updated 5/29/2013 10:30:25 AM ET 2013-05-29T14:30:25

THE LAST WORD WITH LAWRENCE O`DONNELL
May 28, 2013

Guests: Nia-Malika Henderson, Marcus Owens

LAWRENCE O`DONNELL, HOST: In Washington, the president and Democratic
senators are pondering the nuclear option in the Senate. But on the Jersey
Shore, it seems at least one Democrat and one Republican can get along.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The Republicans aren`t defined by what they`re
for, they`re defined by what they`re against.

SEN. HARRY REID (D-NV), MAJORITY LEADER: Three hundred and eighty-six
filibusters.

FORMER SEN. OLYMPIA SNOWE (R), MAINE: Excessive political
polarization --

SEN. PATTY MURRAY (D), WASHINGTON: Unprecedented obstruction.

SNOWE: -- is preventing us from tackling our problems.

SEN. CHARLES SCHUMER (D), NEW YORK: The Republicans now treat
judicial filibuster as the rule.

REID: Three hundred and eighty-six filibusters.

JON STEWART, COMEDIAN: It chills your soul, does it not?

REID: It`s time to get the Senate working again.

STEWART: You don`t miss it at all, do you?

UNIDENTIFIED FEMALE: I don`t.

STEWART: Yes.

CHRIS MATTHEWS, "HARDBALL" HOST: So many elected officials have
forgotten the power of positive politics.

UNIDENTIFIED MALE: The president could certainly use a friend in the
GOP.

GOV. CHRIS CHRISTIE (R), NEW JERSEY: It is my privilege to introduce
the president of the United States of America.

MATTHEWS: Beach boys.

CHRIS JANSING, MSNBC ANCHOR: Right now, President Obama is on his way
to the New Jersey shore.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Thank you to Governor
Christie for that introduction.

CHRISTIE: Republicans, Democrats, we all came together.

UNIDENTIFIED FEMALE: The political odd couple.

UNIDENTIFIED MALE: They`re back together once again.

UNIDENTIFIED FEMALE: This is both of them doing their job.

UNIDENTIFIED MALE: The president has a job to do which is to lead the
country.

OBAMA: I told you we would not quit until the job is done and I meant
it.

UNIDENTIFIED MALE: Of course there`s a political sub text.

CHRISTIE: We made great progress.

UNIDENTIFIED MALE: He is running for re-election.

CHRISTIE: There`s still a lot more work to do.

UNIDENTIFIED MALE: It looks pretty good for him to be hanging out
with the president now.

ANDREA MITCHELL, MSNBC ANCHOR: It`s in both of their benefits to show
bipartisanship.

UNIDENTIFIED FEMALE: This is bipartisanship at its best.

UNIDENTIFIED MALE: The president could certainly use a friend in the
GOP.

OBAMA: I`ve got to say it, if they ever let me have any fun, I`d have
some fun here.

(END VIDEOTAPE)

O`DONNELL: The second most important court in the land is less than a
mile away from the most important court in the land. Down the hill from
the Supreme Court in Washington is the United States Court of Appeals for
the District of Columbia circuit. It is a feeder court to the Supreme
Court in more ways than one. Many of the cases brought there involve
challenges to federal law that end up being finally decided just down the
street by the Supreme Court.

And there`s no clearer path to membership on the Supreme Court than
the D.C. Circuit Court of Appeals. Four of the nine Supreme Court justices
served on the D.C. Circuit Court of Appeals. There are now three vacancies
on the D.C. Court of Appeals.

The court has two more seats than the Supreme Court, filling the three
vacancies will bring the court to its full strength of 11 judges.

But filling those vacancies might require President Obama and the
Democrats to use the so-called nuclear option in the Senate in order to get
those judges confirmed. "The Washington Post" has reported Senate Majority
Leader Reid privately consulted with President Obama on the need to revisit
filibuster reform, the president has told the majority leader that he will
support the exercising of the nuclear option if Reid opts for it.

The aide says Reid is eyeing a change to the rules that would do away
with the 60-vote threshold on all judicial and executive branch
nominations. The aide says.

Then, there was this debate on the Senate floor.

(BEGIN VIDEO CLIP)

REID: I just want the Senate to work well. This Republican
obstruction has created unreasonable, unworkable standard, where minor
issues are raised to block major nominees, or to require 60 vote super
majority for confirmation.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: I don`t know what the
leader thinks advise and consent means. Listening to him it means sit
down, shut up, don`t ask any questions, and confirm immediately.

(END VIDEO CLIP)

O`DONNELL: Joy Reid, the confirmation process especially on judicial
nominations in the past used to be a routine thing. In fact, before the
television age, they didn`t bother to have confirmation hearings for
Supreme Court justices. There just -- it wasn`t evenness. We have now
come to this.

