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Michael Flynn changes his story TRANSCRIPT: 7/9/19, All In w/ Chris Hayes.

Guests: Guest: Julie Brown, David Corn, Michael Isikoff, Nicholas Bagley, Maura Healey

CHRIS MATTHEWS, MSNBC HOST:  So an hour-long speech for the President should hardly persuade Americans that Trump is suddenly interested in saving the planet from what practically every scientist in the world says it`s coming all the faster because of the man we have in the White House.  And that`s HARDBALL for now.  "ALL IN" with Chris Hayes starts right now.



DONALD TRUMP, PRESIDENT OF THE UNITED STATES:  I had a falling-out with him a long time ago.  I don`t think I`ve spoken to him for 15 years.  I wasn`t a fan.

HAYES:  From terrific guy to not a fan.  Trump backs away from Jeffrey Epstein.

TRUMP:  I was not a fan of his, that I can tell you.  I was not a fan of his.

HAYES:  Tonight, new scrutiny for the former friends of the indicted sex offender.

UNIDENTIFIED MALE:  We looked at President Clinton, we looked at President Trump.

HAYES:  And growing calls for the man who agreed not to prosecute him to step down as labor secretary.  Then --

REP. NANCY PELOSI (D-CA):  Today the Trump administration is demanding that the court strikes down every last provision of the ACA.

HAYES:  The latest on the court case that threatens to destroy American healthcare as we know it.  Plus --

TRUMP:  Michael Flynn, General Flynn is a wonderful man.

HAYES:  Trump`s former National Security Adviser stops cooperating with prosecutors and the President starts feuding with the British Ambassador.

TRUMP:  We`re not big fans of that man.

HAYES:  When ALL IN starts right now.


HAYES:  Good evening from New York I`m Chris Hayes.  Tonight there`s mounting pressure on Labor Secretary Alex Acosta to resign over his past treatment of wealthy sex predator Jeffrey Epstein.  And there`s a new focus on Epstein`s ties to Donald Trump which are far more extensive than the President wants you to think.

Epstein was of course indicted in New York yesterday charged with conspiracy to commit sex trafficking and sex trafficking of underage girls.  Prosecutors allege he abused dozens of victims, some as young as 14 he faces up to 45 years in prison and has pled not guilty.

Now, Epstein faced similar charges in Florida more than a decade ago but was able to cut a lenient non-prosecution agreement with the U.S. Attorney for the Southern District of Florida that protected him from federal prosecution, allowed him to plead to state charges and spend just 13 months in jail with work release privileges.

The U.S. Attorney who oversaw and signed off on that deal was none other than Alex Acosta who is now Donald Trump`s Labor Secretary.  In the wake of the new charges against Epstein, more than a dozen Democratic presidential candidates along with Chuck Schumer and Nancy Pelosi have said Acosta has to go.

For his part, Acosta maintains the deal was the best he could get at the time.  On Twitter today he said he is "pleased that New York prosecutors are moving forward with a case based on new evidence.  Meanwhile, his boss offered some tepid support.


TRUMP:  I can only say this from what I know and what I do know is that he`s been a great, really great Secretary of Labor.  The rest of it we`ll have to look at, we`ll have to look at it very carefully.


HAYES:  Epstein has ties to some of the most powerful people in the country including former President Bill Clinton who took multiple trips on Epstein`s airplane and who put out a statement yesterday saying he knew nothing about Epstein`s crimes.

Legal scholar Alan Dershowitz who represented Epstein in the Florida case is being sued for defamation by a woman who said that Epstein groomed her when she was underage and then lent her to Dershowitz for sex.

Dershowitz denies the allegation and said today that "part of this is clearly motivated by the fact that I`ve defended Trump on constitutional grounds.  And then there is, of course, the President himself.  Epstein`s personal address book contained multiple private numbers for contacting the future president who said in 2002 they had known up steam for 15 years and described him as a "terrific guy."

I`ll read more of the quote.  "He`s a lot of fun to be with.  It is even said he likes beautiful women as much as I do and many of them are on the younger side."  Trump flew on Epstein`s private jet at least once and Epstein attended parties at Mar-a-Lago though court documents say Trump eventually barred Epstein from Mar-a-Lago because Epstein sexually assaulted an underage girl at the club, but not before then 16-year-old Virginia Roberts was she says, recruited by Epstein from the Mar-a-Lago spa.


UNIDENTIFIED FEMALE:  Virginia Roberts was working in the spa at Donald Trump`s Mar-a-Lago club in Palm Beach when British socialite Keely Maxwell introduced her to multi-millionaire Jeffrey Epstein.

UNIDENTIFIED FEMALE:  You`re just thrown into a world that you don`t understand and you don`t know how to -- you`re screaming on the inside and you don`t know how to let it come out and you just become this numb figure who refuses to feel and refuses to speak and refuses -- all you do is obey.  That`s it.


HAYES:  Back in 2010, Epstein was asked in a sworn deposition "Have you ever socialized with Donald Trump in the presence of females under the age of 18."  Epstein`s response, though I`d like to answer that question, at least today I`m going to have to assert my Fifth, Sixth, and Fourteenth Amendment rights, sir.

