? >> yes blame you're referring to our across the table initiative. -- i believe you're referring to the across the table initiative. >> it's not sure of the name but let's keep going. it required, quote, underperforming dealers, end quote to submit by the end of 2014 a plan for improving their sales. is that the same -- >> you said it was launched in february of this year? >> yes. >> the plan has to be submitted to and approved by caterpillar in the united states. is that correct? >> i don't know that. i actually don't know that. >> let me tell you that it does. and if it's not true, you can correct for the record what i'm saying. okay? >> okay. >> it has to be approved by stewart levnik. who is he? >> one of our group president. >> is he the group president of cat pill already customer and dealer support? >> yes. >> okay. he works out of illinois? >> he does. >> so dealers whose plans are approved and have three years to meet their job -- their sales targets or may be drop from the network. is that correct? >> i don't know all the specifics of the program. the intention of the program is benchmarking amongst our dealers, and looking at the dealers that are the highest performing around the world in a number of different elements, and helping to improve the performance of all of our developers around the network. >> right. those dealers then have get to their plan approved or they're going to be -- they have to meet the sales targets or day may be trop. it that true or not? >> i don't know. stu's organization does include the distribution groups that are headquartered in -- one in his -- he has one vice president in geneva, one in singapore, and one vice president in the ute and they have a distribution self-s responsibility which will be coordinating the work with each of the dealers itch don't have all the details on the program. >> he is head of the whole thing. right? >> they report to stu. those three -- >> he is in illinois. >> yes. >> okay. so, it's been run out of the united states. that's the top of it, the responsibility for it. it's not run by csarl, is it? >> well, but keep -- >> i know csarl is part of it -- gees -- >> so are the other traction distributions, i'm just asking you, the head of this effort, the driver of this effort, the one who is going to decide whether or not a dealer stays in or isn't going to be allowed to stay in, is mr. levnik in illinois. >> he will hold his vice presidents accountable to work with the dealers in their region. so these dealers have -- those vice presidents have that accountability and responsibility and, yes, they do work for stu. ... >> [inaudible conversations] prior to the 1989 transaction caterpillar u.s. was buying purchased finished replacement parts and mostly for manufacturers here in united states transferring them to this was affiliate's which then transferred them primarily to caterpillar non u.s. dealers. prior to 1999. >> correct. >> caterpillar reported most of the sales didn't come on the u.s. tax return with the international part sales is that correct? >> caterpillar would have reported a significant portion although it was paid out to the commercial entities responsible for manufacturing. >> but most of that income was shown on u.s. tax return ? >> i believe most of it was. yes. >> until 9985% or more of the international replacement parts, sales income was included on caterpillar u.s. tax richard tranfifteen was reported as swiss income? correct? and then the united states. is that correct? >> i don't remember their ratio. >> let's assume it is that. is that fair enough? >> having a method to keep track of profits for business purposes. is that correct? to make the accountable profits from the internal management system allocated income to all business groups and that accountable profit results. so far argue with me? >> prior to the 1999 transaction that matched the results for tax purposes about 85 percent of the accountable profits in the united states which was designed in building and track and ship the parts while 15 percent approximately we're allocated to switzerland in exchange for their marketing efforts. is that correct mr. beran? >> roughly seven mec get matched the tax report? >> i am not familiar with those numbers. >> anybody here? >> that system is not intended to be the same as what we report legal entity it is a way to drive behavior but i don't believe we understand the relationship you are making. >> is not true 85% of the accountable profits status business groups in the united states before 1999? >> is that true? >> i don't know that. >> it changed how profits were allocated for tax purposes. would you agree? tim mckyer would not change how they were allocated but correctly identified in 1999 where the profits were earned. >> was that a major change from the way it was previously identified? >> the change was to remove the unnecessary middleman. >> via understand the theory and the unnecessary middleman it is absurd to call it the unnecessary middleman but i have heard your explanation. but was there a major change after 1999? from what you just described a major change? >> if i could be clear clear, though work done prior to 1999 and after was not a major change. >> listen to my question. i am not saying the work was changed obviously it was not. when i unmasking is did that have an impact on the allocation on the tax return >> yes. 1989 with the royalty and service fees with the change there was an impact on taxes. guess yes. >> okay. was it understood that the time that that transaction was not going to have a negative impact on the west division accountable profits? was that understood mr. perkins? >> mr. chairman, there are significant differences between legal and business and accountable profits i cannot answer that question still make you say you don't know whether or not at that time there was an understanding that transaction would not have a negative impact on the u.s. division accountable profits you don't know? >> i don't know. i of attacks person. >> you don't know if there was an understanding? >> i do not know. >> do you know, mr. beran? >> i don't recall. >> let me tell you. do you know, ms. legacy? was there an understanding? to make generally what i can tell you is the accountable profits that we use internally to drive behavior is above for tax system so that does not include after-tax measurements. >> the is it a way to reward its divisions for their work ? it affects people's bonuses? >> it is a way to establish goals to drive business behavior that ultimately can impact incentive pay. >> a and rewards. >> it is an accountable system to drive the organization. >> is it not true u.s. business division capt. and about the same proportion of that accountable profit after the cesaro transaction >> i do not know. >> no. be accountable system was independent of the reporting >> i am just asking a question in-house if you were aware of the fact u.s. business divisions kept the same percentage of accountable parts profits after the transaction as they had before the transaction? >> are you not aware of that? did you not tell our staff that? >> no, no, no. mr. beran did you not tell our staff that? >> we were not directly impacting the accountable system. >> that is a pretty good dancer. >> would ever you call it but that transaction, the cesaro transaction does not affect the accountable profits issue strictly accountable system was not aligned with the international tax law but was to derive david behavior. >> of course. it was not impacted by the major change of how taxes would be paid. >> not to my knowledge. >> mr. perkins, while you were working on the cesaro structure 1999 was a you're interested in seeing that it was not supposed to change the operational functioning of the parts of business in any significant way just the invoicing system? was that your understanding? remic the invoicing system with respect to the and related suppliers to cesaro. >> except for the invoicing system like question is what you were working on the cesaro structure was the your new standing it was not supposed to change the operational pushing of the parts business in any way with the exception of invoicing? was that your understanding? >> there were significant changes legal, accounting and tax. legal externally in terms of the the contractual relationship. >> i talk about operational function was your understanding that there was not going to be any significant change in the operational functioning of the parts business? >> physical goods move the same way after the restructuring as it did prior. >> thank you. [inaudible conversations] and there has ben plenty of talk here today suggested by enforcing the current tax laws somehow we will endanger american manufacturing. of men as enthusiastic supporter of american manufacturing has business families space who was more enthusiastic. caterpillar has ideas, the tass quoted can better support manufacturers i am all ears. so as everybody else is obvious if everyone on this subcommittee would be welcoming of such suggestions. i of a strong supporter of r&d tax credits and advanced manufacturing tax credits and a strong supporter of energy efficiency tax credits and policies to help american manufacturing. i support tax policies that helped caterpillar and other manufacturers compete around the of world. what i do not support is making this a competition to see who has the most creative tax lawyers. i do not support tax loopholes or other manufacturers to exploit or refuse to exploit. we need more policies to support manufacturing but that is not what we have here with this investigation. the caterpillars with strategy is not the result of conscious policy making to support american manufacturing. it is simply a tax loophole. actual or perceived it is not fair to other companies to american families we don't have accountants at their disposal. so i cannot support what is going on here. i know caterpillar is an american success story in they have every right to. headquarters are here most executives are here most of the parts are made here, a ship from here, a story from here forecasting inventory management and logistics' are handled year. but since 1999 most of the international parts profits go to switzerland. the contrast between caterpillar u.s. and the swiss operations is dramatic. switzerland does not manufacture any parts united states manufactures 70% of the parts sold abroad. switzerland does not have a single parts warehouse by yet u.s. supports excuse me its doors 1.5 billion parts. only 65 swiss employees handle parts versus 5,000 in the united states. caterpillar swiss operation doesn't have the personal or infrastructure or expertise to have a global parts business. they have a role obviously to promote cards to work with dealers but they don't have the personnel or the infrastructure or the expertise to run a global parts business. everyone knows what happened and the documents could not be more clear. it is a tax deal. caterpillar used to pay taxes on all parts profits before 1999. then a transfer to license to go wholly-owned subsidiary cesaro that allowed it to sell caterpillar parts overseas to more places. it got back a royalty equal 15% of the parts profits that means the other 85 percent stayed in switzerland where caterpillar by the way had negotiated a special low tax rate between four and 6% the usual swiss tax rate is eight-point 5% for caterpillar use the licensing agreement to shift profits of $8 billion to switzerland while avoiding u.s. taxes of 2.$4 billion and counting whereas an ongoing number. $300 million per year in tax avoidance. it is going to switzerland instead of here. caterpillar was not compensated turning of the parts business over to cesaro. no compensation even though it was 75 years developing the business and allowing cesaro to use the state of the art forecasting and order and management system but was paid less by the way. since it traded $1 of profits to cesaro with $0.15 in return. at the same time caterpillar kept doing all of the work. that was the deal and it continued to bear economic risk. all of the economic risk. it is the consolidated returned. no reasonable business could have a chance for the crown jewels to see a related party for less than nothing. keep doing all the work can continuing to bear the economic risk. it is clear that caterpillar licensing transaction fails the arm's-length standard and the substance test because it had no business purpose other than tax avoidance is started as a tax strategy and caterpillar paid 55 million to price waterhouse to implement paillette in compliance with u.s. tax laws that is for someone else to decide. but if caterpillar is right our laws need even more strength. the irs has to step up enforcement to stop the multinational offshore profit shifting to start requiring transfer pricing agreements to justify the profits let between u.s. parents and the tax haven subsidiary. it needs to clarify that economic substance law goes to pricing agreements and congress needs to pass the stop tax haven abuse act to shut down the existing offshore tax loopholes. thanks to our panelists and again to caterpillar and price waterhouse with their cooperation. we stand adjourned. [inaudible conversations] [inaudible conversations] >> please poll your microphone close. think you mr. chairman and committee and members. i am ms. barra the chief executive officer of general motors for i appreciate the opportunity to be here today. more than one decade ago gm embarked on a small car program. sitting here today i cannot tell you why it took so long for a safety defect to be announced for this program but we will find out. kisses an extraordinary situation involving vehicles with no longer make but it came to light on my watch so i am responsible for resolving its. when we have answers we will be fully transparent with you, regulators and customers. while i cannot turn back the clock as soon as i learned about the problem we acted without hesitation. we told the world had a problem that needed to be fixed. whatever mistakes were made in the past we will let shirk from our responsibility now or in the future. today's gm will do the right thing. that begins with my sincere apologies to everyone who has been affected by the recall. especially the families and friends who lost their lives or were injured. i am deeply sorry. the vast former u.s. attorney to conduct a thorough and unimpeded investigation of the action of general motors. i have received updates from him and he tells me he is well along with the work. he has free rein to go with the facts take care regardless of outcome. the facts are the facts. once they're in my leadership team and i will do what is needed to help assure this does not happen again. we will hold ourselves fully accountable. however i want to stress a and not waiting for his results to make changes. i made the new vice president of global safety of first for general motors. his top party is to quickly identify and resolve any and all product safety issues. he is not taking on this task alone for by stand with him and my senior leadership team stands with him as well and we will welcome input from you, our customers, our dealers and current and former employees the latest round of recalls shows how serious we are about the way we want to do things with today's gm. identify issues and we are fixing them. i have passed 13 to stress the system would -- work with one thing in mind the the customer and their safety. customers that have been affected are getting our full and undivided attention. we are talking directly to them with a dedicated but site with updated information and through social media platforms. we have trained and assigned more people to the customer call center and wait times are down two seconds. we're sending customer's written information through the male part we have the power to dealers if they do not want to driver recalls vehicle dealers can provide with the loaner or rental car free of charge today we provided nearly 13,000 loaner vehicles if a customer over the looks for another car dealers can give additional cash allowance for a lease or a new vehicle. our supplier is manufacturing replacement parts that are no longer in production we have commissioned to lines and have lost four 1/3 those parts will start being delivered next week. these are only the first to make things right to rebuild trust with our customers. as i have reminded our employees it is only the first step. giving customers the best support possible throughout this with is how we will be judged i would like this committee to know all gm employees and i are determined to set a new standard. everyone at gm up to and including the board of directors supports this. ims second generation gm employee and i am here as the ceo but also representing the many women who are a part of today's gm dedicated to the safest vehicles on the road. reason the held a town hall meeting to introduce the vice president of safety we met at the technical center in michigan this is where the men and women work the brains behind the cars but also the heart of general motors. it was a tough meeting. they're disappointed and upset. i could hear in their voices. they have many of the same questions that they've want to make things better for their customers to make gm better. they want to know what we plan to do for those who have suffered the most from this tragedy. i am pleased to announce we have retained kenneth feinberg as a consultant to evaluate the situation to look at the best pass for word the committee knows he is highly qualified and experienced to handle matters such as this leading the efforts with 9/11, the bp oil spill and the boston marathon bombing. he brings expertise and objectivity to this effort. i consider this to be an extraordinary event and we are responding to it in an extraordinary way. gm has settled and legal responsibilities. we are thinking through exactly what those are and how to balance them in the appropriate manner. bringing on mr. feinberg is the first that. i would now be happy to answer your questions. thank you. [inaudible conversations] the hearing will come to order. we want to will, our witness sec chairman ms. white thank you to testify before the subcommittee. the sec has a uniquely important job to maintain fair and efficient security markets to encourage capital formation and protect the investment. it is not an easy task but incredible part to keep our economy thriving. fiscal year 2015 the sec is asking 350 million or 26 percent increase over last year funding level. this is an especially large increase for any agency while the sec is funded by fees, i believe congressional oversight over your budget is important task on the commission's activities checklist. what we went from the sec is a securities regulator that is both capable and economical. the sec to argue money will solve all problems of the world but we expect to see results before appropriating additional dollars. the house included bill language fully funding the risk analysis i am anxious to hear how you're using that funding to hire more economist to increase the cost benefit analysis performed during their rule making. in addition i'm interested to hear your thoughts that the sec released earlier this year and i am concerned and might be regulatory overreach in the area that can benefit from more competition, not less. american investors use the markets deserve to know there is a couple of the beat who is protecting our markets. with those damaging inspections and enforcement of the past like the ponzi scheme as a lapse of management and due diligence such as the constitution debacle and with documents and weaknesses of the financial statements. with the increases that congress has given over the past decade there can be no more excuses. york 15 long dash 2015 budget request as for increase of almost all division including overall request of 467. we heard the claim that you need increased staffing to get through dodd/frank however the standing in the -- staffing and funding levels cannot exponentially increase forever. this is not efficient use of your funds and will not protect american investments for toy maker to hear how the plan -- the sec will use key funding to leverage the expertise and capability to protect our capital markets and investors to facilitate the overall group of capital. fake you for being here today and look for it your testimony now of a like to recognize the ranking member. >> thank you. i join you also to welcome chair white back to the subcommittee on the 2015 budget request for the sec. last year you were just into your new position now with almost one year of service with the new position i have been heartened by what i have seen in many areas. as a former prosecutor you have taken a tough line to require more admission of guilt and settlements and made dodd/frank the ongoing priority and have moved the ball for word on the most important and complicated positions for all that said you cannot continue to protect investors to make sure the system is secure without sufficient resources. for all the compromises reached in the appropriations bill i think we did fall short of the mark to provide the necessary funding for the sec for a while concerned about the impact the funding level as of the commission caribbean by belief more needs to be done in the fiscal year 2015 that brings us to the request today of $1.7 billion allows the sec to keep pace with the growing markets. these transactions that take place to expand their role in the wake of the financial crisis without a significant increase we send the signal that market actors should not expect consequences for illegal behavior and that should be extremely troubling for all of us for but this point we know the consequences of the sec underfunded or unwilling with the federal security laws and the market suffering and investors suffer in taxpayers suffered we need the strongest cops on the beach that real strong protections in place to determine future misconduct they take your request seriously i hope my colleagues will as well. i look forward to your testimony. >> no i would recognize the ranking member of the full committee. >> thank you. i certainly would like to think you for holding this hearing. chair white for testifying today and they can you for agreeing to serve this great country of ours. great nova miss possibility that you have. madam chair coming you come before us with the budget request of $1.7 billion which would support the responsibilities as well as the hiring of the additional 639 employees. these additional positions to help the sec to examine investment advisers and enhance its functions with continued improvements of technology to keep up with changing markets, year after year the sec budget authority has been kept below what is needed in the needs of the increasing global economy. the republican majority kept the budget at more than $300 million below the president's request for 2014. this approach is nonsense. the sec is entirely defunded and as such providing adequate funding will not take a dime of taxpayer dollars nor have any impact. i worry their republican majority by jurisdictions from the sec are purposely intended to make it more difficult for the sec to do its job. by bobbing the sec if needed funding to maturity is making it more likely that it will go undetected and investors will be less at risk. when this occurs they'll use that opportunity as the play for future funding it is a cynical and unnecessary cycle. for our economy to succeed to its job these misguided budget restrictions only harm the ability to succeed prefer the 42 discussing the importance of the sec budget request and faq icahn for appearing before us. >> if you keep your remarks to five minutes that gives us more for questions. >> members of the subcommittee thank you for inviting me to testify of the 2015 budget request. now more than ever our markets need adequately resources to sec. fiscal 2001 through 2014 trading volume more than doubled to a projected $71 trillion the complexity of financial products than the speed with which they are traded increased exponentially assets grew by 131% of 14.$8 trillion in assets under management with $55 trillion today there are over broker-dealers with the changes with gm president said change with new and significant responsibilities for derivatives private fund advisers and a crowd funding portals and more. the 1.7 billion dollar budget request enables with critical core priorities including examination and coverage for investment advisers in the other key entities dealing with retail and institutional investors by expanding its enforcement program and capabilities to strengthen the ability to litigate. leveraging technology to make operations more efficient and improve the ability to identify a variety of market risk including emerging fraud. has you know, the funding is deficit neutral that means the amount does not impact the deficit the funding available for other agencies or against the framework but i fully recognize my responsibility to be effective and prudent stuart of funds them pursue only those we need to a advance our mission for our belief our accomplishments should give congress confidence we shall do so. war remains to be done since my arrival of the commission has adopted or proposed 20 significant rule making including mandated across the regulatory spectrum of our jurisdiction. we are now more aggressively enforcing securities laws to will publicly accountable to obtain orders from penalties looking at fiscal 2013 the highest in the history we have taken in said dated driven approach with a complex market structure issues implementing an analytical tool that would permit the sec to increase the examination coverage that every day investors are increasingly turning to for investment assistance of the sec has made the most of the limited resources nevertheless are able to examine only 9 percent of advisers fiscal 2013 as a point of reference in 2001 the sec had 19 examiners per $1 trillion in assets under management today we have zero main page. more coverage is needed as the industry itself has acknowledged it would also allow us to better leverage technology to support a number of key initiatives and including modernization is a multi-year effort to simplify the reporting process and completion of the data warehouse and the analytical tools to allow us to organize and integrate and analyze large amounts of data for fraud detection and enhancement to the referral system to maximize our ability to move quickly to act on the high volume of tips received, information security and responding to the ever increasing security threats and modernization one of the most widely used websites more informative for investors this budget request also allows us to augment our division of risk analysis to bad financial economist and other experts to assist with rulemaking and risk-based selection and structured data initiative. i firmly believe by the important in growing responsibility to investors and companies and the markets this support will allow us to better fulfill the mission to build on this significant progress the agency has achieved and i am committed to achieving in enhancing name happy to answer your questions. thank you. >> let me start by asking a couple of questions about efficiency. one of the things that most of us are aware it has increased 66% going back to 2001 the funding has increased so over the years there has been a lot of money spent and as has been pointed out it is sid defunded agency but we takeover site responsibility to make sure whether taxpayer dollar or feed driven money is spent effectively and efficiently and last year when the sec asked for the 26% increase you were there one month now it is one year in your view is you need another 27% increase. when you talk about technology, but me ask you can you point to the savings you have been able to leverage with this capability? could you tell us how you work on that equation? >> yes. i specifically work with our chief operating officer on savings weather driven by an investment of technology that was in the agency that the cost savings that are measured under different metrics we saved $6 million per year from consolidating operations to save $6 million fiscal 2015 and going forward for a number of years also to achieve the $80 million of cost avoidance by our investment to improve data infrastructure to make maintenance less required. those are two examples but i think seriously with that funding that we do get we do need that the part of that is cost savings ian three defect -- and we do that. >> will i have noticed you have a pretty large amount of carry over funding from previous years for the quarter the report says the balance was 112 million. that was last year when you were subject to the sequester that took about five minute long dash 5 million now is still 8% of your level. you take that with access to the $100 million mandatory reaser find you could spend 100 million on that. i know you talk about additional resources and constraints but could you tell us why you have such a high carryover balance? gimmickry you're able to carry over a balance if we don't spend it that year. it is a product of responsible financial planning because of the continuing resolution spent conservatively early 2013 we also tried very hard very wisely to hire the right people to do the job most effectively. and about 30 million is from financial good one dash manager it to deal obligate moneys on closeout contracts. i spent a lot of time on this, it's taken into consideration. >> at the end of 2014 do you expect to have a carryover balance? >> i cannot answer that certainly we have enhanced the h.r. function to hire more a efficiently as well as prudently that is where that expense comes from but we do think with that request is granted those funds to higher in those physicians that we do think we can do that. yes, sir. >> we will go to questions with the committee members of the people being recognized by seniority where the meeting started the latecomers are recognized in the order they arrived and he will make a special concession to the ranking member for the next round. >> you are very kind because there are several hearings going on at the same time. thank you. madam chair fiscal year due to budget constraints the sec sam and only 9% registered investment advisers over the past decade that number has increased by 40 percent. the assets under management has more than doubled to more than $55 trillion get funding has not kept up with the need the overwhelming majority of investment advisers who work with their clients best interest and mine but there are always bad apples. we can agree with those of pfizer's how does the sec prioritize examination why are these important to mom and pop investors -- investors how could they have been in the market to of the investment divisors never examined? >> no question this is a historic example of the stream challenge by the current level of funding but with his advisers space what we do with our resources is to apply them as wisely as we can with risk-based assessment of where we should go with the rates of return and recidivism. also instructed our examiners i don't want to be absent from the smaller space is either because that is where more and more retail investors are relying on investment to geysers to tell them what to do with their retirement money that they cannot afford to lose the money. there helped by every sam that we do like the larger investment advisers as well because they tend to be managed by the larger advisers this is another data point of concern. we do find issues with these examinations. between 75 and 80% received a deficiency letter of some kind. 42 percent of those are significant deficiency finding the there is harm to a customer or client or a significant risk or some kind of recidivism. in terms of the value returned 86 through 93% of who we do examine will tell us they reid mediated the problems about 15% of the findings were referred to enforcement also to find the problem with the misallocated will return them to investors so it is a critical function we must find a way. i believe using resources to get greater coverage. >> following up on that it carries stories justifiably so but with the stories of working-class families to be taken advantage of by fraud how would the budget request help the enforcement need to combat this fraud? binnacle large part of the budget request is directly to meet the examination and enforcement so we can better protect investors. what we see we still have cases against prominent wall street firm says the rise of the of micro cap fraud that would impact quite significantly we see a rise of securities violations said you could come across directed that victim investment race, religion, age something we have been very aggressive about to meet these crimes that are occurring against retail investors. across the range of enforcement priorities and various kinds of market abuses market integrity issues with the exchange's. is across the board retry to use the resources in the way we can four priority areas. >> i just want to mention what has concerned me greatly i have had a lot of briefings that companies have a responsibility to their shareholders i know in the past when they should have made security breaches public to help prevent future breaches that rather than sharing disinformation companies have kept it private leaving more times. investors to have the right to know companies have been a victim of cyberattacks to ensure the steps to help mitigate criminal action. could you comment briefly shed their reports with the sec and me required to disclose cyberattacks? what resources do they need from the government to effectively manage a cyber threat and how can they encourage information sharing? this has been a major issue and i don't know if we're making much of a breakthrough. >> i share your concerns across the issue of the impact of investors. no question about that. we held a round table last week on cybersecurity to emphasize that with respect to the public companies to bring together the government agencies to are charged with dealing with this cyberthreat in the coordination of the government agencies the department of homeland security with the national security issue is the coordinating agency among the federal agencies and the emphasis there that is so critical to have a public-private partnership the government needs to be better to share information or get security clearance but with disclosure to commend the staff of the sec they put up guidance to public companies to disclose cyberrest if they were material it was regarded as helpful guidance the staff has followed up with think they have improved would it is a continuing process and priority. >> chairwoman plight i along with my colleagues many of whom are here sent you a letter asking for an update on actions after the round table back in december. us you no to such firms one of which is in the process of being sold 97% of the market has actually become defacto bears in the united states come with these firms have obvious conflicts of interest and sometimes don't necessarily reflect the fiduciary responsibility to their clients. is it safe to assume there sec host to the roundtable because it recognizes we have problems there? >> by the way i thought that was quite constructive and there is more areas of agreement and i make to up front calls that they are quite important of the cage with the shareholders but also no question a number of concerns have been raised including whether the disclosures are required to make have been adequate with conflicts of interest there is a lot of dialogue about that with the fiduciary duty to retain that it has a fiduciary duty in their retain that that offerings with it certain duties that the firm is discharging the service. where i think that we are on that, we have received quite recently recommendations from our staff as to what steps if any the sec should take following the round table on these issues i expected fully short order to expect -- discuss that with my commissioners. . .
United-statesJapanTexasBostonMassachusettsGenevaGenèSwitzerlandTown-hallIllinoisBelgiumMichigan >> thank you. a minute before the red light comes on on the timer you will see a light changed from green to yellow, giving you an opportunity to conclude remarks. your written testimony will be printed in the record in its entirety. please let your oral testimony to ten minutes. and i understand that you will be presenting the statement for caterpillar. is that correct? >> yes, i well. >> please proceed. >> good afternoon, chairman levin, senator mccain. thank you for the average into the job. for the subcommittee today. my name is julie legacy, and i am the vice-president of the finance services division of caterpillar which includes tax and accounting function. on my left is caterpillar's director of global tax and trade robin baron, a 24 year caterpillar employee. on my right is right perkins, who retired in 2009 as one of our international tax managers after 35 years of service debt. we are proud to represent caterpillar before you today. caterpillar is a great american company, and our reputation as one of our -- our reputation is one of our british assets. i want to emphasize, caterpillar complies with u.s. tax laws, and we played -- pay everything that we go. we are proud of what we do. we are proud of the men and women to make it possible, and we are equally proud of our u.s. and american heritage. our average effective tax rate is 29%. that is one of the highest for a multinational manufacturing company. three percentage points higher than the average effective rate for u.s. corporations. this is particularly high when you consider that more than 65 percent of our sales and revenues are broad. over the last 15 years, we have increased employment in the united states by 35% to nearly 52,000 jobs, and we have more than tripled our exports to $16 billion. caterpillar enjoys a strong legacy and, in fact, my family has a long history with this company. both of my grandfathers worked at caterpillar. during world war to my grandfather stepped up to work in the factory to help build the machines our servicemen rely upon. my father whose career spanned 38 years began as an apprentice and worked his way up to manage one of the factories. along the way he met my mother who worked a dictated caterpillar. all told, three generations of my family to have more than 140 years of service at caterpillar, and i am a current steward of this tradition. at caterpillar stories like mine are not uncommon. for nearly 90 years caterpillar has helped build the world, including the backbone of modern american. what began with to american investors now employs over 118,000 people worldwide and nearly 52,000 of those people are right here in the united states. when you consider our independent dealer and supplier network, the world wide reach of our company is even greater. at our roots we are an american company. our equipment was there to build the golden gate bridge and create the interstate highway system. caterpillar products, dealers, and employees also show up after tragedy strikes. in oklahoma city at hurricane katrina and ground zero we were joined the first responders in cleaning up, powering up, and paving the way for recovery. we are proud that many of our products are made in america. along the illinois river in our east urea factory we make the machine on which our company was founded, the tractor, better known as the bulldozer. just down the road in decatur, illinois is the only place in the world army will -- where we make the world's largest mining truck which stands to one-half stories tall and thin carry 400 tons. eight out of ten large mining trucks made indicator are shipped outside of the u.s. there are other examples like this across the country from engines rolling off the line in taxes to the locomotives we are building in indiana toward the exit -- or the excavator's made in georgia. customers depend upon caterpillar's unmatched product, services, solutions, and the reliability of our machines. we grow and build near our customers worldwide not only because it is what they demand, but because remaining globally competitive helps create jobs right here now. growing where our business is means growing where our customers are located, not just in the united states, but throughout the world. most importantly, while more than 65 percent of our sales and revenue come from outside the u.s., caterpillar remains committed to our manufacturing roots here in america. that is why we continue to invest here at home with 69 manufacturing and logistics facilities and cat dealers from coast to coast. remain globally competitive helps create jobs right here,. in the past 15 years we have increased our u.s. employment by more than 13,000. many of these jobs can from our exports, which last year alone totaled $16 billion. as you may remember, our effort to grow u.s. manufacturing jobs was highlighted by president obama in his 2013 state of the union address. i want to emphasize, again, caterpillar has fully complied with u.s. tax law. for 2013 we estimate that caterpillar incurred approximately $700 million in income property sales and use taxes to u.s. federal, state, and local governments. additionally our wages accounted for approximately one and three-quarters billion in federal, state, and local employment taxes. with the last eight months caterpillar has responded to several subcommittee questionnaires another affirmation requests. producing dozens of pages of documents on voluntarily permitted and facilitated 11 separate subcommittee staff interviews of current and former personnel and has cooperated in every way possible with the subcommittee's inquiry. we understand that the chairman and its staff are interested in one aspect of our company's business, sales outside of the u.s. caterpillar's philosophy is that our business structure drives our tax structure. we do not invent artificial tax structures. when we identify options that align with our business structure comply with the tax laws and generate tax savings, we pursue those opportunities. the restructuring of caterpillar was one of those of virginities. decades ago caterpillar had the vision to see new opportunities worldwide that would drive our business growth in the u.s. and globally so caterpillar established a subsidiary in geneva, switzerland that would be responsible for putting in place a robust network of employees, independent dealers command suppliers for. that subsidiary is now known as pissarro. by the 1990's and had thousands of people supporting the business and almost 500 employees in geneva, switzerland alone. it is a vital business subsidiary responsible for manufacturing, marketing, and selling machines dimensions command parts outside of the united states. the geneva entity has held -- held this responsibility since 1960. the 1999 restructuring further refined this role. one result of this restructuring was that a streamlined the process and began buying parts directly from u.s. suppliers. prior to the restructuring caterpillar acted as an unnecessary middleman buying these parts from independent suppliers and selling them with the then sold them to dealers outside the u.s. a prudent, lawful business planning required us to eliminate the unnecessary middleman from the transaction flow. we cannot remain competitive, we cannot create jobs, and we cannot increase exports by incurring unnecessary expenses. americans pay the taxes that they go but not more. as an american company we pay the taxes that we go, not more. in planning and implementing of implementing the restructuring caterpillar appropriately relied on advice of two of the world's leading tax advisory firms, price waterhouse coopers, a leading big four u.s. and international accounting firm and the law firm mcdermott will and emory renowned for its international tax practice. both firms provided the advice that the changes are appropriate under the tax loss in both stand behind that advice. this advice was consistent with the experience and judgment of caterpillar tax department. caterpillar in house tax professionals and outside advisers manage to tax risk every day, and we remain convinced that the restructuring and subsequent transaction comply with the tax law. csarl purchases and sales of parts of more than sufficient business of this to be respected for tax purposes. the 1999 restructuring of parts purchases and sales did not in any way violate generally applicable judicial doctrine is in the tax area. an independent expert, professor john stein is of the new york university school of law confirms this conclusion. he had provided airport to the subcommittee staff on march 10th, 2014. csarl pays and arms length royalty for all tangible properties including intellectual property made available by caterpillar, inc. to a csarl as well as ongoing services for all activities performed by caterpillar, inc. fur csarl. so even with respect to parts that are sold to dealers located outside of the united states commits a portion of the resulting income is subject to current basic u.s. tax. the direct purchase of its parts inventory reflects nothing more than the standard business operations and tax planning that any prudent business would employ in conducting its operations and complying with u.s. tax laws. in closing, i would like to emphasize again that caterpillar is a great american company, and iconic company might say, a publicly listed since 1929. we have steadily grown by working our business model day in and day out. caterpillar does a significant amount of business around the world, creates jobs, invests in the communities where we do business, and there is one of the highest effective tax rates for manufacturing company. caterpillar complies with its legal obligation with respect to payment of taxes. we are happy to answer your questions. thank you. >> ms. legacy, my first question is of view. were you involved in the implementation of the csarl transaction in 1999? >> no, i was not. >> ms. perkins, at the time of the 1999 csarl transaction you were working for caterpillar, serving as its tax department's main point of contact. is that correct? >> mr. chairman, that is correct. >> and mr. robin beran, you wore mr. perkins i believe -- what was your role in 1999? >> i was and then the head of the tax department. >> okay. and you work directly under the csarl transaction? >> i was involved with this formulation. yes. the implementation. people did much more work and i. >> so you were involved in the formulation? >> would you look at seven please? this is the way in which he w.c. recommended that caterpillar could reduce its taxes. it is one page for the document. here is what it says. purpose, read characterize marketing company in come. we characterize marketing company in come to achieve u.s. tax deferral. and then if you look further down as you point out it was caterpillar -- as you said, ms. legacy, taken out of the chain as an unnecessary middleman. we will get to that in the minister just tell unnecessary it was. the direct purchase wind in geneva promise suppliers is that correct so far? >> yes, sir. >> mr. perkins, is that correct? >> estimated. >> was it the caterpillar tax department that came up with the idea to remove caterpillar, inc. from that title chain are was that be w.c. idea? >> mr. chairman, i can respond to that. the original idea, the genesis of that was within the tax department and predated the p.w. see proposed changes by at least a half-dozen years. >> okay. take a look at exit 32, if you would. this is a -- by the way, before we leave to 07i will repeat it again. one of the benefits and costs of this change in the title was a relatively simple reenforcing