The Rachel Maddow Show, Transcript 5/17/2017 Manafort Subject of Federal Subpoena

Guests: Sari Horwitz, Adam Schiff, Tim Weiner, Neal Katyal, Dan Rather

Show: THE RACHEL MADDOW SHOW Date: May 17, 2017 Guest: Sari Horwitz, Adam Schiff, Tim Weiner, Neal Katyal, Dan Rather

CHRIS HAYES, "ALL IN" HOST: That is "ALL IN" for this evening.

THE RACHEL MADDOW SHOW starts right now. Good evening, Rachel.

RACHEL MADDOW, MSNBC HOST: Good evening, Chris. Thanks, my friend.

And thanks to you at home for joining us this hour.

I am -- I am 44 years old. I know I look older. I`m 44 years old. Forty- four years ago today when my beloved mother was struggling with a fat, cranky, six-week-old baby me, she found something to keep her distracted from how annoying I was as a child. Because 44 years ago today in 1973, the televised Watergate hearings began.

Starting today, 44 years ago, they ran live during the day, as the hearings were happening and PBS ran them again at night, so you could catch them twice.

When it comes to investigating the actions of the administration itself, particularly when it comes to investigating the actions of a president, everybody has recognized forever that there is a basic problem with the idea of the president being investigated by his own appointees at the Justice Department. And so, forever in the United States, there have been special prosecutors appointed to investigate presidential scandals and scandals that affect various presidential administrations.

In the Calvin Coolidge era, there was a special prosecutor for the Teapot Dome corruption scandal. In the James Garfield era, there was a special prosecutor for a weird Postal Service bribery scream I don`t really understand but seems like it involved tons of money.

In Watergate in the `70s, there was a problem with this age-old special prosecutor idea. There was a problem during Watergate with a special prosecutor who Nixon brought in to work on that scandal, because in Watergate, Nixon fired the special prosecutor. He told the attorney general to fire the special prosecutor and he resigned in protest and told the deputy attorney general to fire the special prosecutor. The attorney general resigned in protest. He then told the deputy attorney general to fire the special prosecutor, and the deputy attorney general resigned in protest.

He finally got somebody else to fire the special prosecutor, who was working on the Watergate scandal. And so, he did get rid of him. But Congress was mad. Congress was really not happy about it. And they eventually let Nixon install a new special prosecutor for Watergate, but only on the condition that the Senate Judiciary Committee would sign off on it with a majority vote if Nixon wanted to fire him, too.

And the Watergate hearings sprawled all through 1973, and Nixon resigned in 1974, and Nixon pardoned by his successor, Gerald Ford, so he couldn`t be prosecuted. And by the time Jimmy Carter got in there as president, the country felt ethics-wise, it was time for a hot shower. One of the big post-Watergate reforms, was the Ethics in Government Act of 1978, which was signed by Jimmy Carter.

And that actually changed the whole special prosecutor thing. It set triggers for circumstances that would require the attorney general to recommend a special prosecutor. It led a panel of three federal judges pick who that special prosecutor would be. Jimmy Carter signed that law in 1978 and that law persisted for more than 20 years.

And everybody hated it. Everybody hated it. The first two special prosecutor investigations happened in the Carter administration, one of them was into whether Carter`s chief of staff was on drugs and the other one was whether Carter`s campaign manager was on drugs. No indictments in either case.

The special prosecutor law changed ultimately into the Independent Counsel Law, they changed the name of it, changed it substantively a few times, re- authorized in the `80s and once again in the `90s.

But you know what? The Democrats hated the way it was used against Democratic administrations and the Republicans hated the way it was used against Republican administrations. And the thing was in and out of court all the time being challenged on substantive constitutional grounds. Finally, in 1999, they killed it. They let it die.

And so, no, great. Everybody hated that. Everybody hated that way of dealing with it so the Independent Council Statute, it died.

But there is still this underlying problem, right? There`s still the underlying existential conflict of interest problem about what you do, how you properly handle it when there needs to be an investigation of the president.

If the Department of Justice is what investigates scandals, how can the Department of Justice, whose leader is appointed by a president possibly be trusted to get an investigation of that president done properly? Get it done right and true?

It`s not a partisan problem. It`s not a modern problem. It`s an original problem, right? It goes back to Teapot Dome and before that. That original problem still stands.

Well, when the special prosecutor became the Independent Counsel Statute when that was left to die in 1999, the attorney general at the time was Janet Reno. Remember, she was attorney general through the whole duration of the Clinton presidency. Her deputy attorney general was Eric Holder. And under Janet Reno and Eric Holder`s leadership at the Justice Department in 1999, after the Independent Counsel Statute went away and the idea of an independent counsel was excised from American law, they had to put something in its place.

So, in 1999, under the leadership of Reno and Holder, the Justice Department promulgated its new regulations for how to handle that enduring problem about presidential scandals and who can rightfully investigate them. They wrote those regulations in 1999 and those other regulations that today allowed us as a country to finally be sure that the investigation into the Russian attack on our election and the prospect of the Trump campaign was in on it is an investigation that will not be carried out by Trump appointees.

And that origin story is important. Not -- I will admit the part about my mom and me being 6 weeks old is not important. But that origin story of how we got the power to do this thing that happened today, it`s important. It`s important to know that this thing that happened today comes from a Justice Department regulation.