It`s also worth remembering generally the president`s history.  He once told to 14-year girls -- 14-year-old girls in a couple of years I`ll be dating you and five women who competed in the 1997 Miss Teen USA beauty pageant told BuzzFeed news that Trump walked into the dressing room while contestants some as young as 15 were changing.

And while it was not specifically in reference to that Miss Teen USA pageant, Trump has of course openly bragged about barging into women`s dressing rooms in his role as owner of the beauty pageants.


TRUMP:  I`ll go backstage before a show yes and everyone`s getting dressed and ready and everything else and you know no man are anywhere, and I`m allowed to go in because I`m the owner of the pageant and therefore I`m inspecting it.


HAYES:  Trump was asked today in the wake of the new charges that he still views Epstein as a "terrific guy."


TRUMP:  Well, I knew him like everybody in Palm Beach knew.  I mean, people in Palm Beach knew him.  He was a picture in Palm Beach.  I had a falling- out with him a long time ago.  I don`t think I`ve spoken to him for 15 years.  I wasn`t a fan.  I was not -- you know, a long time ago.  I`d say maybe 15 years.  I was not a fan of his that I can tell you.  I was not a fan of his.


HAYES:  Joining me now the investigative journalist whose dogged reporting helped expose Epstein`s abuse as well as his secret plea deal with Alex Acosta that would be Julie Brown of the Miami Herald, great -- pleasure to have you here.  Thank you.


HAYES:  I want to do -- sort of start on the president and then talk about Alex Acosta.  In terms of the president, this was clearly -- I mean, you can find pictures of Epstein with lots of people because he cultivated a lot of powerful people.  How do you characterize his relationship to the current President of the United States?

BROWN:  Well, I think that their relationship goes back a long time.  They obviously had a lot in common.  Both powerful wealthy men who enjoyed the company of beautiful women, and they moved in the same social circles, and they also both had experience with models and modeling agencies.

Epstein reportedly invested in a modeling agency and there are court documents that said that at the time and he invested in this modeling agency, he told the people that he was working within this company that he wanted to set up this particular modeling agency just like Donald Trump`s.

So he admired some of the business arrangements that Trump had made in his modeling company and I think that in part they had similar interests, business interests and also with models.

HAYES:  Is there evidence to back up or verify the idea that Trump threw him out of Mar-a-Lago or had a falling out over the fact that Epstein assaulted someone at Mar-a-Lago or was cruising for underage girls at Mar- a-Lago?

BROWN:  No.  I haven`t seen any evidence of it.  My understanding is that this is something that`s pretty hard to verify because it involved the father of a young girl and they -- I`m sure that he doesn`t want to go public and admit that you know, Jeffrey Epstein had hit on his daughter so that`s something that`s pretty hard to verify unless a person would voluntarily come forward.

HAYES:  Let`s talk about Acosta.  You know, the sort of line from Acosta both today in the tweets and generally when he has been forced to talk about this and hasn`t been much is we did the best we could with the evidence we had.  We couldn`t make the case.  What -- is that an accurate characterization into your mind?

BROWN:  Well, let`s put it this way.  If you don`t feel like you have enough evidence in a case, you go find the evidence in the case.  And I know for a fact that the FBI was working toward that and that they had a lot of good leads including leads in New York that he was likely doing the same kind of sex pyramid scheme involving young girls in New York and possibly even overseas.

So they were -- the investigators in the FBI were certainly aware that this case was moving forward and going places.  In fact, my sources tell me that the FBI was very upset that Acosta made this deal because they felt very close to being able to really seal this case and really get further witnesses beyond the girls.

You know, some of the argument is the girls might have been reluctant witnesses for obvious reasons.  They were very scared.

HAYES:  Of course.

BROWN:  But there were other people involved in this operation.  There were recruiters, there were schedulers, they were pilots, there were houseman who helped -- who paid the girls.  There were drivers who drove them back and forth.  There were plenty of people that they could have squeezed if they really wanted to.  They could have looked at his finances.  He was paying lots of cash to these -- to these girls.

I mean, the computers, they never went after his computers.  That doesn`t make any sense at all.  So were they really trying to get him, were they really trying to investigate?  I mean, to me there`s a lot of questions there about whether they were really serious about the case to begin with.

HAYES:  How much pushback pressure was brought to bear on that U.S. Attorney`s Office from people connected to Epstein and his attorneys were very high-powered, high-priced attorneys when this case was before that U.S. attorney Alex Acosta?

BROWN:  Well, you know, obviously you know they -- I think that they were pretty bowled over quite frankly by these big attorneys Kenneth Starr, Alan Dershowitz, Jay Lefkowitz.  These were big-name attorneys and I think that as some of them all had some common links through the law firm of Kirkland and Ellis.  Acosta went -- was an alumna of Kirkland.  Kenneth Starr was at Kirkland.  Jay Lefkowitz was at Kirkland.  By the way, Bill Barr is from Kirkland so they had a lot of connections.

As far as the pressure you know, Acosta says that they really delved into some of these lawyers, these prosecutors backgrounds, but I think as a federal prosecutor your job -- you`re supposed to withstand that kind of pressure.  That`s what your job is.