requirement. in other words, the parts never went to switzerland. is that correct? >> the parts would be distributed all over the world. >> with did not go to switzerland. >> many of them went to one of the -- well, they went to a the warehouses at csarl overseas. >> and how many of the warehouses are there in switzerland? >> none in switzerland. >> how many in the united states ? >> i don't know the exact number it varies. >> says san sound about right? >> in the range. in the range. >> now let's get to exit 32. february 2011, deposition of sally styles under ralph. to any of you know who's selling styles is? that me ask you, is she the caterpillar tractor of global tax? do you know? >> she is the director of global tax operations now. >> says she is now the director of global tax. here is what she said in her deposition. question, exhibit 32. is it fair to say that the driving force behind csarl was the tax department and not a business unit? cancer is yes. was that correct? >> senator, the context is that the tax department has to continually adapts to the way the business is run. that is so we were doing. >> i understand. was her statement direct -- correct? the tax department was the driving force? >> at the point in time we were aligning our tax reporting with the way that the business was wrong, yes, we have to propose that. >> i'm not arguing with you. i'm just asking whether or not the tax department was the driving force behind csarl, the csarl transaction? that's all i'm asking. >> yes. >> okay now, according to information which be w.c. has provided us from 1999-2003, caterpillar paid $55 million to design, develop, and implement the service tax strategy involving csarl which caterpillar called the global value enhancement or below program. does that match what you know? >> i believe that is in the range. >> mr. perkins, does that match your understanding? >> yes, it does. >> all right. from the beginning that decision to use csarl and direct caterpillar's nine u.s. profits to switzerland was to shift profits to a low-tax jurisdiction. is that correct? >> senator, as i said, it was to a line the profit recognition where the business was being run and managed. that tax purpose, shift profits for tax purposes to of low-tax jurisdiction. we had to get the profits where there weren't. >> i'm asking you -- >> it was not a shift. was to get them to where they weren't. i mean, may change the location, but the shift was to go to the -- or the point was to get them to where they weren't. >> take a look at page 4619 in the exhibit seven. [inaudible conversations] >> do you have that page? >> yes. >> the head of the page can increase profits associated with marketing, u.s. tax deferral, do you see that? >> yes. >> and the benefits cost where it says migrates profit from cat into low tax marketing companies do you see that? >> yes. >> okay. >> was that accurate? was that a benefit? >> yes, it's a benefit to our earned income and the tax jurisdiction. >> all right. >> senator, could i add -- >> i'm not. let me just finish. to migrate the profits from cat into a low-cost marketing company. is that what it says? >> yes. >> and this was the plan and you put in place? is that correct? >> that is be w.c. choice of terms to my guess. >> is? >> pricewaterhousecoopers. >> it is their choice of boarding. >> yes. >> fair enough. that is what your company bought . >> senator, could i add please. >> i just want, first, mr. robin beran. >> we pay them for their services, yes. >> you but their plan, their strategy. do you want at something? >> again, keep in mind that csarl and its predecessor company or in business since 1960. at the time of the realignment we have approximately 500 employees and our geneva office, but perhaps more importantly thousands of employees outside of the united states doing the work to help solve parts. >> short. those employees were all caterpillar employees. were they not? >> caterpillar employees -- >> how many employees as caterpillar have? >> in 1999? >> at the moment the you just talked. >> i don't know the exact number of total caterpillar -- >> how many employees did csarl have? >> csarl have thousands of employees. we have 500 employees at that time in geneva, switzerland, but many other employees around the world. csarl is not just in geneva. it is an effort that markets and as manufacturing, outside of the united states. >> and another 400 are so in singapore, but all of the employees around the oral the and and and now working for caterpillar or caterpillars own companies. is that not correct? >> csarl -- >> take a look get your own members, employees and total number of caterpillar employees around the world are in the -- >> we have 118,000 employees around the world today, 52,000 of those employees are in the united states. more than half of our plan is outside of the united states. >> of course, but that is caterpillar offshore employees. is that not true? >> no. >> let me give you numbers. you and tell me where we are wrong. these numbers come at a letter from the subcommittee. total caterpillar employees globally, one under 18,000. caterpillar u.s. employees to the 2000. caterpillar offshore employees including c -- csarl 66,000. now let's get down to csarl. csarl employees global 682. csarl employees switzerland 400. is that wrong? that is the letter that came into the subcommittee from you. >> there are also employees that i believe you have not included their from singapore and some other areas. >> we give you that total caterpillar employees. how many of the wonder 18,000 employees would you attribute to singapore? >> i don't have those exact numbers. again, if i could get that document i can research that and check that please. >> okay. we will give you this document. >> abcaeight. >> thank you. again, those nine u.s. employees we talked about are working for entities that report out to csarl. >> they are. use a report to csarl, but they are caterpillar employees to my not? >> i don't understand the distinction you're making there exactly. >> do they get a check from csarl? >> there are definitely employees of csarl, many employees outside the united states supporting the work of csarl. >> well, we are going to let it your chart, give your chart. according to what we take off of your document csarl employees globally are 6802. is that ron? >> i don't recognize that number i would like to review the charts. >> see you know how many employees csarl as in switzerland? >> in 1999 there were about 500. >> so at least in switzerland there are 500 csarl employees. we think there are 400 now, but we won't argue over 100. >> i think that's -- >> and the total number of caterpillar u.s. employees are 52,000. is that correct? >> yes. >> the total number of employees globally according to your letter, 8300, does that sound right? >> again, it depends upon how you define parts. we cannot have a parts business or identify that. i don't agree that those are all the employees working on parts. no. >> will you take a look at 50 be ? i'm afraid i have gone over my time. i will stop here because i have gone over my time. just take a look. answer number ten. the question was, with regard to emplacement parts business for each year from 1999 until 2012 please provide the following, the percentage of your company's worldwide head counts and payroll assigned to the purchased finished replacement parts business and located in the u.s., the percentage assigned to that business located in switzerland. your answer is you do not have employees assigned terribly oppressed business, however there are organizations throughout the enterprise the support purchase, storage, movement, and sales of replacement parts. the chart below we have identified this is participating in these activities and provide u.s.-based and non-u.s. based headcount statistics for the years 2006, 12, and here is what you say, parts distribution. parts pricing. parts marketing. so on that chart you identify certain number of employees related to parts distribution command you show u.s. ad account, u.s. ad account, total u.s. ad account 30619, nine u.s. ad account hourly, nine u.s. ad account management, and then your total non-u.s. headcount 2027. and then you identify geneva first -- 45 lives down. you have -- this is all parts, parts, parts, parts, parts. for in geneva, six more in geneva and you have parts marketing support. then you show nine u.s. head count. so these are your numbers. so that chart that i read are your numbers. that means for 900 -- 4900 parts related employees and the united states, 66 in geneva. those are the totals from this chart. senator mccain. >> senator, can i comment on that reference in our earlier question? they're is a line here for a total non u.s. head count of 2027. and then with purchasing and non @booktv another u.s. head count. and there are some in geneva. does appear to be thousands of employees outside the united states. >> of course. that is what we said. we believe those are all not csarl employees but caterpillar employees. and treat themselves as caterpillar employees. senator mccain. >> thank you, mr. chairman. the united states corporate tax rate is 35%. but i understand that the effective tax rate at caterpillar was 29% which is 3 percent higher than the average effective tax rate for u.s. corporations. how does that happen? does that include the overseas subsidiary and come? >> yes. senator mccain, that does include. it is a rate that is an average rate on our global business. and so our overall average effective tax rate is 29%. that does include our global business. .. all business outside the united states. there are some provisions like the r & d credit and the production deduction that are part of u.s. tax law. you would then add some back in for state and local taxes. at the end you come up to 29%. >> i just am curious why it is that you would pay even with the overseas profits, you would still pay a higher effective tax rate than motion other corporations. >> we do think that is significant, especially considering 65% of our business is -- or more than 65% is outside of the united states. >> when and how often since 1999 has the internal revenue service cadetted caterpillar. >> we are under continual examination, the irs literally sits outside my office in that time frame we have closed '99, two 2001, 2002, 2003, 2004, five -- >> what haven't you closed, what year? >> the 2007 and later years are still under exam. >> they're still under examination. >> uh-huh. >> you are under constant auditing from the irs. >> yes, we are. >> and they have not claimed you were in violation of irs regulations? >> each year's return provides substantial information, including transfer pricing information, related to international businesses. they propose node adjustments. >> you heard that the phipps panel of -- first panel of witnesses said the irs wasn't doing their job. would you agree with that? >> well, they asked extensive questions about our business. we provided a lot of information to them. answered a lot of questions, reviewed our transfer pricing processes with them. i think they've been pretty diligent. >> maybe you could submit for the record the number of audits and the specific reasons for investigations by the irs that they gave when they i'd audited you. can you do that? >> certainly, senator. >> the caterpillar obviously can deliver replacement parts anywhere in the world in 24 hours or less. what role does the swiss subsidiary and its dealer network play in making the 24-hour replacement parts delivery possible? >> csarl plays a significant role in that. so csarl is administering dealer out that's you'd. they developed the dealer network, now administer the dealers. they're working regularly with dealers on how best to serve our customers around the world, which includes forecasting the needs of the customers, developing merchandizing, marketing programs, et cetera. >> the parts come from the united states or where? >> parts come from all over the world, specifically csarl does purchase 70% of their purchase finished parts from ute. they do get parts from other parts of the world also. >> i thank you. i thank the witnesses. thank you, mr. chairman. >> thank you very much, senator mccain. senator johnson. >> thank you, mr. chairman. just getting back to your relationship with the irs. mr. beran you said they're sitting outside your office. how many? on average? >> on average it's a half a dozen or so. they have a number of members assigned but they're in and out. >> so you closed out through 2006 and 2007. >> 2006. >> i they all just looking at 2007 now or looking at all the years in kind of compilation? >> they typically do two or three-year audit cycles. if they get behind they extend. >> in the closed out audits you said they looked at transfer pricing. that encompasses this entire relationship with csarl and -- because they proposed no adjustments, they've basically given their blessing to what you have done here from the statement of compliance with tax law. -- standpoint of compliance with tax law. >> that's the way i've taken it. there's extensive documents provided each year and they ask questions about it. >> miss legacy, in the scheme of things in terms of the expenses of caterpillar, what is your largest expense? labor? material? >> yeah. it would be the cost to build and make our products, yes. >> okay. and in that hierarchy of costs, where does the tax expense fall? >> it is not the primary driver of our costs. >> but it's a large cost center. correct? >> yes. >> certainly something that any response management team would take a look at managing just like you manage labor and material purchases. >> correct. >> there's nothing nefarious in trying to minimize the tax burden. >> no. absolutely not. >> you had a whistleblower say you didn't report 2 bridge of -- $2 billion of income tax to the united states. let's say legally or properly or improper, let's just stipulate you saved ourself $2 billion in tax expense by complying with the u.s. tax code. what did caterpillar do with that $2 million or any tax saving you enjoyed because of your compliance with the tax code? >> i'd like to say we did have a foamer employee, he did file an employment lawsuit. that was resolved, and all of his concerns were taken seriously, and all of the expert, both internally and externally, price waterhouse coopers found there to be no apart -- no merit in his concerns. regarding what we do with that, we continue to invest that in our business and that's why we've seen the growth we have in 1999 we were $20 billion. last year the sales were $56 billion. our exports and our u.s. business grew over that time period. >> you didn't stuff any kind of tax savings in a mattress or pillow case. you put that to use, growing your business. >> correct. >> creating jobs. >> correct. >> both domestically and overseas. >> exactly. >> so, do those tax savings -- we can quibble over who should have claimed those dollars. certainly had we taken them here in the federal government we would have spent it somewhere, but you actually spent it putting people to work. >> we put into it our business to grow our business, yes. >> what options -- let's say we were able to pass a law here and capture bigger share of caterpillar's income. what options would caterpillar have under that scenario if they texas burden just became too competitive and you constant compete with your global come pit temperatures. >> that's the key. it's really important we have a tax code that allows us to compete fairly in the global marketplace. we're not looking for a free lunch, but we are looking for the ability to compete fairly with companies inside and outside of the united states. >> can you just speak to the relative competitiveness of what you're paying tax-wise to your competitors, the ones mentioned earlier? name the -- >> again, we talked about volvo earlier in the hearing had a much lower effective tax rate. kimatsu -- >> can you give us the relative difference in tax rates? >> i don't have the exact tax rates. >> mr. beraan? >> it varies year by year depending on their mix of income just like us, but they now have a lower japanese statutory rate. but on top of that they now have a territorial system that allows them to earn money in lower tax environments and can move it wherever they can best employ it in theirs business. >> do you feel that caterpillar is at a competitive disadvantage because of the u.s. tax system, and can you be specific in terms of exactly what is the worst part of it? >> one of the worst parts is the international regime, which taxes much more foreign activity income than any of our competitor nations. so a business like csarl wouldn't -- virtually all of the competitor nations would not tax that business at all. back in their home country. you just pay the swiss tax. and then the complexity of the u.s. rules that cause us to have to do much greater effort to be able to move money across our foreign subsidiary, particularly back to the u.s. >> do you believe are are you specifically aware of any maybe large contracts you have lost and potentially believe it was because of our uncompetitive tax system? >> i couldn't say that we have lost contracts that way. it would probably come up more if we were looking to buy a company in a foreign competitor could bid more for the company. >> okay. so, puts you at a disadvantage in terms of activity. what total percentage of your sales is parts? >> i don't know. >> anybody on the panel know. >> we actually, senator, don't separate our parts business so we don't have a separate parts business. it's very integral to our products and our machine products. so it's our business model. >> i was just trying to get a little better feel for the howard-count issue that senator levin was talking about. i view -- this is just my assumption -- that csarl in geneva is kind of a headquarters with limited head count but you have people with other divisions, internationally, with direct reporting responsibility, they may not be called csarl but they are ethe directly reporting to csarl or there's a dotted line. >> that's a very correct assumption. we have a lot of key decisionmakers and a number of employees outside of the united states who do, as you just suggested. they understand our customers and understand the needs of our customers. work with our dealers on everything from financing to inventory management, to understand what the needs are to best serve the customers in that territory. >> i was trying to interpret the schedule that senator levin was talking not terms of head count. i guess my assumption is -- maybe it's not direct. maybe it wasn't answered because you were being very specific in terms of csarl, but there are thousands of employees that in some way, shape or form are reporting or certainly contributing to -- >> yes -- >> the activities of csarl. is that accurate? >> that's true. >> thank you for your testimony. thank you, mr. chairman. >> saying csarl has thousands of employees? >> again, there-- -- >> animal are you saying they have thousands of employees? >> again, if you're asking very specifically on the legal entity structure of csarl and has a number of subsid areas i know there -- subsidiaries i know there are thousands of employees doing the work of administering the dealers, manufacturing, filling machines, et cetera, that are part of csarl. >> i don't know -- part of? you say a lot of people communicate with csarl. are you actually saying -- we know how many employees caterpillar has. >> yes. >> how many employees does c done sarl? >> i don't have -- >> approximation number. do you've have an proximate number? >> no. let's look at exhibit 52. the agreement between cat pill larry and c cc csarl. very few employees reallottively and here's what -- >> mr. chairman, can we get the exhibit number? >> sure. okay. >> who is it that just spoke? >> steven ryan, counsel for the company. the witnesses -- >> i was just wondering since you spoke, for our reporter to know who it was. so at the back of this exhibit 52 is schedule 1. got a number 661 on it. schedule of services to be provided by caterpillar. this is a list of what they do. we got it? >> i have it clerics jew chez following, creating and translating service manuals. provides inventory ability management. provides parts customers services to dealers. processes dealer parts returns. maintains information systems. provides marketing consulting services to dealers. provides strategic planning and accounting services. now, for the u.s. warehouses, caterpillar -- again, csarl has no warehouses -- caterpillar agrees to manage and monitor inventory levels worldwide and perform expediting services, arrange for transportation of csarl parts, perform general warehousing services and provide warehousing facilities. perform inventory management services, and for all those services on the last page, caterpillar gets reimbursed its costs, plus 5% of those costs. so, basically, caterpillar agreed to keep running the program for csarl. csarl has 65 employees handling parts, could going to your charts no warehouses, no parts inventories, no forecasting or other software being administered from csarl. my question is would caterpillar perform all of these same services for a third party at cost plus a small service fee while giving up 85% of its profits? miss legacy, would you do that? >> yes. >> you would. >> your question -- >> you're offering to a third party -- >> i thought you asked me if i would -- >> i thought you were making an offer to a third party to buy all that. >> no. i was attempting to answer your question. so, first, you said csarl kept doing it was doing, and csarl and its predecessor company were in business since 1960, doing the work of supporting dealers and selling parts, marketing parts -- >> you are going into what csarl and i'm now telling you what your documents say caterpillar is doing. that's all. and i've read -- did i read it correctly? >> yes, you read the document correctly. >> okay. >> now, take a look at exhibit 18. 2012, caterpillar board of directors, minutes. look at the first line of the second paragraph. do you have it? exhibit 18. did you get it? >> i'm on exhibit 18. >> second paragraph, says, mr. larson, who is -- >> i don't see that in the document. >> okay. >> is this a board of directors meeting you have, the minutes? >> caterpillar board of directors minutes experts, starts with page 5? >> look at 1857 at the bottom. page eight. >> okay. >> larson -- you see that there? >> yes. >> next described the efforts to transform the part distribution business from a u.s. -- united states centric model -- 2012 -- efforts underway to transform the parts distribution business from a united states send trachemodle. so, -- centric model. so, february, 2012, a year ago, your parts distribution business is called united states centric. that's what was told to the board of directors. are you aware of that? >> no. i am reading those words on this page. i wasn't involved in this meeting so i don't know the context under which this discussion occurred. but i can tell you that our -- we have employees and parts being handled all around the world by a number of people, today and have for maybe years. >> i'm -- have for many years. >> i'm sure of that. that's not the question. the question is whether 8515 -- 85-15 is an appropriate split on the parts business. >> i'd like to respond -- >> well, let me keep asking the questions. mr. larson next described the efforts underway to transform the parts distribution machines from a united states centric model -- a year ago -- you're not aware of that discrimination the board of directors. is that correct? you're not aware of that by mr. larson. >> no. i was not a -- >> the this is the first you have seen that? >> if i've seen it, it's been simply for preparation for this hearing. >> now, -- there was a discussion here at the board meeting, according to the title, on parts growth and distribution facility footprint expansion. that was at the board meeting. did you to the that the board was going to be discussing that in february of 2012? >> i did not. >> now, let me ask you, mr. beran, information which has been provided to the subcommitee by caterpillar shows that 70% of all purchase finished replacement parts sold offshore were manufactured in the united states. that is a chart we're going to put up. that's exhibit 1-f, the same thing as the chart. i think miss legacy you used the same figure a moment ago. is that correct? >> yes. approximately 70% of -- >> purchased replace. parts sold offshore, manufactured in the united states. correct? >> yes. >> okay. which mr. beran -- >> by purchased, by suppliers. >> you agree with that, mr. beran? >> yes. >> how many purchased finished replacement parts are manufactured in switzerland? >> anyway rowing things down to switzerland does not describe -- >> i'm just asking you a question. you would ask yourself a different question. i'm asking you a question. how many parts are manufactured in switzerland. >> csarl manages to. >> cow answer my question, please? i'm not asking you what you think they've managed. i'm asking you a simple, direct question. >> they don't have any manufacturing -- >> thank you. >> in switzerland. >> what percentage of the -- how many warehouses does -- are there in switzerland? caterpillar warehouses, or csarl warehouses? do you know? >> number to my knowledge. >> do you know how many warehouses there are in the united states? cat pill already warehouse. >> i think we discussioned earlier, around 10. don't knoll the exact number. >> is it true, mr. beran, that caterpillar has its largest parts house and manages the global part inventory in morton, illinois? the largest parts warehouse of caterpillar in morton, illinois. that's my question. >> morton as a very sizable facility. i think it's the largest -- >> thank you. >> but we have large ones in belgium, singapore -- >> not in switzerland. >> not in switzerland. all of them are owned by csarl of one of its subsidiaries. >> i understand. you say owns. csarl owns that? who owns csarl? >> csarl owns all -- excuse me? >> who owns csarl. >> ultimately owned by caterpillar inc. but every government in the world expects us to report by legal intent. >> so csarl is owned by caterpillar. >> that's correct. >> you say csarl owns the warehouses? >> csarl either owns the warehouses or owns the entity that owns them. >> who owns the entity that owns csarl? >> again, ultimately, caterpillar inc. >> are the names stewart -- and steven larson and barbara hodo -- are those names familiar you? >> i recognize those names. >> you know those names? >> die. >> do they work in the united states? do you know? >> cue read the his again. >> stewart levny ik, steve ven gosselin, steven larson, barbara hodel. >> yes, all of them work in the united states. >> are they key leaders caterpillar's parts business? >> they are key leaders but, again, keep in mind, we do not have a parts business. >> i'm sure. are they key leaders in the parts part of your business? >> they are key leaders of caterpillar. >> do they work heavily in the parts part of caterpillar, even though it's not signified at parts separately? >> they have, again, especially stu, would have multiple responsibilities that go well beyond parts but tom does have some responsibilities there also. >> how about steven gosselin? does he have significant -- >> he has significant overall product support responsibilities but, again -- >> does that include parts? >> yes. >> steven larson? >> steven larson has retired. >> barbara hodel? >> barb hodel works in our parts distribution area. >> does she work the the united states? >> yes, she does. >> okay. do you know how many parts, approximately, are warehoused in the united states? >> i do not. >> do you know, mr. beran? >> the number of parts -- >> approximately. within 100 million or so. warehoused in the united states. would you know, mr. perkins? >> no, i do not. >> how about within half a billion. >> i would say in total, i believe we have just under a million serviceable replacement parts. i do not know how many of those are stocked in the united states. >> would it surprise you to know that there's about a billion and a half parts no -- not types of parts but parts warehoused in the united states? >> i don't know that number. >> okay. it wasn't -- wouldn't surprise you or would surprise you. >> individual, so not part numbers but just individual numbers of parts? i frankly have no idea how many there might be housed in the you'd. >> okay. >> would you take a look, please, at exhibit 53. >> i don't have an exhibit 53 in my book. thank you. >> do you have it now? >> yes. >> okay. this is the value of -- i want to talk to you about the value of what was transferred to csarl as part of the license. and this is a pwc document that addresses that question. what intangible property will be transferred from cat inc. to csarl under the replacement parts license? under the replacement parts license. that's what we're talking about. replacement parts. not machines. replacement parts license. into, first, please note that the document talks about parts, not machines. and cosarl refers to what we have been calling csarl. here's here it what was transfer ted patents and designs, parts including patent elements, trademarks, parts sold under cat trademark, contracts, buying from suppliers. caterpillar already has screened. qualified. negotiated prices with. systems and procedures, cat proprietary log information. no how, methods, forecast, estimates. now, if you take a look at exhibit 51, if you would, page 2, under intellectual property. this was transferred. bill ledge property throughs but notice immigrant led to know how, processes, designs, specifications, engineering standards, trade secrets, inventions, pant tent applications, caterpillar production, customer lists, supplier lists, systems and more. so that -- the neck right -- economic rights to use that were transferred to your subsidiary in a tax haven. would you have transferred all of that anyone but a related party? now you have a chance to answer that question. miss legacy. >> keep in mind that, again, don't agree with your characterization of a tax haven -- >> you don't think switzerland is a tax haven? >> i don't know the definition of a tax haven. >> oh, okay. you said you disagreed with my definition. >> right. so i -- >> now you say you don't know what the defense mission. >> it's where we have done business and had a headquarters since 1960. >> it's a low-tax jurisdiction under your own documents and that was one of the purposes of the transfers, under your own documents to a low-tax jurisdiction. what's that it says. migrate profits to a low-tax jurisdiction. >> we have had headquarters in geneva since 1960 and found it to be a good base from which to grow our business outside of the united states. >> i'm sure -- >> which has been fairly effective. >> i'm sure you said that take a look again at exhibit 7. benefits. migrates profits from cat inc. to low tax marketing company. that's not irrelevant that it was a low tax marketing company, or is it irrelevant? that's your own document. read it to you three times. exhibit 7, pain three at the end, benefit: migrate profits from cat inc. to low tax marketing companies. >> this is a pwc document, i believe. i certainly would agree that the tax rate in switzerland is much lower than the tax rate in the united states. >> okay. take -- so, you use words, too, don't you, low-tax countries? don't you ever use those words? doesn't caterpillar use those same words? yes or no? >> we don't use the word "tax haven pay pay. >> how about low tax and high tax? >> countries that are lower tax and others. >> how about low tax. look at exhibit 17. at the bottom, 5979. this is a -- got cat number at the bottom? you see it? page -- i think it may be page 6. you see that? >> starting at -- >> tax drivers. >> right. >> see that in that oval at the right, losses in high-tax rate countries, profits in low? do you see that? >> i do see that. >> okay. my question is, would you have transferred all that, all of that was in the licensing agreement to anybody but a related party? >> again, to answer that question, keep in mind that everything that we have done has been at an arm's length standard. so -- >> well, that's my question. will you sell that to an unrelated party? give a license to unrelated party? that's my question. >> that would require a business decision based on the economics of the situation. i can't simply answer that. >> you can't answer that, no? >> no, i cannot. >> okay. i think you wouldn't answer that no. but you can't answer it no because nobody in their right mind would sell to an ,ingse are patents, trademarks, know how, crown jewels of the company? >> those are very important, yes. >> they were transferred to csarl, the economic rights to those? is that not true? >> again, there is a -- there was a license agreement -- >> i'm just asking you if it's true. >> my colleague, mr. beran, may be able to talk more precisely about what specifically was -- >> i read it to him before. i read the patentses, trademarks, okay? i read that all to you. >> what was transfer walled the right to use them? >> of course. >> caterpillar did not give them up. they continued to receive compensation for the utilizeddation of those. >> you're just talking about the parts profits they retained. >> the patents wore relate- -- were related not just to the parts -- >> automatic talking about patents relating to parts. come on. >> the patents were related to design and parts. >> that's what we're talking about. that's what the strategy related to was parts. >> it's an overall license nor entirety over the business. >> including the parts. >> parts are an integral element of our -- >> that's why i say including the parts. >> -- product strategy. >> that's why i say including the parts. >> yes. >> and the parts strategy, the tax distract related to parts. >> it related to the overall business. we were align hogue the product managers and other managers of the company ran the business. >> i understand what you're repeating but aim reading document after document after document relates parts, parts, parts. that tax strategy reef lated -- related to parts, digs not? that's my question. >> the -- >> did the parts strategy relate to parts? >> it related to parts. >> didn't reef late -- related to parts. did you ever see any parts related in the documents i've read? >> well, senator, if you select documents prepared by people from our logistics business, they will prim marrily talk about parts. >> and you have documents with you've that say what was transferred was something other than parts? >> again, csarl is an integrated entrepreneur -- >> i know. you're talk being threat documents we got. i'm just asking you do you have any other documents? >> i didn't brake any documents. frsh. >> take a look at exhibit 7. >> i'm just going back to this one more time. this was the proposal that you accepted and implemented for this tax strapping in switzerland. recharacterize marketing company income. recharacterize, mind you -- to achieve tax deferral. look what it said down here? what is left out? out of the chain? >> i'm still -- >> you're having trouble finding -- >> i'm on -- at the bottom. 4619. >> no. 4618. >> okay. >> see where it says, remove caterpillar inc. from the chain of title passage for purchased finished parties. >> yes. >> that's the strategy. i'm going to read it to you because this is the strategy. to remove caterpillar, itching, from the claim of title passage for purchased finished parts. okay? i don't know -- >> but i believe -- >> i understand there was more than that. i'm just talking being the tax strategy. >> again, the tax strategy was established to follow the business strategy. csarl was set up an an integrity it entrepreneur and included manufacturing facilities and other things. >> let's -- mr. perkins, if you take a look at exhibit 34, this is a depression that you provided under oath in 2002 about the tax strategy developed by pricewaterhouse for caterpillar involving csarl and the nonu.s. -- when you were asked the in the deposition was there business advantage for caterpillar inc. to have this arrangement -- meaning csarl -- put in place other than the avoidance or deferral of income taxation at higher rates, close quote? you responded under oath: no, there was not. was that truthful? >> mr. chairman, at the time that i gave that deposition in the employment lawsuit is a couple years after retired in terms of the response to that specific question, that is a true statement, but i would like to have the opportunity to clarify what -- i did not say at that time the activities that associated with the removal of cat inc. from the supply chain did in fact have significant business activities accompanying it. when i responded to this question, i responded negatively, but the point is, i -- >> i know what the point is now. i'm asking, was it true when you said -- was it true that when you said to the question, was there any business advantage to caterpillar to have this arrangement put in place other than the avoidance -- avoidance -- or deferral of income taxation at higher rates? your answer, no, there was. no my simple question to you -- and i know what you'd like to say now but my simple question to you is: was that true when you said it? >> when i responded, i'm responding from a tax viewpoint, and i look at things from financial impact, certainly from a legal intent standpoint there was a financial advantage, but legal entity changes are transparent to our business units. and so any after-tax benefit generated creating a financial advantage to the enterprise, that was not reflected on the business unit's performance. >> question: what was the benefit to caterpillar, inc. to have csarl purchase finished replacement parts instead of having cat pill already inc. buy them and sell them to csarl? your answer: it would alter the character of the income from csarl from includable deemed distribution income to the united states. was that true? >> again, from -- >> i'm just asking you, was your answer true? just, yes, it was. >> question. -- same depression -- the advantage to caterpillar inc. would be that it would pay less federal income tax. answer: yes. was that true when you said it? >> yes. >> mr. beran, are csarl's financial results included within caterpillar's u.s. consolidated financial statement? >> yes, they are. >> are any csarl losses that might come to pass ultimately then be reflected in that financial statement? >> they would in the financial statements. not necessarily reflected in the u.s. tax returns. >> of course. but in that financial statement they would be included. >> in the -- in our con ol' -- afternoon kole dated -- >> consolidated financial statements, yes. >> and csarl's losses are in the consolidated caterpillar as the parent financial statement. please take a look, if you would, to -- exhibit 17. [inaudible conversations] [inaudible conversations] >> on page 5984, under -- says cash management crossover cash buildup in geneva. there's a cash buildup in geneva? you see that page? >> yes. >> okay. caterpillar definition crossover occurs when offshore cash no longer can be accessed in the u.s. without increptal -- incremental u.s. tax costs. fliers you bring that cash to the united states you have to pay tacks on it and even for credit for tacks paid in geneva it indicates you would have to pay 25% on the cash temp bottom it says you are working to, quote, develop tax efficient repatriation strategies, and then on page 12, it lists some of those strategies, with a goal of repatriating $3 billion. talks about loans, tax efficient dividends, prepaying royalties and goods prepayment. did you work on those strategies, do you know, miss legacy? >> i was not there at that time. i think i can shed some light on this general topic. we are, again, about a 56 -- >> i'm not talking about at that time. have you continued to work -- put it in the present -- on the tax strategies. >> we have approximately $3.5 billion offshore at this point, outside of the united states. and that is available for general corporate use, and can be repatriated without significant additional u.s. tax. most of that money is outside of the united states because it is needed to run our businesses outside the united states. again, 65% of our $56 billion in sales and revenues comes from outside of the united states. >> and how much, if repatriated, would be subject to tax here? >> because of previously taxed information, transactions already taxed the u.s. rate, the substantially -- a substantial sum can be returned significant amounts can be returned, nearly all of that without any substantial income tax. >> is there any part of that which you'd have to pay a tax on? u.s. tax? >> there might be some very minor but very insignificant. it's available for general corporate use and could be brought back to the united states without any additional significant tax burden in the united states. >> what does this mean tax efficient we patriation strategies. i would can't you just bring it back to the united states? >> i believe this is a 2010 document, and i am not exactly sure of the situation back in 2010 with cash, but again, i'm telling you that today -- i know you have situations of companies that you have talked to that have significant amounts of cash outside the united states that can't be repate treated but we're not d -- repatriated so but we're not one of those companies. >> how much did you have in cash. >> we have 3.5 billion in cash. >> you could repatriate all of that without u.s. tax -- >> it is available for general corporate use and that cash could come back without significant additional u.s. tax there may be some small amounts there. >> that's what i -- you answered the question. [inaudible conversations] >> i made reference before to documents written in the 1970s which said that cat inc. had the largest role with regard to market and dealer development. do you agree with that? these were caterpillar documents. i've read them before today and you were here, i believe. exhibit 4-a if you want to look at it again. >> exhibit 4-a? this is a pricewaterhouse document. >> yes. the same thing was said in 1996, '95, '94, '97. >> right. that was stated by pricewaterhouse, again -- >> correct. i'm just asking you, said cat inc. has the largest role with extraordinary market and dealer develops, gives the reasons, acknowledge or says the marketing companies also have major responsibility for market development. in fact this is their primary responsibility. that's what they do. but it says that the largest role with regard to market and dealer development is cat inc. do you agree with that statement? that's what i'm asking. >> senator, at that time the u.s. market was over half the world. so by definition it would have the largest responsibility related to that. >> again, as we have said, cosa had the -- the predecessor company to csarl to develop that network outside of the united states. >> by the way, this says, it has the largest role with regard to that for three reasons. the third is, continues to be involved in the development and oversight of worldwide marketing programs and approaches. did you agree with that statement? >> could you point me to they page you're on? >> the same page. >> okay. thank you. >> number three, continues to be involved in the development -- of worldwide marketing programs and approaches. >> i would say most of the specific marketing programs and discounting and merchandizing programs that happened outside of the united states are driven by csarl today. >> okay. [inaudible question] conversation [inaudible conversations] [inaudible conversations] >> i understand, miss legacy, a dealer cannot be add or dropped from the caterpillar network or significantly change its territory without permission from caterpillar executives in the united states. is that correct? >> we have 178 deleads around the world and i do not know that for a fact. that seems reasonable to me but i do not know that for a fact. we have very -- >> the other two witnesses know if that's true? >> i do not. >> okay. >> neither do i. >> okay. >> we have very little attrition in our dealer network around the world so that would not happen frequently. >> that i know. i'm just saying it's my understand that a dealer can't beakedded or dropped from the caterpillar network or significantly change it's territory without permission from caterpillar executives in the u.s. and you have no rope not to believe that. >> no reason not to believe that. i don't-door. >> that's what was told to us by caterpillar. >> okay. >> in february, caterpillar launched a major effort to toughen oversight of dealers around the world. are you familiar with that, miss legacy? >> yes blame you're referring to our across the table initiative. -- i believe you're referring to the across the table initiative. >> it's not sure of the name but let's keep going. it required, quote, underperforming dealers, end quote to submit by the end of 2014 a plan for improving their sales. is that the same -- >> you said it was launched in february of this year? >> yes. >> the plan has to be submitted to and approved by caterpillar in the united states. is that correct? >> i don't know that. i actually don't know that. >> let me tell you that it does. and if it's not true, you can correct for the record what i'm saying. okay? >> okay. >> it has to be approved by stewart levnik. who is he? >> one of our group president. >> is he the group president of cat pill already customer and dealer support? >> yes. >> okay. he works out of illinois? >> he does. >> so dealers whose plans are approved and have three years to meet their job -- their sales targets or may be drop from the network. is that correct? >> i don't know all the specifics of the program. the intention of the program is benchmarking amongst our dealers, and looking at the dealers that are the highest performing around the world in a number of different elements, and helping to improve the performance of all of our developers around the network. >> right. those dealers then have get to their plan approved or they're going to be -- they have to meet the sales targets or day may be trop. it that true or not? >> i don't know. stu's organization does include the distribution groups that are headquartered in -- one in his -- he has one vice president in geneva, one in singapore, and one vice president in the ute and they have a distribution self-s responsibility which will be coordinating the work with each of the dealers itch don't have all the details on the program. >> he is head of the whole thing. right? >> they report to stu. those three -- >> he is in illinois. >> yes. >> okay. so, it's been run out of the united states. that's the top of it, the responsibility for it. it's not run by csarl, is it? >> well, but keep -- >> i know csarl is part of it -- gees -- >> so are the other traction distributions, i'm just asking you, the head of this effort, the driver of this effort, the one who is going to decide whether or not a dealer stays in or isn't going to be allowed to stay in, is mr. levnik in illinois. >> he will hold his vice presidents accountable to work with the dealers in their region. so these dealers have -- those vice presidents have that accountability and responsibility and, yes, they do work for stu. ... >> [inaudible conversations] prior to the 1989 transaction caterpillar u.s. was buying purchased finished replacement parts and mostly for manufacturers here in united states transferring them to this was affiliate's which then transferred them primarily to caterpillar non u.s. dealers. prior to 1999. >> correct. >> caterpillar reported most of the sales didn't come on the u.s. tax return with the international part sales is that correct? >> caterpillar would have