Suspected Russian Spy found working at US Embassy. TRANSCRIPT: 08/02/2018. The Rachel Maddow Show

Show: THE RACHEL MADDOW SHOW Date: August 2, 2018 Guest:

ARI MELBER, MSNBC HOST: And thanks to you at home for joining us this hour. I am Ari Melber, in for Rachel who has the night off.

Now, we're reporting several big stories right now, including a financial turning point in the trial of Paul Manafort.

Today is the day Mueller's prosecutors brought out Manafort's own bookkeeper who told the jury he kept his foreign bank accounts secret from her. Well, that could be crucial to the case because it goes towards the criminal intent prosecutors allege that Manafort had throughout these tricky transactions. We have legal experts who were there inside the courtroom to explain tonight.

There's also a breaking news story about how an alleged Russian spy burrowed inside the U.S. embassy in Moscow.

So, we have both of those developing stories tonight. But we begin with some new flares coming from Donald Trump's own national security aides about the risks that continue to be posed from President Trump's one-on-one meeting with Vladimir Putin in Helsinki. Now, that was just three weeks ago. And according to experts across the spectrum, it marked a low point in a presidency with many low points that relate to Russia.

Experts inside Trump's own administration also say this is a problem, indeed it was Trump's own intelligence chief who took this extraordinary step of publicly noting that Trump was hiding what happened in the meeting from him. That was an admission that upset the White House. It was made under questioning by NBC's Andrea Mitchell at a security conference.

(BEGIN VIDEO CLIP)

ANDREA MITCHELL, NBC NEWS CHIEF FOREIGN AFFAIRS CORRESPONDENT: In Helsinki, the president was alone with Vladimir Putin for two hours, more than two hours, with only translators.

Basically, how do you know what happened? You are on the dark side of the moon. How do you have any idea what happened in that meeting?

DAN COATS, DIRECTOR OF NATIONAL INTELLIGENCE: Well, you're right. I don't know what happened in that meeting. If you had asked me how that ought to be conducted, I would have suggested a different way. But that's not my role. That's not my job. So, it is what it is.

MITCHELL: Is there a risk that Vladimir Putin could have recorded it?

COATS: That risk is always there.

(END VIDEO CLIP)

MELBER: People who run intelligence agencies do have all sorts of legit ways to duck those questions. They can say, they won't discuss private deliberations with the president. They can say they won't discuss classified information and certainly part of that meeting would be classified.

But note that instead, Coats sent a signal that whatever went down, he was out of the loop. If what went down was bad or nefarious, he is on the record. That he was out of the loop.

Now, perhaps he also hoped to nudge his boss towards bringing him into the loop. It is hard to run the intelligence agency's quest for information around the whole world if you can't get basic info from down the hall.

But here's what's new tonight. We are learning officially that Coats still doesn't know what went down, which makes the history even more concerning since what we do know is that Trump partially walked back his support for Putin in Helsinki, but then he canceled a lot of that out by saying that Russian election interference didn't happen. Of course, that's still Putin's position.

Then bureaucrats got in to action. You remember they had an actual National Security Council meeting on election security which would be a good thing but reporters noted entire summit was less than an hour and didn't have any public follow-through or public announcements. And that matches reporting that the Trump administration has no central policy for election security and no one is in charge.

While we're running through the facts tonight, note that another Trump appointee flagged how they don't have a key person, quote, minding the store on cyber security because the Trump administration eliminated the job of cyber security coordinator. So, that's a lot of facts. That is the current policy baseline.

Experts noting the Trump approach here looks more like cyber lackadaisical than cyber secure. That is the framework for what happened today. A list of intelligence VIPs, marching into the White House briefing room. And you can see it there. They were rolling deep.

You see the leaders of intel, NSA, FBI, Homeland Security announcing that contrary to what their boss says, the recent reports in the news of Russian midterm meddling are true. That Russian interference in U.S. politics continues right now, and they say, this administration is working to protect the mid-terms and their boss does care about it. Now, if there is a silver lining here to that group of people you saw, we're going to play some of what they said, the silver lining is these intelligence professionals are trying to show a united front and correct their own president while also trying not to enrage him as he certainly watched their televised performance.

But as Jerry Garcia pointed out long ago, every silver lining has a touch of gray and that came as reporters asked the logical question about the contradiction between the message in that room and Trump's message in Helsinki.

(BEGIN VIDEO CLIP)

JOHN ROBERTS, FOX NEWS REPORTER: Let me take you back to Helsinki. The president seemed to indicate that he may believe Vladimir Putin when he says, he didn't have any influence in the 2016 election. What is your belief about the Russian government involvement in meddling in 2016?