And I think that you know you shouldn`t be swayed by a big star power attorney, defense attorney.  You should be still advocating for these girls.  These were you know, young 13, 14, 15-year-old girls here.  I mean, you know, that that`s who you`re -- you should be protecting, not a child molester.

HAYES:  And just to be clear, I mean, these girls, these teenage girls, they and their parents wanted to go forward right?

BROWN:  Yes.

HAYES:  I mean, they wanted it -- oftentimes in these cases, you have extremely reluctant witnesses for very good reason, ambivalent about it.

BROWN:  Right.

HAYES:  In this case, these individuals wanted the charges to be pursued.

BROWN:  There were several women that were very strong about it and in fact, they were calling the prosecutor`s office repeatedly and they weren`t getting any callbacks.  And so what they did was they hired an attorney Brad Edwards to help them communicate with the prosecutor`s office because they weren`t getting any calls back.

And the police chief too was getting calls from the -- from the girls and their parents saying what`s happening.  We`re calling the FBI, we`re calling the prosecutor`s office, we want to know where the case stands.  Nobody is calling us back.

HAYES:  Well, Alan Dershowitz and Ken Starr appear to have done a pretty good job for their client in this case.  Julie Brown, thanks for being with me tonight.

BROWN:  Thanks for having me.

HAYES:  I want to turn now to Cynthia Alksne who`s a former Federal Prosecutor whose extensive experience prosecuting sex crimes also an MSNBC Legal Analyst and Senator Claire McCaskill former Democratic Senator from Missouri, now an MSNBC Political Analyst.

And Senator, let me start with you.  You were in the Senate when Acosta was brought before the Senate.  He -- you were one of eight Democrats to vote yes along with 52 Republicans.  There was some concern at the time about this case but it wasn`t front and center.  What`s your feeling now watching all this develop?

CLAIRE MCCASKILL, MSNBC POLITICAL ANALYST:  Well, it`s one I`d like to take back.  I`m embarrassed about that vote.  And there`s some context.  The guy who`d been nominated before him was from St. Louis --

HAYES:  And accused of spousal abuse.

MCCASKILL:  And a crusader against Roe v Wade, and against the minimum wage, and against working people.  So when a nominee came along that the Firefighters Union supported and the Laborers Union supported, I think as somebody from a state where Trump had done very well, I was going OK, maybe this guy -- now do I regret that vote?  You bet I do.  Because I spent years in the courtroom prosecuting sex offenders.  I know the dynamic between the federal prosecutors and state prosecutors on these crimes.

And that`s why now that we`re looking carefully at this, it makes no sense to me.  And I really think they need to have a hearing and hear from the state`s attorney as to what actually happened here because typically the federal government doesn`t do sex crimes.  That`s a state prosecution 99 percent of the time.

So the fact that the feds had it and then gave it back for sentencing is incredibly unusual and something that doesn`t happen very often.  I never saw it and I was in the courtroom and prosecuting for many, many years.

HAYES:  You know, Cynthia, there so much this anomalous -- a friend of mine as a lawyer referred to the non-prosecution agreement I think he said is one of the sloppiest and most corrupt documents that he had ever seen.  Does it strike you as it does Senator McCaskill and others as a truly bizarre agreement?

CYNTHIA ALKSNE, MSNBC LEGAL ANALYST:  It`s not just bizarre, it`s a scam.  I mean, they hid this from the girls.  The girls were calling and they were deceiving them.  And Acosta was meeting off-site secretly with the defense attorneys.  Let me just tell you what, when I was a federal prosecutor prosecuting sex crimes or police officers or any -- I didn`t defer to any defense counsel and I don`t know anybody who did.

And these guys were deferential and -- would this be OK with you.  It was - - it was a bizarre relationship that they had.  But it`s more than just sloppy, this is intentionally helping this rich white man over these young girls who didn`t have the kind of representation that the Department of Justice is ethically responsible and morally responsible to advocate for,

HAYES:  You know, part of the issue to me is that there`s nothing -- we still not have the full story.  Julie Brown did amazing reporting.

ALKSNE:  Yes, absolutely.  I mean Acosta should answer questions.

HAYES:  Yes.

ALKSNE:  I mean, I`m all for the state`s attorney answering questions but we don`t have an answer on why he was meeting off-site, why did he lie to the girls, why did he give immunity to these other four women plus persons known and unknown?  Why didn`t he get anything in return for this deal?  Why didn`t he research up in New York?

I mean, I can give you a list of 30 things that he should have to respond to right away.  And this business about well, you know, I think justice was done is a completely -- is A, not true and B, an unacceptable response from him at this time.

HAYES:  You know, it strikes me that -- here`s a guy currently sitting the cabinet, right.  This is something that doesn`t pertain to what he has done as the Secretary of Labor is putting aside, but it also strikes me that like, you may be the cost of keeping his job as he should answer these questions.  You think -- I mean --

MCCASKILL:  You know, and it`s so disingenuous for him to tweet on new evidence.  I mean, you can read the indictment and clearly, it`s on conduct --

HAYES:  The same --

MCCASKILL:  It was under his jurisdiction that he clearly reviewed and he clearly knew was going on.  So his tweet is B.S.  And it seems to me that if he called me and asked me for advice, I`d say you should quit tonight and move on with your life because I don`t think this is going to get better.