The Justice Department has these regulations. The Justice Department has the power to do this on their own. Because this special counsel that was appointed today, it happened within the Justice Department. It`s a decision that was made by the newly appointed Deputy Attorney General Rod Rosenstein. He is the one who signed this order naming former FBI Director Robert Mueller as the new special counsel. The order spelling out the terms of his remit and what he will be investigating.

And you know what? The White House was not even notified that this was happening until a half hour after the order was signed. Gone are the days when the president appointed the special counsel.

Now, the attorney general, Jeff Sessions, has said he has recused himself for matters involving the Trump-Russia investigation. That recusal is now very much in question because of Jeff Sessions admitted role in the firing of FBI director, James Comey, who, of course, was leading the Trump-Russia investigations in the FBI.

But this order today, this order tonight to hand over oversight of those FBI investigations, hand that over to Robert Mueller as a special counsel, it didn`t come from Jeff Sessions. It wasn`t signed by Jeff Sessions, by Rosenstein who says that in this matter, he was acting in his capacity as acting attorney general on this issue.

So, we`re going to have more on exactly what that means and why that`s important in terms of how much we should all trust that this is now going to be an independent and capable, uninfluenced, unimpeded, real investigation. We`ll have more on that coming up, in fact from a former very senior former Justice Department lawyer who was personally involved in drafting the special counsel regulations that made this possible today. We`ve got that coming up this hour.

Now, in terms of why exactly this happened and why it happened today, we don`t know exactly. We`re hoping to get some guidance on that this hour as well. We`re going to be speaking tonight with one of the Gang of Eight in this Congress. The Gang of Eight is the senior leadership in the House and Senate and senior intelligence committee leadership. Those are the people who get briefed on stuff when nobody else gets briefed on it.

We know the Gang of Eight was briefed tonight on what exactly happened here, and we will be speaking with a member of the Gang of Eight live on this program this hour.

As recently as five days ago, it was reported that Rod Rosenstein did not see a need for a special counsel. He didn`t see a need to appoint somebody to a job like this. He said he wasn`t inclined to change his mind on that, unless, quote: The FBI investigation appears to be imperiled.

That was five days ago. Today, he apparently thought circumstances warranted changing course on this.

We have learned tonight that Rob Rosenstein is due to give a classified briefing to all members of the House of Representatives tomorrow, specifically on the firing of FBI Director James Comey. So, in terms of figuring out why Rosenstein named a special counsel today, why he went this far, why he did it without telling the White House he was even going to do it until after it was signed, what changed his mind about this?

Well, it`s possible what happened over the last week was enough, right? It`s possible that the James Comey firing and what has emerged since that firing a week ago in terms of the president`s public explanation about the firing and allegation published yesterday by the "New York Times" director Comey says the president told him to shut down the Trump Russia investigation into Michael Flynn before he fired him and it`s possible it pushed him into this special counsel territory for the deputy attorney general, we just don`t know.

It`s also possible that what changed here is the progress of the investigations and what they`re turning up and the magnitude of what they`re turning up or the lack of magnitude of what they`re turning up. I mean, in terms of the ongoing investigations, we know three investigating committees in Congress have now requested public testimony from former FBI Director James Comey.

Senate Intelligence asked from them, Senate Judiciary asked from them, House Oversight Committee asked for hem. And we know that those committees and more have also now demanded documents from the FBI and from the White House pertaining to White House meetings, and communications that James Comey might have had with not just the president but also the attorney general and the deputy attorney general and even the people who served in those positions before the transition, before Trump was sworn in.

So, the congressional committees we can see them operating in public, right? We can see them demanding new testimony. The House Intelligence Committee scheduled testimony with former CIA Director John Brennan. We see them making demands for documents and all these document demands they want in 72 hours, or they want a week from today, like we are seeing these committees get into gear. Some of them might even find the clutch one day and start to engage in forward motion but nobody guarantees it.

At the FBI we know from public statements by the FBI that there is an ongoing counter-intelligence investigation into the possibility that the Trump campaign cooperated with Russia in its attack with the U.S. election last year. We know that that investigation, that counter-intelligence investigation will continue. But if you broaden the scope a little bit, we believe there`s probably multiple investigations at the FBI and Department of Justice.

NBC News reports tonight Paul Manafort, the former Trump campaign chairman and Michael Flynn, the former national security advisor, are now both being described as subjects of a criminal investigation. And that generally technically means they are officially suspected of committing crimes. Both men, of course, deny all criminal wrongdoing through their attorneys.

Now, we were first to air last night with the NBC News reporting that financial dealings by Paul Manafort are now the subject of a federal subpoena issued in a criminal investigation. This comes after previous reporting that Michael Flynn related investigation has also been subject to a federal grand jury subpoena. But with this new reporting tonight, NBC News is broadening that out to report that both Paul Manafort and Mike Flynn are the subject of multiple grand jury subpoenas and records request in these criminal investigations which they are now subject to.

And, you know, whether or not you have strong feelings about the eventual fate of Paul Manafort and Mike Flynn, to the extent that a real investigation into the heart of the matter, right, the real investigation into the president`s campaign, to the extent that a real investigation into that will require testimony from cooperating witnesses who are in a position to see and know what was going on -- well, the former national security advisor and the former campaign chairman being the subjects of law enforcement pressure like this, that affects the odds as to whether or not either of those men will ever surface as witnesses in any of these broader investigations.

In terms of Mike Flynn, those adds get even better when you consider that Flynn`s attorney has already volunteered that he wants to testify in exchange for immunity, claiming he has a real story to tell.