reported a significant portion although it was paid out to the commercial entities responsible for manufacturing. >> but most of that income was shown on u.s. tax return ? >> i believe most of it was. yes. >> until 9985% or more of the international replacement parts, sales income was included on caterpillar u.s. tax richard tranfifteen was reported as swiss income? correct? and then the united states. is that correct? >> i don't remember their ratio. >> let's assume it is that. is that fair enough? >> having a method to keep track of profits for business purposes. is that correct? to make the accountable profits from the internal management system allocated income to all business groups and that accountable profit results. so far argue with me? >> prior to the 1999 transaction that matched the results for tax purposes about 85 percent of the accountable profits in the united states which was designed in building and track and ship the parts while 15 percent approximately we're allocated to switzerland in exchange for their marketing efforts. is that correct mr. beran? >> roughly seven mec get matched the tax report? >> i am not familiar with those numbers. >> anybody here? >> that system is not intended to be the same as what we report legal entity it is a way to drive behavior but i don't believe we understand the relationship you are making. >> is not true 85% of the accountable profits status business groups in the united states before 1999? >> is that true? >> i don't know that. >> it changed how profits were allocated for tax purposes. would you agree? tim mckyer would not change how they were allocated but correctly identified in 1999 where the profits were earned. >> was that a major change from the way it was previously identified? >> the change was to remove the unnecessary middleman. >> via understand the theory and the unnecessary middleman it is absurd to call it the unnecessary middleman but i have heard your explanation. but was there a major change after 1999? from what you just described a major change? >> if i could be clear clear, though work done prior to 1999 and after was not a major change. >> listen to my question. i am not saying the work was changed obviously it was not. when i unmasking is did that have an impact on the allocation on the tax return >> yes. 1989 with the royalty and service fees with the change there was an impact on taxes. guess yes. >> okay. was it understood that the time that that transaction was not going to have a negative impact on the west division accountable profits? was that understood mr. perkins? >> mr. chairman, there are significant differences between legal and business and accountable profits i cannot answer that question still make you say you don't know whether or not at that time there was an understanding that transaction would not have a negative impact on the u.s. division accountable profits you don't know? >> i don't know. i of attacks person. >> you don't know if there was an understanding? >> i do not know. >> do you know, mr. beran? >> i don't recall. >> let me tell you. do you know, ms. legacy? was there an understanding? to make generally what i can tell you is the accountable profits that we use internally to drive behavior is above for tax system so that does not include after-tax measurements. >> the is it a way to reward its divisions for their work ? it affects people's bonuses? >> it is a way to establish goals to drive business behavior that ultimately can impact incentive pay. >> a and rewards. >> it is an accountable system to drive the organization. >> is it not true u.s. business division capt. and about the same proportion of that accountable profit after the cesaro transaction >> i do not know. >> no. be accountable system was independent of the reporting >> i am just asking a question in-house if you were aware of the fact u.s. business divisions kept the same percentage of accountable parts profits after the transaction as they had before the transaction? >> are you not aware of that? did you not tell our staff that? >> no, no, no. mr. beran did you not tell our staff that? >> we were not directly impacting the accountable system. >> that is a pretty good dancer. >> would ever you call it but that transaction, the cesaro transaction does not affect the accountable profits issue strictly accountable system was not aligned with the international tax law but was to derive david behavior. >> of course. it was not impacted by the major change of how taxes would be paid. >> not to my knowledge. >> mr. perkins, while you were working on the cesaro structure 1999 was a you're interested in seeing that it was not supposed to change the operational functioning of the parts of business in any significant way just the invoicing system? was that your understanding? remic the invoicing system with respect to the and related suppliers to cesaro. >> except for the invoicing system like question is what you were working on the cesaro structure was the your new standing it was not supposed to change the operational pushing of the parts business in any way with the exception of invoicing? was that your understanding? >> there were significant changes legal, accounting and tax. legal externally in terms of the the contractual relationship. >> i talk about operational function was your understanding that there was not going to be any significant change in the operational functioning of the parts business? >> physical goods move the same way after the restructuring as it did prior. >> thank you. [inaudible conversations] and there has ben plenty of talk here today suggested by enforcing the current tax laws somehow we will endanger american manufacturing. of men as enthusiastic supporter of american manufacturing has business families space who was more enthusiastic. caterpillar has ideas, the tass quoted can better support manufacturers i am all ears. so as everybody else is obvious if everyone on this subcommittee would be welcoming of such suggestions. i of a strong supporter of r&d tax credits and advanced manufacturing tax credits and a strong supporter of energy efficiency tax credits and policies to help american manufacturing. i support tax policies that helped caterpillar and other manufacturers compete around the of world. what i do not support is making this a competition to see who has the most creative tax lawyers. i do not support tax loopholes or other manufacturers to exploit or refuse to exploit. we need more policies to support manufacturing but that is not what we have here with this investigation. the caterpillars with strategy is not the result of conscious policy making to support american manufacturing. it is simply a tax loophole. actual or perceived it is not fair to other companies to american families we don't have accountants at their disposal. so i cannot support what is going on here. i know caterpillar is an american success story in they have every right to. headquarters are here most executives are here most of the parts are made here, a ship from here, a story from here forecasting inventory management and logistics' are handled year. but since 1999 most of the international parts profits go to switzerland. the contrast between caterpillar u.s. and the swiss operations is dramatic. switzerland does not manufacture any parts united states manufactures 70% of the parts sold abroad. switzerland does not have a single parts warehouse by yet u.s. supports excuse me its doors 1.5 billion parts. only 65 swiss employees handle parts versus 5,000 in the united states. caterpillar swiss operation doesn't have the personal or infrastructure or expertise to have a global parts business. they have a role obviously to promote cards to work with dealers but they don't have the personnel or the infrastructure or the expertise to run a global parts business. everyone knows what happened and the documents could not be more clear. it is a tax deal. caterpillar used to pay taxes on all parts profits before 1999. then a transfer to license to go wholly-owned subsidiary cesaro that allowed it to sell caterpillar parts overseas to more places. it got back a royalty equal 15% of the parts profits that means the other 85 percent stayed in switzerland where caterpillar by the way had negotiated a special low tax rate between four and 6% the usual swiss tax rate is eight-point 5% for caterpillar use the licensing agreement to shift profits of $8 billion to switzerland while avoiding u.s. taxes of 2.$4 billion and counting whereas an ongoing number. $300 million per year in tax avoidance. it is going to switzerland instead of here. caterpillar was not compensated turning of the parts business over to cesaro. no compensation even though it was 75 years developing the business and allowing cesaro to use the state of the art forecasting and order and management system but was paid less by the way. since it traded $1 of profits to cesaro with $0.15 in return. at the same time caterpillar kept doing all of the work. that was the deal and it continued to bear economic risk. all of the economic risk. it is the consolidated returned. no reasonable business could have a chance for the crown jewels to see a related party for less than nothing. keep doing all the work can continuing to bear the economic risk. it is clear that caterpillar licensing transaction fails the arm's-length standard and the substance test because it had no business purpose other than tax avoidance is started as a tax strategy and caterpillar paid 55 million to price waterhouse to implement paillette in compliance with u.s. tax laws that is for someone else to decide. but if caterpillar is right our laws need even more strength. the irs has to step up enforcement to stop the multinational offshore profit shifting to start requiring transfer pricing agreements to justify the profits let between u.s. parents and the tax haven subsidiary. it needs to clarify that economic substance law goes to pricing agreements and congress needs to pass the stop tax haven abuse act to shut down the existing offshore tax loopholes. thanks to our panelists and again to caterpillar and price waterhouse with their cooperation. we stand adjourned. [inaudible conversations] [inaudible conversations] >> coming up next live your calls and comments on "washington journal." then "newsmakers" with jason if you rememberen, the chair of the white house counsel of economic advisers. a house hearing on the gm gnition switch recall. >> let's take a case like hsec which got a 1.9 billion settlement, levied at them i guess it would be a year ago. and in that, among the part of the deferred prosecution agreement was they admitted that they had laundrd as much as $850 million for a pair of central and south american drug cart else. so we're talking about not only did they commit minor technical infractions. we're talking about an organization that was operating at the top of the illegal narcotics pyramid. this is a major criminal enterprise and they admitted it and if they didn't find the evidence to put those people in jail that's on them. that's a failure of the regulatory system. if you have somebody that you know is guilty who has admitted that they were guilty, who were in league with truly dangerous and violent people and helping them out with the worst kinds of behavior that a bank can be involved with and nobody does a single day in jail that's outrageous. but even even more outrageous when you look at it in comparison with who does go to jail and that's people at the very bottom. the consumers, people caught in possession, people caught selling dime bags in the corner. they go to jail for real time. they go to jail for tive, ten years. at the same time that we're letting hsbc off with a total walk. again, nobody does -- nobody pays any individual penalty in that case. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2014] captioned by the national captioning institute --www.ncicap.org-- host: good morning a live view of the u.s. capitol. andpublican budget plan democratic alternative front and center at the house this week as lawmakers debate priorities. years ago when another congress passed one of the most significant pieces of legislation in the 20th century, the civil rights act of 1960 four. on thursday president obama will be joining predecessors to commemorate the anniversary. we will begin with
United-statesJapanTexasDecaturIllinoisGenevaGenèSwitzerlandIndianaBelgiumGeorgiaWashington >> well, you're right, donald trump and hillary clinton and andrew cuomo and bill de blasio demanled an apology and i'm happy to. i apologize to the millions of new yorkers that have been let down by liberal politicians in that state. >> if i told you a year ago the republican race would come down to donald trump versus ted cruz, you would have never ever have believed me but that's where we are right now with 17 days to go until the iowa caucuses. it is a very busy friday evening, everyone. thank you for joining us. breaking news. six gunmen storming a hotel taking hostages and exchanging fire with security forces. al qaeda and islamic is in the african nation of burkina faso and a pentagon correspondent barbara starr will join us by phone. robin, what's the latest there? how many are dead and what do we know about hostages? >> reporter: from what we understand, don, around 20 people are dead, that's according to multiple media reports according to eyewitnesss at the scene, as well, number of dead bodies littering the scenes and a number of people injured being taken to nearby hospitals in ambulances. also, we can tell you attackers according to eyewitnesss were light skinned speaking a language not native to burkina faso and covering their faces. we understand they claimed responsibility and the same group who orchestrated that deadly attack in mali in november of last year killing 22 people, very similar hotel attack storming the radison blue in the capital of mali killing, as i said, 22 people also a hotel very, very popular with westerners. >> why this target? why this target, robin? >> reporter: it would appear it's targeting westerners and a high-profile attack making the rounds on the international media circuit. they attacked at 8:30 p.m. burkina faso time. that's six hours ago. it's nearing 2:00 a.m. that's six hours of stand off. if they are from mali, they were speaking a language not native and would have traveled there very well orchestrated, as well. we understand more sophisticated than the initial radison blue attack. so just to be as high profile as possible, we're hearing that it is possible that french were the targets of this -- at least according to initial reports saying that france was the target in this attack. >> robin, stand by. i want to bring in barbara st r starr. tell us about any military response to this. what is going on? >> it may be the french military will take a lead in the military response but the u.s. very much watching this closely and getting involved. what we now know the french have asked the u.s. for assistance in surveillance and recognizance of the site. the u.s. military we're told by defense officials will provide is providing a drone to fly over the site, to have a pair of eyes on what is happening. there are, in fact, about 75 u.s. troops in this country. the majority of them actually do what many troops do. they provide assistance, advice, training for the french forces in burkina faso and advice and assistance there. we also know tonight there is at least one u.s. military member outside the hotel directly on scene providing that advice and assistance and, you know, you -- a lot of people may say why is the u.s. military in so many locations here in africa remote from the united states? it's exactly what robin was addressing. these terrorist groups go after western oriented targets, the concern is they dig in, they develop safe havens in these areas, the u.s. very much and the french trying to get local security forces trained up, able to deal with these situations so these safe havens don't develop. >> again, six gunmen storming a hotel full of westerners taking hostages and there are reports as many as 20 people dead. thanks to both of you. i want to bring in cnn intelligence bob bear and thank you. unbelievable story. bob, you say this attack was long over due and people better wake up. why is that? >> it's long over due since the fall of libya. a lot of groups got weapons lost there, anything from surface to air missiles to explosives and the rest of it and these groups from algeria, mali and have been arming themselves and push back from places other places. they are gorilla groups threatening to attack in west africa for a long time and these targets are very vulnerable and they want to hit easy targets and cause them damage they can the number of casualties, the most they can and this is what they have done. >> what can you tell us about al qaeda and the islamic group who has taken responsibility for this attack? do you know about them? >> that group resurged in recent years and verecently, you had a group that carried out the radison attack which had originally broken with al qaeda the islam but remained loyal to al qaeda coming back over to al qaeda which adds to the capabilities. that's significant because in particular, fit the profile that robert bear talked about. they were like special forces for al qaeda going from country to country that included the attack in eastern algeria that was an oil facility which occur in january of 2013. the attack in other rather high-profile attacks. they are very good at terrorism game and seems they were involved in this attack. >> bob, we have turkey, and now this. are groups trying to one up each other? >> well, i think what we're seeing more is an offensive. the islamic state and al qaeda are not that different. i pamean, one has a caliphate a the other doesn't. these are unimportant. i've been talking to, you know, jihad circles for a couple days now and they have been talking about an offensive and you've got the one as you said in turkey and you've got the burkina faso and the fall of ramadi had no effect on groups and the fall of tim buck two. they are mobile and gorilla force and difficult to get inside of and these alliances change all the time and it's, you know, we don't know where it will go next. they will hit vulnerable targets in west africa. it's very dangerous place. >> can i get your response to this? you heard barbara starr said the u.s. is worried about safe havens. how many safe havens are there now? respond to what she said. >> the amount of safe havens multiplied over the course of the past five years. if you look at areas where groups have a safe haven, libya embedded in the way they were before and somewhat of a safe haven developing in the western part of tunisia. it isn't fully one but you have activity in that area. yemen today, syria and iraq are quite obviously jihadist safe haven. you have a safe haven for jihadists in somalia and advances by anti sha bob forces and a number of countries in which governance is threatened and the central government cannot extend the rift throughout the entirety and provides groups an ability to operate. two other places i should mention are mali and nigeria. >> what do these safe havens mean to the u.s.? can they reach the u.s. from these safe havens? >> there are a lot of targets, american businessmen and oil companies and the rest. we are vulnerable but i don't think it's a threat to the united states. i don't see them organizing and, you know, attacks in new york or los angeles. i just don't see that, not now. they can destabilize africa. they are everywhere and they will continue to attack and the security forces there are very thin and there is not much we can do, the united states or even france. >> bob, thank you very much. robin, as well and our barbara starr, again, we're on top of this breaking news. make sure you stick with us tonight. the brutal hotel attack, al qaeda claiming responsibility for it. we'll continue to follow it. when we come right back, we'll talk about the race for the white house and includes terror and this, trump versus cruz with 17 days to go until iowa. that's what is going on now but why is lady liberty giving ted cruz a one-finger solute? 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i know this guy did. let's talk about the winners and losers. the losers. my old friend hugh hewitt is here. that was good, hugh, don't you think? it was pretty good. >> i loved every minute of it. i think the only person that lost was dr. carson and he kind of evaporated but i do believe the golds go to march co rubio donald trump. donald trump had a moment people will remember for a very long period of time. ted cruz, though, i got an e-mail from a supporter today that said he did exactly what he set out to do to remind his troops in iowa and new hampshire and south carolina he is the real deal evangelical candidate who represents all three branchs of the republican coalition, all three parts -- >> and he's not afraid to take on trump. >> he is. we're going to have, i've used this analogy so much, alley frasier fought three fights. >> that was my question to you that you compared it to ali frasier. that was the rumble in the jungle? >> no, that's foreman -- >> okay. >> thriller in manila is -- >> all right. >> frasier won the first, ali won two. >> you said -- what moment do you say that trump, was it the one he talked about new york values? is that the one. >> i don't know if you can see this cover. this is the new york -- >> i do. i saw that today. >> that was sort of the moment and the cover came after where it says drop dead ted and statute of liberty giving him the finger. why did you say that's the winning moment? >> for donald trump it goes over the heads of everyone else in the chattering class and says i was in new york when new york was attacked and came back like the city kacame back. ted cruz says new york is manhattan and does not concern itself with unborn concern and concerned with big federal government, large spending and lots of taxes. they both win. here is the guy i watch and had him on the show today, marco rubio conducted a general election campaign last night and went after your favorite and mine, mrs. clinton. he did so again on my show again tonight and he's saying to voters, they are having a lot of fun, cruz and rubio are. they are terrific but when it comes to beat mrs. clinton, vote for me and your earlier segment, that was a chris christie coal mes -- commercial. chris christie stock rises. this is a wide open race. >> that was the one time it was barely appropriate to bring up hillary clinton. i'll give you props on that one. let's talk more about this trump versus cruz thing. i want you to listen to what donald trump told jake tapper. listen. >> as a canadian citizen until 15 months ago, if you can believe that. >> he had dual citizen ship. >> he says he didn't know. >> he didn't know? he didn't know about his financial papers, either. how are you going to be president if you don't know about a $1 million loan from goldman sachs and something you don't know about? he doesn't know he was a canadian citizen. that's in a way maybe worse than all of the other things. >> so hugh, you think this birther issue is a non-issue but what about the questions object the cruz finances? do you think that's an issue? >> yes, it is and he answered it. the politics of his birth is not a non-issue. the legality is a non-issue. i happen to have a law partner that sat on the former district court and just at the supreme court last month, he's a very smart guy. i called up steven larson and said there is there anything to this at all? the law processors agree with one exception no, there isn't and the judge said no one can bring a case against ted cruz if they do sue them, they will be thrown out for standing grounds technical. if they didn't get thrown out and got a crazy secretary of state they would lose. i believe judge larson. now, having said that, donald trump knows how to punch harder than anybody in politics and when he brings that up, he keeps ted cruz off of his game and in iowa, it's about energizing people into believing one of two things, you best represent what they stand for or that you can beat hillary clinton. and i think marco rubio is playing the second half of the game and cruz and trump will slug it out for the next month in an epic confrontation and by the way, we're going to cleveland, don. get your hotel room for two weeks. >> i'll call my travel agent. i want you to listen to the president because the president weighed in on this current race today. look. >> the closer you get to actually deciding on a president, everybody gets a little more sober. it'sless entertainment and a little bit -- >> i like that. >> this is serious business, this person has the nuclear code. like the comment section or trolling. >> very familiar with the comment section. >> where people feel like they can vent without really thinking about what they say ahead of time. >> hugh, i know you pretty much agree with the president all the time. that's sarcasm. is he right this race could change when voters get closer to going in there and pulling the lever or punching whatever they do? >> the president is right. there, i said it once in seven and a half years. president obama is absolutely right voting becomes very personal very quickly, especially against the backdrop. you have a hotel mass cure in africa and hotel massacre or a vocational center massacre in a room in which i appeared in which a law student brother was slain three weeks ago. voting becomes very personal when people are afraid, when they are concerned about the market dropping 390 points and the chinese stock market losing 18% in value and american market losing 18%. obamacare premiums, when they get the premium check, 30% hike are going to turn the republican field and say who is most concerned with my problems and who can beat the formidable hillary clinton? that's why marco rubio was attacking her with a hammer last night and again on my radio show today and this will go on and i think the race will reset three or four times as these issues, president is right. people get very sober as they get very close to voting. >> i think only three references to hillary clinton and maybe ten to marco rubio. pretty much on par for hugh hewitt. >> and four for crist christie and jeb bush. >> you said the president was right. i mean, we are going to mark this. social media people please put this out right away, hue huet to hue huet's twitter. have a good weekend. >> you, too, don. i want to bring in ben ferguson, talk show host and andy dean, trump supporter and the author of "wilderness deep inside the republican party's chaotic quest to take back the white house" and that's all the time we have since mckay's book titled -- >> i come you on to make you read the title. >> could you come up with a longer think for a book? you wrote a piece in "buzz feed" you said an amazing headline, the trump -- >> the headline. >> did it come last night? >> no, i didn't. i mean, you have to remember that for months and months the republican establishment and some on the far right that believed trump isn't a real conservative have said for months that if trump didn't flame out on his own, if his campaign didn't melt down on its own, then before we ever got close to iowa, a cavalry of super pacts and conservative groups would carpet bomb the states with attack ads and basically chase trump out of the race before we got, you know, a vote was cast. that didn't happen and in fact we're in a bizarre situation right now where campaigns are spending millions of dollars to attack each other and not a single dollar is being spent against the front runner. >> can i challenge the premises of your -- >> yes. >> because i think the cavalry came, i usually say cavalry. >> i screwed myself up and will say it wrong. i think it did come. i think the cavalry did come, but donald trump just beat them. >> but where is the money then? why isn't any money -- millions of dollars being spent to attack chris christie, marco rubio, jeb bush. >> because they don't know how to do it. they came but don't know how and he has out with him -- go ahead. who is that talking? >> one of the most brilliant things, he lowered the ball so low. touch my hair, it is real? do i get botox or not? he lowered his own bar to the point where people like he's going to flame out. he's going to say something crazy and people will hold him accountable for it. >> hold on. ben. is that lowering the bar. >> chill, ben. >> thank you so much. i appreciate that. >> or is he being authentic whether you agree with him or not. >> i think he lowered the bar and knew what he was doing and all of a sudden, he was really good at throwing punches at other candidates and so that was where the shock came in. it was this first this is a joke. he's not really going to run. he's not going to release his financial statements and then he was running and then all of a sudden, no one knew how to take him on. remember, the first person to take him on was jeb bush. he got the living crap beat out of him by donald trump as he deserved to get beaten up but instead of everyone coming together, everyone was so afraid to go toe to toe because he is the best trash talker i've seen in politics and he can come back, we saw some last night, ted cruz is very good but donald trump on the new york issues a great point where he smacked him around a bit, that's why people are afraid. >> andy, get in here. >> yeah, look -- >> how do you turn that into votes, whether under estimating him, over estimating, how do you turn this into votes? >> with ben saying this low bar thing is bizarre. ben ferguson and i were on cnn five months ago saying trump is a clown and side show and ben ferguson tries to get attention by hating donald trump and it hasn't worked. donald trump -- >> you might need to listen to my show. >> let him talk. >> ben, i actually -- it's true, i don't listen. it's unbearable. ben, let me tell you this, there is a reason why, donald trump is a gate to gate winner, american people want somebody competent and run companies that's a billionaire and that's something to be proud of because the guy knows how to get deals done and we need somebody in the white house that can do that and obama's competence led to the rise of donald trump. it's not about calling donald trump a clown but realizing after six months that the american people are right. >> people will say, also, the incompetence of the republican party. >> this is what i want to ask you because it is remarkably you have to admit that donald trump is not being -- is not the subject of any attack ads, not the subject of any -- most of the candidates aside from jeb bush are ignoring him. why do you think that? the republican party is scared of him. >> easy answer. jeb bush spent $50 million on all sorts of ads throwing anything against the wall including the kitchen sink and at 4%, 5% in the polls because nobody likes jeb bush because he's low energy. donald trump with two words calling jeb bush low energy did more than $50 million in spending and why is that? because donald trump cuts through. he gets it and the american people -- >> i think that the candidates are scared of that. >> there is one -- >> i'll say let ben talk. imagine that, go ahead, ben. >> look, there is a lot of people that like donald trump. there is a lot of people that like the bluntness. i think that's why he's done so well is that people are sick and tired of establishment candidates and let's be clear, the reason why jeb bush didn't do well is not because donald trump said he's low energy, because he's the establishment pick just like john mccain, just like mitt romney. he was a terrible candidate. he has been. he looks stiff and awkward on stage. let's not act like somehow that was just -- >> that doesn't make sense -- >> people did not -- let me finish. people did not like jeb bu bush early on. there is anger and frustration, that's why donald trump is doing so well. we can both agree on that. the question is can he bring other people on board or is he going to have a max out point, which is where he is now? yeah, you might be able to get the nomination but can you win the general election. that's the question, can he start to bring people along that he started to rip on the entire campaign. >> everybody said he's at a max out. >> i like this, don. it's nice to have cnn defend trump. >> i'm not defending trump but i'm telling you the reality. >> don lemon is about to endorse donald trump. >> yeah -- >> the endorsement there. >> i have sat here five nights a walk and talked about donald trump and heard person after person, pundit, say donald trump is a clown and he's defied the conventional wisdom and still in the game. that's why -- i almost want to take a bet with ben because -- >> don, we'll make you am basketba -- ambassador. >> thank you. appreciate it. i can't believe ben is taking the high road about the radio show jab. >> mine is still on the air and andy's got cancelled. live with that. >> i walked away to make a lot more money. >> wow. >> there you go. [ laughter ] >> i did enjoy being a guest on your radio show. >> if anyone wants to give me a radio show, just call me. i'm on twitter. >> i wish i had popcorn. i would sit here and eat it and let the show continue. >> you can see the full interview, state of the union and sitting down with jake is hillary clinton and bernie sanders sunday morning at 9:o00 eastern. >> actor sean penn speaking out about his interview with "el chapo." why he says mexico's claims about the interview are wrong. when i lay in my tempur-pedic contour, i slowly feel it start to kinda wrap itself around me... and the next thing i know it's morning. >>with tempur-flex, you got the spring and bounce of a traditional mattress, then it also adjusts to my body. ahhh. >>my cloud feels so comfortable. it feels like somebody's hugging you. how can a bed do that?! there's a tempur-pedic for everyone. find the feel that's right for you. to sleep happy guaranteed, and zero percent apr financing, visit mattress firm, america's number one tempur-pedic retailer. i built my business with passion. but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line. what's in your wallet? glad i could help you plan for your retirement. alright, kelly and promise me that you'll try that taco place on south street. and we have portfolio planning tools to help you manage your ira. yeah, you're old 401k give me your phone. the rollover consultants give you step-by-step help. no set-up fees. use your potion. sorry, not you. my pleasure. goodnight, tim. for all the confidence you need. who's tim? td ameritrade. you got this. actor sean penn is talking about his remarkable interview with drug kingpin "el chapo" guzman. penn denies his meeting with "el chapo" helped lead to the drug lord's arrest. talk with if my lips will work, co-creator of the netflix series about a drug lord pablo escobar, the perfect person to talk to. good evening, sir. you have done a lot of research on all of this. what did you make of "el chapo's" arrest and it may be hinged on these two actors? >> with the amount of time and money they were spending to try to catch "el chapo" whose second escape from a maximum-security prison was an embarrassment, i figured they would get around to it one time or another and whether penn denies any involvement in the actual tracking, in other words, denies his interview with "el chapo" is responsible for that and quite honestly, "el chapo" was caught in a completely different region and my guess is that mr. penn is right, that they were tracking him. the mexican intelligence and dea are quite on top of it. >> sean penn is speaking out for the first time since his interview with "el chapo" and making some pretty heavy allegations against the mexican government. take a look at this. >> we know that the mexican government, they were clearly very humiliated by the notion that someone found him before they did. well, nobody found him before they did. we're not smarter than the dea or mexican intelligence. we had a contact upon which we were able to facilitate an invitation. >> do you believe the mexican government released this in part because they wanted to see you blamed and to put you at risk? >> yes. >> they wanted to encourage the cartel to put you in their cross hairs? >> yes. >> are you fearful for your life? >> no. >> should he be worried about his safety? >> well, i think, i can't speak to what the mexican government's statements were to mr. penn -- >> we lost our guest there speaking out about "el chapo." and also, about sean penn's interview with "60 minutes" but you heard charlie rose ask him directly if he believed the mexican government put him in a position to be in the cross hairs of the cartels and he said absolutely and they also asked him if he had any regrets. let's listen to the interview. >> you said to the a.p. and i'm asking now, you have no regrets. >> you know, i have terrible regret. >> what regrets? >> i have a regret the entire discussion about this entire article ignores its purpose, which was to try to contribute to this discussion about the policy on the war on drugs. >> chris is back with me. had a little glitch with the satellite there. chris, let's talk about that. the war on drugs, will "el chapo's" arrest help the problem here? >> well, i think it will be the same situation that we saw with escobar in colombia in the 80s, which is to say these men as mr. pen says in his interview are figure heads, the big guys it gets headlines when you catch an "el chapo" or kill pablo ed scor but it's an enormous business that involves thousands and thousands of people so catching the figure head just creates an empty seat at the top which often times leads to more violence at the bottom and i think mr. penn's point is that we have to examine the war on drugs as something that involves two countries, the u.s. and mexico and also involves supplier and consumer. >> yeah, and also, i mean, colombia is in there, as well, because people feel like the cartels are far away in mexico and colombia and directly or indirectly reach into every town and city in america, don't they? >> yeah, part of the discussion about mr. trump in your last segment is the border and ever since the free trade agreement, we opened our borders to an enormous amount of legitimate trade with mexico and plenty of trucks that cross our border with elicit substances. >> so your netflix show, i think it proves that there is an ap title for this kind of story. why do you think that is? >> well, it's got all the requisite elements. it's got kingpins, glamour, untold amounts of money. it's sexy to some degree, though, obviously, there is an enormous cost of drug addiction and dark and horrible side to it all but i think there is always fascination with gangsters be they of any stripe and these men lead very, very larger than life existences and they walk a tight rope between life and death and it's pretty fascinating. >> the executive producer of kings and profits on abc series premieres on march 8th. thanks, we appreciate it. it's been almost 48 years since the assassination of dr. martin luther king junior but never before seen footage of a civil rights leader is being unveiled right here on this show. and you're going to see it next. this is how banks used to see me. ever since i had a pretty bad accident three years ago. the medical bills - the credit card debt all piled up. i knew i had to get serious my credit. so i signed up for experian. they have real, live credit experts i can talk to. they helped educate me on how debt affected my fico score. so i could finally start managing my credit. now my credit and i - are both healing nicely. get serious about your credit. get experian. go to experian.com and start your credit tracker trial membership today. the gillette mach 3 turbo still feels better after 10 shaves than a disposable on it's first. mach 3 blades have twice the coatings. for a closer shave with zero redness. get an incredible experience shave after shave after shave. gillette. the best a man can get. i thione second it's there.day. then, woosh, it's gone. i swear i saw it swallow seven people. seven. i just wish one of those people could have been mrs. johnson. 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like 51 years. >> here we go because i don't want to keep people waiting any longer. we'll play a portion of it now. here it is. >> what do you feel like carmichael's recent statements have split the civil rights movement? >> well, i don't want to engage in a public debate with mr. carmichael and therefore, i don't go to the point of saying any one man can split the civil rights movement. >> dr. king, in light of the recent statements made, would you consider marching side by side with them in one of the civil rights demonstrations? >> well, it depends. i feel that the time has come for the civil rights movement and all of the organizations in that movement to sit down in a summit conference to asses not only our gains but to discuss our differences. i would like to say we have come to a split in the civil rights movement. i would hope that we can find common ground and moving toward the same goals and work therein. i do feel, though, if there are such fidifferences, it would be difficult for us to continue to work together. >> all right. that is the first time that's been seen and again, this is exclusive to cnn. thank you for that. he's talking about carmichael. there is historical significance to this. explain to the audience what he's talking about there. >> i mean, dr. king was a symbol of love and peace and stokely carmichael was, you know, the leader of the black power and then later black panther movement and one is sort of like yen and the other one is yang. one is about love and peace. the other one is really saying let's fight for our rights and honestly, i can understand both sides because there was such great oppression in this nation at that time. there were so much racism, so many problems and something had to be done. one way or another. and it's sad that, you know, it's still continuing until today. i cannot believe in 2016 we still have so many problems with racism. it's mind boggling to me but i love the fact that we had a profit like dr. martin luther king, you know, that graced us with his presence. >> now that you have revealed this, kia, what do you hope happens next with this video? >> well, we would like to basically sell the video and have it donated to the civil rights museum maybe at the lorraine motel where he was shot or national archives so, you know, it is available for sale and whoever wants it could buy it, either and have it in their collection or what i'm praying for is somebody buys it and donates it to one of the big institutions and that's where it really belongs. it's like having a tape of abraham lincoln speaking. who is bigger than dr. king? you know, i can't think of anyone bigger than dr. king. so it's really like dr. king speaking from the grave and here we have this unique footage. so it's very exciting. i had goose bumps when i saw it. i really, you know, it is so clear and so sharp and he basically, you know, i feel there's a light illuminating from him he's such a peaceful loving guy -- >> it is amazing from 1965, this video has been sitting in basically someone's basement or attic and now you have found it and here we are in 2016 on his birthday. i'm honored you allowed us to show it exclusively. you're going to show it other places coming soon. >> my pleasure. >> kia morgan, thank you so much. >> thank you, don. >> dr. king back in 1965. we will be right back and again our thanks to kia morgan. >> dr. king in the light of the recent. ative colitis, the possibility of a flare was almost always on my mind. thinking about what to avoid, where to go... and how to deal with my uc. to me, that was normal. until i talked to my doctor. she told me that humira helps people like me get uc under control and keep it under control when certain medications haven't worked well enough. humira can lower your ability to fight infections, including tuberculosis. serious, sometimes fatal infections and cancers, including lymphoma, have happened; as have blood, liver, and nervous system problems, serious allergic reactions, and new or worsening heart failure. before treatment, get tested for tb. tell your doctor if you've been to areas where certain fungal infections are common, and if you've had tb, hepatitis b, are prone to infections, or have flu-like symptoms or sores. don't start humira if you have an infection. raise your expectations. ask your gastroenterologist about humira. with humira, control is possible. you've finally earned enough on your airline credit card. now you just book a seat, right? 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>> i just like to have fun. that's why i do it. i always wanted to fly. i wore a cape when i was a little kid all the time trying to be superman. and it's just i want to fly. i like to be off the ground. >> is it called b.a.s.e. jumping because you jump from stationary things, buildings, antennas, spans, earth, is that why it's called that? >> it's jumping off fixed objects. there is also an "o" in there too for other. >> do you feel like you are flying? we were talking a group of us before we came on air, there must be this unbelievable feeling that you're flying in order to get people to the this. >> well, i mean, you feel like you are flying when you wear a wing suit and when you are flying in the parachute. if you are just falling it feels like you are flying straight down. >> it's more dangerous than jumping out of an airplane, correct? >> yeah, it's kind of a little more risky because you only have one parachute instead of two. >> so let's talk about the wing suits. what is going on there? when i see these guys going between two rocks or two mountains and you is to be spot on or it's going to hurt a lot or worse. >> yeah, you definitely want to be precise on that. it just takes a lot of practice. people start out of airplanes and they do a couple hundred at least and really get used to the wing suit and there are all kinds of wing suits to use as well. you have to tune your body to be just precise doing that before you take it to b.a.s.e. jumping. once you go to b.a.s.e. jumping there are some jumps that are harder than others. you want to start with the easier ones and it's fun to start flying closer to the ground. but you know, you have to always remember that it's not a video game like, you know, some people might think it is. it's all about precision. >> you know what, i'll try almost anything, snow boarding, i ride skateboards, whatever, but this one you can have. sean chuma, thank you very much. and cnn films, "sunshine superman" premiers sunday night at 9:00 eastern. we will be right back. dad, you can just drop me off right here. oh no, i'll take you up to the front of the school. that's where your friends are. seriously, it's, it's really fine. you don't want to be seen with your dad? 