The challenge for Harry Reid is, what happens when we end up in the
minority. How should they weigh that?

JOY REID, THE GRIO: Yes, remember you talked about the D.C. Circuit
Court being a feeder to the Supreme Court -- remember a guy named Robert
Bork who sat on that court who Reagan tried to get on the Supreme Court and
he was blocked. So, Democrats want to preserve the ability to block
something like that. But at the same time --

O`DONNELL: But I don`t think he was blocked by a filibuster maneuver.
I think -- Ari, did they have a vote on Bork and it go down? There wasn`t
a filibuster, I`m sure --

REID: He wasn`t --

ARI MELBER, "THE CYCLE": I don`t think so. I think Bork was
defeated.

REID: He was just defeated.

O`DONNELL: The audience will have it Googled by the time we finish
this conversation.

REID: Well, I mean, the point being that this is a very important
court that does feed into the Supreme Court.

And, look, I mean, the problem is that even nominees that have
bipartisan support, like the one most recent nominee from the Obama
administration who was just empanelled whose name I would butcher, Sri
Srinivasan, he was overwhelmingly supported once he finally got to a vote.
But you have these three vacancies. And Republicans are actually accusing
the administration of trying to pad the court by filling the three
remaining vacancies.

That`s insane. It is the president`s prerogative to try to fill these
vacancies. It`s something he is supposed to try to do.

O`DONNELL: Pack the court is a phrase that Republicans get very
excited about because Franklin Roosevelt did try to do that, he tried to
expand the number of Supreme Court justices so Democrats would control it
for a very long time. But this as Joy says isn`t that at all.

MELBER: No, this is just trying to fill the court. The sound from
McConnell was very instructive, because there was a lot of projection
there. He said, oh, the president just wants us to confirm the nominees
immediately and we refuse to do it.

In fact, it`s just the opposite. If you look at the numbers under
George W. Bush, all of his nominees for the courts were delayed an average
of about 34 days. They got through. They got their up or down vote.

For President Obama, the average is 116 days. This is Rumsfeld`s
famous maxim that in bureaucracy, you need not say, no, just say later.
And they`ve been doing that to slow the court. And as you pointed out,
Lawrence, the D.C. circuit is the most important appeals court in the
country.

O`DONNELL: The -- there`s two different things here. The nuclear
option for legislation which I think Democrats aren`t even close to
considering, this is a very targeted idea that Harry Reid has, which is
just for nominations and just for certain kinds of nominations. We are
going to override this 60 vote necessity.

I`ve got to say, I think and I am very conservative about changing
Senate rules, because I worry about what happens when your party is in the
minority, and you want all those levers, this seems to me to be one that
they can change and the consequences they will get by being in the minority
are not that different from the way things used to be. It used to be that
the Republicans could get their judges confirmed with, you know, 53 votes
if needed.

REID: Yes, and you said you were conservative about changing the
rules, so was Harry Reid. We have seen that he is reluctant to pull the
trigger --

O`DONNELL: No, if you worked in the Senate in the minority, you love
these rules, OK? You love these rules. No minority has ever used them the
way the Republican minority does.

REID: Right. And the other issue with D.C. Circuit Court, they can
look at regulations, upheld Obamacare. It struck down regulations on power
plants. So, the Republican Party in a lot of ways wants to keep it the way
it is, because up until the recent nominee, it had four Republican
nominated judges and elite three Democrats and they liked the ratio, they
kind of like the averages they were playing at the time, and they sort of
liked court the way it is.

They`re claiming that it`s because the workload isn`t big enough to
have the other three people filled in. I think it is in part also about
the second issue, which is always in the back of the Republican
consciousness, can we get this court to rule our way on regulation, which
is, of course, the other thing they hate almost as much as they hate the
Obama administration.

MELBER: Yes, and the other thing if the Democrats are serious about
this, they have to get off the nuclear option thing. This is the democracy
option, this is the up or downer vote option.

O`DONNELL: You`d like a new phrase. It doesn`t sound quite so scary,
anti-Democratic as, say, the nuclear option.

MELBER: I think nuclear was not designed by people necessarily trying
to get over the line. Reminded of Bob Edgar, who was a common cause
president, congressman, died earlier this year, had a simple line to your
point, which is, yes, people do care about some continuity here. He said,
look, you can take what`s in the Constitution and the lines there for what
requires a super majority and you can look at treaties and you can look at
the committee process and see places they intended to go slowly.