COATS: Well, the relationship to the 2016 election, of course, none of us were in office at that particular time. But both the president, the vice president, think everyone on this stage has acknowledged the fact that the ICA was a correct assessment of what happened in 2016.

Our focus here today is simply to tell the American people, we acknowledge the threat. It is real. It is continuing and we're doing everything we can to have a legitimate election that the American people can have trust in.

(END VIDEO CLIP)

MELBER: So that was the answer. That's the tension on the intelligence. Then there is a separate tension about how do you investigate, indict and punish the people identified by that very intelligence for attacking American democracy?

We all know now, there is a busy special counsel operation that Trump has denigrated and at sometimes lied about. So, a question on that was posed to the FBI director who, let's, of course, not forget has this job because his predecessor was fired because of the same Russia probe and that firing is now part of the obstruction inquiry.

(BEGIN VIDEO CLIP)

REPORTER: I have a question for Director Wray. Thank you.

The special counsel Robert Mueller has indicted more than 20 Russian officials based on work by the FBI for meddling in the 2016 election. The president has tweeted that that investigation by the special counsel is a hoax and should be shut down. I know you've said you don't believe it is a hoax.

But why would the American people believe what you're saying about the FBI when the president says that the investigation by the special counsel is a hoax and when the press secretary yesterday says that there was a lot of corruption within the FBI? Do you have any response to those things coming from the White House?

CHRISTOPHER WRAY, FBI DIRECTOR: Well, I can assure the American people that the men and women of the FBI starting from the director all the way on down are going to follow our oaths and do our jobs.

(END VIDEO CLIP)

MELBER: A strong question. The answer is up in the air. That is a statement that could mean something. That oath that he referenced is to the Constitution. Not the president.

And in our history, there are certainly officials who took their oaths to mean they had to stand up to criminal conduct when discovered by their peers or superiors. But let's be clear. Director Wray's statement also could mean nothing because it's leaning on a cliche rather than stating unequivocally today the FBI director still has Mueller's back, has his own agents' back, and isn't going to change his actions or his words just because the president down the hall keeps running down the probe.

Now, there's one more insight we can probably glean from today's events and it came also from intel chief Dan Coats, the one who chose to tell everyone before that Trump was hiding the Putin meeting's contents from him which again isn't something he has to put on blast in front of the nation. But he did it again today, putting on the record that this was not an issue of timing or delay or sitting down with his boss. It's been three weeks and your nation's top intelligence officials still doesn't know what happened in Helsinki.

(BEGIN VIDEO CLIP)

JEFF MASON, WHITE HOUSE CORRESPONDENT, REUTERS: In the run-up to the Helsinki summit, the U.S. officials, ambassadors to NATO, ambassadors to Russia said that the president would raise the issue of malign activity with President Putin. He didn't discuss it, at least at the press conference. You're saying today that the president has directed you to make the issue of election meddling a priority.

How do you explain the disconnect between what you are saying, his advisers, and what the president has said about this issue?

COATS: I'm not in a position to either understand fully or talk about what happened at Helsinki.

(END VIDEO CLIP)

MELBER: He's not in a position, meaning he still doesn't know.

There is an old Brooklyn saying about that moment of insight that hits you when you learn a truth, if you don't know, now you know. Well, under Trump, Dan Coats has turned that upside down telling everyone, he didn't know and he still doesn't.

He is the one person in charge of our U.S. national security secrets. If he still doesn't know, that sounds like a problem for all of us.

We begin tonight with Ken Dilanian, intelligence and national security reporter for NBC News, that's been a part of a great deal of reporting and some scoops on this subject.

Thank you for joining me tonight.

KEN DILANIAN, NBC NEWS INTELLIGENCE AND NATIONAL SECURITY REPORTER: Thank you, Ari. Good to be here.

MELBER: When you look at that united front, what do you see as the positive and what do you see as problematic that was clearly left unsaid?

DILANIAN: That was such a fascinating mixture of truth and fiction, of cynicism and earnestness right before I sat that news conference. The fiction and the cynicism was national security adviser John Bolton coming out and trying to suggest that from the moment Donald Trump took office, he has had a strong and forceful policy to counter foreign election intervention and Russian meddling.

That's just false. We've reported that it's false. Anyone who has a Twitter feed or reads Donald Trump knows that that's not true.

What he's done is undermine at every turn the conclusion of the intelligence community that Russia interfered. Even tonight hours after this event, Donald Trump gave a speech in Wilkes-Barre and he again referred to the Russia how much. He said his relationship with Putin could be good but hindered by the Russian hoax. So, that part of it was ridiculous.