You know, the Judiciary Committee in the House is pretty busy right now yes so the notion that they would pull up a hearing on this right now -- but there are other Committees of jurisdiction on both sides of the Capitol, both of the Senate and the House.

Some committee of jurisdiction whether it`s health and labor over in the Senate or whether it`s an appropriations committee, I don`t care who it is.  They need to call people in and find out what exactly happened here and hear from these young women.  What were they willing to testify to because Acosta keeps referring to that they didn`t have the evidence, that he wasn`t going to get jail time under the federal law.

Well the federal law that he was just indicted under, there`s a significant amount of jail time and no statute of limitations.

HAYES:  And to your point, Cynthia, one of the remarkable things about the Miami Herald and Julie Browns reporting but primarily about the individuals involved is that these now women then girls are on -- they`re on-camera.  Their names -- I mean, they`re on the record making the accusations now.  This isn`t some difficult to chase down group of individuals.  They can come and talk to you.

ALKSNE:  Right.  And you know, when you do prosecute sex crimes, there are women who don`t want to come forward.

MCCASKILL:  Of course.

ALKSNE:  There are people that it would -- they are too fragile to be able to testify.  But they had dozens of victims and they hadn`t even finished their investigation, dozens.  What was the last time you saw a case like that?  Dozens.  They could have done that.  And like Julie Brown said, somebody was driving them, somebody was paying them, somebody was cleaning up after these encounters.  There was a host of witnesses who should have been in the grand jury.

This case was provable in 2005 and Alex Acosta needs to explain to us what really the reason.  Is it just you know, rich white men hanging out at Kirkland and Ellis or was there some other nefarious thing.  But we need to know the answer to that.  And if he had any shame he would resign.  But even if he resigns, he needs to answer these questions.

HAYES:  All right, Cynthia Alksne and Claire McCaskill, thank you both for being with me.

MCCASKILL:  You bet.

HAYES:  A quick programming note, an important one.  Tomorrow on the "TODAY SHOW" Savannah Guthrie will sit down for an exclusive interview with a new Jeffrey Epstein accuser who is telling her story for the very first time.  No one missed that.

And next Michael Flynn and his new legal team stop cooperating potentially landing the President`s former National Security Advisor with a longer sentence.  The pardon play in two minutes.


HAES:  Just one week before Robert Mueller testify before Congress and the American public, there are new developments in the case of Michael Flynn.  He`s the only member of the Trump administration to be charged in the Russia investigation.

Tonight it appears that Flynn is reneging on part of his plea agreement.  According to a new court filing, former National Security Adviser Michael Flynn walked back a previous admission that he had lied on foreign lobbying disclosure forms which is a federal crime.

Now his lawyers say that his old lawyers filed the inaccurate forms without Flynn`s knowledge.  Just last month, Flynn fired his old legal team.  He then hired a new lawyer, a guy who had previously written on Twitter "General Flynn should withdraw his guilty plea."  Just to give you a sense of where it`s coming from.

And now federal prosecutors say they no longer believe that Flynn is telling the truth.  So instead of calling him as a witness in a trial against his former business partner next week, they will designate him as a co-conspirator instead.

Now, all this comes after a judge already warned Flynn he would need to show more cooperation to receive a lighter sentence.  He sure looks like someone who has an opted to angle for a presidential pardon instead.

Meanwhile, the Democratic-controlled House Judiciary Committee will vote on Thursday about whether to subpoena a dozen of Trump associates in there obstruction of justice probe and Michael Flynn`s name is number two on that list.

Joining me now someone who`s been covering the Russian investigation from the very beginning Mother Jones Washington Bureau Chief David Corn, Co- Author of Russian Roulette: The Inside Story of Putin`s War on America and the Election of Donald Trump.  David, what is Michael Flynn doing?

DAVID CORN, WASHINGTON BUREAU CHIEF, MOTHER JONES:  You know, one of the guest earlier tonight walked out this deal and said to me what the F is going on here.  And the only logical explanation with the information that we have is that Michael Flynn is going for pardon from Trump.

Either he has an assurance that it`s coming or he`s delusional in thinking that Trump is actually going to stick out of his neck and help him some point down the road.  Because as you noted, it was just a few months ago that he appeared before a federal judge, Judge Emmet Sullivan about the case that he`s pleaded guilty to and he was about to be sentenced, and he was trying to backtrack from his guilty plea saying that he was tricked into lying to the FBI.

And the judge said, you know what, you should just withdraw your plea then.  If you want me to sentence you right now, I`m ready to do it.  And it seemed like he would get some jail time.  At that point, Flynn said, no, no, no, I`m not really saying that and I will be cooperating with the feds in this other case and so let`s come back and revisit my sentencing down the road when I`ve shown you that I`ve cooperated.

Well, now he`s not correct cooperating.  The feds are saying that he`s lying in this new case about his information and they`re calling him a co- conspirator, not a witness, so when he goes back to the other judge the judge, the judge, if we take the starting point where we left off, has no reason to not lock him up.  So why would Flynn do this other than if he thinks the don`t right might come riding to his rescue.