And, then, you look at nominations in the courts, right, where you say
advise and content, consent or deny, but not delay endlessly. The notion
that you would endlessly delay the Consumer Financial Protection Bureau,
something that grew out of our financial crisis that finally passed has
never had a permanent leader because every nominee from Elizabeth Warren,
which people remember to Cordray now, who`s less famous, no one has ever
gotten an up or down vote on staying there, that`s not what the Founders
intended, that you could literally have a government without people because
Congress would just say no to everybody.

O`DONNELL: Joy, the problems here for McConnell are many, including
his own re-election, right now, which looks very bad. He`s polling at 45-
45. He`s below 50, bad for an incumbent. He`s got a Democratic potential
challenger with the same vote he does right now.

Is his obstructionism part of the problem in Kentucky for him? I
mean, it doesn`t seem to be playing great in Kentucky.

REID: Yes, I mean, this is part of the overall problem of the
Republican brand and their failure to recognize what their basic brand
problem is. I think you saw the same thing on guns. They see themselves
as members of the House of Representatives, they almost see themselves all
in a district, and they only see the red part of their base.

They don`t understand that there are still, even in Kentucky, some
moderate, some independents, who look at obstructionism for
obstructionism`s sake as a bad thing. They do send -- people do send their
legislators to Washington to legislate. They send them there to make
decisions, as John McCain had to be the voice of reason say not just to
obstruct the president.

MELBER: And briefly, I think he`s also in Rand Paul`s shadow. He`s
got a guy there who`s doing all the purity politics with none of the
responsibility and he is stuck actually dealing with the caucus, which has
made him look weak back home and less able to actually do things to get
legislation through.

O`DONNELL: Joy Reid and Ari Melber, thank you both for joining me
tonight.

MELBER: Thanks.

O`DONNELL: Coming up, what President Obama and Chris Christie might
be able to teach Washington about bipartisanship?

And later, the IRS official who used to be in charge of overseeing
501(c)4s will join to tell us to tell us what he thinks the IRS did wrong,
if anything.

And in the rewrite, gun companies and their executives managed to
rewrite laws to make sure they avoid any responsibility for what their
products are doing to this country. But one gun executive is in prison
tonight for among other things stealing a gun. And that`s in the rewrite.

(COMMERCIAL BREAK)

O`DONNELL: Today, to no one`s surprise, President Obama endorsed
Congressman Ed Markey in the Massachusetts special election to fill the
Senate seat that John Kerry vacated to become secretary of state. Also
today, the president took a walk on the board walk in New Jersey, the
Jersey shore, with Republican Governor Chris Christie.

That`s next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

(INAUDIBLE)

UNIDENTIFIED MALE: Here we go. That one was out.

(INAUDIBLE)

UNIDENTIFIED MALE: Mr. Governor, want to give it a shot, sir?

OBAMA: Try to go low.

(CHEERS)

OBAMA: That`s because he`s running for office.

(END VIDEO CLIP)

O`DONNELL: Seven months after hurricane Sandy devastated the New
York/New Jersey coastline, President Obama and New Jersey Governor Chris
Christie toured parts of the Jersey shore today.

(BEGIN VIDEO CLIP)

OBAMA: Governor Christie and I just spent some time on the Point
Pleasant boardwalk. I got a chance to see the world`s tallest sand castle
being built. We played some touchdown fever. I have to say Christie got
it in the tire the first try, although I did pay for his throws.

(END VIDEO CLIP)

O`DONNELL: The president and Chris Christie also met with hurricane
Sandy victims, still recovering from the storm.

(BEGIN VIDEO CLIPS)

OBAMA: Now, we all understand there`s still a lot of work to be done,
but thanks to the hard work of an awful lot of people, we`ve got wonderful
shops and restaurants and arcades that are opening their doors and I saw
what thousands saw Memorial Day weekend. You are stronger than the storm,
after all you`ve dealt with, after all you`ve been through, the Jersey
shore is back and it is open for business, and they want all Americans to
know that they`re ready to welcome you here!

CHRISTIE: Everybody came together, Republicans, Democrats,
independents. We all came together because New Jersey is more important
and our citizens` lives are more important than any kind of politics at
all.

(END VIDEO CLIPS)

O`DONNELL: But, of course, politics is in there somewhere. Appearing
with President Obama won`t hurt Chris Christie`s re-election campaign,
especially since 42 percent of the Republican governor`s supporters voted
for President Obama in November.

According to a recent NBC News poll, 60 percent of registered New
Jersey voters say they will vote for Christie in November, 28 percent now
say they will vote for Democratic State Senator Barbara Buono.

Joining me now, MSNBC`s Karen Finney, and "The Washington Post`s" Nia-
Malika Henderson.

Nia, what is President Obama up to here? There is a governor`s
campaign going on in New Jersey now. He can`t be unmindful of that.