So, here`s some questions tonight. Now that we know a special counsel has been named by the acting attorney general has named by the deputy attorney general to oversee these investigations, here`s some questions that I think, actually think that we`ll be able to answer with the guest that we`ve got coming for this hour tonight. I think they`re all answerable questions and they`re all important as far as I`m concerned, at least as far as I see this.

First of all, how will the appointment of former FBI Director Robert Mueller affect the other investigations that are ongoing in Congress? We really don`t know how much the various congressional investigations have gotten done already. We do know they`ve been falling all over themselves in the past 24 hours to get, you know, congressional testimony from James Comey at least, to get documents from the FBI and from the White House.

Whatever you think about the protect of those congressional investigations, does the appointment of special counsel change the prospects for those committees in Congress of getting that testimony, getting those documents, generally continuing their work. That`s question one.

Also, what happens exactly to the ongoing Justice Department and FBI investigations? There`s the congressional investigations. There`s also the law enforcement investigations. What happens to those Justice Department and FBI investigations now that there is a special counsel?

Do they proceed exactly as they did before but now they just report up to Robert Mueller instead of reporting up to Rod Rosenstein, the Trump appointee? Or does Mueller`s special counsel role materially change how we expect those investigations to proceed?

Also, what about the scope of this investigation that Robert Mueller has been charged with. You have seen the remit by now in terms of the letter - - the order that they published establishing this appointment.

All right. You`ve seen how they -- you`ve seen how they describe it. The special counsel is authorized to conduct the investigation confirmed by then FBI Director James Comey and congressional testimony on March 20th, including, one, any links and or coordination between the Russian government and any individuals associated with the campaign of President Donald Trump.

And, two, any matters that arose or may arise directly from the investigation. OK, that`s what Robert Mueller has been assigned to do. As soon as this order was announced, I started calling people to get advice on whether this is the right remit, basically, whether this is, if you want a robust, unimpeded investigation that is narrowly targeted enough to not be out of control and not be running amuck, but widely enough scoped so that it can get at the heart of the matter whatever the heart of the matter is.

I started calling around trying to get advice from people who are in a position to know whether this seems like the right scope. I ended up speaking with former Attorney General Eric Holder tonight. He told me in his view that the second phrase in the order warrants the most scrutiny, when this remit says any matters that arose or may arise directly from the investigation.

So, check out coordination between the Russian government and Trump campaign and any matters that rise directly from that. He suggests that it could have said instead, matters that arise directly or indirectly from that investigation. The special counsel could have had the option to get permission from the attorney general to expand his remit if he felt special circumstances warrant.

Is it clear, for example, that Robert Mueller may also investigate any potential problems involving Jeff Sessions and his role in all of this? Is it clear that his remit includes, for example, the firing of James Comey as FBI director? So, that`s another question here. Is the remit wide enough?

And while that is a subjective view to a certain extent, here is a special answerable question, if special counsel Robert Mueller feels that this remit is not broad enough, if he feels he needs to expand his remit, if he wants clause two2 to say matters that rise directly or indirectly, can he request an expansion and who does he request it from? Answerable question.

Also, what resources does he have and who approves the resources?

We are told already that Robert Mueller is bringing with him to his job, his former chief of staff from the FBI who`s been working with him in his post-FBI life at a fancy Washington law firm. He`s also bringing somebody else from that law firm with him into the special counsel job. Presumably that means he has hiring authority on his own terms, in terms of who was working with him on this investigation.

But how many people does he get to hire and who decides how many people he gets to hire and who approves or is in a position to disapprove of his funding and resource requests? Answerable question.

Anything else? Oh, yeah. When do we hear? Will the special counsel make a public account of his investigation or does he now get announced, say, I`ll do my best, and then he disappears for months or years, while we the public and/or Congress are kept in the dark as to whatever it is that he is doing.

I believe these are all answerable questions. We`re going to try to answer as many of them as we can over the course of this hour.

Joining us now is Sari Horwitz. She`s a "Washington Post" reporter who covers the Justice Department.

Ms. Horwitz, thank you very much for being with us on this busy night. Really appreciate you being here.

SARI HORWITZ, THE WASHINGTON POST JUSTICE DEPT. REPORTER: Thank you for having me, Rachel.

MADDOW: First of all, let me ask you if I`m asking answerable questions? Do we know enough how it works in practice and how it`s supposed to work as a Justice Department regulation to be able to answer these questions about, for example, who gets to approve the resources? Does he get to expand his remit? Whether or not this is a properly scoped investigation.

HORWITZ: Yes, those are good questions and mostly answerable. As you know, this has been a huge day in Washington, huge news. The deputy attorney general, Rod Rosenstein was under such pressure to appoint an inspector.

You raised the question earlier about why today? And I believe it`s because there is this meeting he has before the full Senate tomorrow where this was inevitably going to come up because they had been putting pressure on him to do this. And he chose Robert Mueller, who has so much integrity, really respected by Democrats and Republicans.

And in answer to your question, he reports to Rod Rosenstein although he technically reports to him because Rod Rosenstein is the acting attorney general because Sessions recused himself.

But Mueller is really on his own. It`s his investigation. He`s leaving his law firm to prevent any possible conflict of interest. He can bring in a team of people, as you mentioned he`s bringing chief of staff. He can bring in other people.

And he most likely will keep the FBI investigators who already are doing the work. Those of us who have covered him over the years know he is very serious. He`s not going to leak. There won`t be leaks out of this investigation.