HAYES:  Well, and we should say there`s a bit of a pattern here which is somewhat striking to me.  Three individuals who struck cooperation deals and then essentially tried to back off and see if Michael Flynn is doing that now.  George Papadopoulos who had a plea and an agreement and then toyed with the idea withdrawing his plea, enquired about it, and then said he had been sort of trapped into talking about it and the whole thing was a deep state plot, and then you have Paul Manafort.

I mean, Manafort, you know, the Special Counsel`s Office struck him on cooperation, Manafort intentionally lied to the Special Counsel and in the Mueller report, it says that he stopped them from actually getting to the truth of the matter.

CORN:  Yes.  And so, what -- we haven`t seen any pardons, we haven`t seen - - we`ve seen a few public signs from Trump saying that he might consider it, but I don`t know.  I mean, I don`t know how to -- how to look at this.  Do you think that Donald Trump would go out there and pardon Paul Manafort if unless Paul Manafort was doing something to actually help Trump and needed to keep doing that?

It`s unclear at this point if Manafort, Flynn or you know, have not fully cooperated, they`re sitting on information that wouldn`t it be bad -- worse for Donald Trump than what`s already out there.  So we do know that Flynn has these new lawyers, Sidney Powell, who is a Fox you know news commentator who believes Mueller has destroyed evidence, who believe this is an Obama deep state plot against Flynn, and all the crazy conspiracy stuff that her and Sean Hannity, she`s down with that.

And so maybe I don`t know if she`s leading Flynn on or Flynn is trying to use her to rally the Fox forces.

HAYES:  Speaking of the Obama deep state conspiracy and I --

CORN:  Speaking of that, yes.

HAYES:  I incorrectly gendered Sidney Powell for it`s a woman.  There`s this piece of news today about Christopher Steele whose story you were the first to break in 2016.  He`s the author of the infamous dossier then.  Basically, the I.G. went to talk to him and one of the two sources said DOJ and Inspector General Horowitz`s investigators appeared to have found Steele`s information sufficiently credible to have to extend the investigation, its completion date is now unclear.

These that people were looking into the charges of the origins of the investigation who have apparently spent 16 hours now with Steele.  What do you think of that?

CORN:  Well, you know, the deep state conspiracy on the other channel is that the Steele dossier was somehow cooked up by the Democrats and used by the FBI as a way to get this Russian investigation going so they could stop Donald Trump from becoming elected president which of course they didn`t do.  They didn`t try to -- and they never use the dossier against Trump in this time period.

And of course, we know that Steele himself did not give this as Isikoff and I report in our book give this information to the FBI really into the fall of 2016, months into the Russian investigation, so none of it holds up. 

Yet we hear this time and time again and you got the Breitbart crowd, and Daily Caller and everybody else out there you know, baking on this investigation by the you know, the inspector general but also baking on yet another investigation that Bill Barr who`s a little bit more politically minded here, is also trying to mount in the same way.

All to prove that somehow this Russian investigation was cooked up from the beginning and distracting us from the key issue Russia attacked the election and Donald Trump in his campaign you know helped him  along --

HAYES:  Encouraged --

CORN:  Encourage him and benefited from it.

HAYES:  All right, David Corn, thank you -- David Corn, thank you very much.

CORN:  Thank you, Chris.

HAYES:  Coming up, the Trump administration`s latest attempt to destroy the ACA at the expense of health care for millions of Americans, what happened inside the courtroom today`s next.


HAYES:  Today, the Trump administration, along with a group of Republican governors and state attorneys general, pressed their argument before a federal appeals court to nuke the Affordable Care Act.  The court also heard oral arguments from representatives of a group of 21 Democratic attorneys general as well as the House of Representatives there defending the law.

And depending on where the court lands, those arguments could be the end of all of Obamacare,  though it will likely go to the Supreme Court, the end of protections for people with preexisting conditions, the end of young adults staying on their parents` insurance until the age of 26, the end of standards of what insurers must include in their coverage, it would be the end of an entire regulatory structure that has been built up since the law passed in 2010.

The regulatory structure of American`s health care system, which counts for one-sixth of the nation`s economy, just blown up, thrown into chaos.

And it`s worth highlighting the extraordinary steps taken here by Donald Trump and his Department of Justice, which not only, in a very rare move, opted not to defend Obamacare in the courts but this spring agreed the entire law, all of it, should be struck down.

And some people call Medicare for all a radical and disruptive proposal on the left, but on the right Republicans are pushing something that is as radical as those critics say in the opposite direction right now at this very moment.

Here to explain what`s going on, Massachusetts attorney general Maura Healey, one of the Democratic attorneys general defending the law; and Nick Bagley, a professor at the University of Michigan Law School, who was part of an amicus brief last year in support of the ACA.

Nick, let me start with you just to try to set the context, and then I`ll come to you, attorney general.  The argument today happened in an appellate -- there were three judges in appellate court in New Orleans.  You, and a lot of people, thought the first argument, the first decision by a district judge, was pretty judge. 