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New-yorkUnited-statesCanadaBurkina-fasoNew-hampshireTexasAlgeriaAtlantaGeorgiaTurkeyChinaCalifornia when sheriff joe endorses trump, that means there's no one on immigration. >> speaking live in las vegas. speaking of donald trump, his victory in south carolina has given him a big lead in the race for delegates. a state treasurer of arizona. a trump surrogate. listen, you're there. you hear him talking about sheriff joe which you would know about. how is the atmosphere there? >> the atmosphere here is great. if this is not proof, as you look around this room, that this is a movement. this is not a normal candidacy. this is a movement in america. there are over 12,000 people here that are beyond enthused to see donald trump who has the leadership, the courage, the will, the strength to move america forward. to make america great again. and to see this, to see the energy in this crowd and what's going on here. it really shows that something powerful is happening in america. >> okay. let's look at the delegates. and it is still early. i want to put up this delegate hunt. he needs 1237 to win. he has 68. after winning in new hampshire and south carolina, do you think he's going to run the table here? >> you know, it certainly looks like we could. we just picked up an extra delegate in new hampshire. took all 50, all 50 in south carolina. that was not a winner take all state and we still took all 50 delegates. so there is the potential on run the table. we'll see. i think there will be enormous pressure on ted cruz and marco rubio and john kasich if they don't win their own states. when you have people like that, ted cruz from houston. if he doesn't win texas, i don't know how he can win the presidency. if marco rubio doesn't win florida, i don't know how co-win the presidency. so there will be enormous pressure on the other candidates as this moves further down the road. >> you said there's a potential to run the table. not that you were. here's what the skemics point out. he's never won much more than a third of the votes. as the field gets smaller. is that something the campaign is concerned about? >> you say he hand won more than a third but every one else has won a lot less than that. as anyone drops out, you would think proportionally they'll all get more and mr. trump will get stronger too. you look at a candidate like ted cruz. if he dropped out, a lot of those people would go the mr. trump. when you go to ben carson, i can see wherever every voter will go to trump. so he's only won a third of the vote. you can win an election without winning the entire vote. i won my race for state treasure you are with 43% of the vote. you never know what can happen in these races. there are reports that rudolph giuliani has been in touch with donald trump and is advising him in some fashion. it looks more and more like he will be the nominee. what kind of advice and input does he need and what is rudolph giuliani giving him? >> the best way i can say it is mr. trump is a businessman. he brings people together. he is a great guile. he will always listen to anybody who wants to call. >> he's been in touch with rudolph giuliani. >> well, yeah. i think it's been well reported, yeah, that's correct he's been in touch with rudolph giuliani. the aspects of that is between the two of them. i think it is great to hear that people like that are coming on board. everybody is coming around and getting on board as they realize what donald trump is bringing to america is something very powerful. everybody wants to be a part of it. >> thank you. i appreciate you coming on. >> i want to bring in republican writer, matt lewis, the author of too dumb to fail. >> you heard donald trump there. you heard jeff dewitt in las vegas. will donald trump run the table or will he hit a ceiling as some insist? >> i think he'll run the table. i think he'll run the table to the point of possibly winning every state from here on out. cruz is ahead by 5 points in texas. cruz might win that state but donald trump certainly has a chance. he is ahead in florida. rubio pose as viable challenge there but i think he'll win there. you look at next tuesday. he is winning in eight of the 11 states. this is a give pulling out victories left and right. the exit poll showed 92% were angry with the federal government. i think that's what is really undergirding his campaign. anger. >> i still want to ask, do you think there's a possibility of donald trump as we listen to him live there in las vegas, that he could run the table? i think he can run the table in the republican primary. he did something amazing which nobody has given him credit for. not only did he beat the establish nypd south carolina. he also beat everything the establishment wants the republican party to look like. he beat rhone rubio, trey scott, nikki haley and he beat them down. >> and won over evangelicals. >> so yes, i think he can run the table. on the flip side, the republican primary in south carolina was 96% white. me and kaley had this conversation all the time. you cannot win the presidency of the united states with white conservatives. you simply can't. >> run the table? >> no. he won't run the table and i'll tell you why. this is a guy, he has won two. let's keep this in perspective. and he lost one. when christie drops out of the race, trump's numbers were higher and then when they came in, they were lower. he didn't pick up christie votes or fiorina votes. so i don't buy this notion that somehow trump has, he is the inheritor of all these votes. i think he has a ceiling. >> bob beckel is a genius and i think he is exactly right as usual. >> donald trump is the front-runner. he is doing an amazing job. stunned everybody. surprised me from the get-go. i think he has a ceiling and of course he is going to get -- if john kasich got out tomorrow. some votes would go to donald trump. the vast majority would not. if you look at them, they're going to marco rubio or cruz. they're not going to mostly to go trump. the question is, will there be five candidates running indefinitely? or could you ever get trump one-on-one? until that happens or unless they employ my devious strategy of jiu jitsu, i don't think they can stop him. >> we are listening in. donald trump is speaking light at a campaign rally. we're talking about can he run the table? i'll get your thoughts. >> i would argue that hawaii you a a huge victory. donald trump came in, to his point, i would argue that polling shows he does the best among minorities of any republican candidate. frank lunlts. he could do as well as reagan did who won more votes than any candidate. >> john kasich is still in the race. he is taking aim because of his political career. that was in the 1970s. he said they left their kitchens to get out and support him. >> i'm sorry. anybody who is offended, of course. of course i'm more than happy to say i'm sorry if i offended somebody out there. but wasn't intended to be offensive. if you their whole thing you'll understand the context of it. >> does he get a pass on this? >> yeah. i think he does. john kasich has run one of the most admirable campaigns of anybody on the republican side. i don't believe john kasich to be sexist. i think that he made a flippant remark, she apologize because it was offensive. i'm sure that people will make a lot out of this. but just from watching the campaign that john kasich is running, i can't hold it against him. i think he needs to apologize and move on. >> i don't understand why he needs on apologize for anything if it is factually true. he said when he ran for congress in the 1970s, moms, stay at home moms came out and volunteered for him. if that's factually true, i think this is why donald trump is i know w. because of this political correctness. >> that's also not what he said. he said women came out of kitchen to put up yard signs. >> but is it true? >> the theory that they were not working women. that somehow women were second class citizens. it's not true. >> i don't think he suggested that. there probably were stay at home moms who came out of kitchen and volunteered for him. if that's factually true. in the 1970s. why would he apologize? >> you're reaching back here now 40 years on the john kasich quote. and donald trump makes more outrageous quotes every week and we don't go back and analyze those. to matt's point, that's yes believes donald trump is i know. because he is not politically correct. >> he is flat wrong. >> listen, to matt's point. my mom was a working mom. she always worked from the 1960s on up. if you look at the 1970s, if it is factually correct, not that women's places are in the kitchen but if they did come out. as mothers who were in the home, then what's wrong with what he said? >> it's absurd. it's offensive. >> well, it may be offensive but you have to put it in the context of the times. most women temperature were stay at home moms and a lot of women did come out to help in kasich's race. i was involved in politics. that's not the point. we're spending minutes on kasich who will not be the nominee and we're letting donald trump pass on everything from, i have to look at the transcript. >> this is why people like donald trump are i know w. because somebody like john kasich, the media forces him to apologize for something that is not offensive. this is political correctness run amok. people are fed up with it. >> this is also the reason the republican party cannot win the presidency of the united states. because fundamentally they don't know how to talk to people of fundamentally -- >> not true. >> they don't know what's offensive and not offensive. because this -- >> it's your party that sees the world through the purviews of gentler and race. women were not offended. there are some women who boring in the kitchen. there are some men who are stay at home dads who also boring in the kitchen. if it is factually accurate, then it's factually accurate. >> i can't believe we're having this discussion. >> why not? >> donald trump has offended every segment of the population. please continue to use this rhetoric. please continue to use this dialogue in november and you will have the 45th president of the united states have a d by their name. >> by thinking that, are you -- there's nothing wrong with being a stay at home mom. that's probably the hardest job anybody can have. >> i'm not saying that. what we're saying is the way he used the phrase. there's nothing wrong a stay at home mom and nobody is saying that. to infer women were coming out of the kitchen and relegating them to second class citizenship. that's what em. >> that's not what he. did we live in such a high offense culture i'm awol on this panel and i wasn't offended but he is offended on my behalf. >> hang on. before we go any further. >> stand by. i want everyone to listen and do exactly what he said and then we can talk about it more. here it is. >> i went to washington, following my mother's advice. i've been in this legislature before that at the age of 26. and how did i get elected? i didn't have anybody for me. we just got an army of people, and many women who left their kitchens to go out and go door to door and put yard signs up for me all the way back when things were different. now you call homes and everybody is out working. but at that time, early days, it was an army of the women that really helped me to get elected to the state senate. >> who has a problem with that? do you have a problem with that? >> no. i have a problem with the fact that he apologized. i think that shows that he is a wimp. >> i don't know if he really apologized. >> i think he is bound to political correctness. he didn't say anything wrong. this is 40 years ago and stay at home moms helped him get elected to congress. >> he did say he was sorry. does that change anything listening to it in context? >> no. if you listen to the woman who asked the question next. she said i'll be voting for you but i won't be coming out of kitchen to vote for you. i'm not sensitive. if the person on this panel supporting donald trump doesn't have a problem with it, please continue. >> last word. >> the fact that we're going on with kasich about this and we let donald trump get away with calling the only female candidate on the republican presidential slate ugly. calling megyn kelly, the horrible issue about bleeding and get away with that. >> we called him out on all of that. >> you called him out. >> hillary clinton responded to it. this happened on the campaign trail. this had nothing to do with donald trump. john kasich can stand on his own words, can he not? >> did we spend this much time talking about when he said fiorina was ugly? >> yes, we did. you criticized the media for saying, you give too much attention to trump and then we talk about another candidate. now we're giving attention to another candidate. >> he says some of the wompt rhetoric out of any presidential candidate i've ever heard. >> there you go. a long time to go, brother. >> thanks. stay with cnn for all the replying political events. moderated by chris cuomo at 8:00 eastern. thursday night, the last debate before super tuesday. moderated by wolf blitzer. beginning at 8:30 eastern. up next, apple versus the fbi. should the company bow to pressure to unlock a terrorist phone? plus, were some police are calling for a boycott of beyonce's tour. >> i don't know what the hell they're talking about. it is a cruz ad, a cruz scam stoffel evangelicals didn't vote for him. do you know why? they don't like liars. lecithin lecithin. l-e-s (buzzer sound) your word is milk. m-i-l-k milk wins. ingredients you can spell. isn't it time to let the real you shine through? e to severe plaque psoriasis... introducing otezla, apremilast. otezla is not an injection, or a cream. it's a pill that treats plaque psoriasis differently. some people who took otezla saw 75% clearer skin after 4 months. and otezla's prescribing information has no requirement for routine lab monitoring. don't take otezla if you are allergic to any of its ingredients. otezla may increase the risk of depression. tell your doctor if you have a history of depression or suicidal thoughts, or if these feelings develop. some people taking otezla reported weight loss. your doctor should monitor your weight and may stop treatment. side effects may include diarrhea, nausea, upper respiratory tract infection, and headache. tell your doctor about all the medicines you take, and if you're pregnant or planning to be. ask your dermatologist about otezla today. we expect the fbi to fight terror but not to be in a fight with one of america's biggest and best loved companies. that's apple. it is all over a court order to unlock the iphone of san bernardino syed rizwan farook. a court order that apple is refusing to comply with and saying they need to protect their customers. who is right? here to discuss this is steven larson, a former district judge also recommending san bernardino victims and their families. and the senior counsel with the electronic privacy central. good to have you both here tonight. you are working with the victims' families and you're following a brief in support of the government. plane is to us what the fbi is asking apple to do and why. >> at this point i think the fbi is simply asking apple to follow the court order. the time has come for apple to comply with the court order. to provide access to the cell phone. >> so allen, today, apple ceo tim cook sent out a memo to the entire country. it says as individuals and as a company, we have no tolerance or sympathy for terrorists. when they commit unspeakable acts lying the tragic attacks in san bernardino, we work the help the authorities pursue justice for the victims. that's what we. did apple is a uniquely american company. it does not feel right to be on the opposite side of the government centering on the freedoms and liberties that government is men to protect. you say will apple is right? >> this case isn't just about this case. apple is looking forward to future cases where other members of this government, other governments potentially could be asking them to do the exact same thing. and apple realizes the press denial that says any government agency can order them to basically rewrite their software and make their devices less secure for everyone. >> how do you respond? >> it's not true. there's no agency that is ordering apple to do anything. it is a federal judge ordering apple. we have the fourth amendment. you can't hide criminal evidence. you can't put in it your house, in your bank, you can't put in it your phone. if you do do that, if there is a probable cause for the government to obtain that information, they can go to a court and they can ask the court to issue an order. that's what happened here. this isn't a government agency. this isn't some rogue entity within the government trying to track down and obtain information off these iphones. this is a federal judge sitting in riverside who has considered the application of the government, considered the government's arguments, and has ordered apple to produce the information. >> so i want to know, what is the difference then when, if there is probable cause for looking through your e-mail, your personal documents, your tax records, going into your home to do a search. why is this different? >> sure. well, the problem here is that the fourth amendment is, establishes protections but it doesn't grand the government authority. just because the fourth amendment says the government can do certain searches with probable cause does not mean that evidence persists or the government can access it. unlike the search of an e-mail account or a home the government can enter. the fourth amendment doesn't guarantee access to that information. >> here's what the director of the fbi wrote. he says we want the chance with a search warrant to try to guess the terrorist's pass code without the phone self-december instructing and without it taking a decade. we don't want to break anyone's encryption or set a master key loose on the land. so apple is essentially saying, we would love to help fight terror as much as the next guy, once we create this technology, that it will set things loose. loose on the land. people can get into iphones and people's privacy will be invaded. are they right about that? >> there's no one more committed to the fourth amendment and privacy rights than myself. i was a federal jfl i'm a civil rights attorney now. at the same time we have some compelling interests. the compelling interests involves combatting this terrorist act and finding out the information. not only for the government. i want to be arguing for the victims as well. they're entitled to this information. we are talking about a dead murderous terrorist who committed a horrendous act, who was using a cell phone that was owned by the county of san bernardino. this was not even his own cell phone. and to suggest that he has privacy rights at this point, that trump the interests of law enforcement, given the procedures that have been followed here. given the fact that we've gone to a federal judge. the fbi has gone to a federal judge and they've obtained an order. this is not people running around the country doing all these terrible things that mr. cook is concerned. about i think there's some scare tactics being used here. it is not fair to the government or law enforcement. most importantly, it is not fair to the victims. >> how many other iphones are locked if criminal cases. how often does this come up? >> what we know is that there are 150 iphones locked, sitting in the new york prosecutor's office right now. that he has said on the record, he would immediately seek a similar order if there was a precedent set in this case. that's just in one state. it is not just iphones contained in prosecutors' offices, this concerns iphones stolen or lost or misplaced. this is a technique that could be used not only by law enforcement but other people who want to hack these phones as well. >> all right. thank you vex. great conversation. i'm sure this will continue. a lot more to go. why some people are threatening to boycott beyonce's tour in the wake of her super bowl performance. who is right and who is wrong? then, woosh, it's gone. i swear i saw it swallow seven people. seven. i just wish one of those people could have been mrs. johnson. [dog bark] trust me, we're dealing with a higher intelligence here. ♪ the all-new audi q7 is here. ♪ how do robots work? ♪ you need a team... ...working together... ♪ ...doing all kinds of jobs. and the best place to find the job that's right for you is on the world's number-one job site. indeed. how the world works. ♪ no, you're not ♪ yogonna watch it! ♪tch it! ♪ ♪ we can't let you download on the goooooo! ♪ ♪ you'll just have to miss it! ♪ yeah, you'll just have to miss it! ♪ ♪ we can't let you download... uh, no thanks. i have x1 from xfinity so... don't fall for directv. xfinity lets you download your shows from anywhere. i used to like that song. calls are growing louder for a boycott of beyonce he had a world tours. joining me now, police decker houck, it is good to have all of you here. let's go. you first. some police groups are calling for a boycott of the upcoming tour. it includes asking officers to refuse to work offduty security details for these events. are you surprised at how deep this opposition to her performance is in. >> i am surprised. even on the show i thought why are we having this conversation? essentially i feel that beyonce like so many african-americans would absolutely never advocate violence against police. she is having a moment when she is connecting her art to a vibration that african-americans are on. we are standing together. young people are saying that it is not okay for police to be violent. remember the ad vent of the black panthers happens because of the police. you get the direct panthers in direct proportion to police violence. it was t . >> so some say it was black lives matter, that movement. as she just. do you feel it was ant-police? >> well, it is also racist. her support of the black will he be rags army who by the way has assassinated over 15 police officers through the years. the fact that the head of the bla, the former head, malik shabazz called for the killing of whites and their families. so dressing up her dancers like the b.l.a. tell me that was a, they've murdered and assassinated police officers for years. >> i was so encouraged that so many black people watched and all americans watched that pbs documentary. it is high time that we talk about the truth. that we really begin to analyze the correct history. there's not one narrative about the black panthers. the police don't get to tell what the black panthers are. we get to define it. >> what about the dead police officers? >> i have to laugh at harry. come on. i have to laugh at harry houck for saying this was race. i. harry is a friend. i have to laugh saying this was racist because it is not. i wish they were as vocal when we have young african-american men who die at the hands of police officers for committing crimes they should not be sentenced to death for. with that being said, i think beyonce like myself, we all agree. police officers go out every day and they serve and protect and they do so with such honor. however, there is a very, very specific pain that is felt by african-american that's beyonce and kendrick lamar are speaking to. >> let's add another layer. >> why are there very few instances? where police officers are involved in some kind of misconduct or maybe even murdered. those police officers are, they are sent to court and arrest asked convicted. >> no, they're not. >> they're not. >> they're not. >> they're not. >> you tell me which cases. you tell me which cases. we can go down the line. >> we can go down the line here. >> one at a time, please. >> that what happened in ferguson was murder, i'm sorry but it was not. what happened in -- >> we can go back. >> we can go back. >> we can go back to february 8, 1968, harry. where you had eight officers fire shots into a group of students, we can talk about that. we can talk about we have people. walter scott. >> why don't we talk about the real issue? they go without finding justice. >> why don't you talk about the real issues though? >> what real issues? >> harry, here's the thing. i don't think anyone here will say there's not an issue with people killing each other of all races. you can talk about people being shot and killed by police officers. law enforcement feels that beyonce is promoting division between law enforcement and african-american communities. i talked with rudolph giuliani. he's been brought up a lot about this and here's what he told me. >> maybe, it might not be a bad idea for people who have the fame and celebrity that she has to teach everyone, not only in her community but every other community to respect the police. to respect the uniform. to respect the uniform of our police officers, our military. that's the way i was brought up. a lot safer way to bring up your child by the way. >> this is what you do. you speak to artists and beyond. >> what are people at least in the industry saying about a responsibility of someone like a beyonce? >> well, first of all to mr. rudolph giuliani. it is the way i was brought up as well and i'm quite sure it is the way that tina and matthew knowles brought up beyonce. i think what is really interesting here. when did the conversation go from beyonce making a statement in her art to she hates the police? i don't see the correlation there. and i think it is very interesting when these people who, the majority of them. i'm talking about the police. can you let me finish? i didn't interrupt you. i sat and listened to everything you said. i would appreciate the same. what i was saying is that i think it is interesting these people that i consider everyday heroes, the majority of them. and i'm speaking about the police now are saying because we're mad at you, we are not going to, or we potentially don't want to do for you what we signed up to do. that's serve and protect. this is america. and we're allowed to have a voice. we're allowed to have freedom of speech. and if you don't want to serve and protect someone that you may not agree with, i'm not sure why you signed up to be a police officer. that's just my view. >> we have to clear this up. the one issue here is not the fact that police officers don't want to protect her. these are side jobs that the police officers get paid extra. they get paid extra to go out. this is volunteer work to wear the uniform and protect somebody like beyonce. this is not working while you're a member of the police department. you're just wearing the uniform. this is a side job. they're also protecting the people who go to the show as well. this is a side job. they don't have to do this. if they are signed through the police department to go and work at a concert, those officers have to do that. >> as i was saying earlier. an added layer on top of this, one group, one very controversial voice is saying police don't want to protect beyonce? i'll do it. i...just me...me andrd my four daughters.... ah, there's a lot of dancing and pageants that go on in our kitchens and living rooms and things like that. i've had to learn to accept certain things like the fact that my toe nails and finger nails are going to be painted constantly. but it's really awesome to watch them at their own things. they're great kids... all of them. whatever home means to you, we'll help you find it. zillow. start with a specialist. start with a team of experts who treat only cancer. every stage. every day. the evolution of cancer care is here. learn more at cancercenter.com/experts. appointments available now. i'm a customer relationship i'm roy gmanager.ith pg&e. anderson valley brewing company is definitely a leader in the adoption of energy efficiency. pg&e is a strong supporter of solar energy. we focus on helping our customers understand it and be able to apply it in the best way possible. not only is it good for the environment, it's good for the businesses' bottom line. these are our neighbors. these are the people that we work with. that matters to me. i have three children that are going to grow up here and i want them to be able to enjoy all the things that i was able to enjoy. together, we're building a better california. watching tvs get sharper, you've had it tough. bigger, smugger. and you? rubbery buttons. enter the x1 voice remote. now when someone says... show me funny movies. watch discovery. record this. voila. remotes, come out from the cushions, you are back. the x1 voice remote is here. okay, so mr. louis gave a speech today. he praised beyonce for taking a stance. >> sweet sister beyonce. you know, people are terrified. beyonce? giuliani said, on the greatest platform in the world. the super bowl. she started talking about black stuff. and white folks, we don't know how to deal with that. but when one of us shows some independence, look how you treating beyonce now? you gonna pickett, you are not going to offer her police protection? i will. >> i'm going to let you handle that. >> you come to me first. you know, my answer to this is i'm still not sure how we got to this point. >> exactly. me neither. >> i am at a loss on how we got from 0 to 100 in the words of the great american poet drake, so quickly. i find myself -- >> really? >> very proudly with beyonce. very proudly, not just because they're millennials and a part of my generation but they're articulating so much pain in our communities. and i really wish harry, who is in south carolina, who is less than ten mile away from where balancer scott was killed. less than where others were gunned down. just take a moment and a deep breath. >> i was there. >> and then we can have a more productive discussion. >> listening to that. >> what about the pain i feel talking about the police officers murdered -- >> when you heard minister farrakhan saying, i'll do it. >> i don't listen to what he says. the man is a racist. and he called for the death of whites. he called for the death of jews. i wouldn't give this guy 30 seconds of my time in my life. >> revisionist history of the black panthers. i have to keep coming back to that. it is not okay to simply discount the counter intelligence. >> explain it then. >> i just encourage your viewers to watch the pbs document ri. to google counter intelligence program. to read about it. to learn about the black panthers for themselves. when you fact find about this organization, it is not as simple as a single narrative. it is not just a bunch of cop killers. >> what is a lie? that they didn't kill cops? >> did they assassinate them? >> they assassinated police officers. the fbi was watching them because they were a group of criminals. >> you don't get to kill unarmed people. you don't get on kill people who are asleep because -- >> police officers can kill unarmed people in certain instances. >> very clear about the fact the counter intelligence program violated civil rights. you have to do the research. i bet you, harry, yourself, are uninformed about the truth of the black panthers. >> no, i'm not. i lived through the black panthers. i went after -- >> unfortunately. >> so the fact we're having such an intense conversation and people are saying, i don't understand how we got here from 0 to 100, in his words. i understand how we got here. there is a division on one side. i've been watching the people versus o.j. simpson. amazing. >> it is amazing. >> the division about race in this country are so deep. you have one side who is really so upset and feel police officers are not getting their fair share. then you have people of color who have a different reality. police officers. that's why. then when you have someone as controversial as mr. louis farrakhan, then things get much worse. talking about racial division. this is what's going on in culture. i want her to respond. go ahead. >> i think you're right. i think that's when it is combustible. you get these polarizing figures over side all coming together and spouting whatever rhetoric or feelings they have. that's when it becomes combustible. i go back to the point, we live in america. the greatest country in the world. and we have these rights to express ourselves. beyonce is an artist. i think that the song is a brilliant song. she calls it a song of empowerment and self-love. she certainly has never called it a song, anti-police song. she didn't call the police song ant-police. there is a scene where you have a young boy who is crunching in front of a police line and you see the words, stop shooting us. i'm not sure where that turns into i hate police. i think it is a statement. and i think you can agree there's pain on both sides. this is very intelligence. the air is thick right now. >> these conversations sometimes need to be had at the root and being raw in order to take a step forward. and i think everybody has to -- >> harry -- >> we will continue this discussion. >> there is giving to do on every side of it. and hopefully one day you'll understand that. >> we'll talk about this more. >> and i hope you'll understand it also. >> thank you, everybody. up next we'll talk about hollywood's big night almost here. will it be overshadowed by a big controversy? 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[richard] switch to block and pay half. you totalled your brand new car. nobody's hurt,but there will still be pain. it comes when your insurance company says they'll only pay three-quarters of what it takes to replace it. what are you supposed to do, drive three-quarters of a car? now if you had liberty mutual new car replacement, you'd get your whole car back. i guess they don't want you driving around on three wheels. smart. new car replacement is just one of the features that come standard with a base liberty mutual policy. and for drivers with accident forgiveness,rates won't go up due to your first accident. learn more by calling switch to liberty mutual and you can save up to $509. for a free quote today,call liberty mutual insurance at see car insurance in a whole new light. liberty mutual insurance. that hash tag should be so controversial. it might be the most controversial for years in the wake of the outrage of the all white nominations. but it may be worse than you think. back with me now, so worse than you think because there was a new study release that had finds across the board in hollywood, women and minorities, hugely underrepresented both onscreen and off. it seems like this backs up what people are saying about this controversy but then goes even further. >> it is not the first time we've heard these numbers and seen one of these studies. it seem like they come out yearly and the number are pretty consistent. i thought this was interesting because they did use very, very inflammatory words. things like whitewashed. saying major media companies are whitewashed. they used a phrase like an epidemic of invisibility. they were talking about the representation of women, minorities and the lgbt community in the industry as a whole. so i think this went up step further. it went to the argument those real hard numbers that people really cannot dispute when you want the debate. the number are in front of you. the study is in front of you and it does alleged to the argument or the debate being had. >> this is from the an anberg community. >> i just read this in the times on the way here. of the 30 film that a black person received a nod for best actor or best actress, only three were directed by a black man. none were directed by a black woman. that does speak to the problem of inclusion. it is bigger than just diversity. that's what one author said. it is more of an encollusion problem than anything. >> and i think it is interesting, too. it spoke to women and minorities. but also the most underrepresented group was the lgbt community. 2ers that of all characters on television define. they as lgbt. >> i think for the asian-american community, it is pretty dire. >> absolutely. absolutely. >> i'll see you at the end of the week. >> i can't wait. i cannot wait. >> he will have his total moment. >> make sure you stay with us this weekend as we take you to the red carpet for the biggest night, beginning at 6:00 p.m. eastern. after the awards, we'll wrap it up at midnight with, and the winner is. that's it for us tonight. thank you for watching. don't miss the democratic town hall tomorrow followed by the live republican caucuses beginning at 10:00. beginning at 10:00. "ac360" starts in just a moment. -- captions by vitac -- www.vitac.com how does rock and roll work? ♪ you need a team... ♪ working together... ♪ doing all kinds of jobs. ♪ and the best place to find the job that's right for you is on the world's number-one job site. indeed. how the world works. i thione second it's there.day. then, woosh, it's gone. i swear i saw it swallow seven people. seven. i just wish one of those people could have been mrs. johnson. [dog bark] trust me, we're dealing with a higher intelligence here. ♪ the all-new audi q7 is here. ♪ watching tvs get sharper, you've had it tough. bigger, smugger. and you? rubbery buttons. enter the x1 voice remote. now when someone says... show me funny movies. watch discovery. record this. voila. remotes, come out from the cushions, you are back. the x1 voice remote is here. good evening, thanks for joining us. there is so much happening it's hard to keep up. tonight after of a major shake-up in one campaign and a tough new attack from another, we will try. one state at a time for the candidates. and just as this week alone, the nevada republican caucus, south carolina democratic primary, cnn democratic town hall on wednesday, cnn gop debate on thursday. we'll look at all it over the next two hours. we begin with the shake-up, ted cruz, firing his communications director rick t
New-yorkUnited-statesNevadaNew-hampshireTexasFloridaCaliforniaNew-lightSouth-carolinaSan-bernardinoWashingtonDistrict-of-columbia the justice department's lawyers arguing "the executive order is a lawful exercise of the president's authority over the entry of aliens into the united states and the admission of refugees. it also asserts that it is not a ban on muslims. and all eyes tonight are on the san francisco ninth circuit court of appeals, three judges are holding a hearing on the travel ban, each side will get 30 minutes to argue its case. now, trump signed the executive action just ten days ago, the ban targeting immigrants from 7 muslim majority nations, it was issued with little warning and not nearly enough explanation unleashing massive confusion at airports and protests across the country. the president is now on his 17th day in office has a full blown legal battle on his hands already. a battle that now, tonight is expected to go all the way to the supreme court. pamela brown is outfront. this is a crucial brief we just got from the justice department. >> reporter: just moments ago, the justice department filing this brief, saying the district courts nationwide injunction was simply wrong and vastly over broad. it says that the president has broad discretion under both the constitution and the law to manage immigration. particularly when it comes to national security and the refugee program, because the president has access to classified information among other reasons, and it talks about the refugees and citizens from those countries, those seven countries listed in the travel ban, who have never stepped foot into the united states, and the lawyers for the department of justice argue, they should not be afforded constitutional rights, that's not an issue, basically, according to this brief that was just filed. what's interesting here, at the end, there's this carve out, the justice department lawyers give the ninth circuit judges an option, if they wanted to limit the injunction to those previously admitted to the united states if they wish to travel to the united states. tomorrow we expect oral arguments at 3:00 p.m. pacific time. that will be over the phone, each side will have 30 minutes. beyond this, we expect the losing side to appeal and for this to make it up to the supreme court. >> thank you very much. and now let's go to sara sidner. she's outside the courthouse where those hearings will be. >> reporter: the scenes of tearful reunions from san francisco to washington, d.c., as people from seven predominantly muslim countries rush back into the united states. >> even though my family already came here, we feel for all those who are still in limbo. >> after being temporarily banned by donald trump's executive order. hundreds of visa holders are trying to legally get into the u.s. after a federal judge temporarily stopped the president's travel ban. >> good afternoon, everyone. >> reporter: washington and minnesota sued the department of justice, arguing the ban discriminates on the basis of religion and harms the states irreprese irrepresentarabl. >> the state has met its burden that it meets irreparable injury. >> with that, the travel ban came to an abrupt halt, albeit only temporarily, as the court hears the merits of the case. president trump quickly responding toed order. the opinion of this so-called judge, which takes law enforcement away from our country is ridiculous and will be overturned. the department of justice is appealing to the ninth circuit court of appeals. the doj asking for an emergency stay to put the ban back in place while the case goes through the court system. >> they say that their harm, the harm to the public is the process of judicial review, the harm is that the court intervened and issued a stay. you don't usually see that as harm. our constitutional process is supposed to let judicial review happen, almost always. >> of course, you did hear that there is a much more substantive argument by the doj talking about the president's right to control the borders and, of course, saying the federal judge overstepped his bounds. everyone on pins and needles, the families who want to come to this country, of course worrying about this, watching the court, we should hear something. there are oral arguments scheduled for 3:00 california time, 6:00 p.m. new york time. >> thank you very much, 24 hours from now, we will have a verdict. "outfront" now, the man at the center of this case, noah purcell, he argued the case in court. thank you for being with me. let me start with this, we're awaiting this decision from the ninth circuit, three judges there, one appointed by republican, two by democratic administrations, a lot of people thought we would have a ruling immediately tonight. now we know oral arguments will be tomorrow. at this exact hour. does it concern you that they're going to ask for those oral arguments? >> no, not at all. i think they're taking this case very seriously as they should, and it's not unexpected they would ask for an argument on a case of this importance. so we're not concerned, we're looking forward to answering their questions. >> at this hour, of course, you have 16 states, pennsylvania and iowa on the list, both of those states voted for trump. they have now filed a memorandum with the ninth circuit court in support of your effort. how did this come about? >> well, states often file amicus briefs in support of each other when there are issues that matter to states. washington took the lead in filing amicus briefs in the united states versus texas briefs. we were defending in that case, president obama's zpangs of the daca program for immigrants and we worked with a number of other states to file an amicus brief. states have come together arguing that we have standing to bring this claim, and supporting our side, which we appreciate very much. >> the trump administration filed their replay to you moments ago. there are several key points, i wanted to ask you about a few of them. the first is this, they deny this had anything to do with religion. i want to read for the viewers, what's in their reply. the order violates equal protection principles. the order temporary suspends entry of aliens from seven countries previously identified by congress and the executive branch being associated with a heightened risk of terrorism. at least one muslim majority country bansed. clearly not religious in their case, it's one muslim country to another. does this hurt your argument that this is religious? >> no, to prove that claim, we don't have to claim that every single person harmed by this order is muslim. we don't have to prove that some muslims are unaffected. the argument is that one of the motivating factors behind the order was an intent to target islam and muslims, and that's the standard, that's the legal standard. and to favor one religion over another. we believe that already at this early stage of the case, there's strong evidence to support that claim, given the president's statements, the statements of his advisers, the complete lack of any tailoring of the order to address national security concerns. we have strong evidence it was motivated by a desire to target muslims. >> on that front in boston, a judge refused to extend a court order that blocked the travel ban as you're well aware. in that case, the judge wrote in his opinion, the rich immigrant history of the united states -- the public interest and safety and security in this ever more dangerous world is strong as well. he, of course, refused to extend the temporary ban, he sided with trump. does that worry you? >> no, you know, he certainly is entitled to issue the opinion that he thought was appropriate. but we agree with judge row barred who made a very reasonable decision here in our favor. he did not downplay the importance of national security, neither are we. it's an important interest. it's just that this order does nothing to further trgs as evidenced by the declaration that was attached to our brief yesterday from former heads of the cia and state department saying the order harms national security. if the order were motivated by national security, one of the points i made in the oral argument was, why didn't they figure out in advance, whether to apply to lawful permanent residents that are green cardholders from these seven countries. there's roughly half a million people from these seven countries. the white house had not made up their mind before they issued the order about whether the order applied to them or not. either those half a million people are a threat or they're not. the white house had concluded that they were a threat, and the order should apply to them. but by wednesday they changed their mind after going back and forth several times on that. it really seems to be a political decision more than a national security one. >> i appreciate your time. thank you very much. i know you have those arguments tomorrow. 