But, you know, Chris Wray, Paul Nakasone, who's the head of the National Security Agency, and Dan Coats, I really believe do have an interest in trying to do something and they did want to communicate to the American people that the government does recognize that this is a problem. They're trying on flag that the Russians still throughout intervening and there are some things that they are doing about it.

And the most interesting thing that I heard was Paul Nakasone who's a general and who commands Cyber Command, which is, you know, the nation's cyber war force said that he was prepared to go after foreign meddlers in our election and he seemed to suggest that he had presidential authorization to do that. I think that's actually up in the air. We need to pin it down because he actually can't use the vast cyber arsenal at his disposal unless Donald Trump allows him to do that.

But that was the biggest news I thought that came out of what many of those people said. Other things that they said we already knew. Yes, the Russians continue to meddle in our politics. Yes, DHS is reaching out to the states to try to shore up cyber security. Yes, the FBI has a foreign influence task force and they are trying to step their efforts.

And no, there is no presidential leadership. The president wasn't there. There's no central unifying force that knits this together.

MELBER: Let's dig into that point you raised. It is common to say this is better than nothing. And you hear that a lot in Washington where a lot of times nothing is what's going on. That's a low bar for the administration. So while better than nothing, as you say, without the president there, doesn't it still look like the cyber security plan is sort of a headless body where these various agency folks do what they can but we all know and see that the head of the government is undercutting them before and after?

DILANIAN: Yes. And the biggest evidence of that is that they're having this news conference 100 days before the midterms. It's about -- it's about a year and a half too late because none of this behavior by the Russians stopped at all after the 2016 election, particularly the intervention on Facebook and Twitter, the attempt to sort of divide Americans by creating false personas and stirring up trouble.

That's been going on. And Dan Coats gave a speech a couple of weeks ago where he said the system is blinking red. So, yes. You're right, because we can shore up our cyber defenses and we can do a lot of different things to try to defend.

But the Russian intelligence hackers are always going to get in in some fashion. And the way that you stop them is to deter them. To make them pay a price.

And the only person who can do that is Donald Trump. Those other people in the news conference can't do that.

MELBER: And just briefly, to that final point. You've reported on this. One of the issues with the Obama administration and the perils that are posed even if someone tries to take it seriously was, quote, Obama's approach, "The Washington Post" noted seemed to be don't make things worse. Obama's advisers concern any pre-election response could provoke an escalation from Putin.

Putting aside the Trump piece of this, what is the problem for the U.S. that as you put it, lives in a glass house when it comes to escalating a cyber global war?

DILANIAN: Yes, that was a reasonable concern by Barack Obama, because we are the most vulnerable of any society. We are the most Internet- connected. And we are extremely vulnerable to Russian cyber attack. And they are in our networks, including the critical infrastructure.

But, you know, most intelligence officials and experts that I talked to feel like, what else can we do? There has to be a response to this. We are wide open right now to an attack on our democracy. And the Russians have not been deterred in the least and there has got to be something we can do to deter them, Ari.

MELBER: All right. NBC's Ken Dilanian, thank you so much, all over the story.

DILANIAN: Thanks a lot.

MELBER: As we turn to our next guest, I want to look at March of last year. This was just after the 2016 election. The Senate Intel Committee was looking at these issues and they heard testimony from a former FBI special agent, Clint Watts.

And he said something that's echoed in people's heads ever since.

(BEGIN VIDEO CLIP)

SEN. JAMES LANKFORD (R-OK), INTELLIGENCE COMMITTEE: This is not new for the Russians. They've done this for a long time across Europe. But it was much more engaging this time in our election. Why now? Mr. Watts?

CLINT WATTS, FORMER FBI SPECIAL AGENT: I think this answer is very simple and is what no one is really saying in this room, which is part of the reason active measures have worked in this U.S. election is because the commander in chief has used Russian active measures at times against his opponents. On 11 October, President Trump stood on a stage and cited what appeared to be a fake news story from Sputnik News that disappeared from the Internet. He denies the intel from the United States about Russia. He claimed that the election could be rigged. That was the number one theme pushed by RT Sputnik News white outlets all the way up until the election.

(END VIDEO CLIP)

MELBER: I now, as we look at another election, I want to bring in Clint Watts, former FBI special agent. He's the author of "Messing with the Enemy: Surviving in a Social Media World, Hackers, Terrorists and Fake News." I imagine that as a person involved in law enforcement, you don't get great personal pleasure, ego from being early and right about something that is such a massive problem.

But the way you put it there in a serious setting to Congress that early on was far ahead from where people were comfortable stating the problem that you said these Russian active measures were put in place basically more effectively because of the way Donald Trump behaved.