And he is not required, at the end, to present a public report. He is required to present a confidential report to Rod Rosenstein, who Rosenstein at that point can make it public.

You are not going to see Bob Mueller going out before the cameras, like Comey did, doing a press conference on his own, releasing his own report. That will not be what happens. But he will be working with people he brings in or the FBI investigators already on the case.

MADDOW: In terms of the resource question, you made very clear that he`s going to be making those requests to Rod Rosenstein.

My sense talking to people about Robert Mueller, his extraordinary long 12- year tenure at the FBI and the sort of relationship that he has, the political capital he has, my -- at least it seems people I talked to today that if he makes a resources request, unless it is insane, if he makes any sort of resources request or even if he makes a request to expand the remit of his investigation, he`s the kind of person who Rod Rosenstein both politically and personally would have a very hard time saying no to.

Is that a fair assessment what that dynamic, how that dynamic would work?

HORWITZ: I think that`s exactly right, Rachel. I mean, I think that Rod Rosenstein who formerly was a U.S. attorney in Baltimore and knows Robert Mueller. Everybody in law enforcement sort of knows him and respects him, I believe, from the people I`ve interviewed. I think that any request for resources, if it`s reasonable, will go through. They`re going to be coming up with a budget in the coming days for this investigation.

And although technically, Rod Rosenstein could fire Mueller, I don`t think we`re going to see that happen. We would do know from the order that the president, President Trump, cannot fire him. He can only be dismissed by the attorney general. And Rod Rosenstein is acting in that role right now.

MADDOW: Sari Horwitz, this was very clarifying. Thank you for helping us get through this. I hope you will come back in the days ahead as I inevitably get confused how this works.

HORWITZ: I`d be glad to.

MADDOW: Thank you.

All right. Joining us now is Congressman Adam Schiff, ranking Democrat on the House Intelligence Committee.

Congressman Schiff, I really appreciate you being with us tonight. I know this is a very busy time for you.

REP. ADAM SCHIFF (D-CA), HOUSE INTELLIGENCE COMMITTEE RANKING MEMBER: Rachel, I can`t hear you. I`m sorry, I had someone else talking in my ear. But please go ahead.

MADDOW: Can you hear me now?

SCHIFF: I certainly can.

MADDOW: Great. We can sell cellphones together.

Congressman, let me say as a matter of introduction, I had said earlier in the show that we expected Rod Rosenstein, the deputy attorney general, to be doing a classified briefing on the firing of FBI Director James Comey for the full House tomorrow. I think I was wrong about that. Actually, he`s briefing the Senate tomorrow and he`s expected to be briefing the House on Friday.

Is that your understanding?

SCHIFF: That is my understanding, yes. I think they were trying to still finalize the House briefing on Friday, but I think that`s the case.

MADDOW: And that will be specifically on the matter of the Comey firing rather than on the Trump-Russia investigation broadly or even now on the question about the appointment of the special counsel?

SCHIFF: Well, I would certainly imagine that now that he has appointed a special counsel, that will be the subject of discussion as well. But I imagine members are going to have a lot of questions about the memorandum that he wrote and what went into that and lead-up to the firing of James Comey. I think those will very much be the topic of discussion.

MADDOW: Congressman, I know you are highly briefed on intelligence matters as the top Democrat on the House Intelligence Committee. I also know you cannot talk to us about any of the things you are briefed on even other members of Congress aren`t allowed to know, let alone us as members of the public. That said, with that being stated, do you have any insight that you can share with us about why this happened now?

As recently as five days ago, the deputy attorney general, Rod Rosenstein, had been indicating to the press that he saw no need for special counsel to be brought in. He had -- there had been reported the only way he would do that if he saw the FBI investigation being impeded.

I don`t know if that reporting was definitely accurate five days ago but makes me worried what triggered this decision for him. Can you shed any light on that?

SCHIFF: Well, I don`t know how much light I can shed on that, except to say that I spoke with the deputy attorney general last week and among others, I urged him to appoint a special counsel. And the argument I made with him was that it wasn`t that I doubted there were good career prosecutors at justice, there were great many of them that are capable of doing the investigation, but it`s not enough to be capable of doing it, it has to be independent enough that the public will have confidence in any decisions made at the end.

And I thought in the absence of independent counsel, in light of all the problems at the FBI, with the DOJ, recusal of the attorney general himself, the only way to have that confidence was with a special counsel.

He listened to me politely and heard me out. I had no indication he was prepared to take this step. But I think it is a great step and I think Mueller is a very good choice. And I would also underscore what you just were talking about earlier, and that is, if he wants to expand the scope, I think it`s going to be very difficult to say no to Bob Mueller. If he needs resources, I`m confident they will give him the resources he needs and we in Congress are going to make sure that he gets all the resources he needs.

MADDOW: As an experienced prosecutor and investigator yourself, do you feel like the scope of his investigations, the scope of his responsibilities was appropriately defined? When you look at that order, is that the way that you would have written it?

SCHIFF: I think it is plenty broad for the work at hand. If there`s any question about something, whether it flowed directly or indirectly from the course of his work, that`s something he could discuss with the deputy attorney general. And again, it would be very hard to say no under those circumstances. So, I think by virtue of the broad respect he has and obviously the close scrutiny we and others are giving this, I think that he will have all the discretion that he needs.

MADDOW: In terms of your own investigation at the House Intelligence Committee and the other congressional investigations under way, do you think that the appointment of the special counsel will slow those down? Will change your expectations, in terms of what you get access to and when?