NIA-MALIKA HENDERSON, THE WASHINGTON POST: You`re right, he can`t be
unmindful of that. I guess at some point he had some sort of contact with
the Democrat, Barbara Buono, there, but it certainly wasn`t the photo op
that he had with Chris Christie.

Getting out of Washington is great for Obama. You saw him out there
tossing the football at the carnival game. He`s got something of a mess on
his hands in Washington with the IRS thing, Benghazi, "The A.P.", and FOX
stuff going on with Department of Justice.

So, him being out in Oklahoma first and then in New Jersey, you get a
different sense of this president. And you also have an argument about
government. It`s an argument about bipartisanship. It`s an argument that
putting sort of ideology aside and getting something done is good politics.

O`DONNELL: Let`s listen to Rush Limbaugh`s take on this meeting today
in New Jersey.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO HOST: There`s bipartisanship here. Obama has
money, Governor Christie wants the money. Governor Christie needs the
money so that people will be helped. So Christie praises Obama.

It is a master-servant relationship. That is exactly the kind of
bipartisanship that the drive-by media wants -- master-servant. That`s
bipartisan. That`s what`s going on here.

Master-servant, master-staff, don`t take it any further than that, not
going there, I am just telling you, Obama has the money, Christie needs the
money. Obama wants to walk the beach, that`s what we are going to do.
Obama wants a photo-op, that`s what we are going to do.

(END VIDEO CLIP)

O`DONNELL: Karen Finney, your reaction to Mr. Limbaugh?

KAREN FINNEY, MSNBC HOST: Oh, my God. You know, I`m going to just
leave him be.

O`DONNELL: OK. You can do that. That`s an option here. You can
also ignore him.

FINNEY: I feel like he can`t be more of an idiot. There he goes, he
is more of an idiot.

But from the political side, it is a win-win for both. Let`s just be
honest, right? It`s good for Christie.

You know, the other thing that`s reason I think it`s good for
President Obama is it shows that within the realm of the things that he can
control, things are working, that he is willing to be bipartisan, but also
in terms of this argument about government, things are actually working.
FEMA is actually there doing the job it is supposed to do.

The problem that I have with all of this talk about the bromance, when
I was growing up, my mother told me you don`t get extra credit for doing
what you`re supposed to do. I think we should remember -- and this is why
I find Rush Limbaugh so cynical, they`re doing what they`re supposed to do.
That this is their job.

Their job is supposed to be you put aside your differences where you
can, you come together where you can, and it`s supposed to be about the
people. I know that gets lost a lot of the time, being a bit too
Pollyanna. But, you know, I think this is what they`re supposed to be
doing.

O`DONNELL: No, I think you`re right, they`re both doing what they`re
supposed doing, in response to this storm and this recovery, and this does
not involve them trying to come to an agreement on any kind of legislative
action as is necessary in Washington.

So, Nia-Malika, it`s hard to see what the bipartisan lesson is from
this visit that could possibly have anything to do with the way things work
in Washington.

HENDERSON: No, that`s probably true, I mean, other than this idea
that speeches don`t really matter, I mean, people in Washington, senators
and Congress folks are obsessed with this idea of speeches and acting like
that`s actually accomplishing something. Only thing it accomplishes is
sound bites on FOX.

And here, I think, the lesson for bipartisan and governing is that
people expect things to get done. When voters get to the polls, their
question is what have you done for me lately? I think for Chris Christie,
this is something that`s going to serve him quite well for his campaign
coming up and possibly 2016, if he can get forgiveness from his party.

O`DONNELL: Let`s listen to what the former Republican Senate leader
and former presidential nominee for the Republicans, Bob Dole, had to say
this weekend about bipartisanship. This is from the guy who when we look
back on it now was better at bipartisanship than any Republican working in
Washington today.

Let`s listen to what he had to say.

(BEGIN VIDEO CLIP)

FORMER SEN. BOB DOLE (R), KANSAS: I think they ought to put a sign on
the national committee doors that says, "closed for repairs" until New
Year`s Day next year.

CHRIS WALLACE, FOX NEWS: Could people like Bob Dole, even Ronald
Reagan, could you make it in today`s Republican Party?

DOLE: I doubt it. Reagan couldn`t have made it.

(END VIDEO CLIP)

O`DONNELL: Karen, I think he is absolutely right. Bob dole and
Ronald Reagan wouldn`t have a chance in today`s Republican Party.

FINNEY: And the key point to that quote is that he went on to say
because we have ideas, right?

O`DONNELL: Yes.

FINNEY: The reason that they would not fit in today`s Republican
Party is that they actually had ideas that they were willing to fight for,
that they were willing to sit down and work with the other side to
accomplish, hey, if we can`t get 100 percent, can we get 40 percent? Let`s
do the 40 percent. We`ll come back for the other 60.