How does that context apply to what we saw there in the briefing room today?

WATTS: Yes, thanks, Ari. It's a happy, sad moment, right? That is a briefing that should have happened in February 2017.

President Trump was briefed about this before the inauguration, we know now. And yet there was no response. And the person that should have been leading that press conference today is the commander in chief of this country. It is his job to defend all Americans against enemies, foreign and domestic, and particularly when they come together. He should be trying to ensure the integrity of our electoral process or democratic institutions.

So what was fascinating today was essentially, the leaders of these institutions, many of whom have been battered essentially by their boss are now moving around him to really serve the American people. I thought Director Wray's comments were right on target. But he said I am in charge of our organization and this is what we're going to do.

The same with the NSA director. He essentially said, I'm willing to strike back against Russia and I might do that. It is almost independent.

It is like, Ken said, it is shocking that we're talking about offensive cyber operations because ultimately, this should be led by a task force, headed by the commander in chief. It should come from the national security staff and it should be an integrated strategy.

What if we launch that offensive cyber attack but then we receive a counter attack from Russia or another adversary in cyber space that it's the financial sector, or turns off the lights in one of our cities? This requires coordination.

And so, while I'm happy to see these advances being made and I'm sure this is just a reaction to that Helsinki summit and the fear that many Americans have legitimately about the interference in our election, I still worry that we really don't know what the right happened and the left hand are doing and who is in charge of this.

MELBER: And the point there is this is now. This is not litigating 2016 or seeing what Mueller finds that happened in 2016, the Helsinki is now. Whatever was secretly discussed is operative now. The midterm meddling is now.

Do you have a view, given the great expertise, beyond what most of us have access to, of what Dan Coats is doing there and repeatedly saying he's out of the loop?

WATTS: Yes. I think he is trying to make sure that he is honest with the Congress, which is oversight over him, and with the public. I find value in that. While I'm disappointed what his answer is what it is, at least he is telling the truth I think which is saying, this is my position, this is what my job is and this is what I know.

What makes me nervous is, as we saw on that stage in Aspen at the security forum, he didn't even know that the White House would extend an invitation to Vladimir Putin to come to the United States. This is stunning for the head of our intelligence to be that out of the loop. So while I like how a lot of these leaders, these institutions are now essentially moving around the president, I'm just alarmed at where our country is. And that a year and a half later, we're just now saying we'll do something about the attack two years ago.

MELBER: You make such an important point, and it's something Rachel has obviously been all over in her reporting, which is if the head of intel doesn't know the decisions being made to give Putin that benefit, that honor, then obviously they're not making a pretense of having consulted him, which means and that is decision is being based on whatever. Some other thing and given the investigation questions about whether there's anything nefarious there.

Clint Watts, we really appreciate your time tonight.

WATTS: Thanks, Ari.

MELBER: We have a lot more coming including day three of Paul Manafort's trial. Stay with us.

(COMMERCIAL BREAK)

MELBER: Today looked like a bad day for Paul Manafort and his trial. Now, before I report any other facts, let me say in fairness, the early days in trials often look bad for the defendant because we hear one side of the case for the prosecutors. Their first best argues. In this case, that's Mueller's laser focus on Manafort's finances which were presented as lavish, shady, sneaky, and in some cases bizarre. Even though the defense is yet to cop, here is why there was so much bad news for the defendant.

Manafort's bookkeeper took the stand, painting a picture of his secretive boss breaking the law. More on that in a moment.

One of his closest aides, Rick Gates, will take the stand against him we learned today. Mueller's team confirming after some back and forth they have every intention of doing it. To be clear, that testimony could reverberate well beyond this trial, because for all the talk of people flipping and the intrigue about what Mike Flynn or George Papadopoulos may have told Mueller, when Gates speaks under oath in public in this trial, it will it be the first time we actually hear a Trump campaign aide legally turn on another Trump campaign aide.

And the other development might be a little more melodramatic than pivotal, but it is also one that a lot of people are talking about. We return, of course, to the ostrich jacket. Mueller's team filing an overnight motion challenging the judge's decision to keep from the jury photos of Manafort's sartorial tastes, the fancy suits and $15,000 ostrich jacket.

Prosecution arguing evidence regarding Manafort's expenditures on goods, services and property through wire transfers from these foreign accounts that he controlled to U.S. vendors is directly relevant to the elements of the offenses. Now, that is very lawyerly and we'll show you exactly why.

Judge Ellis responded I'm well aware the evidence is relevant and that's why I permitted the government to introduce the amounts of money that he spent. The relevance being, OK, you can do the receipts.