These are some of the quotes about it: "he went too far in rejecting the entire law.  This is a crackpot argument.  It makes a mockery of the rule of law and basic principles of democracy.  Pretty bananas, assault on the rule of law."

What was the argument -- what was the argument of that judge?  And how did that go over today?

NICHOLAS BAGLEY, UNIVERSITY OF MICHIGAN LAW SCHOOL:  Yeah, so the argument is that when congress passed its tax bill it zeroed out the penalty for going without insurance.  And everybody understood that what congress was doing w as repealing the individual mandate.  The president said so himself.  But the red state attorneys general say, a ha, congress left on the books a naked, meaningless command to buy insurance, one that can`t be enforced at all.  And they say that command is unconstitutional.  And because that command, which is backed up by no penalties at all, is unconstitutional, the entire act has to fall.

HAYES:  What is the position of the state of Massachusetts, attorney general, on this?

MAURA HEALEY, MASSACHUSETTS ATTORNEY GENEARL:  Well, Chris, it`s great to be with you, though I`m really sad to be here, because frankly, this issue should have been and was settled long ago.  You know, the Supreme Court already upheld the constitutionality of the Affordable Care Act.  And then congress went on to try to repeal it no less than 70 times.  It`s really sad that we are back in court today, and especially so because the U.S. Department of Justice isn`t doing its job. 

The Justice Department has a constitutional duty, obligation, to defend the law, the Affordable Care Act.  Because they are not doing that, because Jeff Sessions and Donald Trump actually ordered the lawyers at the Department of Justice to no longer defend the ACA, and in fact removed those lawyers from the case, we as Democratic AGs have had to step in to defend the constitutionality of the law.

And fundamentally, this is about people.  We talk about the law, and it`s important in the cases in court, but Chris, I`m here and my colleagues are here, because this is about people`s lives.

You know, through the ACA, hundreds of millions of Americans have access to health care coverage.  In the state of Massachusetts alone, more than 300,000 have access through expanded Medicaid, another 2.5 million folks are covered here with preexisting conditions.  All of that is now at risk, and it is my hope that this court rules the right way, but certainly it`s a matter that`s probably going to head to the Supreme Court, and we will be there the whole way.

HAYES:  Here is the thing, Nick, everyone remembers the mandate and the Medicaid expansion  challenge, it`s the first challenge to the Supreme Court.  There was s another one that I think is a little forgotten, which was a question about whether the exchanges had -- basically who could run the exchanges and pay for them.  It was a weird statutory interpretation question that started off as kooky -- I remember everyone in the beginning being like this is pretty nuts, clearly congress didn`t mean this -- and then lo and behold it was before the Supreme Court.

And I feel like I`m watching the movie again.  I watched, you and everyone else, legal observer, being like the theory of this case is insane.  And yet today it sounds like they got a receptive hearing from the two Republican appointed judges on that appellate court.

BAGLEY:  Yeah.  It didn`t go well today in court for the defenders of the Affordable Care Act, I  think that`s safe to say. 

The arguments on display in this case, though, are an order of magnitude more kooky than the arguments in the last go-around when we were fighting about the Affordable Care Act.  This is another set of arguments that no principled legal observer has on the left or right has taken seriously, has said yes, these arguments have merit.  So it was really a surprise to see the two Republican appointed judges on the court today really seem to embrace an argument that  almost everybody would have put well beyond the pale.

So I think Attorney General Healey is right, I think this is likely headed to the Supreme Court.  We`re going to have to see if they bite on a case that is frankly much stupider than the previous two court challenges they`ve heard.

HAYES:  Well, what`s your plan, attorney general, about how this goes forward?

HEALEY:  Well, to win the case.  I mean, we were in court today.  I`m not going to read anything into the questions asked by the judges.  We`ll await a ruling.

But I can assure you this, Chris, we will be there to fight to make sure that Americans have access to the health care that I think they`re entitled to in this country.  And what we see from Republicans, this is a political game, you know, this isn`t serious about policy.  All this is about is trying to take away something that was done during the Obama era, simply because they don`t like President Obama.  This is about sabotaging access to health care.  It will destabilize and destroy health care markets.  It will shut down community health centers in our states.  It`s going to keep young people from getting access to health care insurance after they turn the age of 26.  And for the more than 130 million Americans, a third of this country with preexisting conditions, it`s going to put into risk their ability to become insurable in the future.

This is serious business.  The stakes could not be higher.  I sat with a woman today whose son had a congenital heart defect, three open heart surgeries.  Now she has to worry, as parents across this country have to worry, about whether her child as he gets older will have access to the coverage that he needs.  It`s about saving lives.

HAYES:  All right, Maura Healey and Nick Bagley, thank you for sharing your time.

BAGLEY:  Thank you.

HEALEY:  Good to be with you.

HAYES:  Ahead, Michael Isikoff is here with shocking new reporting on the origins of one of the ugliest conspiracy theories of the 2016 election.  What we now know about where the Seth Rich conspiracy theory came from ahead. 

And the president`s newest feud in tonight`s Thing One, Thing Two, next.