SCHIFF: You know, it won`t change in the sense that our investigation will remain as important as ever. It will, I think, give a lot of us the confidence there is someone in charge of overseeing the FBI that will not be deterred and can`t be interfered with. But we`ll also have a new point of contact.

We need to try to do everything we can so that our investigation doesn`t somehow interfere with what the FBI and the department, through Mr. Mueller are doing. So, to the degree that we can coordinate, we should and we will. He will now be the person to coordinate with.

But I don`t think it will substantively impact what we investigate or how we investigate it but it does give me a lot of confidence that in many respects, the most important investigation will go forward unimpeded, and that is the FBI investigation because they have resources we don`t. They have a reach around the world we don`t, and there`s no substitute, even with our best efforts for what the FBI can and must do here.

MADDOW: Congressman Adam Schiff, the top Democrat on the House Intelligence Committee. Thank you for joining us tonight. I know you have a lot of options in terms of whether and where to talk about these things. Thanks for being here with us, sir.

SCHIFF: It`s a pleasure, Rachel. Thank you.

MADDOW: All right. We got much more to come tonight including what has happened in Robert Mueller`s life since he left the FBI? It was an unusual and controversial -- slightly controversial decision when Barack Obama decided to keep him beyond the end of his 10-year term. He kept him for another couple of years for a very specific reason.

After his 12 years in the FBI came to a close, he has spent the time in his post-FBI life in a very interesting way that may be very important in terms of what`s about to happen next here. We`ll have that and more expert testimony next. Stay with us.

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MADDOW: Robert Mueller started at the FBI one week exactly before 9/11, and then he served for ten years. After his ten years as FBI director were up, by then, Barack Obama was president, and he asked him to stay on another two years. He specifically asked him to stay on because the Defense Department and CIA were both in the process of changing their leadership at the same time, too, and the Obama administration reportedly worried that would be too much turnover in too many key national securities agencies all at the same time.

He got a unanimous vote in Congress to allow him to extend his tenure by an extra two years, he stayed on an extra two years. He left in 2013.

Since he left, though, since 2013, since he was replaced by James Comey at the FBI, Robert Mueller has been working for a law firm called Wilmer Hale, but specifically he`s been working as the guy who gets called in after a big deal organization makes a huge mess and they need somebody to come in and sort it out and clean it up.

For example, 2014, the NFL botches its investigation into a domestic assault by Baltimore Ravens running back Ray Rice. The NFL gives Rice a slap on the wrist. They fail to uncover or depending on who you choose to believe, they choose to ignore a video of the assault which proved way more vicious than the league had initially let on. After it became clear that the NFL`s in-house investigation and the league`s subsequent handling of that incident was a disaster, the NFL hired Robert Mueller to do his own investigation into the NFL`s investigation. It was his job to figure out how the NFL blew it. That`s one.

Last year, it was the VW thing. Remember when they were outed for cheating on their emissions, test? Robert Mueller was installed by a judge as the settlement master in that case to fairly and transparently facilitate billions of dollars worth of settlement discussions to hammer out payments to Volkswagen owners.

He was selected for a similar role earlier this year when the airbag company Takata was found to have cheated on their safety tests with defective airbags being linked to lots of injuries and at least 16 deaths worldwide. Wow, what a mess, what a terrible thing, call Bob Mueller, he will sort it out.

Now, once again, Bob Mueller is being called on to function as an independent party. But this time, he`s got as to quit his law firm job to do it because this time, the former FBI director will be taking over his old agency`s investigations into the current president of the United States.

Joining us now is Tim Weiner. He`s our foremost modern historian of both the FBI and CIA. He`s the author of "Enemies: A History of the FBI". He`s also a Pulitzer Prize winning intelligence reporter.

Tim, thank you for being back here.

TIM WEINER, AUTHOR, "ENEMIES: A HISTORY OF THE FBI": Hello, Rachel.

MADDOW: What do you think when you first heard the news?

WEINER: I think the republic just got a chance of saving itself.

MADDOW: Really?

WEINER: Bobby Mueller, Bobby Three Sticks his agents called him.

MADDOW: What do they call him?

WEINER: Robert Swan Mueller III.

MADDOW: That`s why they call him Three Sticks?

WEINER: There are three important things people need to know about Bobby Mueller. One, he was a marine. He was awarded the Bronze Star for Valor for personally leading his troops under fire and rescuing a terribly wounded soldier on enemy lines. He`s going to personally rescue this case, I think.

Two, he took over the FBI, as you mentioned, September 4th, 2001. The following week, he was in charge of the biggest investigation in the history of the universe, leading 4,000 agents trying to find out what happened.

MADDOW: Restructuring the FBI in the process. They moved all these FBI agents, thousands of them into counter-terrorism and national security.

WEINER: People are not that worried about bank robberies at this point.

MADDOW: Yes.

WEINER: They`re worried about now what.

MADDOW: And he oversaw that shift.

WEINER: And when the president and vice president, Bush and Cheney, and the head of the CIA, George Tenet, were flipping out and losing their moral gyroscopes because of the fear and secrecy and ignorance of those times, Bobby Mueller kept his cool. And it was Mueller and James Comey, who was his boss at the time, the acting attorney general of the United States, who went in and told Bush they had to stop spying on Americans with the NSA program, that they had gone too far, Bush and Cheney and the NSA. They said no to the president.