The judge goes on to say, what I have not permitted is to gild the lily. That is if he spent a lot of money on fancy clothes or watches, or cars I guess you would call them designer clothes, they're not Men's Wearhouse clothes but it wouldn't matter if he had spent money on Men's Wearhouse clothes. You want to the introduce pictures of these suits, that -- meaning the picture aspect itself the judge argues -- quote, isn't relevant at this point and kind of besmirches the defendant and kind of engenders some resentment against rich people generally.

So, that is how these lawyers get into the little details here because they have a reason, Mueller's team, to want to have the jury see with their own eyes all that fancy spending. Some of this sounds like an episode of Lifestyle's the rich and famous. You almost don't need the pictures because they're telling the jurors about a $10,000 karaoke system that Manafort put in his Hamptons home which has a huge flower bed of white and red flowers shaped like an "M" off the driveway and a manmade pond in all of the Hamptons that was complete with a waterfall feature.

Then the receipts are, of course, from the bookkeeper who we mentioned. She walked through that she dealt with Manafort's income expenses and this notoriously high flying super rich consultant was actually living a lie.

He was on his way to being broke. He lied to financeable institutions to get loans. He couldn't pay his own family's health bills.

The prosecution asked, did there come a time when Manafort had trouble paying his bills? And she said yes.

Now, here's where it comes together. That was part of what was presented today. And that was about early 2016. Evidence showing Manafort needed money. But instead of seeking a new consulting gig or some new financial retainer, his plan was to take a demanding full time high stress job as a volunteer.

We all know that because he had a written pitch that leaked to Trump which offered his campaign services for free. No paid job. The worst news for Manafort is that all of this written and testimonial evidence today suggests he was broke and that led him to commit alleged financial crimes.

But the wider question no matter what happens in this trial is whether Paul Manafort's plan to work for free was itself another financial lie. Did he have a plan, executed or not, to use the Trump campaign like prosecutors alleged he had used so many others as a witting or unwitting accomplice to new different illegal money schemes.

To be fair, that is not what's charged in this trial. But to be fair, this investigation ain't over either.

We're now joined by Josh Gerstein, justice correspondent for "Politico" and MSNBC contributor as well. And Barbara McQuade, a former federal prosecutor and MSNBC analyst.

Barbara, your view of day three and what it means that the prosecutors are going to the mat on the pictures.

BARBARA MCQUADE, FORMER U.S. ATTORNEY: Yes, I think that they want to make the case as they said in their trial brief that this isn't just a matter of spending money. It is spending money very lavishly, because one of the things they have to prove is that when Paul Manafort signed his income tax returns, he knew that those were false statements. He knew that the amount of income he was declaring was far less than what he had.

And how do you show that, his knowledge? You show it by showing all of the different things he's spending money on. And I'm concerned that information is coming in so quickly, so fast, so much that the jury is having a hard time keeping up.

When you see those pictures, it does bring that home. And it helps explain his motive for the bank fraud charges which is the cash dries up and this is someone who loves money. And so, when the cash dries up, he needs and is desperate for cash which explains why he's motivated to engage in that bank fraud to get the cash he needs to pay his expenses.

MELBER: Josh, your views.

JOSH GERSTEIN, JUSTICE DEPARTMENT CORRESPONDENT, POLITICO: Well, I am reminded of an old English teacher who used to say show, don't tell. And the problem is that Judge Ellis is really insisting that the prosecutors only tell and very rarely show. So, as a result, as Barbara is alluding to, jurors are getting almost the equivalent of a ledger of expenses which simply may not carry as much weight as seeing the actual items.

Now, the prosecutors say they're not trying to make fun of Manafort or besmirch his reputation but to emphasize that these are not business expenses, these are actually personal expenses. They could not be any other. These oriental rugs were not going into an office. They were going into Manafort's homes.

And they're just the kinds of spending that could not conceivably relate to any legitimate business expense.

MELBER: Right, which goes, Barbara, to something we've seen in other cases where there's sort of an accountant's defense where people say, hey, my people were doing this. A lot of money flies around. I didn't really know.

Whereas if you have enough ostrich jackets and the jurors say I remember the ostrich jacket, wouldn't you remember it, it clears that hurdle to some degree. I wonder, Barbara, if you could only speak to the Mueller's team, the theory of the case from the Mueller team that they want to give more than one reason why Manafort acted this way.

Today in the spotlight, the reason was he was desperate, he was broke, and he made these decisions. But they've also separately made the arguments by suggestions and in written filings that he was greedy, that he was -- to use a more proverbial word, scummy.

Why do you think they're using basically more than one theory of why he would allegedly commit these crimes?

MCQUADE: Well, I think they need to establish theories for both kind of sets of counts in this case. There's a set of counts that relates to the filing of false income tax returns. And so, for that part the purpose is showing his knowledge of the income.