HAYES:  Thing One tonight, there is a pretty big international incident brewing in Washington this week after a British tabloid published leaked cables written by the UK ambassador to the U.S.  Ambassador Sir Kim Darroch seems like a rather perceptive chap, perceptive observer of American politics.  He calls the White House, quote, "uniquely dysfunctional," describes Trump as "inept, incompetent," and my personal favorite, "radiating insecurity."

Of course, it didn`t take long for that report to start making waves on this side of the pond.


UNIDENTIFIED FEMALE:  Mr. President, do you have a reaction to the British ambassador`s comments that we reported about today?

TRUMP:  No, I haven`t seen it.  But, you know, we`ve had our little ins and outs with a couple of countries.  And I would say that the UK and the ambassador has not served the UK well, I can tell you that.  We`re not big fans of that man.  And he has not served the UK well.  So I can understand it. And I can say things about him, but I won`t bother.


HAYES:  Oh, I can say things about him, but I won`t bother.  For sure, dude.

How long do you think our completely and totally thick-skinned president could keep that promise?  That`s Thing Two in 60 seconds.


HAYES:  So after it was reported that the British ambassador referred to Donald Trump as insecure in cables, the president held out nearly a whole 48 whole hours before unleashing a totally secure and composed series of insults, saying he didn`t know the ambassador, but he is not liked or well thought of, calling him wacky, a very stupid guy and a pompous fool.

He sure has a lot to say about a guy he supposedly doesn`t know.

President Trump also disinvited Ambassador Darroch to a dinner with the emir of Qatar last night, which was a whole other weird scene.  But he did make sure that his good friend Robert Kraft was there.

And for some reason, the UK trade minister told the BCC that he would apologize to Ivanka Trump for the whole mess at a previously scheduled meeting in Washington, but there was no mention of an apology in the White House`s read-out of that event.

Regardless, this has got to be the end of the road for the ambassador, right?  Considering the president himself said we will no longer deal with him?


UNIDENTIFIED MALE:  Will the State Department deal with the ambassador?

MORGAN ORTAGUS, STATE DEPARTMENT SPOKESPERSON:  We will continue to deal with all accredited individuals until we get any further guidance from the White House or the president, which we will of course abide by the president`s direction.

UNIDENTIFIED FEMALE:  So you have not received any instruction from the White House to cut contacts with the embassy or with the ambassador?



HAYES:  Maybe check your phone?


Well, we`ll just have to wait I guess for the next set of tweets.


TRUMP:  Well, first of all, I don`t have thin skin.  I have very strong, very thick skin.

I have a very strong temperament, and it`s a very good temperament, and it`s very in control temperament.




TRUMP:  Tonight, we renew our resolve that America will never be a socialist country.


HAYES:  It`s a wild thing that in the year of our lord 2019, socialism is the front and center of our political debates.  Presidential candidate Senator Bernie Sanders is once again running on a democratic socialist platform, Representative Alexandria Ocasio-Cortez, one of the most recognizable members of congress, identifies as a democratic socialist, and 30 years after the fall of the Berlin Wall, there seems to be a resurgent debate about what socialism means.

In this week`s podcast, Why is This Happening, I have a conversation about the past, present and future of socialism with Bhaskar Sunkara.  He`s the founder of the socialist magazine Jacobin. 

I learned a ton from it.  I think you will too.  You can find it wherever you get your podcasts.


HAYES:  The 2016 election was a banner year for disingenuous and despicable disinformation.  And one of the most disgusting examples was a specific conspiracy theory that sullied the memory of a man who had been murdered.  Seth Rich worked for the Democratic National Committee in the voter protection division.  And he was, by the accounts of his family and friends, a great guy a loyal member of the DNC.

But after his murder, which remains three years later unsolved, conspiracy theorists started floating the false and totally baseless idea that the hack of the DNC emails was not, in fact, a hack but was actually an inside job, a leak, and that Seth Rich was the source.

It was a theory that, of course, conveniently provided an exculpatory story for the Russians who were, of course, actually behind the DNC hack. 

But there was no evidence to support the Seth Rich conspiracy theory, and it slandered the name of the man who had been murdered.  But it started in the bowels of the Internet and worked its way up to the high profile outlets and to the White House itself.


SEAN HANNITY, FOX NEWS:  Let`s start with the Seth Rich issue, Jay, and the timeline here.  Is it possible that this whole Russian narrative was -- and the leaks -- really came from a DNC staffer, and that the media has been wrong for almost a year?

JAY SEKULOW, TRUMP  LAWYER:  Well, Sean, the media has not been right yet.

JULIAN ASSANGE, FOUNDER, WIKILEAKS:  As a 27-year-old, who worked for the DNC.  He was shot in the back, murdered, just a few weeks ago, for unknown reasons as he was walking down the street in Washington.

UNIDENTIFIED MALE:  What are you suggesting?

ASSANGE: I am suggesting that our sources are -- take risks.

UNIDENITIFIED FEMALE: We are just one year shy of the one year anniversary of Seth Rich`s murder.  And ever since we learned  Rich was a DNC staffer, the conspiracy theories online have taken a life of their own, but today Fox 5 has learned there is new information that could prove these theorists are in fact right.