MADDOW: In terms of Mueller taking over here, there`s interesting questions that we will see play out in real-time, in terms of what it materially means to the investigations he`s now in charge with this special counsel role. It seems to me that nobody leaves an organization as big and as fraught as the FBI after 12 years as its director, nobody else served that long other than Hoover without leaving some really big footprints.

How did he leave the FBI? How was he viewed in the FBI by current agents whether or not there when he was there, how was his tenure viewed?

WEINER: A lot of respect. He`s a very rigorous person. He speaks with precision. He would never gratuitously said a certain someone had been extremely careless, which is not a federal crime, wouldn`t have let that slip.

MADDOW: Right.

WEINER: And I talked to him at length about six months ago. He and Comey get along great, but he wasn`t terribly happy about the way that played out.

MADDOW: He wasn`t terribly happy about Comey`s behavior?

WEINER: That particular instance I think he thought was poor judgment.

MADDOW: OK.

WEINER: But they got along really well, having worked together for years.

MADDOW: Comey`s public statements about Mueller are glowing.

WEINER: Yes, and Mueller`s private statements about Comey are glowing, too.

MADDOW: Hmm, OK.

WEINER: So, I think what happens now the FBI sticks with its counter- intelligence investigation and Mueller looks at crime. He looks at money. He looks at obstruction of justice.

The FBI is set up as an intelligence agency. That goes against spies and is a criminal law enforcement agency. I think you have to divide the work here.

The FBI stays on the counter intel part, Bobby Mueller rides to the rescue to save the republic from criminal abuses of power and obstruction of justice.

MADDOW: Tim Weiner is the author of "Enemies: A History of the FBI," Pulitzer Prize-winning intelligence reporter. Tim, thank you. I really appreciate it.

WEINER: You bet.

MADDOW: Boy, was I glad you were able to come in here tonight.

WEINER: The way we get special counsels in this country is relatively new. Regulations were written in 1999 in the Department of Justice after the statute previously covered something called independent counsels was allowed to die. We don`t have that many examples to look back on to see how this special counsel thing usually goes. We`re trying to learn everything we can now about how this process works, what happens next, what the expectations are.

We have with us now, a person who knows the special counsel regulations inside and out because he helped write them back in 1999 when he was top staffer to the then-Deputy Attorney General Eric Holder. Joining us now is Neal Katyal. He previously served as acting solicitor-general in the Obama administration, also has been on the news lately as a lawyer arguing against the president`s travel ban on behalf of the state of Hawaii.

Mr. Katyal, thank you very much for being here. I really appreciate it.

NEAL KATYAL, FORMER U.S. ACTING SOLICITOR GENERAL: Thank you, Rachel.

MADDOW: Is that a fair description you were involved in the writings of these guidelines back in 1999?

KATYAL: Yes, I spent about a year and a half writing these regulations. And they were written for exactly this kind of situation. I mean, everything from our first lines of the special counsel regulations assume the attorney general is compromised and they provide for the deputy attorney general to take the place of the attorney general, then they play out a way the special counsel will function with day-to-day independence from the acting attorney general.

MADDOW: When you say day-to-day independence, can you just talk us through what that`s really going to mean? I`m thinking about this announcement that we got today from former Director Mueller that he`s bringing a couple staffers from his current law firm. I`m thinking about him presumably showing up at FBI headquarters or DOJ headquarters, I don`t know, trying to get up to speed on the status of existing investigations.

What does he have to get approval for, or does he -- based on you having written these regulations, does he just operate on his own terms answering to himself only unless something extraordinary needs to change?

KATYAL: No. He doesn`t get to answer just to himself. So, part eight to the regulations require him within 60 days to submit a budget to the acting attorney general and then the attorney general will decide on that budget. And yes, he will meet with bureau agents and other people right away on the investigation.

But, you know, if he takes a step and he`s required to notify the Deputy Attorney General Rod Rosenstein whenever he`s about to take a significant step, if that -- if Rosenstein rejects that and says, hey, I don`t want to do that. He has that power, but he`s got to then notify Congress.

And again, we wrote this anticipating something like this in which you have, you know, frankly, a kind of spineless majority party in Congress that`s not willing to serve as our Founders thought in check and balance. So, that report has to be given not just to the majority members of the Senate Judiciary Committee, but also to the ranking members on the minority side. So, that`s Representative Conyers and Senator Feinstein. They would get any report in which Rosenstein decided to overrule Mueller with any significant step.

So, let me just under -- let me underscore that and say it back to you to make sure I`ve got it right.

If as Special Counsel Bob Mueller makes a request of the attorney general, whether it`s about the scope of his investigation or resources or any other matter that he needs to go to the deputy A.G. on, if the deputy A.G. says, no, he has to tell Congress at that time?

KATYAL: He has to tell Congress. It`s not necessarily at that time. It can be later, because there`s all sorts of law enforcement reasons why that has to be delayed.

MADDOW: OK.

KATYAL: But he does have to do. And we also wrote the rules to say the only way in which Mueller could be overruled is if he`s taking a step that is against the established traditions and views of the Justice Department. So, it can`t be like a just disagreement, like, hey, I don`t think the evidence really gets you there or something like that, it has to be a very serious violation. It`s a very high standard. That was proposed by a bipartisan committee to us back in 1999 and it`s enshrined in the regulations.

MADDOW: Can I ask you broadly what we should worry about here? Obviously, a lot of people who have been concerned about the investigations being protected from political pressure and from potential obstruction are welcoming this choice not only in the abstract, but specifically welcoming that it`s Bob Mueller who has been appointed to this job. Is there anything that you`re worried about or you feel is not being adequately addressed in the order in the way people are reporting this out thus far?