And then there is a series of charges related to bank fraud. And so, with regard to those charges, they need to show the motive that he was running out of cash. And so, that's why he was involved with this money.

So there are two different motives, because two different theories for the two different sets of cases. But the legal standard under the rules of evidence is the evidence should be permissible unless it is substantially more prejudicial than it is probative. Because it is probative, because these are the things he himself bought, it is hard to argue that it is substantially more substantial than probative.

MELBER: And, Josh, what about the big question that we've teed up tonight and that's come up before and come up in reporting in the "New York Times" and your publication, as well, that this was an unusual volunteer arrangement?

GERSTEIN: There is no question about that, and at a particular moment. I mean, you're talking, Ari, about why there might be different motivations. I think it's because this is case spans a long period of time from 2010 or all the way back to 2005, to 2016 and 2017, right into the heart of the Trump campaign and beyond.

In 2010, Manafort seemed to be doing OK. He was bringing in a lot of money from this deal with Viktor Yanukovych, and the oligarchs supporting the party of regents. The government says $60 million for his work in Ukraine. Even with a lavish lifestyle, you can manage to spend a few years on $60 million.

But it had begun to dry up in 2015 and 2016 and that's when the desperation set in. And the real question is, was that job at the top of the Trump campaign a product of this desperation? Was he just going to go through the revolving door and become another Washington lobbyist once again like everybody else? Or was perhaps there's something more nefarious at work?

MELBER: All right. Barbara McQuade and Josh Gerstein, my thanks to both of you for your expertise coming straight out of the courtroom.

And we will be right back.

(COMMERCIAL BREAK)

MELBER: Here's a bombshell tonight from the "Guardian" newspaper in the U.K. A suspected Russian spy has been working undetected in the heart of the American embassy in Moscow for more than a decade. The Russian national has been hired by guess who? The U.S. Secret Service and was understood to have had access to the agency's Internet and e-mail systems which gave a potential window into the confidential material, including the schedules of the president and vice president. Investigators now have established that she was having regular and unauthorized meetings with Russia's principal security agency.

Now, numerous secret meetings with that agency, the FSB, and undercover Russian spy operating under the umbrella of our own U.S. government undetected for, yes, a decade.

What kind of damage could have been done over all that time? And what happens next? This is a big one.

Michael McFaul, former ambassador to Russia under the Obama administration joins me.

I guess we should start with, when did you first learn about this and based on your knowledge of that embassy, obviously, where does this person fit?

MICHAEL MCFAUL, FORMER U.S. AMBASSADOR TO RUSSIA: Well, I only learned about it when press reporters started poking around about it. I did not know about it when I was ambassador. Although it sounds like this woman worked for me when I was there. I don't remember her or recall her.

Obviously, this is not good news. We don't want to have people working for the FSB inside the embassy interacting with people, having access to information.

Now, there is some good news, Ari. I think it's highly unlikely she had access to classified information. That are just does happen in the embassy for Russians, for foreign nationals working there. But because she worked for the Secret Service as you just alluded to, she probably would have access to the schedules of people like the vice president and president. That obviously is not good.

MELBER: Walk us through where this fits on the spectrum of expected, possible, low risk, impossible. You operated in an environment where Rachel and others have reported on before where there were all kinds of explicit measures taken against you and your team there. So, you, obviously, this is not like working in the Canadian embassy. I should say the U.S. embassy to Canada to be precise.

MCFAUL: Right.

MELBER: But did it cross your mind that this was part of the risk you faced from your own staff or Russians who are hired by Secret Service and the embassy?

MCFAUL: Absolutely. Of course, and with good reason, by the way. So, just one anecdote and I need to be careful what I talk about and what I don't. But when I would go to meet with members of civil society, I would show up and would be all kinds of protesters there. Sometimes as many as 50 protesters outside, blocking the doorway for how I could get in there.

How did they know my schedule? These were not announced meetings. So, one way might be through cyber activity. But another might be through people like this individual that were working with us and somehow got access to the calendar.

Remember, she didn't work close to me, right? This woman in the Secret Service. But they got to know other Russians that work in the building. They got to know my bodyguards who are Russians, they got to know different staff members and that's the other way that information transfer could happen.

So, it's a very --

MELBER: Right. Let me ask you, as well about the most messed up part of this from what I can tell and this is probably not something, if you say you're just learning about it, it doesn't involve your leadership.

But the report here is that the Secret Service quietly terminated this person and there is no indication of any other measures of accountability. This comes at a time where we're talking every night about indictments of Russians and hoping to potentially get them.