24 hours from now, we may have that formal ruling from the ninth circuit court. we're learning new information tonight about that high risk raid in yemen. we now know who the navy s.e.a.l.s were after, exactly who it was, how crucial this person was, and why he got away. more companies uniting, more than 100 now, apple, facebook on the list, supporting the suit against the travel ban. we're live on capitol hill, where democrats are vowing to protest through the night, all the way to tomorrow morning. trump's nomination for the education secretary position. one senator leading the charge. and then melissa mccarthy and sean spicer on when a ban is not a ban. >> this is not a muslim ban. it's not a travel ban. people spend less time lying awake with aches and pains with advil pm than with tylenol pm. advil pm combines the number one pain reliever with the number one sleep aid. gentle, non-habit forming advil pm. for a healing night's sleep. won't replace the full value of your totaled new car. the guy says you picked the wrong insurance plan. no, i picked the wrong insurance company. with liberty mutual new car replacement™, you won't have to worry about replacing your car because you'll get the full value back including depreciation. and if you have more than one liberty mutual policy, you qualify for a multi-policy discount, saving you money on your car and home coverage. call for a free quote today. liberty stands with you™. liberty mutual insurance. breaking news, the two sides in the challenge to president trump's travel ban up against the clock. they've been given less than 24 hours to be ready for oral arguments, they're going to begin in less than 20 hours from now. it is now, of course, in the hands of the ninth circuit court of appeals. the court's three judges reviewing a number of documents, including a motion by some of the biggest companies in america, including apple, google and facebook. all opposing the ban. kyung what are you learning, it's not 100 companies, the vast majority of them are tech companies joining the fight against the immigration ban. >> we learned this is a legal brief they have filed with this court, the court that we spend all hour talking about, the ninth circuit court of appeals this is a broad coalition of tech companies, many of the big ones you named. tech start-ups, this is a rare move, a rare joining move coordinated by these tech companies, it's a symbol, a sign of the animosity between silicon valley to this executive order, it's something that sentiment has been brewing for some time ever since the executive order was put into place. it runs counter to the culture that many of these tech companies were founded by immigrants, run by imgrabts, they have to rely on immigration, some of their best talent comes from overseas, and also, we have seen protests on their front lawns by their own employees urging their companies to do something more definitive certainly this legal brief is that. >> the ceo of uber dropped out of president trump's advisory council. push back during the super bowl? >> you could not have picked a more public venue to draw that opposition between corporate america, at least here, the corporate america that's in silicon valley, to this executive order. we saw it most starkly in that air bnb commercial. there were shades of it in the going emad. what we are seeing is these companies based in california, a progressive state, a state that's expected to lead the opposition against the trump administration, saying publicly to people who are watching the super bowl, we don't agree with this. >> thank you, kyung. "outfront" now, steven larson, former united states district judge appointed by george w. bush. let me start with you, i know you've been designated to serve on panels with the ninth circuit, they've taken this on tonight. some thought it could give a ruling at any point this evening, now they're saying, 23 hours from now, they're going to take 30 minutes of oral arguments from each side. you heard the solicitor general say, this doesn't concern him at all. what does it tell you about where their mind is right now. >> i don't think it's going to be an easy decision, it's a hard decision. it recognizes the fact that we need to get a decision on this quickly. we are moving quickly on this matter. it shows how serious the court has taken this. >> on this issue, as i pointed out, you have two of these judges, that's three. two appointed by democratic presidents. how do you suspect they will rule? will this then fall down those party lines or not? >> if it does fall down party lines they rule in favor of the state of washington and the ban continues to be held at least for the time being unconstitutional. bear in mind this is a federal court, an institution in and of itself, i don't think party lines always dictate in these situations, i think they're going to be looking carefully at the law. >> i want to talk to you about this issue here, about whether this discriminates against muslims or not. the solicitor general said they absolutely believe it does. i raise the point of some muslim majority countries who essentially ban the same seven countries from coming into their countries. donald trump has talked about a muslim ban. repeatedly during the campaign. here are a few examples. >> donald j. trump is calling for a total and complete shutdown of muslims entering the united states. >> it's a temporary ban, it hasn't been called for yet, nobody's done it, this is just a suggestion, until we find out what's going on. >> ideally you won't have a ban very long. we just have to find out what's happening. >> so those are things he said. then he changed his view, he said, no, it's not about muslims, it's about extreme vetting. are those things that can be used against him? >> they can. there's a series of supreme court cases that have set out a road map for how one might consider a claim of discriminatory motivation. that became important in racial cases. it's not enough to show a constitutional violation, have you to show intent. how can that be shown? you can look at past statements by key players, that's clearly relevant, the statements we saw. you can look at whether the decision violated the normal procedural process, which would seem to suggest that there's something else going on, besides normal decision making. or it violated the normal substantive rounds for decision. they have a basis, more than one would normally see in any kind of case like this. for getting to the next stage. >> to get it to the supreme court? >> the plaintiffs would like to see that the stay remains in place, it's remanded to the court for a more complete proceeding on the facts. and the government i think if that happens, the government would ask the supreme court to step in and stay it. >> what happens if this ends up in the supreme court as so many anticipate it will. you have the possibility of a 4-4 134ri9. >> the court might split 4-4, liberals against conservatives, that means that the ruling of the lower court would prevail, the state of washington's ruling would in theory prevail on that scenario, i think we're forgetting about one thing with the supreme court it's an institution of government, with trump attacking judges now as he did in this case, by calling the federal judge in this case a so-called judge. you have to wonder if the supreme court will consider the judiciary under attack. and will he say, you know, we need a decision, not a split court here. i think you'll see a decision from the supreme court. >> paul raises this point about trump attacking judges. he did. he sent several tweets out about this this weekend. cannot believe a judge would put our country in such peril. people pouring in, bad. when you read that, as a judge. what do you -- what is your reaction? he's saying if there's a terrorist attack, it's going to be this judge's fault? >> it's very disconcerting the way that both political sides have basically used attacks to in my view undermine the judiciary. rule of law is very important in this country. it's inappropriate for the president to be called about so-called judges when you're talking about judge robard and any of our judges. it's equally inappropriate for the democrats to say, we have a so-called president. this has got to stop, it's important that we debate these issues, it's important we let this judicial process play out. this is not the first time the president and the congress have gone head to head. you go back to franklin roosevelt. there's any number of instances where this happens, we can't undermine our judicial institutions by resorting to attacks on judges or for that matter, attacks on the president in terms of his legitimacy. it's got to stop. >> thank you all. and next, the breaking news at this hour, new details on that commando raid, a navy s.e.a.l. dead, civilians dead, we know who the target of that raid was, and you're going to need to hear this. trump charges the dishonest press isn't reporting on terror. is he accusing the media of a cover-up? 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(vo) do not go gentle into that good night, old age should burn and rave at close of day; rage, rage against the dying of the light. do not go gentle into that good night. ♪ ♪ ♪ ♪ what ever happened to theo say, "handling"?ing and handling"? i do all the handling. can you handle this laptop before we ship it, nick? there's free shipping, and handling on everything at dell.com. ♪ breaking news, we have just confirmed the primary target of the president trump ordered raid in yemen last week that left a navy s.e.a.l. dead and civilians dead, that target was qassim al rimi. he survived the raid and is mocking trump in a real tape criticizing the president about jim sciutto is "outfront." this answers a lot of questions, why you would put a whole commando team in, why you would go in in person. what else have you learned? >> it explains the enormous risks, including the loss of the u.s. navy s.e.a.l.,ed aqap leader was the target of this deadly raid in yemen last sunday. al-rimi not killed he since released this audio message, as he taunts donald trump. the senior u.s. military official telling cnn the raid still gained valuable intelligence that could help lead the u.s. to the terrorist leader at a later date. a quote from that audio recording now, he says the white house' new fool, referring to president trump has received a painful blow at your hands, speaking to his supporters in his first outing on your land. that's al-rimi's records according to his follower there's. the big point is, you and i were talking about this, erin, this was a risky operation, lots of american boots on the ground. you had the cooperation of special forces from the united arab emirates. you had u.s. aircraft involved, including an osprey that was lost. seemed like a great idea for intelligence gathering. >> thank you very much. jim sciutto, and also new tonight. president trump claiming that the media is refusing to report on terror attacks. here's what he said during a visit earlier today to u.s. central command. >> you have seen what happened in paris and nice. all over europe, it's happening. it's gotten to a point where it's not even being reported. and in many cases, the very, very dishonest press doesn't want to report it. they have their reasons, and you understand that. >> senior white house correspondent jim acosta is outside the white house at this hour. the white house standing by those comments? >> they are. as a matter of fact, sean spicer was asked about this claim that the president made earlier today, and he said that while the president believes that these events are not covered enough, here's more of what he had to say. >> look, i think the president's comments were very clear at the time. he felt as though members of the media don't always cover some of those events that other events will get covered. a protest will get blown out of the water and an attack or a foiled attack doesn't get the same coverage. >> to back up this claim that the media are not reporting or devoting enough coverage to these attacks. they would produce a list of these attacks that they believe were not covered enough. we just got our hands on this list. our producer just obtained this from a white house official. there are 78 attacks listed on this list. and i have to tell you, erin, it's a head scratcher, several of these, we here at cnn and other international news outlets, covered these extensively, mentioned on this list, the november 15 terror attacks in paris. yes, the paris attacks were 129 people were killed, the san bernardino terrorist attack. the brussels/belgium terrorist attack that happened last year, istanbul. even the nice truck attack, erin, all of these, you'll recall, we covered these extensively. it's puzzling as to the white house would include these attacks on the list, when they were covered for days on end. we have not gotten any explanation from the white house as to what the president said, the dishonest news media are not covering these terrorist attacks for some reason, and you know what i mean, he said to that military audience earlier today. >> yeah. >> a real head scratcher in terms of a comment coming from the president tonight. >> thank you. mo brooks, member of the house foreign affairs committee and armed services committee. thank you for being with me tonight, you know, we are just trying to understand what the president means, i mean, what's your response to donald trump. he says the media isn't covering these events, and then he said, you know what i mean. is he alleging a cover-up? the media is sympathetic with the terrorists? do you have any idea? >> well, i haven't talked to the president on this particular issue, it's hard for me to extrapolate from what i've heard from the folks in the news media, what his intent may be. if i had to guess, it would be something to this effect, he wishes people would stress more so than they have been, the types of terrorist attacks have occurred, and what may be the cause for those terrorist attacks, and how those kinds of things interrelate to the policies that president trump is trying to implement in order to better protect americans from those kinds of terrorist attacks on american soil. >> they just did supply this list of 78 attacks. they put brussels there, the paris attacks in november of 2015, orlando, media obviously covered those extensively. i happened to be among the many on the ground in all of those cases. we talked to the families of the perpetrators, the families of the victims, we talked about u.s. visa policy, what that meant. and we did this for days and days and days and days. i am at a loss. frankly it's absurd. >> i don't know if there's a question in there, i heard your comments, all i can say is, if i had to guess what is in the president's mind, that's the position you're putting me in. he wants a greater stress than the amount of emphasis that you all have given on these terrorist attacks and the motivations behind them. i understand where you folks are in the media. you have a short news cycle so many things are happening, you have to shift focus from one topic to another. if you're asking me to extrapolate any more than i can, i'm afraid i'm going to disappoint you. >> i think you've answered it as best you can, i will say, for the record, i think we cover terror exhaustively, and one of the biggest criticisms we get is that we cover those sorts of stories too much. >> i've watched you on cnn many times, and i watched you give coverage to a number of terrorist events where people are killed. i'm appreciative of the coverage that you have given. >> i want to ask you about some other things as well. president trump is also facing criticism today for what he said in an interview, 12 million people watched it yesterday, it was a big and important platform he had. and he -- in that interview also talked about vladimir putin. i wanted to play what he said. >> if russia helps us in the fight against isis, which is a major fight, and islamic terrorism all over the world. >> right. >> major fight, that's a good thing. will i get along with them, i have no idea. >> he's a killer, though. putin's a killer. >> we have a lot of killers. you think our can't is so innocent? you think our country is so innocent? >> is it -- is he right to say the united states has a lot of killers equivalent to russia's putin. >> i don't know if he was emphasizing an equivalency, certainly america's armed forces over the decades have been significant forage enormous amount of life among our enemies. it's a good thing, if you believe in what america's trying to do. so if you're talking about deaths occurring -- america does have a substantial role in that, and the planet, at the same time we're trying to defend ourselves, that's part of it, we try to liberate kuwait, that's part of it, afghanistan after 9/11, we tried to take out the taliban and successfully so. from our standpoint i believe there's a difference in the moral equivalency of what russia has done in crimea and the ukraine, and what the united states has done as we try to protect freedom loving people's from oppression from bad actors. >> congressman brooks, thank you very much i appreciate your time tonight. appreciate it, sir. "outfront" next, you're looking at a live picture, senate democrats planning to hold the floor overnight, a last ditch attempt to derail trump's pick for education secretary. jeanne moos on the new sheriff in town, cleaning up white house press briefings. >> this is soappy water and i'm washing that filthy lyin' mouth. . ♪make tonight a manwich night mattress firmness? enter sleep number... she likes the bed soft. he's more hardcore. you can both adjust the bed for the best sleep of your life. right now, save 50% on the ultimate limited edition bed. go to sleepnumber.com for a store near you. are you ready?? you gotta be ready. ♪ oh, i'm ready i mean, really ready. are you ready to open? ready to compete? ready to welcome? the floors, mats-spotless. the uniforms, clean and crisp. do your people have the right safety gear? are they protected? i'm ready! you think your customers can't tell the difference between who's ready and who's not? of course they do. ♪ i'm ready for you everybody wants a piece of ready. cintas, ready for the workday. we'rebut maybe we've had it wrong all along. maybe our most extraordinary moments happen when we feel small. princess cruises, come back new. so we know how to cover almost alanything.ything, even a "truck-cicle." 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[burke] and we covered it, february fourteenth, twenty-fifteen. talk to farmers. we know a thing or two because we've seen a thing or two. ♪ we are farmers. bum-pa-dum, bum-bum-bum-bum ♪ democrats in the middle of holding the senate floor for 24 hours. it's a last ditch effort to stop president trump's nominee for education secretary. she's expected to get that job, only because mike pence will vote as the tie breaker. democrats are trying to get one more republican to come on their side and deny her of the job. is there a chance? >> we're not getting any indication that there's a republican senator who's going to flip. republican leaders are confident that their party is falling in line over all, just going to lose two senators tomorrow. what democrats are trying to do is energize their party who wants a fight against donald trump's nominees, and betsy devos being front and center. this is a nomination that has united democrats who are actually -- have a lot of different views, i'd yo logically, you have very conservative members of the democratic caucus, people like joe manchin of west virginia, up for election in 2018. and a very liberal wing of the party led by elizabeth warren and bernie sanders. i've had a chance to talk to the top democrat, he believes this fight over betsy devos is something that's bringing his party together and will help them politicalpy. take a listen. >> i think these senators have said that they're going to fight trump on things like the betsy devos nomination, whether you live in montana or maryland, you don't want to voucherize our education system. >> at the end of the day, all of these senators are going to look out for the best interests of the people of their state. they have a record of doing that, the people of the state trust them, they have confidence in them. >> now, the question is, how united do democrats stay when we start talking about other nominees, including donald trump's supreme court nominees. in a key development, senate republicans are planning on pushing forward to get them confirmed to the cabinet post this week. they're planning to move to jeff sessions. and also, steven mnuchin. planning to keep the senate open late at night to get those nominees done. democrats are trying to stall the process as long as possible. betsy devos first and foremost tomorrow. first time ever the vice president coming in to confirm -- to break a tie and confirm a cabinet nominee. >> thank you. i want to go straight to debbie stabenow, she's part of the stand in in the senate, going through the night. senator, thank you for calling in to talk to us. what is it about betsy devos that makes her the one worth doing this for? >> you know, erin, this is something that actually has galvanized citizens across the country. and we know in michigan, better than anybody else, because betsy devos is from michigan, she's been able to put forward her ideas that have cost us funding in public education, and set up very unaccountable for profit as well as nonprofit charters, you have a company running a charter, they believe they're a private business and don't have to have public accountability. people across michigan have been overwhelmingly opposed to having what has happened in michigan public schools happen across the country. originally, back in january the republicans wanted her nomination to move forward the second week in january. and what we have done is really pushed to have the time for citizens to be able to engage. and they have. hundreds of thousands of people across the country indicating this is not the direction they want for our children and schools. >> do you dispute what senator cornen just said. i don't know if you heard our reporting, it may take until the midnight hours on saturday, but this week, betsy devos will be confirmed. jeff sessions will be confirmed, allen mnuchin will be confirmed. we will have four new cabinet secretaries this week. >> we know we don't have the votes to stop these nominations by ourselves. but people, parents, teachers, administrators, community leaders across the country have power and are weighing in, and they've already had an impact, we have two republican colleagues now voting no as you said, 50/50 historic tie breaking vote, and we may in fact have an additional republican colleague voting no, which would stop her tomorrow. >> you believe you have that? you think you could have a republican, you could kill that nomination? >> i think there are a couple folks still thinking about it, obviously, this is -- we don't know at this point. we didn't think we would be at 50/50 a week ago. it's only because the citizens engaging, and parents carrying about their children that we're at this point tonight. >> can you tell us which two? >> i can't. i bet there are definitely places in this country where people have been weighing in with their senators and it may make a difference. >> thank you very much, senator stabenow, good to talk to you again. i appreciate it, and my apologies for misspeaking there, i meant steven mnuchin not allen. a replacement for obama care could be more than a year away. and melissa mccarthy impersonating sean spicer. >> they gave him a five minute standing ovation at the end. >> the crowd greeted him with a standing ovation, which lasted a full 15 minutes. oh yeah sure... ok, like what? but i thought we were supposed to be talking about investing for retirement? 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(avo) ask about namzaric today. breaking news, a top republican pushing back on president trump's time line for a replacement for obama care. >> can americans expect a new health care plan rolled out by the trump administration. >> in the process, and maybe it will take until sometime next year. we are certainly going to be in the process. very complicated. obama care is a disaster. you have to remember, obama care doesn't work. >> just moments ago, republicans need to move a lot faster than that. >> the president has said he's committed to repealing obama care, republicans in both houses have said we're committed to repealing obama care. >> you want to do it this year? >> absolutely. >> would you be concerned if the time frame slipped to 2018? >> i think we need to move as expeditiously as possible. this was a promise made to the american people and we need to deliver on that promise. >> this leaves question for the 20 million people who are on obama care. what's the human meaning of repealing obama care. >> this is his breathing treatment. >> in the fight for obama care, the most powerful voices, those like cedric clatores, the 29-year-old paralyzed from the neck down can't utter a word. >> you're okay. >> ten years ago, cedric was an avid gymnast, healthy, handsome, a rare blood disease required a liver transplant, then he contracted a neurological disorder. after four years, it paralyzed him. >> we're pretty much from 6:00 do midnight. >> the family has insurance through howard's job, but obama care did one thing for them, and everyone else, remove the million dollar lifetime limit on care, anyone whose ever dealt with serious illness knows how rapidly the bills can mount. >> you can go through a million dollars, believe me, we want through 600,000 in a month. >> before obama care, most insurance policies had lifetime and sometimes annual limits on care. the affordable care act got rid of all of it, affecting everyone with insurance regardless of whether they got it privately, through their employer or from medicare or medicaid. >> if obama care goes away, do you know what will happen? >> no, you don't really know what's going to happen, nobody has said what's going to happen. >> if we can't afford his medicines, we don't know what's going to happen. >> his medications, ground up, served intravenously. cost in the thousands. >> we both work, we make good money and it's still hard to get by. if it weren't for obama care, he would be dead a long time ago. >> the family has transformed themselves into nurses, a full time effort, their sons health as uncertain as his health care. their message to those rushing for repeal. >> come and sit with us one day and see what we go through. that's all you have to do. >> i think what they need to be able to do is put faces to what they're talking about. >> cedric claytor, his body devastated by disease, still loved and a cause worth fighting for. >> that is emotional and hard to watch. >> if we think we have problems. >> you point out they have insurance, they're not on obama care, but there was a lifetime cap of a million dollars, they were approaching that as obama care took effect. >> that's their biggest concern are if they get rid of obama care, caps are ream posed or they consider their son having a pre-existing condition, suddenly their care could go away, they're not sure what is going to happen, and all of the talk about repeal without a sense of what will replace it is putting another level of stress on their life and many others. before obama care there were many, many people whose lives were financially destroyed, even with good insurance, because they went over that million dollar limit. >> you put a face to it, and i think it makes everyone realize, these aren't just words of repeal and replace, but lives. senator bernie sanders and ted cruz are going to debate the future of health care. it will be a live debate, tomorrow night at 9:00 eastern. next, jeanne moos on why sean spicer says melissa mccarthy needs to dial back her impersonation of him. >> wall street, are you okay? get off the computer traitor! i won't. 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"saturday night live" takes on the white house press secretary, here's jeanne moos. >> reporter: melissa mccarthy -- >> settle down. >> reporter: sure added spice to sean spicer. >> by apologizing from you to me. and that apology is not accepted. >> reporter: a exit for the ages. there's talk mccarthy could become a recurring character, snl wouldn't comment. the writers took spicer's actual squabble over travel ban. >> he's using the words that the media is using. at the end of the day it can't -- >> hold on, hold on. >> the travel ban is not a ban, which makes it not a ban. >> you just called it a ban. >> i'm using your words. you said ban. it's circular using of the word and that's from you. >> the actual spicer was portrayed using props. >> against radical moose-lambs. >> he's not been known to weaponize his podium. >> are you okay? >> when asked about the exit, spicer told "extra" that melissa mccarthy could dial it back a bit. he told fox news. >> it was cute, it was funny. >> reporter: one personal quirk they barely had to exaggerate. >> i'm here to swallow gum and take names. >> i think melissa mccarthy needs to slow down on the gum chewing. >> i'll get back to you many. >> reporter: spicer told the post he chews 2 1/2 packs of orbit cinnamon gum every day before noon. >> he doesn't just chew them, he chews and swallows them. >> what spokesman wouldn't like to spout off like this p.m. >> what are you doing? >> this is soappy water and i'm washing that filthy lyin' mouth. >> reporter: jeanne moos, cnn, new york. >> i guess he's lucky they say, that's an old wives tale that it lives for 7 years in your stomach when you swallow gum, thanks for watching. hope you had a good day, thanks for joining us. we have breaking news on president trump's travel ban which could go to the supreme court. comes after a day and weekend of tweets, sound bytes and headlines from trump. he's back in washington today after speaking in tampa, igni igniting a controversy over something he said. he is drawing fire for a tweet over the weekend slamming the
New-yorkUnited-statesIstanbulTurkeyParisFrance-general-FranceTexasAfghanistanWashingtonBostonMassachusetts wider department of justice nor apparently a heads up to the president's own communications team. were the reasons behind the firing different from the reasons given for the firing. that's one of the many questions we have this morning. welcome to "morning joe." it's wednesday, may 10th. with us veteran columnist and msnbc contributor mike barnicle, senior politics reporterality "usa today" heidi priz bella, and msnbc's mark halperin. "new york times" reporter michael schmitt and columnist and associate editor for "the washington post" david ignatius. >> looking at some of the headlines, this is just "the washington post," trump fires fbi director, "the new york times" "trump fires comey amid russian inquiry." "the boston globe," "trump fires comey in the midst of the russian probe." "usa today," "trump fires fbi director comey." it's one of those days we all will remember for a very long time. you cannot overste, fst of all, the seriousness of what he has done, the challenge it poses to our constitutional system and the challenge it poses for the republican party. are they going to allow a lifelong democrat destroy the par stay from top to bottom, or are they going to stand up to this president and actually going to do what our founding fathers wanted him to do and present a system of checks and balances, an outrageous act yesterday, but we have a lot to get to. >> we'll start at the beginning. the white house issued a statement saying president trump acted on the recommendation of attorney general jeff sessions and his deputy rod rosen stein. in a letter rosen stein hammered comey's conduct during the 2016 presidential election and investigation around hillary clinton's e-mail server. rosen stein called it a, quote, textbook example of what federal agents and prosecutors are taught not to do. as jeffrey toobin pointed out, trump saw fit to fire comey for the very things he praised him for in 2016. >> it took guts for director comey to make the move he made in light of the kind of opposition he had where they're trying to protect her from criminal prosecution. you know that. >> i respect the fact that director comey was able to come back after what he did. >> what he did, he brought back his reputation. he's got to hang tough because there's a lot of people want him to do the wrong thing. >> he's become more famous than me. >> in his letter rosenstein made no mention of anything having to do with the current investigation into russian contacts with trump associates -- >> the president took care of that himself. >> president trump made that mention himself, including a glaring paragraph in his own letter to comey. it reads in part, quote, while i greatly appreciate you for informing me on three separate occasions that i am not under investigation, i nevertheless concur with the judgment of the department of justice that you are not able to effectively lead the bureau. >> so many republicans, willie, jumping out on that line, justin amish saying that was a bizarre sentence. richard burr coming out being critical. as justin said, an absolutely bizarre statement for this bizarre president to make. >> i think it's another case of donald trump not being able to help himself, to give himself a compliment in a statement he makes. in this case it might implicate him. so many preposterous things about the letter, number one that donald trump and the white house are -- jeff sessions saying the same things in november about jim comey, and also the idea that president trump would be convinced by a deputy attorney general who was sworn in two weeks ago, a guy he barely knows, that this guy came to him, said to president trump, you've got to do this. >> for doing the very things that trump repeatedly praised him for. it was about as bizarre as the fact that jeff sessions, the attorney general, who signed the letter, to get rid of comey actually promised to recuse himself from any investigations into russian. >> that's not recusing yourself. that's getting involved, isn't it? >> mark halperin, this is absolutely stunning. i know you've been critical in the past of james comey. i think it was bill krystal who said one can disagree with the way comey conducted himself during the campaign and still be deeply disturbed by the actions yesterday. >> as you said, this is grave and serious and lots to talk about. let's focus on the russia probe? who is in charge the probe today? rod rosen stein, a career prosecutor who lots of democrats praised. andrew mccabe, the acting fbi director who has a reputation of not being partisan, and the career prosecutors and fbi agents. i think the thing the president needs to do, he's got to talk about this himself, this is not the kind of decision you can make and delegate to sean spicer or a piece of paper. two, he's got to pick somebody to run the fbi who is beyond reproach and do it quickly. in terms of timing, the question i have is why not wait until you have a stellar, sterling person lined up. why the urgency? >> because sally yates testified yesterday and this guy, david ignatius, will blow himself up and his white house and the constitution of the united states because he's a day trader who doesn't like bad headlines. that's my opinion, not your opinion, but it's pretty shocking. i ask you to go back in all your years covering the government to find a decision anymore shocking than this. >> this is one we'll remember where we were when we heard it. it had that kind of impact. the truth is, joe, i don't know why they did this. it was done in a rush clearly. it was all put together yesterday. comey wasn't even in town. he was surprised by the announcement. i'm ld i talking to my fbi sources that back during the transition, there was talk about getting rid of comey. they didn't like comey, they mistrusted him. the decision was this is more trouble than we need. the peculiar thing is, as angry as democrats were at comey after the way he handled the hillary clinton e-mail issue. hillary clinton clearly blames comey for her defeat, he had come to be a symbol of putting trust and integrity back in the fbi through the russia investigation. it's strange that the democrats who were so angry at him are now furious at his firing. i'm told finally that last night, among fbi agents, including those who really didn't like comey, he was a very divisive figure within the fbi. we should be clear about that. even among his critics last night, there was a sense of confusion, people genuinely upset, wondering what had happened. i think you have to say the situation for the next fbi director who comes in is going to be extraordinarily difficult in maintaining a sense of balance and fairness in that agency which is now quite sharply split. >> so james comey had been set to testify thursday in open session in front of the senate intelligence committee. last night while in los angeles he was set to give a speech, but it never happened because, as michael schmitt reports in "the new york times," quote, mr. comey was addressing a group of fbi employees in los angeles when a television in the background flashed the news that he had been fired. in response, mr. comey laughed saying he thought it was a fairly funny prank, but then his staff started scurrying around in the background and told mr. comey that he should step into a nearby office. mr. comey stopped addressing the group, proceeded to shake hands with the employees he had been speaking to and then he stepped into that side office where he confirmed that he had been fired. at that point he had not heard from the white house. comey got into a moat cade and made his way to the airport snarled in l.a. traffic before boarding a private jet and heading back to washington. former's head of private security and now director of oval office operations keith schiller hand delivered the termination notice to the department of justice. michael schmitt, your reporting is amazing. what else do you know? >> comey started his day yesterday in florida where he was speaking to some police officers. he flew out to california where he was supposed to actually, as you pointed out, give this diversity speech. all this came as a complete shock at the fbi. they had no idea the justice department had been working on this for several days, it dated back to at least last week and probably sooner than that, and there was actually some question last night how comey was actually going to get home from los angeles because he was no longer the fbi director and it wasn't clear whether he should still use the government plane to get home. ultimately he does get on that plane and he does come back. it's not clear whether he even went into the bureau last night after he got here to pick up his stuff or anything like that. today at the fbi it's a brand new day. the real question is whether the scrutiny of this firing will be able to stand up. will the administration be able to make the case to the public and to congress as the spotlight is put on this that there was a real rationale for doing this and this was not simply done on the whims of the president. >> not only is this dangerous and outside the constitution, but the white house itself outside of trump were caught off guard. showing how little they know about politics in washington, they were shocked by the blowback they got. >> this is all going to come down to the timing. why now? all the justifications given in this letter are things that have been known for months. if trump was so incensed which is really hard to believe considering the "lock her up" mantra, he could have fired, they wanted a clean start, why not fire comey in january? there was an active ig action under way, no precedent for making a firing like this, without that coming to conclusion. to your point, this is like there was some kind of urgency to this, the way it was done. it was so ham-handed, no one in place to replace him. >> willie, bad headline, sally yates. he reaches and talks about barack obama tapping his white house. again, this is the definition of a day trader, like a day trader on crack. >> i think it's more than that. >> political crack where this was so shortsighted for him not to know this was going to blow up in his face politically suggests something deeply troubling about him and the people around him. >> the irony of it is, by firing james comey, he may have guaranteed himself an independent investigation, guaranteed a special prosecutors. >> just like the obama tweet, by lying about the 44th president, he then put six, eight more weeks of intense focus on his side of it. >> by the way, has now unleashed jim comey as private citizens are free to discuss this with people like the media. >> he did one other thing, too, yesterday. this is no longer about donald trump, no longer about james. it's about the presidency which is being diminished on a daily basis by his behavior. it's about the constitution. it's about the united states of america and the people of this country. that's what this is about. >> the question is, mika, i will say it again, are the republicans, especially in the senate, going to attach themselves to a guy who had been a democrat for life, came in, blew up their party, had a hostile takeover of their party and now is going to drag the party down? i can't even imagine running in 2018 if i'm a house member anywhere that's remotely a swing district. this reminds me in a different way of 2005. you knew nancy pelosi was going to ba speaker. i had a friend ask me, i've been thinking about running for congress tore ten years, should i run? no. the tidal wave is ugly. >> clearly, after all the talk is done, all the verbiage has been piled on all this, jim comey is no longer the fbi director because the president of the united states new instinctively he could not control him. >> this is donald trump, a man who has never had any checks and balances his entire life, a man who has never had any discipline his entire life, a man who has never had anybody close to him tell him no his entire life, coming to washington, d.c. and finding a guy that he couldn't control. so he fired him. >> so i have a question that really scares me and i'm trying to think of who to ask it to. david ignatius has written on the russia investigation, we'll get to that piece in a moment. i think the question is for you because you know everybody really well. obviously we have clear concerns about the qualifications and the personality and the psychology of this president. what does this latest move tell you about the abilities of his -- and the qualifications of his -- and the mental fitness for the job of his press secretary, his chief of staff and i'm sorry, the influence of jared and ivanka which seems to be nowhere and also his foreign policy team. where are these people? why can't they do anything? where were the voices of reason? are there any? >> you're not going to have anybody, first of all, walking to the white house from the foreign policy team telling him not to do this. >> why? >> because they're the foreign policy team. you a group of people close to trump, and the truth is, and heidi, you report there all the time, nobody tells him no. when i tell him nobody tells him no, nobody tells him no. >> who is the troubling thing about that premise. there are many things trump does that appear to be in the moment, snap decisions. if you look at the rosenstein letter, this doesn't look like something that was crafted overnight. this looks like a pretext. it looks like this was planned. they wanted to get rid of comey, and when he made the misjudgment or the misstatement before congress about the huma e-mails, it gave them that pretense and this was actually in the works. >> michael schmitt, you reported exactly that last night. i read your tweet which began to explain what was happening, which was the white house and the department of justice, according to your reporting, wanted to fire comey for well over a week and went in search of a justification and asked the attorney general's office to help with that. >> if you look at that letter, attached to it are press clippings that are negative about comey. in the letter, there's a lot of details about different things he had done. this is clearly something plotted out. it was clearly how are we going to get to the point where we can make the rationalization. to my point earlier, now they're going to have to defend that and probably at some point oven capitol hill. they'll have to say with a straight face that there was enough evidence here to get rid of him. the problem they'll have time and time again are their statements on the record from sessions, from trump, defending comey's decision last october to do what he did. >> not just defending it, but praising it. mark halperin, final question to you this block -- we've got so much to go over. the question is what will the republicans do? richard burr, the chairman of the intel committee tweeting he was troubled by the timing and reasoning. senator james langford of oklahoma said the american people deserve an explanation for this immediate firing. congressman justin amish tweeted he's reviewing legislation and called the second letter of the president's letter bizarre. jeff flake also tweeted last night he can't find any acceptable rationale for the firing. pen sass of nebraska, also on the judiciary committee finds it troubling. >> why can't his people say this before he does it. >> bob corker of tennessee said comey's removal at this particular time will raise questions. the sque how many other republicans are going to stand up and actually do what's best, not only for the party but for their country. >> here is what's going to happen next? you'll see more republicans saying independent counsel, more republicans saying we need comey and the administration to explain why it happened when it did. you'll see the president -- he's got an interview scheduled. you'll see him under the next 24 to 48 hours under intense pressure to explain this and to explain how it is that the american people can have confidence that the on going investigation that is a dangerous to his administration is going to continue, and republicans i think will insist on that. >> any reporter, any reporter that interviews donald trump and does not throw his own words back in his face and makes him eat them from the campaign praising james comey for his guts and for his courage and his forthrightness for what he did, which was used yesterday as an excuse to fire him in the middle of an investigation, my republican friends, into possible ties between putin and russia and your president of the united states, any reporter that doesn't shove those words back down their mouth is a disgrace and a failure as a reporter. and with that, michael schmid, we thank you very much for being with us. we have a parting gift. >> lester holt will be sitting down with president trump tomorrow. >> nbc guy, didn't know that. >> unless they cancel. >> unless they cancel. >> little scaredy cat will cancer, that's for sure. this is a very small man and his lies will bring down his presidency. >> you said it yesterday. >> i'll say it every day. maybe at some point you will actually hear the woman at the table saying what all the men will finally say. you'll go, oh, guys, you're so smart. still ahead on "morning joe." >> coming up, lindsey graham, tim kaine, rob blumenthal, and michael resh loss and bob woodward. where his people that are so close to him? those are the people that are the touchstone on the president's personality. jared and ivanka can get to him. guys, everybody, to be with the narratives. this is bad. plus deputy white house press secretary sarah huckabee sanders joins us. we'll be back in a moment with more on this major political story. stay with me, mr. parker. when a critical patient is far from the hospital, the hospital must come to the patient. stay with me, mr. parker. the at&t network is helping first responders connect with medical teams in near real time... stay with me, mr. parker. ...saving time when it matters most. stay with me, mrs. parker. that's the power of and. gives you a reason to slow down and pull up a seat to the table. that's why she takes the time to season her turkey to perfection, and make stuffing from scratch. so that you can spend time on what really matters. marie callender's. it's time to savor. 