That`s not the mentality of this Republican Party.

So, yes, having ideas, not so -- not so much the Republican Party
these days.

O`DONNELL: And, Nia, at one point I was watching Bob Dole there,
wondering at what point do we say, OK, history has drawn a line and that is
ancient history, and we must deal with the Republicans as they now exist
and forget any of these previous models?

HENDERSON: Well, the Republicans in some ways have certainly
forgotten those previous models. There with Bob Dole, you`re reminded what
a statesman he was. When he ran, he picked Jack Kemp and he still speaks
with some authority. I think many Republicans will see that and say, well,
you lost, you were a moderate, and that`s why you lost. That`s the
argument a lot of conservatives make.

But again, I do think there are many Republican parties, maybe it`s
going to take somebody like Chris Christie, does appear to be something of
a statesman to turn the party around.

O`DONNELL: Karen Finney and Nia-Malika Henderson, thank you both for
joining me tonight.

FINNEY: Thank you.

HENDERSON: Thanks, Lawrence.

O`DONNELL: Coming up, former IRS official will join me with his
reading of the inspector general`s report.

And "The New Republic" cover story this week, the NRA is going down.
The author will join me later.

(COMMERCIAL BREAK)

O`DONNELL: In the spotlight tonight, what did the IRS do wrong? Rush
Limbaugh thinks he knows. And today Rush actually said that what the IRS
did was nothing less than win the presidential election for President
Obama.

(BEGIN VIDEO CLIP)

LIMBAUGH: You look at the 2012 election returns, you see Obama`s
turnout was millions of people less than it was in 2008, and he still won
sizable margin.

Now, you can chalk some of it up to the Republicans again not having a
genuine conservative candidate, but this IRS scandal saw to it that there
would be less money supporting Romney, less money supporting Republican
candidates, and there would probably be less people voting for the
Republicans. It worked. The IRS scandal achieved the suppression of Tea
Party votes.

You have different kinds of scandals, and a lot of scandals are where
people get mad at what was attempted. Nixon, he tried to bug the
Democratic headquarters. He was trying to do whatever. He didn`t succeed
in any of it, but you look at the IRS scandal, it wasn`t so much just the
attempt, there was blatant success there.

(END VIDEO CLIP)

O`DONNELL: Wow. There`s so much to pick at there. There`s so much
to talk about.

But let me see, I`m going to leave out the Nixon craziness. What`s
the most succinct way to respond to what Rush just said? Oh, yes, there`s
this.

(BEGIN VIDEO CLIP)

J. RUSSELL GEORGE, TREASURY INSPECTOR GENERAL: It is noteworthy that
zero cases have been denied.

(END VIDEO CLIP)

O`DONNELL: Joining me now are Marcus Owens, former head of the IRS
exempt organization division, and Julian Epstein, Democratic strategist,
former counsel for the House Judiciary Committee.

Mr. Owens, you have the job where all this action took place for
years, unperturbed, no investigations of anything. You have read the
inspector general`s report about what happened in your old what do you read
in the inspector general`s report? What do you think the IRS did wrong
here?

MARCUS OWENS, FMR. IRS DIRECTOR TAX DIVISION: Well, actually I
couldn`t find anything that suggested the IRS had acted inappropriately.
Acted perhaps ineffectively in a couple of places, but not inappropriately.

O`DONNELL: Well, I have to tell you, if you were on any other program
in America, you would have just shocked the audience. But I have been
saying that over a week now. I haven`t seen what they did wrong. They are
supposed to evaluate how much political activity a 501(c)(4) wants to
engage in. According to regulations of the IRS, it is specifically their
job to do that.

But do you think in the inspector general`s report that he kind of
just accepted this notion that there was something wrong with this basic
screening process that they have to engage in?

OWENS: Well, that is one of the fundamental concerns I have with the
report. It really doesn`t describe the process that has to take place with
the processing of applications for exemption. This whole idea of
targeting, that`s a pejorative term. In reality what happens is the IRS
opens the morning mail. And in the mail there will be a pile of
applications for exemption. Those applications have to be sorted. And the
most complex applications assigned to personnel with the most experience.

That`s simply the way complex legal work is handled. And that`s what
happened. And it was the sorting mechanism with the use of nomenclature,
rather than some other less flamboyant, I guess, or incendiary terminology,
was seized upon by the inspector general as somehow evidence of bad acts,
when in fact it was simply an effort to sort applications, those more
likely to trigger the need for careful evaluation of this concept of
political activity, which is a very difficult concept to wrestle with, as
the inspector general did suggest.

O`DONNELL: The Julian Epstein, the inspector general reported this,
but lost in most of the coverage of it is that most of the applications
that were screened through the process did not have conservative sounding
titles in the applications or conservative sounding terminology in the
applications.