KATYAL: Yes, no. I think it`s -- you know, look, Mueller is as good as you can possibly get. And I think the regulations are written pretty strongly. At the end of the day, you know, our founders gave us a system the president does have, you know, the power to take care of the laws be faithfully executed.

That means that he could order the dismissal of Mueller. And, you know, at this point, you know, there`s very little that, you know, we`re only 120 days in, and there`s little that would surprise me in the days to come given what we`ve seen. But it is important to note that, yes, the president does effectively have the power to get rid of Mueller. It would be a horrible disaster and perhaps, you know, the fall of the government, but he does have that power.

MADDOW: Thank you. Neal Katyal, former acting solicitor general under President Obama, a person who knows the special counsel regulations better than nearly anybody else because he made them. Thank you for being with us.

KATYAL: Thank you.

MADDOW: I know it`s not your favorite place to be. Thank you.

All right. We got much more to come tonight and actually because this is our life now, new substantive breaking news has just happened in the last couple of minutes. And we`ve got that next.

(COMMERCIAL BREAK)

MADDOW: Because no night is complete anymore without several new major breaking news stories about the administration, just in the last few minutes, we`ve gotten this new reporting from the "New York Times."

Quoting from "The Times": Michael Flynn told President Trump`s transition team weeks before the inauguration that he was under investigation for secretly working as a paid lobbyist for Turkey during the campaign. This warning came about a month after the Justice Department had notified Mr. Flynn that he was under federal investigation. Despite the warning, Trump made Flynn his national security advisor anyway.

Flynn`s disclosure to the Trump transition was on January 4th. It was first made to the transition team`s chief lawyer, Don McGahn, he`s now White House counsel.

That conversation and another one two days later between Mr. Flynn`s lawyer and transition lawyers shows that the Trump team knew about the federal investigation of Mike Flynn far earlier than has previously reported, putting a much finer point on the question of why they hired him and then why they didn`t fire him until 18 days after the Justice Department came to the White House with their proverbial hair on fire, saying your national security advisor has a Russia problem?

They knew he was under federal investigation when they made him national security advisor. Now, of course, we know he`s under federal investigation in the probe into possible collusion between the Trump campaign and Russia. NBC News reports tonight that he is described now as a subject of a criminal investigation, meaning technically that he`s officially suspected of committing crimes.

This "Times" story tonight also has some new details on the investigation into Flynn. Quote, the pace of the investigations have intensified in recent weeks with a veteran espionage prosecutor, Brandon Van Grack, now leading a grand jury inquiry in northern Virginia that is scrutinizing Flynn`s foreign lobbying and has begun issuing subpoenas to businesses that worked with him and his associates.

"The Times" has reviewed one of the subpoenas. It demands all records, research, contracts, bank records, communications and other documents related to work with Mr. Flynn and the Flynn intel group. The subpoena also asked for several records about a Turkish businessman who is close to President Erdogan of Turkey. This is the man who paid Mike Flynn over half million dollars for his lobbying.

This is the first time we have heard these details about this subpoena. It`s also the first time we have the name of a prosecutor apparently leading this investigation, and because apparently this whole thing was cast by somebody who has absolutely no sense of what is too much on the nose, we now know that prosecutor`s name is Brandon Van Grack, and he specializes in espionage. What`s the muppet for that?

Despite knowing Mike Flynn was under investigation, Donald Trump made him national security advisor with access to all the nation`s top intel secrets.

Never a dull night. Thank God Dan Rather is here, host of "The Big Interview with Dan Rather" on AXS TV. Dan is a veteran of covering Watergate and much more.

I`m really happy to have you tonight, sir.

DAN RATHER, AXS TV: Well, thanks.

What a news night. What a news night.

MADDOW: Yes.

RATHER: Almost surreal and, of course, dangerous for the country.

But in the same token, I do think there is something reassuring about this. You know, for most of the early stages of the Trump presidency, the question begged, are we still a country of laws or have we become or are we becoming a question of men and a man?

And today`s events with the appointment of this special counsel, special prosecutor gives a resounding answer, we`re still -- this is one of the things that unites us. We`re still a nation of laws, not of men. And now, facts are going to tell us what our destiny is and what our history will be. Not Donald Trump`s version of anything.

Number two, these "Times" stories are big stories. Thank God for the American press, "New York Times", "The Washington Post" and others doing a good job. Number one, this information about when they knew that Flynn was under investigation for serious law breaking, they went ahead and appointed him.

And as you alluded to, this raises anew the question what it is that Flynn knows about Donald Trump and his campaign that Donald Trump wants to keep hidden? Obviously, Flynn knows something. It may not be criminal. But if it`s not bad news, if it`s not something criminal or corrupt, why are they working so hard to hide it?

Number two, I think today shows us this is the day up until today, President Donald Trump has had the ability to control almost every news cycle. From this day forward, he no longer has control. And instead, if you will, of being the hunter, he becomes the hunted.

And I think, you know, that`s extremely important to keep in mind. From here on out, that`s the way -- he can`t -- he can`t control it.

Also, have I this question, Rachel. Maybe you`ve asked it before. You know that meeting with the Russians in which they didn`t allow any American photographers, only allowed Russian photographers. And there is some controversy of what the president said or didn`t say.

Question, were the Russians taping that? Were they taping it? It is true Putin said he`d give us a transcript. But where -- if there is a tape, let`s have it.