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did not want to resign. and that standoff apparently resulted in his firing today. >> stunning late breaking news, president trump has fired james comey as director of the fbi. >> writing to him, you are not annual to effectively lead the bureau. >> those were the federal officials who were fired while in the middle of looking into investigating donald trump and the white house. add this nugget, president trump will meet with russian foreign minister sergey lavrov this morning at the white house. the highest level face-to-face meeting with russia of the trump presidency. >> timing is everything, right. >> i'm sure it's a coincidence. >> he fires comey and then you have top ranking russian official coming to the white house and then you have a spokesperson for trump saying we should drop the investigation. >> right, and she's joining us this hour. >> there are also reports yesterday that grand jury subpoenas had been issued in the fbi investigation that was ratcheting up shortly thereafter jim comey was fired. and then the president of the united states -- >>en in while at the white house trump has hired lawyers to hush back on the claims that he has business ties, lawyering up to connect the dots. >> joining us is former fbi special agent clint watts. clint, good morning, that is attorney general jeff sessions leaving his house this morning. >> recusing himself from all things related to the russia investigation, other than being a part of the firing of the guy leading the russian investigation. >> the firing was not ability the russia investigation, it's about the treatment of hillary clinton. >> clint watts, let's get your reaction, first of all, to the firing of jim comey, the way it was done and the timing of when it was done. >> well, for a guy who likes to claim how classy he is, president trump did it in a low-class way yesterday. he delivers a letter, doesn't apparently seem to know where comey is at. comey finds out while he's conducting fbi business through a television broadcast that's on behind him. which is a blatant embarrassment to the fbi director. the fbi is probably on pins and needles today trying to understand why this was conducted that way, how do you remain balanced, how do you proceed in investigations? the key point in all this is, in the russia investigation, if you're going to move charges forward, if you find anything, you have to take those to the department of justice. it will be u.s. attorneys running the grand jury. it will be appointees of the trump administration that will then look at whether this should move forward. how can you say they're independent and balanced today after you just fired comey for essentially something that came up last summer that you once applauded. it's an 'embarrassment in terms of how our government is conducted and what we see in third world pub countries. >> david ignatius, everybody talking about grand jury investigations. when they come up with a conclusion, it is up to trump appointees to decide whether to prosecutor not. and there is is no reason that anyone should have any confidence in anyone that donald trump has appointed to make those decisions this morning. >> i think we can say this is going to be the most important appointment that donald trump makes in his presidency. a lot hinges on this. i just would note one ominous thing and i'd ask clint for his judgment on this. in trump's letter dismissing comey, he makes reference to three separate occasions in which comey had said to him that he was not under investigation. clint, is he setting the table there for being able to say to the next director, there's no investigation of the president, so don't even think about that? how did you read that? >> i read it exactly that way, that it's a passive push that there's nothing there whenever we bring in the new director, we don't need to waste time on this investigation? this is a repeated pattern of trump which is to try and pressure the fbi director to do what he wants. then when the fbi director doesn't do that, when comey doesn't do that, he's either maligned publicly through tweets or now he's fired. when you look at this, they were trying to push for a leak investigation of which there was no evidence. they wanted como to focus on that over a russia investigation which there's tremendous amounts of evidence for. it's a really perilous situation we're in here in our country where the fbi -- comey said he did these press conferences last summer because he didn't know if the doj can be impartial. now trump applause him in october and fires him for it now many months later. it doesn't add up, doesn't make sense. basically when trump doesn't get his way, he either smears you or fires you. >> mark halperin, the question now, what will the senate republicans do with the next person meant to run the fbi sent to them by donald trump, if only three say no, then, of course, whoever is appointed, trump doesn't get his selection. is there a possibility that they may strike the deal, the republicans, that you don't get your appointment through unless we get an independent prosecutor? >> it may head in that direction. the person really on the hot seat is rod rosenstein, number two at justice, he is a trump nominee. he's got an incredible reputation. he put his name and reputation on the line yesterday with this letter saying -- >> i've been hearing that, mark. how could he have an incredible reputation this morning after sending a thinly veiled hit piece, political hit piece to undercut an investigation on whether the president of the united states' presidential campaign had ties with russia and vladimir putin? i'm sorry, i don't want to hear this guy has a good reputation anymore because nobody with a good reputation would do what he did last night. >> what i'm saying is, before we get a nominee and confirmation hearings, some republicans will call for and lots of democrats, he needs to go to capitol hill this week and explain did he talk to the white house, what were the conversations that led up to this decision and his putting his credibility at the official in charge of this investigation on the line. i think some republicans are going to call for that pretty quickly. >> clint watts, thank you very much. coming up, she says it's time to move on from the russia investigation. that's difficult to do when the president himself brings it up in the firing of james comey. deputy white house press secretary sarah huckabee sanders straight ahead to explain. you do all this research on a perfect car, then smash it into a tree. your insurance company raises your rates... maybe you should've done more research on them. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. liberty mutual insurance. if you have moderate to severe plaque psoriasis, isn't it time to let the real you shine through? introducing otezla, remilast. otezla is not an injection or a 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venture, you earn unlimited double miles on every purchase, everywhere, every day. not just airline purchases. seems like a no-brainer. what's in your wallet? joins us now from the white house, nbc news national correspondent peter alexander. you spoke with press secretary sean spicer last night. what did he have to say about comey's firing? >> reporter: to give you behind the scenes color of how this went down at the white house, shortly after 5:00, a meeting with members of the press in sean spicer's office when reince priebus, the chief of staff came in, everyone was told to leave the office, out a side door we wouldn't traditionally go in or out of, then sean delivered the message that the fbi director would be out. for hours there was effectively silence from this administration, no public statements before spicer, sarah huckabee sanders, his deputy and kellyanne conway approached the cameras. i had a chance to speak with sean spicer last night. here is part of what he told me. >> scholars are preparing this to nixon's saturday night massacre. what do you think of those comparisons. >> i think that's ridiculous. the deputy attorney general is an individual confirmed by the senate 94-6 just two weeks ago. >> did you underestimate the backlash about this? >> i think we're a little shocked at the politicalization that people like nancy pelosi, like chuck schumer -- >> republican senator burr is among those -- >> i think those individuals on the democratic side who were very clear the director lost their confidence to lead the fbi, who politicized the process, this is something they should be welcoming the president's decision, something they called for for a while, and i think it's ironic they are not agreeing with the president's decisions. >> reporter: the bottom line is spicer and his colleagues say that the president should be praised for taking this decisive action. really what struck me, mika and joe, is the fact that as this was going down and we're told spicer insists this decision was made only after receiving that letter from the deputy attorney general that was also recommended by attorney general jeff sessions who confirmed that decision, that the president came to this conclusion, but came to the conclusion based on that recommendation of rod rosenstein who only served in this post for two weeks, there appeared to be no messaging strategy and certainly no replacement in place. >> peter, was it your impression that they were surprised at the blowback they got last night? was that your impression? >> reporter: that's exactly right. we were here in the dark asking questions of aides. they conceded that while they thought democrats would push back and try to say it was all political, they were overwhelmed by it. that's what made the three-hour period so striking, between the moment we first got the information and all of a sudden whatever president trump was saying on cable tv, his aides were rushed to the cameras and went out and tried to fight his case. >> nbc's peter alexander. thank you very much. joining us now deputy white house press secretary sarah huckabee sanders. thanks for being with us. >> good morning. thank you for having me on. >> why specifically did president trump fire fbi director james comey? >> i think it's real simple here. the deputy attorney general, a guy who has a stellar reputation was just confirmed 94-6, across the board has the respect of democrats, republicans, people in the justice department, made a very strong recommendation, the president followed it and made a quick and decisive action to fire james. >> was this decision made on comey's handling of the russia investigation? >> i know. i know that's what the media would love to report and say. if that's going to continue, it's going to continue whether jim comey is there or not. this decision was made because the deputy attorney general, again, a guy who has a reputation -- >> i understand. >> okay. >> we got it. >> what was the rationale of the deputy attorney general? >> i think he laid it out very clearly in the letter he sent to the president that you all have, i'm sure, scoured over. this is a guy who had lost not only the respect and the credibility of people within the justice department. democrats and republicans alike have been calling for him to step down. joe, earlier this year you thought it was time for him to step down and get out of the way. i think we're at a place where the fbi, the reputation of this department has been under major scrutiny, taken a big hit. we need to restore credibility back there. i think that has to come from a new leader and new director. >> sarah, did the president lose confidence as well in the director or just take the advice of the deputy attorney general? >> i think it's both. i think we've heard from the rank and file of the fbi, but particularly someone who had done a thorough review and someone who has the respect and reputation that the deputy attorney general has. >> at what point did james comey's handling of the hillary clinton e-mail investigation change? back in october after director comey put out that letter, president trump praised james and praised his handling and said it took a lot of guts for him to do what he did when he did it. at what point did the president's opinion of james comey change? >> i think it's taken place over a period of time. i think it came down, the bottom line was he had lost the respect, not only of the rank and file within the fbi, democrats and republicans alike, in a town like washington where you can't get democrats and republicans to agree on much of anything, i think you can see across the board generally that most people thought comey had become more of a distraction, he was incapable of carrying out the job he needed to do and it was time for him to go. >> you said last night it was time to move on from the russia investigation, there's nothing there and it's become absurd. do you know something that the rest of us don't know about there being nothing there? >> i know that person after person your own joe scarborough said there's no evidence of collusion here. they've been pushing on this for months -- >> wait, wait, wait. i've got to interrupt. >> she's quoting you, joe. >> i said there's no obvious evidence of collusion out there right now. if there were that obvious evidence of collusion, it would have already been leaked by now. i also said there has to be in depth investigations because it may take, and i think probably an independent prosecutor to figure out the financial ties between donald trump and russia, to figure out -- >> son eric says there's a lot of. >> donald trump, junior, all talking about how important russia money has been keeping the trump empire afloat all these years. >> that's a pretty egregious stretch -- >> since you brought my name up twice, a couple liberal democrats twisted my words yesterday. what i said there's nothing obvious there. doesn't that just prove we need an independent counsel to investigate this? >> not at all. joe, we've had almost an entire year that they have spent, the house committees, the senate committees, the fbi e, everyone has looked into this and everybody comes to the same conclusion. >> yes, there's something there. >> you're actually not telling the truth right now. >> wow. that's a pretty bold claim. >> you've got richard burr, running the senate intel committee talking about how deeply troubled hep is. senator ben sasse serving on the judiciary committee talking about the very troubling findings and many others, mike barnicle, talking about how this investigation needs to go forward. the senate investigation, mike, is just starting to take off right now. >> and every bit of it -- i hope the senate completes it so they can come to the same conclusion that everyone else has and that every person has said, whether it's been clapper or others that there is no evidence of collusion between the trump campaign and the russians. >> the investigation has just started, sarah. that's like a prosecutor starting a criminal case saying no, we don't have the evidence yet, but that's why we have an investigation. >> again, i said i'm glad that they will be able to complete that because i think, and i'm very confident, they are going to come to the same conclusion that everyone else that's gone down this rabbit trail will come to, that there is no evidence of collusion. >> it's not a rabbit trail. there's so much evidence for them to follow, they're going to be doing this for quite some time. something that was obvious six months ago. >> i think what was obvious six months ago is the democrats were looking for a reason and an excuse for why they were beat so badly. >> and your president loved comey. mike barnicle. >> let's skip over your investigative prowess and go back to the letter that the president wrote to director comey in which he say, i greatly appreciate you informing me on three separate occasions i am not under investigation, i nevertheless confirm with the judgment of the doj to dismiss comey. do you know how many people helped the president prepare that letter, if any, who approved sending that letter and the allegation that he was told three times by jim comey? do you know anything about this? how closely contained was this letter and was this decision in the west wing? >> look, i don't know -- i don't think there was a head count done this terms of how many people read the letter, but i think it's pretty clear that the president along with, again, i go back to the deputy attorney general -- >> sarah, you don't know if the white house counsel, the chief of staff saw this letter before it went -- >> helped him along? >> i can't imagine that they would have not seen that before it went out. >> that's stunning. heidi? >> thank you. >> sarah, why the urgency? the ig had an investigation under way of how comey handled the clinton investigation. this was done with no replacement in hand, and the justification, again, is for things that happened months and months ago. what happened within the last 24, 48 hours, why the urgency to do this without even giving a heads-up as well to the career staff at the fbi? >> look, you have a new deputy attorney general in that position. he conducted a review -- >> sarah -- >> a great reputation, yeah. >> the same president of the united states, sarah, praising james comey non-stop for what he did during the campaign. >> last i checked, he was in charge and is very important. >> i think he showed he was in charge last night. i don't think there's any question about that. >> why the change? >> he was given a recommendation. he made a decision and made it quickly. >> you keep talking about the deputy attorney general. you've got the president of the united states who has been praising james comey repeatedly for doing the same thing that they're now justifying the firing the middle of the russia investigation. does donald trump not stand by everything he said during the 2016 campaign now about james comey? >> absolutely. here is the thing, joe -- >> absolutely he did not stand by his praise of comey. >> that's not what i said. i said the director of the fbi reports to the attorney general. >> i need clarification here. does the president of the united states stand by his praise of james comey from last year, especially september, october, november of last year? >> knowing the president, i would say yes, he does. >> okay. thank you so much. >> that's interesting. >> david praised him. >> so sarah, you made reference repeatedly to the report by the deputy ag rob rosenstein. who asked him to make that review? who asked him to undertake that review? >> i'm not sure it was requested. all i know is that the director reports to him. i would imagine that is part of the process of him coming on board and taking it over that position. >> this is a crucial issue. was this an independent effort on this part? did he talk about it with jeff sessions? >> sean spicer says it was self-started. i'm sure you know the answer. i was asked if it was something he came to on his own. that's my understanding. this is something as coming into this new position and being a person that would oversee the director of the fbi, that would be part of this process to do a review and to make a recommendation based on that review. that's what he did. she would have immediately fired jam james comey. i'm sure it is the very people that would have been cheering and celebrating comey being dismissed will be the very ones saying hi shouldn't have been. >> i can tell you, we certainly would not hear. i can also tell you that the very people who this morning are cheering the firing of james comey in the trump camp are the very ones who were praising him last fall for his courage and his tenacity. >> why was there urgency to act on it without a replacement lined up? once it was written why was there anner gent si to act on it? >> i think when you receive a report that is so clear and a recommendation by someone like the deputy attorney general you have to clois but to act. there was no reason to sit around and wait and it was time to move forward the deputy director of the fbi will step in as the acting director for the time being and so to pretend like there is pure chaos and no leadership i think is a little bit disengene use. >> there's so much flying around the president's decision to ultimately fire director comey was not about the russia investigation? >> absolutely not partly because that's not based on the recommendations but the other part is there's nothing to that. there's no evidence of any collusion. i think that's the biggest point. >> so in the justice department memo from the deputy ag one of the reasons given was that he served the attorney general's attorney when he decided not to recommend prosecution so does he standby his firing of jim comey? >> again, i hate to sound like a broken record but i think it's very simple. he has the person that the fbi director reports to. give him a very strong and very compelling recommendation that he needs to go. >> so he gets is recommendation and quickly turns around and fires james comey. he had the 44th president of the united states and attorney general recommending that he fire his national security adviser -- >> ties to russia. >> ties to russia who is a risk to nation nag security. >> i think it's partly a credibility component here. you have one of your political opponents making the reck member dags versus somebody who has -- >> a president of the united states? >> let's be honest. >> we're trying. >> what about sally yates? a very conservative republican? >> i also would hardly be pressed to say that not a partisan in this case as well. a decision was made and i don't see there was a review process in both cases. once it was maetd a redecision was made and carried out. >> okay. thank you so much for being with us. we greatly appreciate it. >> thank you for having me on. >> coming up, one of the people that had a heads up. we'll be asking senator lindsay gram how it impacts the investigation into russia. tim cane will be with us as well. senator from connecticut asking for a special prosecutor. plus tis to yans join us. no president has ever dismissed an fbi director under such circumstances. we'll be right back. ♪ ♪ ♪ ♪ sfx: engine revving ♪ (silence) ♪ "how to win at business." step one: point decisively with the arm of your glasses. abracadabra. the stage is yours. step two: choose la quinta. the only hotel where you can redeem loyalty points for a free night-instantly and win at business. hello, my name is watson. i am helping 8 million taxpayers get the largest refund they deserve. one million people can benefit from precision cancer care. 197 million passengers can fly with less turbulence. i am on my way to working with one billion people. i look forward to working with you. >> took gets for him to make in light of the kind of opposition he had try to go brekt from criminal prosecution. you know that. >> i respect the fact that he was able to come back after what he did. he has to hang tough. a lot of people want him to do the wrong thing. he has become more famous than me. >> since he has got to hang tough -- >> and making everyone clap for him. >> note to anybody that works for president trump. you must have a sick feeling because you you never know when you're day will come. or maybe not. >> but you have got a president of the united states who has spent his entire life surrounded by yes men, entire life without any checks or balances that the rest of us go through. >> on any level in life. there are never ceos that is boards they have to answer to. somebody said if donald trump had worked in a publicly traded company his decision-making process would have been different. he could be destroying everything and nobody there to do anything but pick up after his mess. >> this is going to unravel. >> it is going to unravel. i feel badly for people like sarah sanders who are charged with an impossible pass k. >> yes. >> she was just on our show -- >> yeah, in the last ur. there's a dly diminishment. it is far larger than this individual donald trump or james comey. it is about america and about the united states of america and about the president, how we define it, think of it and the belaif yor. >> and i see what's going on and i see what's going on yesterday. i said i don't like this guy rub running my party. i'm not going to be a member of his party. >> that is deeply offensive to me. it is a guy that would over what they put in place. i spoke to a lot of them last night. >> and i know you loved your party. >> i have been writing about this, donald trump, a lifelong democrat has taken over the republican party. it was a hostile bid last year. they owe him absolutely nothing. are they going to march and get detroyed. >> principals have long been deeply disturbed by throughout this administration. this is a breaking point. you may say this is the moment when it becomes clear we can no longer use him they held their nose and supported them because they thought we can use this guy to get our agenda and to get big things that we care about enacted. so they will bail. >> and even before this tuesday night massacre you had a vote on a health care bill that had an 18% approval rating. republicans marched over the cliff for the benefit of a press conference for donald trump so he could talk about what a great president he was, sort of a ribbon cutting ceremony. the political report moved over 20 seats in the democrats direction. even before that you actually had party preference polls you have 23, 24 seats. the republicans behind you know they are in deep deep mud. -- if they follow this guy into the swamp. >> the reason a lot will demand answers is this is an issue where donald trump and the way it was handled yesterday this is not a day trade people will forget about. this is one he'll have to explain a lot more than he did yesterday. he will face not just a revolt but a serious set of question that is will come nate more than the russia investigation has today. >> and just as a strategic question, he now opened himself a special investigation, a special council, someone from the outside to look in at what's happening, to shine a brighter light on that. >> you look at what happened yesterday and there's no doubt that too many my from pennsylvania, portland from ohio, johnson from wisconsin, these republicans in blue states are going to have to call for a special prosecutor they only need three to say we will not give you your attorney general until you give us a special prosecutor. >> the order from the commander in chief, fire the investigator. >>. >> a great and profound crisis. >> he believed the executive could overpower the institutions designed to keep his presidency in check. >> he said it was solel to remove crnation as quickly as possible. >> in the end he destroyed the public's confidence and tarnished his legacy forever. >> nothing like this has ever happened before. >> the question for washington this morning, is another president using his power to stop an investigation and will congress standby and watch while it happens? the latest to fall fbi director jim comey wloz con ver shl announcements. >> there is evidence they were extremely careless. >> rocked the presidential race. >> and fed trump's message in the final days. >> i respect the fact that director comey was able to come back after what he did. comey was in the heat of an investigation looking into ties of the trump associates and the kremlin. >> there is no way to give a timetable of when it will be done. >> his firing requires another, the saturday night massacre. investigating the water gate scandal stemming from the 1972 reelection campaign. it revealed the president had secret over office reportings. they issued a subpoena seeking toez tapes. he offered up summaries. >> he offered to try to gain access to the tapes. >> he rejected that offer and stood by his temperature power. >> he waited for weekend when he ordered him the fire cox. he pledged not to stand in the way of the investigation. >> mr. cox will have full independence as far as i'm concerned. nixon found someone else who would do the deed. >> the justice department is headed at the president's election by robert h.bork. >> forced his party to face the grim facts. >> the people that were try to go obey the law, trying to enforce the law and now they are the people that are forced out. that's -- that i think is the crux of the new crisis. are we going to be a government of law? >> and now another president is clinging to carry out his orders. it is only the latest. sally yates fired for not enforcing the travel ban just after her officer enformed the white house that michael flynn was vulnerable to blackmail by the russians chls and nrk's top investigator it was not so long ago that a president who felt looked down by the press and by elites and believed he had to play dirt toy to win an unfair game. the question this morning is whether the history old system will swing into action. >> wow. >> and by the way, john, last night the nixon library got in on the news tweeting fun fact, president nixon never fired the director of the fbi. >> now more than ever. >> so john. >> you know, it goes back to the crisis is a turning point in a disease. does the patient survive or does the patient die? i think we are at a point here where we are going see where the 45th president of the united states respects the rule of law. what we have heard is that that's talking point out there he moved quickly. that's authoritarian talk. they are trying to bully their way through the fact that the president of the united states has removed someone who is in charge of an investigation that could lead to treason. >> joining us democratic richard bloomenthal. what was your first thought when you heard of the comey firing? >> disbelief. i skould not believe it! you said you will introduce legislation appointed by a three-judge panel. explain how that would work and what the job of that council would be. >> there are two ways abdomen i have been calling to appoint a special prosecutor. it was established right after watergate. it was to have an attorney general petition to appoint an independent council who would supervise the investigation. either way what's needed as an independent objective impartial prosecutor because only a prosecutor can hold accountable the people who may have committed treason or fraud or lied to the fbi. it was when he refused to rule out the president. >> right. >> as a potential target. >> right. >> senator, i believe you're one of six senators who voted against this because of this. the white house is hanging a ton on him and saying his credibility and recommendation w was. >> decisive here. it absolutely failed even the most cursory smell test to hang it on an incident with respect to his e-mails some ten months ago is -- really defies credibility. he has to say i am going to appoint a special prosecutor blast at issue is an investigation and i will support it. i'm a career prosecutor, which he is. >> wow. >> all right. thank you so much. you were talking about the possibility of treason. right now in the systems of checks and balances it seems that it is united states senate that so much is riding on here if hamilton and madison's system is to actually be able to do its job. >> yeah. aaron burr of all people who had his own moments with loyalty to the system said in his farewell address that if the constitution ever falls at the hands of a demagogue it willing fought on the floor of the united states senate. that's last line of defense. you think back to -- since we are thinking about nixon you think back to the meeting in august two or three days before nixon resigned where they take john roads from the house and they go down and tell nixon tt it's over. only has 12 to 15 votes in the senate. that was the moment that began to push nixon towards resigning. the senate, i think, has a special responsibility here as does the house but the senate is that last line. >> that was my feeling last night when this happened. you were talking about these headlines. these are headlines we will remember far very long time. i was nine years old i think. let's see, 74. i was 11 years old. i remember the headedness linli nixon resigned. there are also moments in men and womens political career that is define their entire careers, how they stand or how they cower when challenged usually by a president of their own party. are we at one of those times for republicans of the united states senate? >> i think we'll see profiles in coming weeks or months. i think you're right to focus on people in your party, republicans. defending the rule of law, defending the integrity of our system really falls to people from president trump's party who will insist that these investigations go forward so that we can have answers on questions about russia's influence campaign so that we have genuinely independent investigation of prosecution. my biggest fear, to be honest, is that the white house is pushed to focus on leaks of investigation. it will be the dominant strain. if you remember back to watergate the reason we continued to know what was going on is courageous people talked to journalists especially at the washington post and so the public had a sense of what was moving forward. i think this white house will do everything it can to choke off that flow of information to indim date peopi intimidate people. it ought to worry all of us. preventing that is in the hands of courageous republicans in congress. >> he is tweeting this morning. anything worth it? >> no. >> really quickly, i want to follow up on those that weren't listening last hour, there have been some republicans that have stood up quickly. one of the first is actually one of the most parent and that was senator richard burr, the chairman of the house intell committee. he immediately said i am troubled by the timing and reason of director comey's termination. he called him a good and honorable man. >> is that getting us to the second base of this that we need to get to in terms of the independent council? >> he also said this is making things more confusing and making our job more difficult almost as if he is setting up a predicate for a call for an independent prosecutor? >> he is also opening the door for other republicans to come out and speak their minds and speak more freely. you are seeing some of those republicans walk through that door. i'm seeing tweets from folks like senator flake. today will be critical. these republicans are going to get hammered, joe. i spoke with a democratic leadership and they said we intentionally during his confirmation hearings put him on the record to say yes, if the situation were appropriate i will appoint a special prosecutor. who is going to say that the situation right now is not appropriate? the last man standing who has no political ties to trump, wasn't appointed by trump, who is doing an investigation is gone. >> all right. >> we need to hear from the leadership too. >> absolutely. joining us now, member of the armed services me democratic senator tim from virginia. i want to know what you thought the moment you heard he was fired. >> i was stunned. i think the president took this action because he feels the noose tightening in the russia investigation. there is a clear pattern here when deputy attorney general yates told the white house about his being compromised by she got fired. nsa flynn was fired when contacts with russia became public. attorney general sessions was caught misleading about his context with russia and had to recuse himself and now the president fired the director of the fbi who is conducting an investigation into their ties with russia. >> and you can add to the list who was fired after the president promised to hold him on. he was conducting investigations against some of the most powerful allies in new york. he we got fired as well. >> this is a pattern that's stacking up. the other thing that's really unusual, the letter that president trump wrote had a tale in it like a bad poker player who tells you what you're worried about. he says we are letting you go. thanks for telling me three times that i wasn't subject of an investigation about my russian ties. that shows a deeply insecure president who is very very concerned about this investigation and that's the reason that jim comey got fired. we have got to get to the bottom of this. >> you were in a unique position to talk about this given you were the vice presidential nominee. you were all outraged by the conduct when he put out the letter and then the second letter a few days later. do you see why some believe he shouldn't be in his position and now out dcraged? >> i was critical of director comey. there's a reason you give an fbi director a ten year tenure. they should be able to be criticized. the indetpendentindependent, wh congress likes what he likes or whether the president likes or doesn't like it you give them a ten year term so they can act without fear of being let go. while i was critical i never called for him to be fired. he has to have independence. this russia investigation is making donald trump very very nervous, as his letter showed. that's why i believe he was fired. >> what role, if any, do you think his fishing for a plea bargain or immunity has to do with what happened to jim comey yesterday? so drawing the line it may be hard to draw a straight line. when you stack up sally yates, jeff sessions and now jim comey, what is the connecting tissue between all of these extraordinary actions? and now you see that's known because it has what's called the rocket docket. if their are subpoenas being issued there that tells you things are moving. >> all right. thank you so much. >> thanks for being with us. >> thank you. let's bring in justice and security analyst matthew miller. i want to read for you the report as to how james comey found out he was fired. he was addressing a group of fbi employees in los angeles when a television in the background flashed the news that he had been fired. in response mr. comey laughed saying he thought it was a fairly funny prank. his staff told mr. comey that he should step into a near by office he proceeded to shake hands with employees he had been speaking to and stepped into a side office where he confirmed he had been fired. at that point he had not heard from the white house. >> your response to the events of yesterday and where does it take us? >> i think the president has crossed a red line here. you have been talking about our constitutional checks and balances. one thing is good men and women standing up and doing what's right. we saw a major test failed last night. the department of justice has been independent from the white house. there's no rule, there's no law establishing that independence. and what we saw was instead of standing up for independence they puckbuckled. >> to the president. >> yes. he couldn't do it on his own. >> they buckled -- >> but we see him do this, joe. he bullies people. >> they buckled and actually an attorney general who had done the right thing and recused himself from any russian investigation actually signed off on this tuesday night massacre, so to speak. so donald trump once again stepping in and doing whatever he can do to brush aside any checks or any balances. so the question is, what does the republican party do, the united states senate do? what does paul ryan do? >> well, the leaders we have not heard from yet and democrats will be very aggressive. the house is not in session, as you know. check and others will be aggressive to putting this back on the republicans. the white house and the president this morning are trying to put it back and saying everybody agreed he did such an outrageous thing. >> but for every one of those statements we have a statement from donald trump and republicans saying that comey did a great thing. >> yes. >> that nullifies anything and then a republican trying to whitewash it that way is too stupid. it is to not only have a voting card they are too stupid and they should sequester them, put them in a corner, get bubble wrap, wrap them up and stop them from hurting themselves. their president praised comey. >> he is going to have to explain a lot more. again, you look at a decision like firing the fbi director. can't be done by staff. there needs to be a public explanation because not just because of the politics of it but because of the constitutional issues involved. they have got to explain it or republicans i think will be very insistent about things that will head this investigation into a direction exact opposite of where it is to go. >> you one more question? >> i'm sorry. >> he has so many questions. >> it was joe, not me. >> one more thing, the question was raised this morning that it would be the deputy attorney general who would appoint independent council. he recommended to the president that comey be dismissed. how would that work? do you think this deputy attorney general would do it? >> you 15 seconds, go. >> absolutely not. rob rosenstein had the backbone to stand up and do what was right. he showed last night he doesn't and there's no reason to think he will appoint a special council now. >> thank you very much. ahead on morning joe, senator lindsay gram will be our guest. i look forward to that. yesterday lead the president to beef up his legal team. this morning he is -- >> going to sue us. >> he is tweeting too. liberty mutual stood with us when a fire destroyed everything in our living room. we replaced it all without touching our 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automatically deploying countermeasures. keeping the world of business connected and protected. that's the power of and. the president announcing compromise and firing the fbi the director the next. >> william sessions finally got the message today. it's time to go. he was fired after refusing a request from janet rino to step aside. >> with attorney general at his side president clinton went before white house reporters to say his leadership left the fbi in turmoil. >> after a thorough review of mr. sessions leadership she reported to me in no uncertain terms he could no longer effect fly lead the bureau and law enforcement community. >> only one other fbi director and that was william sessions fired by president clinton in 1993. it came after an internal ethics investigation found he billed the government for personal spending and engaged in falts transactions to avoid paying taxes. nbc's pete williams reported on that case 25 years ago. he joins us next with new rep t reporting on the exit of james comey. you're watching "morning joe". whether it's connecting one of the world's most innovative campuses. or bringing wifi to 65,000 fans. businesses count on communication, and communication counts on centurylink. and these kids are having a bake sale for their soccer team so i need some cash. can i give you my mother's maiden name or my first concert or - [team member] oh, well, now you can just use your phone. 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[customer] thanks! i count on my dell small for tech advice. with one phone call, i get products that suit my needs and i get back to business. ♪ ♪ if you want to stay on top of your health, one simple thing to do -- is take the pledge to go and get screened for the cancers that might affect you. so stand up to cancer and take the pledge at getscreenednow.org it only takes a minute to take care of yourself, and nothing rhymes with "org"... we literally cannot live without it. and if we can't live without it, maybe it's time to reimagine it and make it even better. so it's awesomely fast. no. still nope. now we're talking. so it works here and here and here. and so you can even take the occasional time out. nooooooo! yes!!! yes, indeed. speed, coverage, control. introducing xfinity xfi. find your awesome and change the way you wifi. welcome back to "morning joe". pete, what are you hearing from your sources about how agents and officials there first of all heard about james comey's firing and how they are reacting to it? >> you heard about it which is through the cable television alerts last night. they had no idea. i was talking to fbi people and asking why was comey fired and they said we don't know what you're talking about. the feeling over there goes along three lines. one is comey was generally well liked and well respected. yes, there were agents who were not happy with how he handled the clinton e-mail investigation but he was a person who always talked up the bureau and agents and integrity. they liked that. he was popular and well liked. secondly, the way he was fired, the president didn't call him, the attorney general didn't call him. he literally found out about it standing in front of field office. the question is what happens now in whether the trump campaign was in any way involved with that. this does cast something of a cloud over that. >> and before i let you go part of the rational that we heard on this show was that director comey lost the confidence of the rank and file. from your reporting, is that true? >> not true. the irony here is there was a feeling that he wanted to tell his story about how he handled the clinton e-mail investigation which he did last week before the senate. the feeling was he had sort of finally gotten it past him. it turns out it was one of the things that he didn't accept any mistakes and admitting any mistakes and it ended up being one of the factors against him. >> thank you, as always. nbc's lester holt will sit down with president trump for an exclusive interview that will air on nbc nightly news. ahead this morning senator lindsay gram joins us live. we are back in a moment with our political round table. stay with us. david. what's going on? oh hey! ♪ that's it? yeah. ♪ everybody two seconds! ♪ "dr sen, aftecareful consideration of your application, it is with great pleasure that we offer our congratulations on your acceptance..." through the tuition assistance program, every day mcdonald's helps more people go to college. it's part of our commitment to being america's best first job. ♪ the whole country booking on choice hotels.com. four words, badda book. badda boom... let it sink in. shouldn't we say we have the lowest price? nope, badda book. badda boom. have you ever stayed with choice hotels? like at a comfort inn? yep. free waffles, can't go wrong. i like it. promote that guy. get the lowest price on our rooms, guaranteed. when you book direct at choicehotels.com. book now. well, what are you doing o take care otomorrow -10am? but... staff meeting. 