JULIAN EPSTEIN, FMR. HOUSE JUDICIARY COMMITTEE COUNSEL: That`s right.
And even some Democratic groups had their applications denied and some had
their 501(c)(4) status revoked. And the "New York Times" did a very
interesting survey today, a random survey of the 100 or so conservative
groups that were selected for further screening. What it found -- and this
was a random survey -- was that a disproportionate number of them seemed to
be involved in what could have been an impermissible level of political and
election activity.

And if that`s the case and they did not, in fact, qualify under the
statute for tax exempt status, then I think this whole so-called scandal,
the complexion of it will change. And it will change quickly for two
reasons. First of all, if they, in fact, under the law did not qualify for
this tax subsidy and this cloak of secrecy which they get with 501(c)(4)
then it`s going to be very difficult for the Republicans to argue that
these groups shouldn`t have had more scrutiny and that shouldn`t have had
some degree of profiling, if in fact they showed a pattern -- a
disproportionate pattern of engaging in political activity.

That`s point one. Point two is that you have heard John Boehner and
other Republicans call for a special prosecutor and suggest that criminal
laws might have been broken. Well, I am not aware of any really strong
case that can be made that criminal laws were broken. But in "the New York
Times" report this morning, it also speaks about some of the groups -- one
group in particular that claimed to the IRS that it would not be involved
in any political or election activity, when in fact it was running ads for
a political candidate.

And if there`s one thing that can get you into trouble under the
criminal laws, it is lying to the IRS, false statements, 18 USC 1001. And
I would advise my Republican friends that before they start talking about
criminal violations and special prosecutors, they may want to be certain
that their friends on the political right that were making these
applications for this tax subsidy -- and that`s what it is. It`s a tax
subsidy. They may want to be 100 percent certain that none of them were
making misrepresentations to the IRS for that tax subsidy.

Because once you get a special counsel in place, that special counsel
can look at anybody, including people that were making false
representations to, again, get this tax subsidy and this cloak of secrecy
that they were not entitled to under the law.

O`DONNELL: Marcus Owens, the inspector general`s report lists seven
categories of requests that IRS made to some of these applicants for
information. But those -- and those are identified as unnecessary requests
for information. But he was actually just adopting what IRS officials had
already decided in their review of the process were unnecessary. So it was
actually their finding they were unnecessary.

I just wanted to go through a few of those for you, like requests for
names of donors, requests for issues that are important to the
organization, questions about whether any of the directors of the
organization might run for public office. You`ve looked at those questions
that were being asked. Do you have problems with those questions?

OWENS: Well, actually no. Some of the categories are extremely
vague. It`s hard to tell what the actual underlying questions were. But,
for example, the question about donors, about sources of the organization`s
revenue has actually been found to be a relevant area of inquiry by the
U.S. Tax Court in the context of processing application for exemption. It
demonstrates or can demonstrate a link to particular political parties,
which would suggest political campaign activity as a purpose of the
501(c)(4). It can also suggest a possible private benefit, if the source
of the revenue perhaps is a commercial enterprise that`s being promoted by
the 501(c)(4).

It could very well be a relevant question.

EPSTEIN: Marcus makes a very good point. There`s nothing in the
statute and there`s nothing in the rules, Lawrence, that forbids the IRS
from asking these kinds of questions. And again, if it turns out, as we
take a closer investigation, that many or most of these groups were engaged
in political activity and didn`t qualify, the Republicans` case is going to
be out the window.

Republicans are very for racial profiling when it comes to driving
while black, when it comes to crossing the borders while Hispanic, when it
comes to flying while Muslim. But if you have a pattern of activity by
groups whereby Karl Rove-like groups are looking for a tax subsidy and a
cloak of secrecy, Republicans quickly shift their philosophical point of
view on profiling. They say there should be none.

I think it`s going to be a tough case for them to prosecute, if, in
fact, "the New York Times" reporting is borne out.

O`DONNELL: Every one of these organizations was engaged in some kind
of political activity. The question the IRS was wrestling with was exactly
how much. Marcus Owens and Julian Epstein, thank you both. We`re going to
have you both back to talk about this more. Thank you very much for
joining me tonight.

EPSTEIN: Thank you, Lawrence.

OWENS: You`re welcome.

O`DONNELL: Coming up, why gun manufacturers can get out of being
responsible for gun deaths in this country, and why one gun executive is in
prison tonight. That`s in the Rewrite.