NEWT GINGRICH, FORMER SPEAKER OF THE HOUSE:  You have this very strange story now, this young man who worked for the Democratic National Committee, who apparently was assassinated at 4:00 in the morning having given WikiLeaks something like 23,000 -- I`m sorry, 53,000 emails and 17,000 attachments. Nobody`s investigating that.


HAYES:  OK.  That`s, just to be clear, that`s false and baseless.  And that is dragging the name of this murdered individual through the mud and re- traumatizing his family and friends, that`s what Newt Gingrich is doing there.

And now there is new exclusive reporting about the actual origins of the Seth Rich conspiracy theory.  And maybe you can guess where it is. 

That reporting was broken by Michael Isikoff, chief investigative correspondent for Yahoo! News, host of the new podcast from Yahoo! News "Conspiraciland."  One of the first episodes is all about the origin of the Seth Rich conspiracy theory.

Great to have you here, and great reporting.

MICHAEL ISIKOFF, YAHOO! NEWS:  Great to be with you, Chris.

HAYES:  What is the origin of this?

ISIKOFF:  Well, as you suggested, it`s not that big of a surprise, although nobody knew it, the Russian intelligence agency, the SVR, their version of the CIA, circulates a bulletin three days after Seth Rich`s death saying he was gunned down by a squad of assassins hired by Hillary Clinton while walking home at 4:00 in the morning on a Sunday morning.

There was absolutely no evidence for this.


ISIKOFF:  Whatsoever.

That -- the same day that the SVR circulates this, it pops up on this obscure website that is a vehicle for Russian propaganda.  And from there it migrants to 4chan and Reddit and soon within a few weeks Roger Stone is on it, tweeting a picture of Seth Rich saying, you know, another dead body in the Clintons` wake.

From there Julian Assange that same day picks up on it, throws that -- suggests that Seth Rich was his source.

HAYES:  Which, by the way, I just want to be clear, that is a particularly despicable thing to do.

ISIKOFF:  Absolutely.

HAYES:  Because the whole thing that they always say, WikiLeaks, we don`t say anything about  sources.  And that`s what everyone says, every reporter says that.

To imply a guy who has been killed was your source, I mean, that is really vile.

ISIKOFF:  We talked to the Dutch TV reporter who interviewed Assange for that interview, and he was astounded by what Assange was saying.  He couldn`t grasp it.  This is episode two in our podcast.  You`ve got to listen to the exchange he has with Assange, and his reaction to what Assange is saying.

And you know what was really particularly cynical about what Assange was doing?  Seth Rich was killed on July 10th.  We know from the Mueller report and the indictment when the GRU online persona Guccifer 2.0 sends that archive of emails, it was July 14th.  It was four days after Seth Rich was dead.

So Assange knew from the get-go that...

HAYES:  He was lying.

ISIKOFF:  ...Seth Rich could not have been his source.

HAYES:  And it`s -- it`s this -- I mean, I should also say that my beloved magazine, The Nation, that I worked at for years and on the masthead ran -- also ran stories dabbling in this.  Like, this got to lots of places.  There were left venues that adopted it, there were conservative venues, all the way up to Sean Hannity and local news stations.  I mean, this was everywhere.

ISIKOFF:  And we should point out, the Trump White House.  We have text messages from Steve Bannon.

HAYES:  This is crazy.

ISIKOFF:  Huge story.  It was a contract kill, obviously.

HAYES:  He`s texting a CBS journalist saying this was a contract killing.


HAYES:  Like, this becomes -- this hearkens back to the Whitewater years when, you know, the head of the oversight committee Dan Burton is shooting a melon in his backyard.

No, seriously.

ISIKOFF:  It`s very similar.

HAYES:  This idea that like the Clintons are on this, like, murder spree.

ISIKOFF:  Right, right, right.

Look, I mean, this was in many ways the cruelest conspiracy theory to arise out of the 2016 election.  We talked to the parents.  And it`s heart rendering when you listen to them.  You know, Mary Rich, the mother of Seth Rich, says this is like losing my son all over again, which she has been subjected to, to see her son`s reputation and name sullied in this, you know, bizarre crazed conspiracy  theory.

HAYES:  And they`ve had to fight tooth and nail.  I mean, I think they filed lawsuits and eventually got Sean Hannity to apologize and essentially stop promulgating this.

ISIKOFF:  I don`t know if you can call it an apology.  He did say...

HAYES:  He was walking away from it.

ISIKOFF:  ...Seth Rich -- out of respect for the family, he was not going to continue to promote it.

HAYES:  And the entire thing was a seed planted by Russian intelligence?

ISIKOFF:  Yes.  Yes.  And that is the astounding thing about this.

HAYES:  It is wild.  It is wild.

I mean, because sometimes you think, look, we`ve got enough -- we don`t need the Russian to like cede us with nutty ideas.  There is enough just organically.  And we don`t need them to cede us  with divisions online, there is enough organically.

But here is like a concrete example, it was them.  They started it.

ISIKOFF:  It was them.  It`s an old tradition.  It goes back to Cold War days, active measures promoting conspiracy theories.

HAYES:  All right, Michael Isikoff, great reporting.  Check out the podcast.  Thank you.

That is ALL IN for this evening.  "THE RACHEL MADDOW SHOW" starts right now.  Good evening, Rachel.