3:45? tai chi. 6:30? sam's baseball practice. you are busy. wouldn't it be great if you had investments that worked as hard as you do? yeah. introducing essential portfolios the automated investing solution. ♪ ♪ ♪ ♪ sfx: engine revving ♪ (silence) ♪ joining us now, former communications director for george w. bush and host of the 4:00 p.m. show, nicole wallice. great to have you back on the show! congratulations. >> thank you. it all started me. >> if you know me, i already have. >> hughh hewitt is here and verified -- >> sankty -- don't get nervous every time. >> what did you say -- >> the problematic idea of wh-- don't know what that means but i like it when you tweet it at me. let's start with hugh he has his avengers body armor on. >> there is no subpoena, no resignations. there are recommendations and last week james comey testified under oath that rosenstein is a great independent -- >> sarah said the same thing 50,000 times. >> i saw that. i read the rosenstein memo three times. he is repeating what every fo former -- when i was in the department of justice and bill webster which is that he has ha and why -- >> why is it we have the president of the united states, commander in chief, guy in charge of the entire executive branch praising james comey for the very things he was fired for. >> i'm not talking about the inconsistency with trump here. >> but you have to because -- >> decide to fire him. >> he's the director of port and i think trumps the director -- >> imagine if that memo had come out and he had not fired him. imagine that he didn't. >> nicole, please, go. >> a lot of people have recommended that i do stupid things through the years and i look at them and smile, that's sweet, thank you. but i would not do something that somebody recommended if it went completely against everything that i had been saying for an entire campaign. >> and trump is the decider and seemed to mix up his role as the firer in chief and commander in chief. the fact you would allow or accept a recommendation to fire the head of the fbi while the fbi is investigating your campaign's ties to russia is insane. it says more about the people around and of course donald trump wanted to fire him. the fact that democrats who by and large believe that james comey is the reason we have a president trump are the ones defending them says something hideous about the republican party. >> yes, well hideous but -- you've got to look at in part chairman burr who stepped out and troubled by it. >> and ben sass and john mccain, the usual heroes but minus them -- >> by the way, you only need three heroes in the senate to change things. >> silence with regards to paul ryan, haven't heard from him, mitch mcconnell. >> what has happened to paul ryan? >> there's a willingness on the part of democratic trump to flaut democratic norm we can talk process, there's optics and then there's substance. the optics is it looks bad, he fired the guy leading the investigation around russian ties and campaign. the substance -- politics and optics are bad but substance of it though, you've been talking about madison and hamilton and checks and balances for two years now. don't worry about the totalitarianism, the system -- and here you have a guy whose personality, strong man, whose actions -- >> i have no doubt that the system will continue to work and that's the thing, hugh, we've had all of these stress tests and we've had the president's aides going on tv on sunday saying the president is not subject to the checks and balances. his authority is not to be questioned but our system has worked. >> and will continue to work. does anybody at the table believe rod rosenstein is involved in a russian collusion. of course not -- >> when did he give up that memo. >> between the testimony director comey gave last week in which he doubled down on the correctness of the behavior and it's referenced that may be the breaking points. >> do you think yates was fired for not enforcing the musli ban? >> no i think- >> okay. >> don't let the streams cross -- >> okay, they are just -- >> rod rosenstein just got there, a man of tremendous st stature -- >> we need a steven larson, some former federal -- >> how do you feel about mccain? >> i need someone like judge webster, as i used to when judge webster who come into the room at the department of justice, i would stand up, you need someone above it all because of russia and as comey testified. >> somebody to stand up to donald trump and that's absolutely -- >> you don't think mckab would stand up to -- >> i think you have someone who has gone through confirmation and now that general counsel of boeing because he was second in line for the chief justice ship and i can't imagine to be independent if you have someone with intig receipt and makes a recommendation to donald trump, he will follow that recommendation based upon the integrity of the person who recommends it. why didn't he dont that with michael flynn. >> when you -- is it saturday nit massacre? >> yeah. >> it is not. it is not a crisis, it's jim comey's repeated failure over ten months to recognize -- >> by donald trump gave speeches celebrating what jim comey did and now fired -- it's laughable. >> that's something, it's context. it's all context. >> it matters an enormous amount. there are 2,000 open terrorism investigations in the united states you need a bureau that works. >> how serious do you take the russian investigation right now? >> i think it's very important the senate intelligence committee do it. i do not want a special prosecutor. >> we're going to get one. that's what happens next. >> rod rosenstein -- >> there are after firing jim comey, i think the lights start to fire. >> there will be an interesting, not happening. >> not happening then you haven't -- >> will you be willing to appoint a special prosecutor. >> he said he would be willing to if he thought it was necessary. patrick leahy said should he appoint it and he said i trust his judgment and rod rosenstein's judgment under oath. >> that is what she'll say on a repeat because there's nothing else to say and you're doing it on a loop too with all due respect. it is unbelievable. sorry. >> it's called the presidency is failing day by day by day lies. sorry. >> hugh hewitt, eddie, thanks bo. >> are you going to be around today? >> yeah, people can be watching you on msnbc all day, they love you here. >> i think you're flat wrong and probably even doing trump's bidding but -- >> talk to anyone at the white house. >> lindsey graham joins us live and bob casey who calls the comey firing nixonian. fountains don't earn interest, david. you know i work at ally. i was being romantic. you know what i find romantic? a robust annual percentage yield that's what i find romantic. this is literally throwing your money away. i think it's over there. that way? yeah, a little further up. what year was that quarter? what year is that one? 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help protect yourself from dvt and pe blood clots. talk to your doctor about xarelto®. there's more to know. can we at least analyze customer can we push the offer online? legacy technology can handcuff any company. but "yes" is here. you're saying the new app will go live monday? yeah. with help from hpe, we can finally work the way we want to. with the right mix of hybrid it, everything computes. you totanobody's hurt, new car. but there will still be pain. it comes when your insurance company says they'll only pay three-quarters of what it takes to replace it. what are you supposed to do? drive three-quarters of a car? now if you had liberty mutual new car replacement™, you'd get your whole car back. i guess they don't want you driving around on three wheels. smart. with liberty mutual new car replacement™, we'll replace the full value of your car. liberty stands with you™. liberty mutual insurance. some of you may have read recently i'm on twitter. i'm not a tweeter. i'm there to listen, to read especially what's being said about the fbi and its mission. and sometimes it's a wonderful place, sometimes it's a depressing place and sometimes it feels like i'm all of a sudden in every dive bar in america where i can hear everybody screaming at the television set. but it is free speech. >> well, that was james comey just two days ago and we hope he's not reading twitter this morning. welcome back to "morning joe." it's wednesday, may 10th. we have msnbc contributor mike barnicle and host of "deadline white house", at 4:00 p.m. >> deadline, baby. >> svu -- >> lots of people watch svu. >> i love it. what areat hour and perfect for you. we're so glad you're like a huge member of the msnbc family. >> your first guest should be ksh. >> tell me. >> the man who knows about the rebel onthan anybody in american popular culture, historian, and sort of our own version of -- john meachum and joining the conversation, associate editor of the "washington post" bob woodward and michael beschloss. let's start with historians first. john meachum, i loved your quote because really as you look at how donald trump has ravaged the justice department and the law enforcement arm of the executive branch, it is now up to the united states senate to actually stand up to a man who sees himself as an authoritarian and auto krat and man who's power is not to be questioned. give us the bird quote again and tell us just how important the united states senate is to this country's democracy this morning. >> what he said in the farewell address, if the constitution is ever to be strangled by uxsurpers or demagogues will witness its dying agonys on this floor. which meant the senate itself was the last line of defense. when you look at the whole structure of the constitution, the senate ultimately was i think alexander hamilton said the saucer in which the coffee was to cool. so there has to be a final court here. that's where we lodge the authority to convert and remove a president and federal judges. senators have, a, the longest term of anyone in the system except for lifetime appointments and these days they are virtually lifetime appointments and they are tasked withstanding up ultimately to these abuses of power. and what we'd have to find out is to what extent was russia involved and possibly with the trump campaign, possibly, during the last campaign, which was as many people have noted, essentially an attack on country. >> and michael beschloss, i want to ask you, if -- what historical parallels there may be where history is rhyming with the event and what your take is on -- i don't want to question the motives of my friends that keep bringing up the deputy attorney general as a justification for firing but it is certainly -- it seems to be a strange fig leaf when the deputy attorney's very thin letter is condemning james comey for the very things the president othe united states is praising him for for the past six months. >> you're absutelright, joe. a thin letter it was. and if you're looking for a place in history, i love the video you had during the last hour about archibald cox, there are certain parallels that fix with nixon and cox and certain that don't. but the ones that do are these, nixon fired archibald cox and his intention was to shut down the watergate investigation. he was saying essentially as we heard from again, your wonderful conversation with sara sanders, nixon was saying move on this investigation has gone on long enough. so he fired the special prosecutor, sent fbi agents to surround their offices with the idea that they might seize the evidence and that was going to be it. and the only reason the things changed was that members of the senate, especially members of nixon's own party republicans said this is not something that shows respect for our institutions and our democracy. this is the way an autocrat behaves and you cannot have an investigation done by your own justice department. they demanded a new special prosecutor and only because of that protest both in the senate and the house and by americans across the country was nixon forced to hire a new special prosecutor, leon jaworsxi just as tough. >> the second historian to say this is the way an autocrat behaves. >> i wonder what your views are on pt comparisons here, the nixon library tweeted last night rejecting that comparison saying president nixon never fired a director of the fbi. are there comparisons here in terms of undermining an investigation into the president? >> indeed there are comparisons. this is a remarkable moment. it's not something to take lightly. but as michael beschloss was saying, there was a lot of pressure on nixon after he fired special prosecutor ash muchibald cox but because of that pressure, he blinked in two ways, agreed to hire another special prosecutor and turned over a bunch of the tapes which were the issue here, those tapes contained a lot of incriminating information then that gave that accelerated the independent investigation by leon jaw orski and eventually there were more tapes in the supreme court forced nixon to turn those over and that ended the reign. the circumstances also in fairness are quite different. by the time special prosecutor cox was fired, there had been four days of public testimony by nixon's counsel john dean, devastating testimony saying that nixon was leading the cover-up. there was also the disclosure of the secret taping system, which told everyone involved, hey, there's a way to get evidence to establish what really happened. in the case of the russian investigation, there are lots of questions that are going to need to be answered, big question here is -- and it's right to focus on the senate, can they step up here and conduct an inquiry that is bipartisan, aggressive, done in a way that you really examine all witnesses and all evidence? that's very hard for the senate to do. >> well, speaking of the senate and investigation, let's bring on from capitol hill for first interview, the morning republican lindsey graham of south carolina. another boring day -- >> nothing going on. >> i'm going to disney world. >> right. >> already there, sir. >> a lot of people in strange costumes. >> i don't know what ride you're on there but it's a weird ride. so chairman burr, richard burr, ben sass and bob corker all expressing concerns about the timing of this firing. do you share their concerns along with senator john mccain? do you share their concerns? >> about the timing -- the question is was it justified? you could make a pretty good case comey has been compromised in terms of being able to lead in the future. i like the guy think he's very sincere. this is not watergate, i don't remember the democratic leader calling for archibald cox to be fired and you have democratic leader calling for this guy to be fired. i think we need a new face or new guy or gal and move on. >> senator graham, it's nicole, you and our friend, my old boss, john mccain have been the tip of the spear in terms of profiles in courage and trying to get to the bottom of exactly what russia was doing and i think yesterday you walked back a little bit but said you were interested in understanding donald trump's business connections if there are any -- >> still am. >> do you have any concern about the optics of firing fbi director while the bureau is investigating those two things, donald trump's ties to russia? >> the fbi is not mr. comey, it's an investigation that will live long after he's gone. if you think this going to result in the senate stop looking ats trump it won't or the fbi will stop its investigation, it won't. you have to understand that democrats have called for this guy to be dismissed for months now all of a sudden he's been dismissed -- >> but the democrats -- that's the point, senator. they think he made president trump president and they are defending comey and republicans aren't, you don't think that's bad for the party? >> i think the american people made trump president. i don't buy into this idea that -- you know, the only way you're going to have a fair hearing in some people's eyes is to convict trump and the only way to have a fair hearing is stop the investigation. on fox everybody is okay with this, by the way. >> of course. >> what a surprise. >> but it's no surprise -- >> it's a great network. >> but here's the deal. i don't care what fox things. i don't really care what y'all think about the timing. i've got a job to do and i'm going to do it this. this guy, mr. comey, is a fine man who has compromised himself multiple ways. i spent yesterday morning trying to explain what he meant about huma abedin and weiner, i have the distinction impression she send thousands of classified e-mails to find out that's not true. let's start over and get somebody in the fbi we can all agree is capable of doing the job. >> senator, the president called you yesterday to give you a head's up -- >> yeah, about five minutes. >> about five minutes, called about five minutes before it was announced, right? >> yeah. >> during the course of the call, did you get the opportunity to ask him why now? >> no, he just told me that he got a letter f the deputy attorney general and he said he thought the guy couldn't lead the agency and i said that's your call but you need to pick somebody that we all have confidence in. >> curious, and i know you don't care what we think, i'm curious what you think of our questions. do you think -- >> good ones. >> thank you. >> that was the correct answer, you also get -- >> many happy years to ask them too -- in all seriousness, i understand what you're saying but i'm not overly worried about this. i'm worried about where we're going as a country. >> i agree with you but i think this actually impacts where we're going as a country because i feel this president is not able to be truthful and puts people out there to be stooges for his interests that are not in the interest of the country. putting that aside though, my question to you is, don't you think it's curious that flynn stayed in place for 18 days while the questions were erupting around him. he was warned by flynn, quite frankly joe warned him about flynn. we complained on air right and left just as much as we complained about the potential of rudy giuliani being secretary of state, everybody was concerned about flynn. yet it took weeks and weeks and weeks for him -- >> pull up. >> to pull the band aid off and comey goes like this and recused himself from the russian stuff and jumps back in. >> hey, chris matthews, what do you think of my question? >> what's your question? >> can i take the 18-day thing on. >> yeah, here's what i think. sally yates did her job. i'm a big sally yates fan. i thought she did it right by going to mccann and saying you have a problem with flynn. i have zero problem with what she did. i don't think she leaked this to the weapon weapon, mccann talked to her and next day he apparently looked at the evidence that gave her concern, 18 days the guy was fired and "washington post" article came out in the middle. the main thing, you can criticize the president he should have sidelined flynn, should have done it earlier, that's all fair game. >> but -- >> that's a good answer. >> that's a good answer. he always does that. >> to compare that, 18 days to like he gets something from assistant attorney general and suddenly all of the alarms go off -- it's a five-alarm fire and suddenly he has to be fired at once. >> he probably should have fired him with schumer called for it and we wouldn't be having this conversation. >> oh. >> what would we be saying if we fired him a month ago when schumer said fire the guy? >> i think we would be saying something completely - >> isn't that the point? >> thatctuay is the point, that as the russian investigation -- as subpoenas start to go out and as a plea deal possibly is being offered for michael flynn, suddenly it's all of these things start to heat up, suddenly, oh, my god, we got to get rid of him. that is the exact question? lindsey, more importantly, why didn't he fire him right after he got elected if this was such a great concern because he's firing comey for the very reasons that he praised him during the campaign. >> all i can say is that i like comey, i think he's tried to be as fair as he knows how to be and made mistakes, it's not a misintent crime, he took on the role of being attorney general. the letter about the clinton investigation being reopened, i can understand why democrats are concerned about that. what he said about huma abedin and weiner a few days turned out not to be true. the bottom line he has the right as president to dismiss this guy. there's a case to be made that he should be replaced. now the question is who is he going to replace him with? the russian investigation will go forward in our committee and fbi. it's a counterintelligence investigation not a criminal investigation. the day it becomes a criminal investigation, we'll talk about a specialrosecutor but that's not what they are investigating. >> senator, you believe the fbi may be better off under new leadership given all that comey has said since july. do you really believe as you said this morning, no concerns about the timing of it, a president's whose campaign is under investigation by the fbi has fired the man leading that investigation? that doesn't concern you at all? >> i'm not concerned because i know the fbi is made up of people who will do their job. i know the senate is going to move forward. i know our system is bigger than mr. comey. so no, i don't believe firing james comey is a get out of jail free card for the trump campaign, i don't believe that. >> but the fbi may be solid, a lot of us agree on that. what about the other side of that equation, you're not upset by a president firing the man whose leading the investigation into him and his campaign? >> my democratic colleagues called for his firing. >> at the same time donald trump was praising him for courage. >> nobody is consistent when it comes to comey. >> right, all right lindsey graham. i am genuinely confused just as you were with myka's question. >> no, it was a good question. >> really. >> michael beschloss, so there you go, we're going to be very surprised, i'm very surprised by that. i thought that lindsey would take a more independent palestine as mccain has, sass has the four or five republicans that stood up to trump throughout this process. i guess we're going to see where this all lands based on where these people are from and when they have elections. >> i think that's right but we really are dependent on them because he was saying the world doesn't begin and end with jim comey, he's righ there, but that only is true if you've got a new fbi director who is above suspicion and whom everyone thinks this is someone who is going to pursue this investigation as zellously as it's been going on. and in the absence of that, i think you really do have to get a special prosecutor, plus, we haven't even begun to talk today about the possibility of an independent 9/11 style commission to look into the investigation of what russia did in our campaign last year. >> i want to ask if you think more of the responsibility forgetting to the bottom of trump's team's ties to russias falls to journalists and journalism now that we have the head of the bureau investigating it out. >> i think that's always the case. more so this time. at the same time, i think lindsey graham is taking a calm approach to this. let's remember the fbi under comey or under somebody new is not going to be in charge of this investigation, the attorney general sessions recused himself. so the deputy attorney general -- >> yet he signed off on a letter firing the guy running the investigation. >> a very good point. one of the many, many inconsistencies but the fbi is not in charge of this investigation. they gather facts. the criticism of comey is that he set himself up as the decider in the hillary e-mail case, which he did, but traditionally and the argument here is let's get it back to the professional prosecutors. >> but bob, when we get it to professional prosecutor s who makes a decision whether they can prosecute a case if grand juries come up with evidence of crimes? >> allegedly and according to what they've said, the deputy attorney general -- >> the guy who just recommended firing man who's running the russian investigation -- the circle is complete here. >> but, joe, that's the problem here. the fbi is not running the investigation. the investigation is over seen by prosecutors. there are now stories that the grand juries -- they are looking at this and issuing subpoenas, that's not being done by the fbi. that's being done by prosecutors in the justice department. that's where the ball rests. now, whether it's going to be done properly, aggressively, we're going to have to see. but nicole's question is a very good one, i think the responsibility quad ruples on the part of the media to dig into this very system attically and get answers, even lindsey graham with his kind of ratiol cool approach, things are going to be okay, but we need to answer these questions. a remarkable thing happened when the intelligence community issued that report saying russia interfered in the election and people who have read the highly classified version say the evidence is compelling 100%. who was involved in that? who knew about it? we better get answers to that. >> bob woodward and michael beschloss, thank you both. still ahead, msnbc's ari mel ber digs into the claim to treating hillary clinton unfairly and bob casey who blasted the firing as nixonian and we're moments from a photo op of russian's foreign minister sergei laf rof who happens to be in washington today. president trump will be meeting with him this morning. it will be the highest level face to face meeting with russia of the trump presidency. we don't we let that breathe for a seconds. we'll be right back. lly aspiratd 5.0-liter v8 engine. a 10-speed direct-shift transmission. a meticulously crafted interior. all of these are feats of engineering. combining them with near-perfect weight distribution... ...is a feat of amazing. experience the first-ever 471-horsepower lexus lc 500 or the multistage hybrid lc 500h. experience amazing. the following ad for your viewing convenience. i finally switched to geico. oh yeah? ended up saving a ton of money on car insurance. i hear they have a really great mobile app. the interface is remarkably intuitive. that's so important. ♪ (flourish spray noise) (flourish spray noise) (flourish spray noise) (flourish spray noise) the joy of real cream in 15 calories per serving. enough said. reddi-wip. 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[ laughing ] show me the billboard music awards. show me top artist. show me the top hot 100 artist. they give awards for being hot and 100 years old? we'll take 2! [ laughing ] xfinity x1 gives you exclusive access to the best of the billboard music awards just by using your voice. the billboard music awards. sunday, may 21st eight seven central only on abc. guess -- i took con law 1 and 2, should have taken 3 because i didn't realize if you read your constitution, that the most powerful person in our constitutional republic is actually the -- the deputy attorney general. >> deputy attorney general. apparently, even the president of the united states. so what did this deputy attorney general write in this letter that was so damning for james comey. >> you're asking all of the right questions. let's start with that point. confirmed 14 days ago and the government story, the trump administration would have us believe he shows up at doj and puts books on the shelf and looks at the computer and meets his assistant, i'm going to call for the first mid stream firing of the fbi director in american history without the conclusion of any investigation or opr, office of professional responsibility results and do that in a letter and the president will respond to me the same day and that's normal. that makes no sense. number two, to your question, what's in the letter? what we are led to believe accoing to the trump administration, at the primary reason to remove jim comey, he was too mean to hillary clinton. you don't have to be a lawyer or expert on doj policy and procedure to know that makes no sense. number three and finally, the letter says the entire goal is to restore public confidence in the doj and fbi in this process, how do you restore confidence when you issued this three page letter/press release with material in it that is misleading about a process that everyone observed over the last year. it makes no sense in a way that calls into question mr. rosenstein's question to do his job right now to be the independent overseer of any russia probe because attorney general jeff sessions said he was recused. >> rosenstein's reasons for comey's firing, actually contradict the president's of the united states praise of comey for the same exact actions. >> bingo. they completely contradict donald trump's judgment as candidate about it and again, to go back to the attorney general, who is his boss, even though he is recused or recused while not acting in a recused manner, which itself a problem for the doj's independent but jeff sessions on the record contemporariously when it mattered saying he agreed with the letter about t e-mails. >> said it was absolutely necessary. >> sessions said it was necessary and good in october. why is it that was good in october was bad now. what was praise worthy then is now grounds for firing? these are questions that cut to the heart not of the politics or ideology, he ran on changing things and won fair and square and can change things but these cut to at the tithe heart of wh have law and order in this country. >> they are just stupid. they come across as stupid to make -- or else they think we're stupid, to say, you know, the assistant -- what is he -- the deputy attorney general has made this recommendation and it's because of the hillary -- when you have donald trump again, we just can't say this enough, praising comey for the very actions and now claiming to be firing comey for. how stupid do they think americans are? >> a guy in the deputy ag probably couldn't have picked out of the lineup two weeks ago before confirmed now guiding policy out of the white house to dismiss one of the top ranking officials in the country. let's go to capitol hill democratic senator bob casey of pennsylvania standing by there for us. senator, i take it you don't agree with the decision president trump made to fire director comey. what's your biggest problem with it? >> the biggest problem as i said last night, because it is nix nixonian in this sense, he opportunities if he felt strongly about comey and a lot i had trouble with as well, two time periods within which to make a decision like this, during transition, you have to ask why that wasn't a major consideration during transition if he felt so strongly, secondly, from january 20th to march 20th, but once march 20th arrived and director comey told the world about the investigation that had been going on for months about the potential ties between the campaign and the russians and that whole line of inquiry, at that moment i think the administration forfeited their opportunity to take this kind of an action. so whatever is in this memo, which might all be true by the way in terms of what people believe about director comey, what's in that memo is all past tense and that's why you have the a circumstance here as people on the set know and joe knows as a lawyer, who have the appearance of i am propriety, all through legal ethics and judicial ethics and i think politicians even elected officials have to be cognizant that appearance of i mpropriety can dominate a circumstance and that's what's happening here. >> we haven't talked about it enough, it all chills other people inside the bureau. >> it chills -- i know this is shocking, but just like generals and admirals who want to get under the shoulder, there are people who actually have a career that want to get ahead in the justice department and fbi. they have now been basically told you step in this president's way, you get fired. >> this is troubling in terms of the pattern, not just in terms of trump firing people who are doing oversight over him but also the pattern of when he's firing them. let's reminds people that comey was set to testify again, i want to know from the senator is that the first test of this congress? and of this senate is how quickly and whether senate leadership decides to still call comey before the senate and what are some of the most important questions forim in this moment? >> i don't think there's in question that now former director comey should be called. certainly for the intel committee, there's an intention to do that. you're right, it is a test. i'll tell you about another test for rod rosenstein and holding it here. these are the special counsel regulations that very simple, he has the power right now, this morning, to appoint a special counsel who would be separate and apart from the justice department to at a minimum begin to finally get answers on these russian i can't questions, i think for rod rosenstein, this is a simple pass/fail, but even if you pass this test, it's not nearly enough. we need an independent commission and we also need to consider some new mechanism where a special prosecutor can be appointed. there's no -- that term doesn't exist in the law right now. the only thing we have is a justice department regulation that allows the appointment of a special counsel. i think it would be very helpful but it's not enough because there are some limitations on even that. >> senator casey, ari melber here, do you believe the attorney general violated his pledge to recuse and if so, what do you believe the consequences should be? >> ari, i don't profess to be an expert in howecusal works and how you would apply the standard, but again, it's this appearance that someone -- the attorney general recuses and i sent a letter on march the 2nd, please recuse and also appoint special counsel. he hasn't done that. but when you participate in any way, if your name is on a memo, if you're part of the determination, i think the attorney general sessions would have been better off for himself and nation if he stayed 100 miles away from what was a very bad decision in and of itself. >> senator bob casey, thank you very much. >> ari melber, thank you as well and still ahead according to the president, washington will soon be thanking him for firing jim comey. our next guest says he agrees with the firing but won't be offering any thanks. the always outspoken john poe dore etc. joins the conversation next. dear predictable, there's no other way to say this. it's over. i've found a permanent escape from monotony. together, we are perfectly balanced, our senses awake, our hearts racing as one. i know this is sudden, but they say: if you love something... set it free. see you around, giulia ♪ "how to win at business." step one: point decisively with the arm of your glasses. abracadabra. the stage is yours. step two: choose la quinta. the only hotel where you can redeem loyalty points for a free night-instantly and win at business. explore your treatment options with specialists who treat only cancer. every stage... every day.... at cancer treatment centers of america. learn more at cancercenter.com/experts you're going to be hanging out in here. so if you need anything, text me. do you play? ♪ ♪ use the chase mobile app to send money in just a tap, to friends at more banks then ever before. you got next? chase. helping you master what's now and what's next. breaking news, we're able to show you secretary tillerson meeting with sergei lavrov, to exchange our views on a very broad range of topics, thank you. >> does the comey firing cast a shadow over your talks -- >> what about the investigation? >> and they are joking about it. that was secretary tillerson and the russian foreign minister sergei lavrov. >> i've got to make a nfession. >> he just made fun of of the comey -- am i wrong? >> sergei lavrov did. i actually think that that makes sense, that they would be laughing -- >> of course, they are here to witness, america, there's the truth for you, there's the story. look at that. >> if myka will stop -- >> i'll be quiet. >> really? >> really. she had a chris matthews questions, 48 minutes. >> you guys aren't even married yet. >> i know. sergei lavrov, right, that guy he's like one of these people, he's a tough sob and i wish it was -- i've been watching this guy for years, he's a tough, tough customer. >> i thought that little look he gave andrea mitchell there, comey, what are you talking about? >> he was fired. >> but clearly -- >> in russia we do something different. >> the russians that was representative of the way the russians field. here it is, it's manifest itself in the president of the united states -- >> in russia. >> fbi director on the orders of a deputy attorney general confirmed two weeks ago. >> one of the things that shocks me the most about this, jon, the fact that the white house had no idea that they would get blowback from it, like one report after another, there's i think there's a "washington post" report just came out and we've been hearing it for 12 hours now, they had no idea that the world would be shocked by this. >> i mean, if anything tells you that this is an amateur hour white house that has -- h brilliant feel during the campaign how to make news and create outrages but has no idea what its impact and no idea what its actions have on the general body politics, this is the proof of it. if that story is true -- >> do you think it's because trump is a want to be autocrat surrounded by people that can't tell him no? >> no, i think this is like keystone cops slap stick bubry, no one will care, democrats and republicans don't like comey, you're right, that's right sir, absolutely. what a brilliant analysis. >> like hogan's heroes. >> right, i don't want to make that analogy -- >> or more nefarious interpretation that there's something there they want to stop the wheels on, right? >> you can do that -- you can do that better too. >> letting him continue was a bigger risk than taking the public relations hit. >> you can do it better. i mean, the classic thing would be line up injure next fbi director so that everybody who has to defend you has a talking point where they can say, that's the past. this guy is terrific, former prosecutor, he did this and did that. >> a day trader, he didn't want comey to testify later this week. >> that's a good anl gi. >> he didn't want people talking about sally yates. this is barack obama tweet was to distract people from testimony that had happened the day or two before. >> sally yates was amazing. >> you have this amazing thing where it's this -- >> i think we should have her on the show. >> gut instinct change the story, redirect, do something different without any sense of the consequences. so he puts out that barack obama tweet that leads to this event -- >> it sounds like you're describing a mental condition. >> well, i'm not a psychiatrist so -- i'm in positive position -- >> did i say he was? it sounds like a we haef yoral issue. >> heidi -- >> not that this will shock anyone at the table, i had the advantage of being off air for 20 minutes during that presegment and they are now confirming what we know is plainly obvious, that trump was growing increasingly enraged that his white house and p.r. people and administration was unable to just make this russia story go away. this had been brewing for a couple of weeks. >> we've been hearing this now for a couple of months. donald trump is angry that this isn't going to go away. we were saying right after the election when he was attacking the intel community, you better stop because this is going to be a 2 or 3-year russian investigation. we were saying that in november, how is there nobody around him that can say, hey, boss, you remember when i told you that you needed to irrigate the 17 kt green in jersey, i was right, you didn't listen. there's going to be an russia investigation -- >> that supposed to be an accent? >> queens ac. >> it is an accent i'm not sure -- >> jersey/queens accent. >> fair enough. here's the thing, so -- >> it's actually a dope accent, from the dope dialect. go ahead. >> thank you very much. i would say here's what i would say, this shows how he thinks as somebody never in politics how he thinks politics in washington runs. barack obama made this go away george w. bush made this guy away and clinton made the other thing go away. why can't you make this go away? >> nothing goes away in washington. >> don't you think he made the likelihood of an independent counsel or special investigation all the likelier? in other words by acting impulsively and saying i'm going to make this go away by getting rid of comey, he made the odds greater -- >> i don't link the analogy to archibald cox, but there's one way it's similar, nixon ended up trashing his own reputation and advancing the cause of his enemies, forcing the appointment of another independent special prosecutor who was -- who was probably worse for him than archibald cox -- >> i think he acts as a day trader and three days later the trade might kill him. >> there's another way of describing that behavior. >> you canescribe it but nobody else is following you there. >> i follow you but don't know what the condition is. >> i'll tell you what it is, it's really bad for this white house. >> that's true. >> he's uncontrollable, he's impossible. he's impulsive and he bullies and he doesn't tell the truth and doesn't care about anybody. and he doesn't care about this country. >> in the end he's the one aside from us, he's the one whose going to suffer the consequences of this. >> that's correct, it's all going to come tumbling down. >> and his party. >> that's the most important thing for republicans listening right now and trying to figure out what to do, nancy pelosi could be speaker of the house in a year and a half, ee leked speaker of the house in the year and a half if republicans don't respond to this correctly. could you -- you're in a unique position, you're fine with the firing of comey. >> i think comey should have been fired on july 5th, 2016 when he showed immense prosecutorial indiscretion by announcing that hillary wasn't charged and yet did something wrong. >> that is a great argument, he should have been fired then. >> could see that. >> that said, how do republicans properly respond to this? >> he's walked them down a one-way -- like the marching band in animal house walked that down into the alley with the wall because if they oppose him, a lot of the republican base is going to be angry at them. if they support him and the news gets worse, then of course it is like the republicans in '74 who lost 72 seats in the house. >> thank you very much. >> up next, republican congressman charlie dent joins the conversation. by the way, joe and i had the opportunity to join forces with a great organization last night that empowers kids and young dids from conflict regions around the world. for over 20 years, seeds of peace has been helping build up the next generation of leaders with the critical skills they need to boost social and economic and political change in their home communities. my family has been involved with the group for years and we were happy to take part in yesterday's event. thank you very much. for more information, by the way, visit seeds of peace.org. keep it right here on "morning joe." with unitedhealthcare, you can get rewarded for all kinds of things... like walking. hey, honey. dad, where's the car? 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[ laughing ] show me the billboard music awards. show me top artist. show me the top hot 100 artist. they give awards for being hot and 100 years old? we'll take 2! [ laughing ] xfinity x1 gives you exclusive access to the best of the billboard music awards just by using your voice. the billboard music awards. sunday, may 21st eight seven central only on abc. welcome to the state department. >> thank you. thank you very much. i want to welcome foreign minister lavrov to the state department and express my appreciation for him making the trip to washington so we could continue our dialogue and our exchange of views that began in moscow with the dialogue he hosted on a very broad range of topics. thank you. >> does the comey firing cast a shadow over your talks, gentlemen? >> was he fired? you're kidding. u're kidding! >> yes, he was fired. >> i'm sorry, there is only one sergey lavrov. it's just resentment and contempt towards the rest of the world. >> that was just a couple of minutes ago at the state department. our own andrea mitchell asking the question that drew that response from the foreign minister. she joins us now. andrea, what did that look like to you, that response from the foreign minister? >> reporter: you know, you've got to love it. sergey lavrov, at least he's a foreign minister with a sense of humor. you know, he's wily, he's crafty, he's experienced. he has run circles around numbers of american secretaries of state. he's here. you can see, i think, behind me the limo. he's going to go to the white house next. obviously these are very important talks. it's the first talks, willie, joe and mika, since they were together in moscow. that was very chilly, as you know, and tillerson said afterwards it was the lowest point in u.s./russian relations. some of us remember the cold war and it was pretty low back then. but in any case, they are trying to talk about other things besides the fact that james comey was fired and russia does clearly overshadow everything. willie? >> all right, andrea mitchell, always on the front line asking questions. thanks so much. >> all right. with us now republican congressman charlie dent of pennsylvania. also with us professor of international politics at tufts university and a regular contributor to "the washington post" daniel dresner, author of "the ideas industry." a great day to have you. congressman, let's start with you. what's your reaction to jim comey's firing? >> well, he's a good and honorable man. he was a good man in a tough spot. i'm most concerned right now about how this firing is going to affect both the congressional investigation as well as the fin investigati -- fbi investigation. i think they owe us an explanation. very perplexing and surprising to say the least. boy, this is tough. i guess i would say it's going to be tough to resist calls for an independent investigation or a select committee at this point. i'd like to talk to some of my colleagues about this to see where they are. i have great faith in burr and warner, conway on the intelligence side is a good man. i served with him on ethics, so i have confidence in them, but it's going to be harder to resist calls for -- >> at this point, listen, i don't know how republicans don't call for that and face voters in 2018. i think it's the only way they do it. so, dan, a perfect day for you to be here. you've written a book about how partisans and plutocrats are transforming the marketplace of ideas and you've been very concerned about donald trump and his autocratic leanings. >> yeah, it's sometng of a concern. donald trump ran for president and managed to do something which i didn't think was possible, which was he managed to get foreign policy intellectuals ranging from pretty far left to the pretty far right to agree this guy was going to be an unmitigated disaster as president based as on what he was saying and in the end it didn't matter that much. >> and you're saying how expertise is being devalued. we saw it in brexit. >> when they said i'm happy, i don't want the experts on my side. >> they're overrated. and now it's the same thing with donald trump. >> right. so there are three trends that i talk about in the book, all of which help to enable someone like donald trump to spout what he does and become president. which is, first, the erosion of trust in expertise. the fact that experts can say something and people will dismiss them no matter what. second, the rise of political polarization. which means essentially that political ideologues on both sides want their own house intellectuals. they don't anyone in the center. and third and most important the rise of economic inequality, which means you have this new class of plutocrats that has more money than they know what to do with. they create their own intellectual salons to talk about ideas. but the ideas they're promoting tend to be ideas that sort of confirm their preconceived world views, which aren't always what the rest of the country might think. >> so, congressman, let me ask you against the backdrop of all of this, the president, the way he's conducted himself in the first 120 days. the white house said this morning on this show when we asked if the dismissal of director comey was about russia, sarah sanders said, quote, absolutely not. do you buy that this had nothing to do with the russian investigation? >> well, that's a question we're going to have to ask. russia meddled. we know that. nobody denies that. i can't explain the timing. look, i'll be very honest with you. a lot of my democratic colleagues have wanted director comey's head on a plate. they have been hyperventilating for some time. i've witnessed this onany occasions. i sure hope the firing had nothing to do with the russian investigation. but it's pretty tough to fire the guy who's investigating your campaign. i understand it's a counterintelligence investigation, not necessarily a criminal investigation, but these are the questions we'll have to ask. >> the alternative explanation from them was they were upset with the way the hillary clinton investigation was handled. >> which of course donald trump praised. >> which he praised as recently as a week before election day. so one of those two is their explanation. which one makes the most sense to you? is it that they're upset about the way hillary clinton was handled or they're upset they were being investigated about russia? >> well, this gets into the issue of rosenstein. i understand rosenstein's rationale, he didn't like the way comey handled the clinton investigation, but obviously president trump made statements that were quite different. so trump's rationale and rosenstein's rationale i don't think are consistent. so i think we need an explanation from the administration as to exactly why they did this and particularly now the timing. we need an explanation. >> so there's a calcification going on not only in washington, d.c. but really the political debate, the intellectual debate in this country and across the world. in part, as you're saying, it's because people are going to their own experts, they're buying their own experts. that's the same thing with the voters. they choose a tv station they want to watch that reinforces all of their pre-existing prejudices. they then get into the car and go to work and pick the talk radio station that does the same thing and then go online after work and go on facebook and go in their own communities or on twitter, their own communities, and they have feeds that reinforce all their pre-existing prejudices. how do we bre out of that? >> it's not going to be easy. essentially, firstf all, you're going to have to have some money that actually funds the kinds of voices that represent diverse points of view. it's going to have to be attractive enough that essentially you want everyone listening to them. part of the reason conservatives watch fox news is because they know other conservatives watch fox news. so what you want to do is presumably create forms of entertainment or forms of information that everyone has to read because they know that everyone else is reading them. and to some extent that still exists. people are reading "the new york times," people are reading politico and "the washington post" because it's a great newspaper. so these things are still going on. the other thing is, unfortunately, we need a little bit of patience. you need -- you know, you need to see a sort of waning of political polarization. weirdly enough, depending upon how donald trump does over the next three or four years, that might actually happen but we don't know that. >> let's turn to health care really quickly in the minute we have left. you voted against the bill. what happens next? >> well, the senate is going to gut this thing. they're going to gut it and may send back a bill or may not. but what they send back will be considerably different than what we sent them. bottom line is the people who were placated and appeased to get the bill out of the house will probably be nowhere to be found on the rebound. and so i think that's really the conundrum that we're in. i've seen this play call before. you appease the real hard right members, get the bill over to the senate. send it back and then maybe it's more reasonable. people vote for the bill and then those of us who vote for the bill are attacked by the folks whore sell-outs. >> while they scatter. there's no way the senate is ever going to pass a bill that cuts $800 billion in medicaid funding, is there? >> no. in fact i think they're going to listen very seriously to what the governors had to say, kasich, snyder, sandoval and hutchinson who put forward a serious proposal on medicaid reform which wasn't considered in the house but i believe it will be considered in the senate. and the tax credits. they're going to make sure the tax credits are more generous so people who transition from medicaid onto the exchanges will be able to afford it. >> charlie dent, best, fairest guest today, thank you. >> dan, thank you for being with us. >> thank you very much. his new book "the ideas industry, how partisans and plutocrats are transforming the marketplace of ideas." that does it for us this morning. stephanie ruhle picks up the coverage right now. good morning. i'm city of new rustephanie ruh. we've got breaking news to cover. the firing and the fallout. president trump axes fbi director james comey setting off a national firestorm. >> mr. president, you are making a big mistake. >> saturday night massacre. >> comey was fired because of the russians. >> the white house in a late-night, then early mor