(COMMERCIAL BREAK)

O`DONNELL: The great state of Colorado made marijuana history today.
Governor John Hickenlooper signed several bills into law that will govern
the cultivation, sale and taxation of recreational marijuana. Yes,
recreational, not medical. Adults over the age of 21 can possess up to an
ounce of marijuana. And there are strict rules as to how pot can be grown
and how much can be grown, as well as a legal limit to how much marijuana
you can have in your system while driving.

If you need the skinny on that legal limit right now before you get in
your car, you will find it on our website, if you can make your way to the
Internet right now. The Rewrite is next.

(COMMERCIAL BREAK)

O`DONNELL: You live in a safer America tonight. Indeed you live in a
safer world, thanks to American product liability law. That is the law
that allows you to sue manufacturers and sellers of products that are
unsafe. This is one of those areas that Republicans think of as frivolous
litigation, but successful product liability lawsuits brought against
automobile manufacturers, aircraft manufacturers, toy manufacturers, and
every industry you can think of over the years has made our cars, our
planes, our trains, our toys, our stoves much, much safer.

Everywhere you look in your home, your workplace, you`ll find
something that works better and is safer than it used to be, thanks to
product liability litigation, even the potential threat of product
liability litigation. So in the 1990s, some wise lawyers started to use
product liability law against the most unsafe products ever made, firearms.

This was the biggest threat ever aimed at the American weapons of
death industry. The gun makers knew they had to stop those lawsuits. And
they knew they couldn`t win them, couldn`t win all of them.

And so what do you think the gun makers did? The gun makers rewrote
product liability law and exempted fire arms from all product liability
cases. And Republican House and Senate members passed that law in 2005.
And a Republican president, oblivious to its legal significance, signed it
into law.

But before that happened, there were product liability civil lawsuits
under way all over the country against the gun manufacturers. And in
today`s "New York Times" Mike McIntyre and Michael Lew did the hard work of
searching out testimony from many of those cases, and giving us a
tantalizing look at some of the gun manufacturer`s executives -- some of
what they had to say in depositions.

When asked about gun trafficking, for example, a top executive at one
gun maker said under oath "I don`t even know what a gun trafficker is."
The gun executives claimed not to know if their company guns had ever been
used in a crime.

One flash of honesty came in under oath testimony from the one
executive who is not American, Hugo Busalli Barretta (ph), whose family`s
name has been on firearms for 487 years, testified under oath that he
believed that the American division of his Italian company, Barretta USA,
required its dealers to determine if there was, quote, "a legitimate need."
A legitimate need for someone to buy multiple guns.

The Times reports that when Mr. Barretta was asked why he thought
that, he replied "common sense." But of course, common sense was not the
policy of Barretta USA or any other American gun manufacturer. Mr.
Barretta, it turned out, was wrong about his company`s American policy.
But he was right about common sense. One of the executives who made the
least sense in his under oath testimony was Glock`s former chief operating
officer, Paul Januzo. When he was asked if Glock ever considered declining
to sell high capacity magazines for its guns, he replied "not for one half
a second, no, sir."

Like all of the gun executives, there`s nothing that Mr. Januzo would
not sell in order to make more money, nothing legal anyway. But Glock`s
merchant of death who was so eager to sell high capacity magazines, so
eager to make money, turned out to be a little too eager to make money any
way he possibly could. And last year, he was convicted on theft and
racketeering charges in a scheme to divert about five million from the
Glock Company. y, and while they were at it, prosecutors convicted him of
stealing a pistol that had been loaned to him by the company.

When his sentencing day came, Januzo, who is himself a former
prosecutor, did the standard my family needs me plea. Januzo`s father died
three years earlier, and his sister testified that their mother really
needed her thieving, embezzling son at home. Januzo`s 80 year old mother
then took the stand to testify about how much she needed her son, and
essentially begged the judge for mercy. Januzo`s lawyer told his life
story and how he came to Glock, and how after serving as a prosecutor in
New Jersey, he came to Glock to be the company`s general counsel, defending
the company against product liability lawsuits.

Januzo`s lawyer told the judge, quote, "this man has been ruined."
Ruined, but not shot by a Glock. This man was not sitting in the movie
theater in Aurora, Colorado, when a mass murderer walked in carrying two
Glocks. This man was not one of the 12 people murdered that night. This
man was not one of the 58 wounded that night. This man was not in the
parking lot in Tucson, Arizona, when a mass murderer with a Glock and a
high capacity magazine shot Congresswoman Gabrielle Giffords in the head
and killed six people.

This man was not one of the people who was killed simply because the
shooter had a high capacity magazine and did not have to reload after
firing 10 bullets. This man was not hit with the 13th bullet that day.
Nine-year-old Christina Taylor Green was hit with the 13th bullet that day.
Her life was ruined by that 13th bullet, ended by a Glock with a high
capacity magazine, the murderous weaponry that Paul Januzo made sure that
mass murderers could easily obtain.