Maria Butina is in custody. Others could be caught by an Interpol warrant if they're traveling and face justice. Mueller didn't indict them as only an exercise.

Could you shed any light on at least in this report that it sounds like this person was just quietly fired?

MCFAUL: Well, I would say two things. One -- three things. One, I don't know the full facts. We'll have to learn that.

Number two, we obviously could not have arrested her the Russian -- on her territory, right? So, that's what's different about Butina versus this individual.

But three, there should have been a thorough investigation. In fact, you know, oftentimes we would run counterintelligence on someone like that to follow them to try to understand what they're doing to try to get greater fidelity as to how the FSB works.

And remember, the FSB dedicated lots and lots of resources. I'm being vague on purpose following every single member of the U.S. embassy and first and foremost me, and they're really good at it. So, just to dismiss somebody without trying to investigate and figure out what they were doing if that holds to be true, then that I think was probably a mistake.

MELBER: And final question then. Certainly can't arrest them on sovereign territory out of the blue. But the fact that this was reportedly a mole inside the Secret Service and you would want to get that informs, they were in U.S. employ.

So what about sending them on a mission abroad to the United States and then holding them there?

MCFAUL: You watch a lot of spy shows, don't you? In all seriousness.

MELBER: Spy shows? Just watch the news, man.

(LAUGHTER)

MCFAUL: That's a very interesting idea, you know? Should that have been done before? That's a great observation because obviously, this was an employee.

If -- again, if everything that's been reported is true, I want to keep saying that, I don't know the actual facts, we should have taken more precautions. And obviously this person was not fulfilling their contract as has been reported to the United States government and that has implications.

And again, we just want to know more than just kind of sweeping this under the rug and moving on. We want to take advantage when we learn this, right? Obviously, we did have some good intelligence that we know allegedly that she was reporting to senior FSB officials. That's the mark of good intelligence.

But we should have taken more appropriate measures to learn more about what happened including, you know, I'm not a lawyer and I don't pretend to be one, but including, of course, were there criminal activity here that should have been investigated.

MELBER: Well, ambassador, it's an intriguing story as you mentioned in your nuance. It's a brand-new one from "The Guardian". So, we may yet learn a lot more. We appreciate the expertise you have having worked inside the building where these activities allegedly occurred.

Michael McFaul, former ambassador to Russia, thanks for spending some time with us tonight.

MCFAUL: Sure. Thanks for having me.

MELBER: Appreciate it.

Up next, there is a friendly game you might want to play of name that town. We'll be right back.

(COMMERCIAL BREAK)

MELBER: Let's do some politics. In one minute, we're going to bring on a hard working political reporter on assignment in an American swing state. The reporter is in a Pennsylvania city of approximately 40,000 people. This is 20 miles sort of south southwest of Scranton with a hyphenated name that I'm not going to say this, because here on the show we haven't found a consensus about how to say it.

Now, we do have one example. We present the great Gene Kelly.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The one and only Eugene Curran Kelly born Pittsburgh --

UNIDENTIFIED MALE: (INAUDIBLE) Wilkes-Barre.

(END VIDEO CLIP)

MELBER: The right way to say the might be Wilkes-Barre, Pennsylvania. However, that's not what the local Chamber of Commerce say.

(BEGIN AUDIO CLIP)

UNIDENTIFIED MALE: Welcome to the greater Wilkes-Barre chamber.

(END AUDIO CLIP)

MELBER: So we have Wilkes-Barre in the running. We also have Wilkes- Barre. If there are any others out there, well, take it away, Mr. Mayor.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Hello, and welcome to the virtual tour of Wilkes-Barre, Pennsylvania.

(END VIDEO CLIP)

MELBER: Maybe they're just low key about it. Wilkes-Barre. That's the third pronunciation that we have found for this we believe to be a great town in Pennsylvania, Wilkes-Barre. Wilkes-Barre, Wilkes-Barre, Wilkes- Barre, feel like fruit. Any way you want to say it. That's where we're going next.

Stay with us.

(COMMERCIAL BREAK)

MELBER: It has now been a full month since NBC News first reported allegations that Republican congressman and Trump supporter Jim Jordan ignored allegations of sexual abuse against a team doctor. This was back when Jordan served as an assistant wrestling coach at Ohio state in the '80s and '90s.

Now more than 100 men have come forward with different types of allegations of abuse by that doctor. One former wrestler telling NBC News he told Jordan about it, six, saying they do have reason to believe that Jordan knew. And other two said that they didn't think he did know. So, there is some debate there.

Now, Congressman Jordan vehemently denies knowing about this. Not only denied the accounts, he's actually alleged this entire story which to be clear in its outlines has wide corroboration is not any good faith attempt to reckon with this history but rather a choreographed attack by the anonymous left.