And speaking of tapes, now with Donald Trump, since he is on the offensive, it`s put up or shut up time for him on the tapes he has alluded to about his conversation with the FBI director. Either he has tapes or he doesn`t. And if he has them, he`s got to come forward with them.

MADDOW: Dan, let me ask you about something that we heard tonight in very blunt terms over the course of this hour. I talked with Neal Katyal, who`s a former solicitor general. And I wanted him to be here because he was part of drafting these regulations that gave rise to the special counsel.

It`s only been -- they use this for Patrick Fitzgerald and the Valerie Plame affair. But other than that, it hasn`t been taken out and driven around very much. It just existed on paper.

I asked him if there is anything that he`s worried about and people ought to be keeping in m mind, despite the fact that people are so reassured by this appointment tonight. And he said, well, you ought to keep in mind at the end of the day, if he wants to, the president can push this to the limit and the president can fire this special counsel.

RATHER: He can fire him.

MADDOW: He can.

And he said in that, I believe if that happened, the way he put it, I`ll paraphrase, that would probably lead to the fall of the government and that would be terrible if that happened. But that`s still an option.

I am trying to recover from my failure of imagination for not being able to anticipate a lot of the things that have happened in the last 110 days. What do you think would happen if Trump went that far?

RATHER: It depends on when it happens. If it happens very soon, I think he might very well get away with it. And here is why. Out there in the country, particular in that part of the country that voted for Donald Trump, all of these conversations we`re having, all of this television coverage, up to today, we`ll what happens, really hasn`t penetrated, made much difference.

And I would say this: if Donald Trump`s core support stays at, say, 38 percent, 40 percent, then he might very well be able to fire special counsel, as your interviewee tonight, he has that power. But if Trump`s poll ratings -- and this is arbitrary on my part, if his poll ratings go to 30 or below, no, because the public reaction would be so strong.

Bottom line, if he does it in the next two weeks, three weeks, which I do not expect, he could probably survive it for at least a while longer. But make no mistake: in many ways, the dam broke today. Tomorrow morning is different from any morning we`ve had so far in the Trump presidency. And I repeat for emphasis, he is on the defensive.

But Donald Trump likes to fire people. He prides himself on I don`t care what the reaction is. I want to fire.

And in answer to your question, I wouldn`t be too quick to say he couldn`t fire the special counsel.

MADDOW: Dan Rather is the host of "The Big interview with Dan Rather" on AXS TV, an American national treasure -- thank you, sir.

RATHER: Thank you very much.

MADDOW: Thanks for being here.

Big nights like, this I`m really happy you can come in.

RATHER: Thank you.

MADDOW: Thanks.

All right. We`ll be right back with the other jaw dropping story we have learned this evening. Stay with us.

(COMMERCIAL BREAK) MADDOW: Obviously, the big story tonight is the appointment of a special counsel to take over the Trump-Russia investigation. That news broke at precisely 6:00 Eastern Time this evening.

At four minutes before 6:00 this evening, "The Washington Post" broke this. Look at the headline. House majority leader to colleagues in 2016, quote, I think Putin pays Trump. Literally, that is a quote from the number two Republican in the House, Majority Leader Kevin McCarthy.

"The Post" tonight reports that he said in the U.S. capitol to other members of Congress, including the House speaker last year, quote, there is two people I think Putin pays, Republican Congressman Dana Rohrabacher and Donald Trump.

Now this apparently reportedly happened on June 15th, 2016. And it`s one thing for "The Washington Post" to report that you said that, it`s another thing for them to say they heard the tape of you saying that.

The recording was listened to and verified by "The Washington Post."

Continuing from their story, quote, some of the lawmakers laughed at McCarthy`s comment. But then McCarthy quickly added, quote: swear to God.

House Speaker Paul Ryan instructed his Republican lieutenant to keep the conversation private saying no leaks. This is how we know we`re a real family here.

According to "The Post", it is difficult to tell from the recording the extent to which the remarks were meant to be taken literally.

For context here, this is about a month before Donald Trump secured the Republican nomination. But there was nobody else really in the running at that point. The day this conversation happened, both McCarthy and Paul Ryan had met with the prime minister of Ukraine, who`ve been telling them about this sophisticated propaganda tactics the Russians were using in Ukraine and the way they were supporting specific populist politician.

Paul Ryan was talking about that when Kevin McCarthy brought up the Russian hacking of the Democratic Party and brought up his comment that he is pretty darn sure that Putin is paying Trump if he is paying anyone. Somebody recorded the whole exchange, saved it for almost a year, and then gave that reporting tonight to "The Washington Post."

Spokespeople for Paul Ryan and Kevin McCarthy denied this ever happened until "The Post" told them there was a tape. Then they said oh, in that case, it was a poor attempt at a joke.

When NBC caught up with Kevin McCarthy this evening, he also said it was a bad attempt at a joke. Maybe it was. We have only the transcript. We have not heard the tape itself.

But someone there thought it was important enough they recorded it, kept that recording for a year and then gave to it "The Post", who published a story about it at about the same moment we got a special counsel on the Trump-Russia investigation, because that`s what the news is like these days. It`s not a real news day unless there are two huge stories announced within minutes of 6:00 p.m.

Sleep well. That does it for us tonight. We`ll see you again tomorrow.

Now, it`s time for "THE LAST WORD WITH LAWRENCE O`DONNELL."

Good evening, my friend, Lawrence.

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