"This man has been ruined," said his lawyer. Ruined. It sounds like
such an easy outcome, compared to murdered, killed, having your brain
ripped to shreds by a bullet, a high capacity magazine of a Glock has
delivered to that barrel, rocketing out of that barrel at 840 miles an
hour. But his lawyer told the judge that this man who did everything he
could to make sure that mass murderers could have Glocks and could have
high capacity magazines, this man has been ruined.

His lawyer asked for a sentence of a fine, community service, or
probation. Georgia Superior Court Judge Latane Kell (ph) sentenced Paul
Januzo to 13 years of probation after serving seven years in prison. So
tonight, Paul Januzo is trying to fall asleep in his cell in a state prison
in Georgia. He is surely filled with regret about the money, about
embezzling millions of dollars from Glock.

But he should regret so much more than that.

(COMMERCIAL BREAK)

O`DONNELL: Since April, when the NRA succeeded in intimidating enough
senators to vote against the modest background check bill introduced by
Democratic Senator Joe Manchin and Republican Senator Pat Toomey, momentum
has been gaining for groups opposing the NRA. Alec MacGillis writes in the
"New Republic," "The defeat did not, as pundits predicted, cause the
activists` momentum to dissipate. Instead, in turned out to be a potent
recruiting tool. In the days after the vote, Moms Demand Action saw a 30
percent increase in membership. Gabby Giffords group has raised an
astonishing 11 million dollars from 53,500 donors in the past four months.
Moms Demand Action has continued to hold protests at the district offices
of lawmakers they believe are persuadable."

Joining me now is Alec MacGillis, senior editor of "The New Republic."
Alec, what -- do you see here an arch of opposition to the NRA that over
time is going to be financially competitive with it?

ALEC MACGILLIS, "THE NEW REPUBLIC": Oh, definitely. I think what
we`re seeing right now is basically the emergence of a serious opposition
of the sort that we haven`t seen ever.

O`DONNELL: The NRA has been outspending the other side more than 10
to one in politics.

MACGILLIS: Exactly. Now with Michael Bloomberg on the scene -- not
just Michael Bloomberg, but also Gabby Giffords who, as you said, raised 11
million dollars in four months, which is an amazing sum, you have the
ability to come back on the other side and basically try to shift the
calculus, to the point where candidates who vote the wrong way, against gun
control, are facing serious repercussions at home.

These ads that are running against Kelly Ayotte, Jeff Flake are pretty
harsh ads. These are the kind of repercussions that were simply never
faced before. And you start to see politicians start to maybe rethink what
is the --

O`DONNELL: We are watching Kelly Ayotte rethink it live as she walks
through these microphones in New Hampshire.

MACGILLIS: Right. The problem for Bloomberg and for Giffords, also,
is that the timing is a little bit off, that the people that they would
really like to target are not up for reelection for a couple years.

O`DONNELL: You make a fascinating point. I thought the NRA was more
powerful than what I am about to read here from your work, that in the last
Senate elections, the 16 Senate races they participated in, they lost 13 of
them.

MACGILLIS: Exactly. I think this is the thing about the NRA, and
this is why the emergence of this real opposition is such a big deal.
Their power has always been overstated to some effect. This goes back to
1994. This is where their legend started to build up, was in `94 after the
big midterm loss for the Democrats that year.

Bill Clinton and others concluded that the reason for the loss, the
story of that loss was that the NRA had done it.

O`DONNELL: It had nothing to do with the fact that the biggest tax
increase in history --

MACGILLIS: All these other things, the scandals that were popping up.
The convenient story was guns.

O`DONNELL: I always thought it was the tax bill. I worked on the tax
bill. I didn`t work on the gun bill. I thought that`s the thing that did
it.

MACGILLIS: And this legend grew up out of that, which has basically
for almost two decades kept the Democrats from taking on this issue, even
though you were starting to see the signs that the NRA simply wasn`t as
powerful as legend might hold. You have all these senators -- you have
six, seven, eight senators from tough purple, red states who have been
winning consistently with F ratings.

No one really took notice of that until recently. You are starting to
see people saying wait, can I maybe get away with supporting sensible gun
control. That`s the key here. You have people like Joe Manchin. I mean,
I was down in deepest West Virginia with Joe Manchin, in counties that
Obama lost by 50 points. And you have Joe Manchin down there after this
vote lost, talking gun control.

O`DONNELL: Still working on it.

MACGILLIS: Exactly.

O`DONNELL: He was on this program still working on it. Alec
MacGillis gets tonight`s LAST WORD. Thanks, Alec.

MACGILLIS: Thank you.

O`DONNELL: Chris Hayes is up next.

END

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