(BEGIN VIDEO CLIP)

REP. JIM JORDAN (R), OHIO: I'd like to think the reason you see the left coming after me and lies being told is because we're being effective.

The guy who is making the most noises is a guy that's got a criminal background. The other guy has been in prison for 18 months.

The way it seems to me was sequenced and choreographed by the left and everything they have done.

I think the timing is suspect when you think about how this whole story came together.

(END VIDEO CLIP)

MELBER: Jim Jordan has taken this on partly by arguing that he's actually a victim of people who are only doing this for politics.

Now, amid these allegations Jordan is running for speaker. So he would be the most powerful person in congress, as well as second in line to the presidency after the vice president.

NBC News reports that Congressman Jordan has been privately pressuring victims of the abuse to recant on aspects of their allegations. Two ex- wrestlers telling NBC the day after they made these allegations against the congressman at least of turning a blind eye to dealing with the abuse by this doctor, that Jordan got another retired coach to reach out and pressure them into issuing statements of support for Jordan.

One saying, I will defend Jordan until I have to put my hand on the Bible and tell the truth. Then he will be on his own. The next wrestler saying when he refused, Jordan's allies began attacking his credibility. Another saying: what a world we're living in when a member of Congress is digging up dirt on sex abuse victims like us.

Now, the retired coach did not return calls seeking comment to explain all this on the record. Jordan's people say that he has many supporters and, quote, of course, we encourage folks to speak the truth.

Whether the new reports will change anything about Jordan's political race here in the House is open. The president and Republican leaders have not weighed in in any great detail. Now, this vein of reporting by Congressman Jordan is a campaign issue in the Ohio special election. That's the race next week. There is a new ad there online asking whether the Republican candidate in that race stands with the victims or stands with Jim Jordan while he was a coach and the approach he took.

I turn now to Jonathan Allen, the national political reporter for NBC News, who as we mentioned is out in the field looking at all of these races.

What is important here to you about the way Jordan is handling this? Because on the one hand, he stands not accused of the original misconduct and yet the way he's responded as you have reported has raised new questions with the very affected community, including self-identified people who say they were victims.

JONATHAN ALLEN, NBC NEWS NATIONAL POLITICAL REPORTER: Right, Ari. You not only have these allegations that Jordan was aware of and turned a blind eye but now allegations of a cover up. That quote you read before is devastating.

You know, I'm going to be with Jimmy until I have to put my hand on a bible and swear under oath at which point I'm casting him aside. That's -- this is really tough stuff. I think the problem for Republicans right now is there is a little bit of that Washington bubble.

They seemed to have forgotten what happened to them in the 2006 midterms when there was a cover-up of the Mark Foley page scandal. Maybe a lot of them obviously weren't in Congress then, but you would think they were politically aware. They seem to be unaware of the larger moment in American history where you have got all these sexual abuse revelations, starting back with the Penn State case and the Joe Paterno-run football team. And more recently Michigan State.

This seems like an untenable thing for Jordan particularly as a speaker candidate as you note, one of the Democratic groups going after one of his fellow Ohioans they're asking if he will support Jordan for speaker. You could only imagine what Democrats will do over the next few weeks, given all the attacks on Nancy Pelosi in the past. Oh, my God, what would happen if Nancy Pelosi was the speaker? You can imagine a series of Democratic ads on what if Jim Jordan was the speaker of the House.

MELBER: Do you think this is something that does cut across party lines out there?

ALLEN: Absolutely. This is one of those issues that does cut through because unfortunately sexual abuse has, you know, hurt so many people in our country. And even people who aren't victims of it certainly can understand. This isn't a partisan or political issue. It's a character issue.

MELBER: Right. It goes to not only what happened, how did it look in the moment from what someone saw, but given what has been called out in the reckoning that's been demanded, how do you deal with it now. And that seems to be where he's under extra scrutiny in part because of reporting like yours.

Jon Allen, thank you for making time for us tonight.

ALLEN: Thank you.

MELBER: We will be right back.

(COMMERCIAL BREAK)

MELBER: I'm discovering a Russian spy. Ambassador McFaul's observations about spy novels. We've had quite a show tonight.

That does it for us. We will see you again tomorrow. I also mention, you can tune into "THE BEAT" at 6:00 p.m. Eastern tomorrow. I will be joined by former Clinton campaign chair John Podesta and comedian Eddie Griffin, which we're looking forward to.

Now, something else we're looking forward to, it is time for "THE LAST WORD WITH LAWRENCE O'DONNELL".

Good evening, Lawrence.

END

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