New-yorkUnited-statesMoscowMoskvaRussiaWashingtonTurkeyFloridaBostonMassachusettsCaliforniaVirginia what would the world look like now, 2.5 years later? for starters, republican in congress would regularly be saying things like this: "i am deeply grateful for the opportunity america has given me, but the giant american corporations who control our f economy don't seem to feel the same way. they certainly don't act like that. sure, the company's wave the have no loyalty or allegiance to america. levis is an iconic american brand, but only operates 2% of its factories here. dixon ticonderoga, maker of the pencil, moved all of its production to mexico. general electric shut down a factory in wisconsin and shipped the jobs to canada. the list goes on and on. these "american" companies show only one real loyalty. to the short-term interest of their shareholders, a 3rd of whom are attorney i investors. foreign investors. they ship jobs overseas to save a nickel, they will abandon loyal american workers. politicians love to say they care about american jobs, but those samey politicians have cited free market principles and refused to intervene for american workers. of course, they ignore those same suppose at principles and intervene regularly to protect the interest of multinational corporations and international capital. the result? millions of good jobs lost overseas at a generation of stagnant wages. growing inequality, and sluggish economic growth. if washington wants to put a stop to this, it can. if we want faster growth and more good american jobs,s, then our government should do what other leading nations do and act aggressively to achieve those goals instead of catering to the financial interest of companies that have no allegiance to america. the truth is that washington policies are a key driver of the problems american workers face. from trade agreements to tax code, we have encouraged companies to do business overseas and keep wages low. all in the interest of serving multinational companies and international capital with no particular loyalty to the united states. it's becoming easier and easier toto shift capital and jobs from one country to another. that is why our government has to care more about defending and creating american jobs than ever before. not less. we can navigate the changes ahead if we embrace economic patriotism and make american workers our highest priority. rather than continuing to cater to the interest of companies and people with no allegiance to america. let's say you regularly vote republican. ask yourself, what part of the statement you just heard did you disagree with? was there a single word that seemed wrong to you? probably not. here's the depressing part: nobody you voted said that or would ever say that. republicans would not promise to protect american industry.cast it might make the koch brothers mad. it might alienate the libertarian ideologues, who to this day fund most republican campaigns. so no, a republican did not say that, sadly. instead, the words you just heard from, , and brace yourself here, senator elizabeth warren of massachusetts. it's true. yesterday, warren released what she calls her plan for economic patriotism. amazingly, that is what it is, economic patriotism. there's not a word about identity politics in the document. noys hysterics about gun control or climate change, no plight of transgender illegal immigrants, just pure, old-fashioned economics, how to preserve good paying americanim jobs. even more remarkable, many of warren's policy prescriptions make obvious sense. she says the u.s. government should buy american products when it can come and of course it should. he says we need more workplace apprenticeship programs, because for your college degrees aren't right for everyone. well, that's true. she said that taxpayers ought to benefit from the research and development that they pay for. and yet she writes "we often see american companies take that research and use it to manufacture projects overseas, like apple did with the iphone." iphone" the companies get rich, and american taxpayers have subsidized the creation of low wage, foreign jobs."ip she sounds like donald trump at his best. so who is this elizabeth warren, you asked? well, not the race hustling, gun grabbing, abortion extremist you thought you knew. unfortunately, elizabeth warren is still all of those things, too. and that's exactly the problem. not just for elizabeth warren, but with american politics. in washington, almost nobody speaks for the majority of voters. you are either libertarian zealot controlledit by the bank, yammering on about entrepreneurship and how we need to cut entitlements, that's one aisle. the or worse, you are some decadent trust fund socialist who wants to ban passenger cars and give medicaid to illegal aliens. that's the other side. what there isn't is a caucus that represents where most americans actually are: nationalist on economics, fairly traditional on the social issues. imagine a politician who wanted to make your health care cheaper, but wasn't foolishly excited about partial-birth w abortion. imagine somebody who genuinely respected the nuclear family, sympathized with the culture of rural america, but at the same time, was willing to take your side against rapacious credit card companies bleeding your dry at 35% interest. would you vote for someone like that? my gosh, of course you would. who wouldn't? that candidate would be elected in a landslide. every single time. and yet, that candidate is the opposite of prettyy much everyoe currently serving in our congress. our leadership class remains resolutely l libertarian. committed to the rhetoric of markets when it serves them, utterly libertine on questions of culture. republicans will lecture you about how payday loan scams are a critical part of our market economy. then they will work to make it easier for your kids to smoke weed because hey, freedom. democrats will not in total agreement. they are on the same page. just last week, the trump administration announced an innovative new way to protecton american workers from the ever cascading title wave of cheap, third world labor flooding this country. until the mexican government stops pushing illegal aliens north over our border, we will impose tariffs on all mexican goods that we employed. now that is a kind of thing you might propose to protect your country, if you cared about youe people. the democrats, of course, opposed it. they don't even pretend to care about the american people anymore. here's here's what republican s. >> it's safe to say you have talked to all of our members, were not fans of tariffs. we are still hoping that this can be avoided. >> tucker: "we are not fans of tariffs." imagine a more supercilious or out of touch, more infuriating response. you can't, because there isn't one. in other words, says mitch mcconnell, the idea might work in practice, but we are against it because it doesn't work in theory. that's the republican party eight, 2019. no wonder they keep losing. they deserve it. will they ever change? joining us tonight to assess the future of that party and what it could be his johnny birthday, executive director of the american conservative. thank you very much for coming out tonight. >> thank you so much. >> tucker: when elizabeth warren -- i just want to restate here, this is far from anm endorsement of elizabeth warren, whom i couldn't vote for because she is so far out of the social issues it would be wrong to vote for her, in my view. but what elizabeth warren is clear about how to make this country -- how to focus on american jobs, clear on economic nationalism and mitch mcconnell, where are we? what is happening? >> here's the bottom line, tucker. middle and working class americans of both parties are sick and tired off looking around their country and seeing the once great industrial cities, places like detroit, cleveland, and baltimore, lying in complete and utter ruin. tucker, did you know that in the city of baltimore, there are neighborhoods where the life expectancy is comparable to that of yemen, and even worse than syria and north korea? this is a travesty, tucker. on much of the problem was caused by the neoconservative and neoliberal trade policies that devastated the manufacturing bases in these once great cities. i find itis highly ironic that e same people who are advocating endless war in the middle east for the past 20 years are the same ones devising the economict strategies that have turned our great cities into places that look like the middle east. >> tucker: so, it's really simple. look at the polling. most people want what i just described in the opening script. which is a party that isn't socialist, but that cares about their economic well-being and puts that first, and the country's economic well-being first. but that also isn't radical and crazy on social issues, but doesn't think third term abortion is liberation. why couldn't you have a party that is economically nationalist and socially conservative? why is that so hard? >> well, that the republican party of abraham lincoln, talker. you might your member the famous link" when he was out on the campaign trail, saying that, give us a protective tariff, and i will make us the greatest nation on earth. tucker, the united states was the greatest nation on earth, and we had a manufacturing base that was the best in the entire world, and over the past 20 years, we have simply handed that over to our greatest geopolitical rival, china. and we know from donald trump's reelection that many of his voters fell in that exact camp. they were economically nationalized, andon socially moderate to m conservative. and i think there is a huge opportunity there, but it seems like the republicans in congress are stuck in the 1980s. they are bent on the rag and policy prescription, which was right for its time, but we are in a different era, 30 years later, and it is time for them to get with the program. it's not the party of mitch mcconnell. it's the party off abraham lincoln. so it's time to embrace economic patriotism, and it is time to put forward an agenda that puts american cities, citizens, families, and workers first. if they do that, they can build a majority that will last a generation. now, there are a few republicans in congress that seemed to be taking the hit. hint. domestic issues senator rubio is taking a plan to counter china's plans and others are taking on other issues like the problems caused by big tech. i applied both of them, and rand paul, same on the foreigny policy, america first issues. but we don't -- we can't afford to have three senators who are in line with the president on these issues. we need 30. we need 50. and we are not getting it. >> tucker: yes. voters want it. they can win. that's the program that puts them in the office. i agree with you. great to see you tonight. thank you. >> thanks for having me, tucker. >> tucker: well, republicans fuss about economics and worry about tariffs, the u.s. border is getting closer and closer to utter collapse. that is not hyperbole. last may, the border patrol apprehended the highest number of border crossers in 13 years. this has massive consequences. for the country that we're not talking about. tammy bruce is thinking about them, though. radio host and president of the women's independent boys, and we're happy to have around tonight by thank you very much for joining us. so walk us through what you think some of the more obvious ramifications of this border collapse might be. >> we already know on the broad sense, and we have had this conversation that for years, about the problems people face onth the migrant trail when it comes to sex trafficking, when it comes to the coyotes, when it comes to sexual assault, et cetera. the problems that children face, as well. and what happens in the aftermath when people are here in the country, the case finally situation. individuals are being protected in sanctuary cities, criminal illegal aliens. the this health crisis is an elt that no one is really discussin discussing. the team at independent women's voice that i am president ofwn has realized that our own government, we are talking about infectious diseases like measles. we eradicated it, we are on track now to the end of this week, probably about 1,000 cases in 26 states. typhus is moving through los angeles bear the cdc now warning about tuberculosis. we have new outbreaks of ebola. certainly, zeke in congo, -- that is in congo, zeke a in brazil. and what is not being dealt with here is the fact you have 144,000 moving across this border. h none of whom, of course, if they have been vaccinated. we hear about the importance of vaccinations. but what we have also determined is that the cdc only requires proof of vaccination for people applying for migrant visas legally. if you are trying to enter using a nonmigrant visa, temporary visa to visit, you are not required to show proof of vaccination. it is an interesting ball that has been dropped at the federal level, and of course, at the border, the chaos here is certainly worried about american families and their health, but the people at the front line, who are extremely vulnerable, are the migrants themselves. the border patrol announced last week that they captured about 161 people from africa, congo, angola, et cetera. congo is dealing with another outbreak of ebola. imagine what these kind ofwi groups merging, individuals coming in fromm brazil with his ego, families coming up from el salvador, the mix of what these individuals are facing in the caravan, and then when they are placed in communal areas, or end up homeless in cities where the infrastructure has collapsed because there are so many. we have started a petition, this is our news for today, something has to happen. we launched a position, i wb wb.org, we must redouble the effort for border security. beyond all of the other political issues we have heard about on this issue, this transcends that. this is about every family in every human being caught up in this chaos. thank you, it's important. thank you, sir. >> tucker: thank you. democratic presidential candidates are pushing for violent felons to get their voting rights back. in a moment, we will talk to a politician from washington, d.c., who would like prisoners to be able to vote from b their cells. that's just ahead. ♪ i have a vision correction number, but i'm more than a number. when i'm not teaching, i'm taking steep grades and tight corners. my essilor lenses offer more than vision correction with three innovative technologies for my ultimate in vision clarity and protection together in a single lens: the essilor ultimate lens package. so, i can do more of what i love! buy two pairs of essilor's best lenses and get a $100 back instantly. see more. do more. 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[ dogs howling ] seriously? embrace the mischief. say "get pets tickets" into your x1 voice remote to see it in theaters. >> ♪ >> ♪ ♪ >> tucker: well, the ever resourceful democratic party has a time-tested solution for any electoral setback: simply change who is voting. that is why they support open borders and lowering the voting age, but there is another way to expand the voting pool: : let ts have the vote. today, beto o'rourke released a plan to let all felons vote after leaving prison. bernie sanders called for them to vote behind bars. he is not alone. robert white is a city councilman in washington, d.c. and introduced a measure to let convicted felons vote throughout their sentence. congressman white was kind enough to join us. thanks a lot for coming on. >> absolutely, thanks for having me. >> tucker: so, when people commit felonies, they lose their rights, the constitution is pretty clear about that. and voting is one of the rights that they lose. what is the idea behind restoring that? >> well, the constitution isn't clear about that. when people commit a crime, when people are convicted of felonies, they don't lose theire citizenship. they don't lose their civil liberties. in fact, they don't even lose the right to counsel. someone could d commit a crime n front of the police, and they would still have a right to counsel. a what i would argue is that in a democracy, the right to vote is a much more fundamental right and the right to counsel. >> tucker: they don't lose their civil liberties. people of convicted of felonies are locked in a cage often until they die. sometimes they are executed, they are killed. of course, they lose their civil liberties. the 13th amendment that ended slavery is clear, involuntary servitude is banned except for punishment as a crime. i would be like a person in a cage, not allow them to have normal relations with anyone or even go outside, but you can still vote? i am confused. >> certainly you don't lose all or even most of your civil liberties. in fact, i think that the right to vote is a basic right of democracy. in fact, i catch her show it, every once in a while you have a conversation not too long ago with the gentleman advocating as to vote in school school board collections. you said citizenship is the right to influence democracy. i agree with. you can't say the right to vote is a right in some arguments and then in other arguments you say it's a privilege of democracy. i want us to be consistent. throughout the history of this country, we have expanded the right to vote. not contracted it. 100 years ago, women got the right to vote, and 150 years ago, african-americans got the right to vote. >> tucker: hold on. >> expanded the right to vote, not contracted it. on to the but hold right to vote is not mentioned in the constitution. you are the lawyer here, but the right to vote is not mentioned in the constitution, that i am aware of for the right to own a gun, to bear arms, is mentioned. but yount are not trying to restore that right, that actual constitutional right, to prison inmates, are you? or just the one that might help you? >> do they have a well regulated militia in prison? >> tucker: i i don't know, i mean, the supreme court has interpreted it -- in washington, d.c., -- right, the heller decision says the second amendment refers and protects individual gun ownership. that is what the constitution explicitly says. but you are not trying to restore that right, you are only trying to restore the one that is not mentioned in the constitution that could potentially help you? i'm just thinking maybe there is some involved here. sure why there would be any self-interest. people are incarcerated of all political parties, right? i am not sure this is a partisan issue. >> tucker: would you campaign in prison? >> i probably would if it were necessary. certainly, i would want to make sure that everybody who is able to vote has access to my message as a candidate. any candidate would.bl what we have to continue to do is incorporate people into our democracy paired the most fundamental right in a democracy is the right to vote. you mentioned -- >> tucker: weight. >> the majority of the rights they don't lose. >> tucker: can i ask a question, super quick? the crime rate in d.c. is completely out of control, the murder rate much higher than mexico, i think. why wouldn't you spend more time convincing people in d.c. not to commit so many crimes? and kill so many people? >> we can do multiple things at once. the crime rate -- >> tucker: no one ever says that paired hey, d.c. people, stop committing so many crimes. why does no one ever say that? >> we do say don't commit as many crimes. we also tryo to make sure that people have the resources that people who commit crimes need so that when they come back to our city, they don't find themselves in the same state. they find themselves with opportunities. that means they need access to our democracy. >> tucker: [laughs] okay, not try to follow the reasoning, but i appreciate your enthusiasm, and above all, your willingness to come on. thank you very much. >> thank you. >> tucker: lawyers in the semi-state of california are pushing to disbarla the creepy porn lawyer and make the creepy porn lawyer former lawye lawyer. one attorney trying to do that joins us after the break to explain why. ♪ i have a vision correction number, but i'm more than a number. when i'm not teaching, i'm taking steep grades and tight corners. my essilor lenses offer more than vision correction with three innovative technologies for my ultimate in vision clarity and protection together in a single lens: the essilor ultimate lens package. so, i can do more of what i love! buy two pairs of essilor's best lenses and get a $100 back instantly. see more. do more. essilor has been excellent. they really appreciate the military family and it really shows. with all that usaa offers why go with anybody else? 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(photographers) look here!hers) ♪ candace! charlie! candace, starkist creations come in over 20 flavors-- right: chicken, salmon, or tuna like my favorite! just tear, eat... mmm-- and go! starkist tuna, chicken, and salmon creations. bravo! ♪ >> live from america's news headquarters, no agreement so far between the u.s. and mexico on how to stop a terror threat. mexico's foreign minister met at the white house wednesday with vice president mike pence and secretary of state mike pompeo. they are set to resume talks on thursday. president trump is threatening to impose a 5% tariff on mexican products entering our country unless mexico stems the flow of illegal migrants into the u.s. amazon says it expects to get drone deliveries off the ground, "within months for packages lighter than 5 pounds." the drones can reach customers within a half hour and fly up to 15 miles from take off. that'll make two day shipping seem ancient. artificial intelligence will prevent the drones from crashing into telephone lines get on top of that, they are electric. now back too tucker carlson. >> tucker: it was just a year ago that the creepy porn lawyer appeared to be on top of the world. ruling the air waves on msnbc and cnn.rl brian stelter and "the view" were hyping him as a presidential candidate. now the scam has ended spectacularly. the creepy porn lawyer was exposed as a fraud who robbed and exploited his own clients to enrich himself. >> mr.avenatti allegedly embezzled and misappropriated millions of dollars in client settlement proceeds to which he was not entitled. the money was used to fuel a lavish lifestyle that had no limits. including making mortgage payments on a multimillion dollar home in laguna beach and purchasing a private plane. >> tucker: not to brag, but we called it from day one. you profited from stormy daniels, you've done tens of millions of dollars of freet media on the basis of a relationship with her, and she is working and strip clubs. you are exploiting her. and you know that. why aren't you paying her some of what you are making? >> sir, this is absurd. >> tucker: you pose as a feminist hero because you are shameless on the other channels let you get away with it, but you're an exploiter of the woman and should be ashamed of it. >> tucker: steven larson is an attorney who represents one of creepy porn lawyer's former clients. he is pushing for it cpl to be disbarred. thanks very much for coming on. >> thank you, tucker. >> tucker: can you tell us what about his behavior in your view warrants disbarment? >> well, my view is shaped by 30 years as a lawyer in the state of california. l i have been a judge, apr prosecutor myself. last ten years in private practice. the legal profession means the world to me come in at the core of the legal profession is honesty, trust, transparency, and accountability to our clients. for someone to do what mr. avenatti is doing, not just by us, but by the state bar of california and two u.s. attorney offices is beyond the pale, dragon's our justice system, it threatens the rule of law. >> tucker: it certainly threatens to shape the public's view of your profession. which raises the obvious question: why hasn't he been disbarred already? just watching this on television, it was clear the guy was a fraud and a menace. >> well, our justice system depends on the process, and the process has been played out. mr.avenatti hasn't been convicted. he hasn't been found guilty. but this week the state bar of california filed papers seeking to have him moved to an involuntary inactive status. they can only do that when they are convinced by clear and anvincing evidence that he is threat to the public and his believe and that they will be successful, and that success will lead to disbarment. it's an unusual step for the state bar to take. it's working its way through the process. part of our rule of law is people are innocent until proven guilty. we are confident that that is what the evidence will show and that is what will happen, but we do need to await the process. >> tucker:wa has he offered any sort of defense? >> none. we have not seen anything come forward, and he has had the opportunity to do so. in fact, we brought arbitration proceedings pursuant to our client with him, we wanted to have the arbitration. it required him to pay the arbitration fees, which he has refused to do. we are now planning to dismiss that and move forward in the state courts, which is all right to do. he was doing, from our perspective, everything he can to delay this. again, it is within his rights, but at the end of the day, we are convinced that justice willi prevail. >> tucker: can i ask a broader question, i can't resist? l you seem like a man of integrity and a serious person, you've been a prosecutor, a judge, private practice attorney. most people don't like lawyers, not because of people likeec yo, but because of people like cpl. there are a lot of sleazy was on out there, and i of them get disbarred. do state bar associations -- why don't they do something to improve the quality of lawyers? maybe that would help all lawyers. >> well, there is no question that we, as lawyers, we regulate ourselves to a large extent. the r state bar's, we are largey a self-regulating profession. and we need to do a better job of that. the vast majority of lawyers are good people and are committed to the rule of law. our judges, our lawyers, by and large, in my experience, are good people. but given the sensitivity of the position and the importance of the position of lawyers, one bad apple or a few bad apples can wreak havoc on the system. >> tucker: that is totally true. nicely put. mr. larson, thank you for joining us. >> my pleasure. thank you, tucker. >> tucker: the left calls itself the party of science bur at this point that seems more like a sarcastic description than anything else. consider the issue of abortion. if you cared about science, he would have been following the remarkable advances in ultrasound technology over the past 40 years. we know incalculably more about the developing child and we didw in 1973 when roe v. wade became law. scientifically, the early 1970s where the dark ages. look at the prenatal images are available today. go ahead. seriously, assess them for yourself. is not just another piece of flesh, like a spleen or in appendix? look at the picture. no, it's not. it's a human being, obviously. and it is far too obvious, actually, for the purposes of the left. the abortion lobby doesn't want you to think about the reality behind their slogans. you might be horrified if you thought of that. so once again, they are suppressing science. lawmakers in louisiana passed a bill banning abortion after doctors can detect a fetal heart been. "the new york times" didn't want you to know that. you mightworried agree with it. so the propaganda man remove the term "fetal heartbeat" entirely from the story and replaced it with the phrase "embryonic pulsing." haven't heard that term before? keep in mind, embryonic pulsing iss not a scientific term. you won't find it anywhere in medical literature, it has no place in journalism. it is pure nonsense. he apparently made up the termhe himself in order to hide the truth from his readers. that is called fraud. it also just another day at "the new york times" ." well, the left's culture of death extends far beyond abortion. euthanasia, and assisted suicide, as well, the netherlands has had euthanasia for many years. recently, doctors there euthanized a 17-year-old girl. she was not terminally ill. she wasn't sick at all, actually. she was depressed due to childhood trauma. for that, doctors let her starve herself to death for refusing to intervene. they let her die. that's euthanasia. despite horrors like that, activists are fighting to bring assisted suicide to the united states. eight states already have it there lawmakers in the state of maine passed a bill to legalize it this week. it awaits the governor's signature. christian hanson is the community relations advocate with the patient's rights fund, knows a lot about this topic, and she joins us tonight. thanks a lot for coming on. >> thank you for having me. >> tucker: this case in the netherlands is horrifying. it's getting attention. but it's not unique. tell us what you make of it. >> the system failed this young girl in the netherlands. and it's a tragedy. but we don't need to look to the netherlands to see how laws that legalize assistedaw suicide here in america abandon patients who are vulnerable to depression. if we look at -- >> tucker: know, we don't. >> if we look at oregon, the state that has had this legalize the longest in america, approximately 25% of patients, a study in 2006 showed approximately 25% of patients were clinically depressed when they requested the lethal medication, and several of those patients were able to go on and receive the medication anyway. these laws abandon vulnerable patients, and it shows that the case here in the netherlands shows that it is a short distance between justifying, aiding people in killing themselves for terminal illness, to rationalizing it for mental illness. >> tucker: of course. and the message they are really sending -- we are cloaking all of this in the rhetoric of personal liberation and freedom. your own choice, your own body, your own life. but what is really happening is we're are spending sending a rr message to the sick and the suffering pure you are inconvenient,er are expensive, u have a duty to die and get off the stage. >> exactly paired when did a right to die become a duty to die? thesehe laws send a message that some lives are not worth living, and where do you logically draw that line? these laws are not about terminal illness, pain, or suffering. it is saying that some lives are not worther living. >> tucker: saw a huge percentage of all deaths now in the netherlands are by suicide, a huge percentage, highest in human history by far. and you have to sort of wonder come at a certain point, who is profiting from this? why wouldn't health insurance companies the all in favor of these laws? of course they would become a correct? >> these laws are ripe for abuse, and mistakes and coercion and abuse are common here in the united states. we have cases in oregon and california and our patients who had doctors requesting chemotherapy drugs for them were denied coverage for those treatments, even though they had curable cancers, and were offered assisted suicide instead. this creates a perverse incentive for insurancere companies to offer the cheapest option: death. >> tucker: that's unbelievable. meanwhile, it is all about personal liberation, but what we can't see his insurance companies have every incentive for you to just die. not surprising. thanks very much for shining a light on that. it's horrifying. >> thank you for having me. >> tucker: a story that hasn't gotten a lot of attention but is intriguing, three americans tourists have died mysteriously at a single hotel in the dominican republic. why? how did they die? should we be worried about how they died? that story after the break. ♪ ♪ >> tucker: well, there is a mistry tonight nights running the deaths of americans at a resort in the caribbean. several american tourists have died from a bizarre and still unexplained medical ailment. trace gallagher is on this story and joins us tonight. hey, trace. >> hey, tucker. there is no indication the first american woman who died at the hotel knew other american couple who died, but oddly, they all checked in on the same day, may may 25th. 41-year-old maranda from pennsylvania was on vacation with her husband celebrating their wedding anniversary. she was apparently happy, smiling, and taking pictures. and then her family says she got a drink from the minibar. watch. >> she had a soda mixed with a small bottle of whatever alcohol it was. she called out to dan. he came right over. she was unable to breathe. she collapsed. >> both her husband who is a doctor and paramedics tried and failed to revive her. 5 days later, 63-year-old edward holmes and his fiance were supposed to check out of the hotel. but staff found them in bed unresponsive. they died of water on the lungs. it would be highly unusual for both to die of the same thing at the same time. when miranda's family heard about the death of the american couple, they called the state department. sode far, the state department isn't aware of any connection between the cases appear they are investigating, but the family thinks there is a link and wonders why the glass miranda drank out of was never tested paired we should note, tourism is the primary driver of the dominican economy, and most visitors are americans. tucker? >> tucker: bizarre story. trace gallagher, thank you for that. so what is causing these mysterious deaths, and what should americans know before traveling to the region? dr. marc siegel is, of course, our trusted medical source, fox medical contributor, and joins us tonight. i guess some of this is unknowable, you haven't seen the autopsy results, but is there a likely cause? >>l, well, tucker, the police ad the dominican dominican republe looking at gas leaks. i think that's highly unlikely. this rapid onset of respiratory failure in the looks, i think about poison. as trace gallagher just pointedu out, they never tested the glass. and i'm not so sure i believe everything coming out of there. here are some poisons that can cause this. botulism is one. arsenic is one. opioids is one. you could have opioids in a drink, like fentanyl, and stop breathing. when you see respiratory failure and fluid in the lungs, you think about poison. that has to be ruled out in this situation. it could be a maniac. and by the way, the u.s. state department has pointed out to us, fox told us, there has been 105 homicides of americans in the dominican republic since 2002. so this is a cause of death down there, and it is something that you really have to be on the lookout for. >> tucker: 105 since 2002. that's not a very big island. so that would be -- if true, and we don't know, but it is -- that will be something potentially the government of the dominican republic would not be interested in publicizing. >> absolutely not. and there are other, organophosphate's, extracts, these can cause it, as well pair they wouldn't want you to know about it. the rapidity of onset is suspicious for some of the things i mentioned. like botulism, like opioids. yeah, i think it is highly suspicious for that, and they wouldn't want us to know about it. by the way, the other main cause of death down there, not natural causes, vehicular accidents. as long as i'm advising people what to do down there, watch what you drink and eat, but watch what you drive. you don't know the rules down there, you can easily get into a car accident in a foreign country like that. >> tucker: so, i mean, advice -- other than be careful what car you get into -- advice for people traveling down there? >> well, i think you have to remember you are not in your own country. if you go down there, it looks beautiful, it looks like everything istifu safe. i mean, i'm not going to tell everybody that's down there to watch what is in the minibar, but you know, there is a lot of things out there that can get you ill, and you are not entirely safe. by the way, there's a lot of reasons i don't think this is an infectious disease, because it happened too quickly and they didn't have other symptoms. but reports of that particular hotel is that there are birds all over the place, you can get sick from the birds there. you can get the flu. you can get a lot of diseases that you are not ready for another countries, you have to be on the lookout for that. it's not being in your own backyard. it is beautiful, enjoy yourself, but be on theen lookout. >> tucker: i'm going to atlantic city. >> hawaii. >> tucker: okay, better. well, elitists the world over looked down on you for not using the metric system, with their kill kilo-meters, or whatever they are called. one writing is making a stand in our defense! in defense of pints, pounds and yards. he is here with his case next. ♪ everyone's got to listen to mom. when it comes to reducing the sugar in your family's diet, coke, dr pepper and pepsi hear you. we're working together to do just that. bringing you more great tasting beverages with less sugar or no sugar at all. smaller portion sizes, clear calorie labels and reminders to think balance. because we know mom wants what's best. more beverage choices, smaller portions, less sugar. balanceus.org jushis local miracle ear t at helped andrew hear more of the joy in her voice. just one hearing test is all it took for him to hear more of her laugh... and less of the background noise around him. for helen, just one visit to her local miracle-ear is all it took to learn how she can share more moments with her daughter. just one free hearing test could help you hear more... laughter...music...life... call now for your free hearing test from an industry leader: miracle-ear. but i'm more than a number. when i'm not teaching, i'm taking steep grades and tight corners. my essilor lenses offer more than vision correction with three innovative technologies for my ultimate in vision clarity and protection together in a single lens: the essilor ultimate lens package. so, i can do more of what i love! buy two pairs of essilor's best lenses and get a $100 back instantly. see more. do more. essilor >> tucker: almost every nation on earth has fallen to tyranny, the metric system, from beijing, >> tucker: almost every nation on earth has fallen to tierney, to bay knows airings. the people have been forced to measure their environment on the grounds, ther environment on the grounds, the united states is the only united states is the only country that is resisted, but we have no reason to be ashamed off feet and using feet to pounds. james panero, we spoke with him recently. him recently. >> i am joining you tonight as>t an anti-metrite. i'm taking a stand against theh. metric system. original system l the original system of global revolution and new world ordersw >> tucker: god bless you, and w. that's exactly what it is. >> tucker: god bless you, and that's exactly what it esperanto died, but the metric. esperanto system continues, this weird dit utopian and elegant creepy the c system continues, this weird utopian system that we alone have elegat resisted.reepy system that how long can we hold out againsh it?ave would you say?long can we hold t it? would you say? >> the united states stands speak of the nearly alone in the world inteds stands nearly alone in theaining the inch, the pound, the foot, y measures. the inch, the the mile. foot, and we should stand tall on our. and we should stand tall on own two feet, i say. because it is customary measures that measured out the revolutios and customary measures that took that measured out the revolution us to the moon. took us to the moon. the metric system is the product of the french revolution.s prodt of the french revolution it was imposed at the businessss it was imposed end of the guillotine. at the bs end of the guillotine. >> tucker: so why our >> turner: our leaders so anxious that we join the rest of the wor >> tucker: so why our our leaders so anxious that we joinn the rest of the world in using g robespierre's favorite to robespierre's f standard measurement? i don't understand.ite to standardde >> it is assumed to be to be progressive and assume that everyone has got behind it.ryone has let me take you back through a . ough a little bit of history. litt a 1793, the height of thele bite french french revolution and the frencd terror, the pied du roi, the foot of the king.. draw, the the measurement in france. foot of the king. the replacing it with the meter, al. replacing it with the customary measures use man and , his labor as the basis of the al measurement, what is an acre?? customary measures it is the land that an oxen cane measurement, what is an acre? it is the land that an ox and can tell one 46r till in one day. a mile comes from 5,000 paces, a pace of 5,000 feet each, a meter is what 5,000 feet each, a meter isswha? what? the globe that is not even not n accurate. >> tucker: it is made up out. of nothing. >> tucker: it is made up out of nothing. >> it. >> it totally made up. and something else. even overturning custom has been the meters imposition of ten. a ten size fits all mentality. the french revolution went all in for ten, they try to impose . the french revolution ten day week. all in for ten, they try to impose 100 hours. a ten day week. 100 minutes, 100 seconds. 100 h they had a whole revolutionary calendar, the metric system ofof 100 minutes, 100 seconds. they had a whole revolutionary calendar, the ten is what remains of the metrc radicalism. system of ten is what remains of the radicalism. that sounds reasonable, cou that sounds reasonable, counting by ten is pretty good. we have ten fingers, it is goodn for abstract calculation. finged for abstract calculation. but not great for but not great for measuring things in the real world. measug things in the real world. there is a there is a reason why the measurement system has 12, 12, eights it comes from ancient knowledge, from the it comes from ancient knowledge, from the romans, from the babylonians. 60, why? because they divide up evenly into thirds, fourths, halves, and enables common people to make calculations. and to measure their livesescal. without complex arithmetic. and what is the third of a foot?out. what it is 4 inches. is the third of? what is the third of a meter? it is 4 inches. what is the third of 33-point something centimeters.? it does not add up. you see the problem right there. it does not add up. >> tucker: i do see the you see problem, and i have not heard ie problem, as eloquently expressed as you t as just did. you just you give us heart to keep you give fighting against a global keep fighting against tyranny of the metric system. al tyrann and bless you for that. >> thank you. our system is quaint, but it is. ours and can access to our than. our system is quaint, but it is ours and can access to and it connects us to our ancestors through cups, teas teaspoons and tablespoons and cooking the recipe is of my grandparents. it is that connection to thean past that the french revolution, the revolutionaries have alwayse pa tried to destroy. >> tucker: i will expect a 46. >> i will accept the kilometer when we accept the euro -- never. thank you very much. >> thank you, tucker. hour is >> tucker: that is it for us tonight, the hour is over. we will be back tomorrow night at 8:00 p.m., the show that is a sworn enemy of sworn enemy of lying, pomposity, smugness, and especially groupthink., have the best night, smugness, and especially ha best night, sean hannity is next. >> sean: welcome to "hannity" on a busy news night. glad that you are with us tonight as president trump continues the international trip abroad, look at what is happening at home. america's economy has become the envy of the world. firing on all cylinders, and for the first time in 75 years we are energy independent and a net exporter of energy. the unemployment rate is at its lowest point since 1969. we are now seeing record low unemployment for african-americans, hispanic-americans, asian-americans, women in the workforce. youth unemployment.
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