updated 3/17/2014 12:26:02 PM ET 2014-03-17T16:26:02

ALL IN with CHRIS HAYES
March 14, 2014

Guests: Sean Cassidy, Michael Goldfarb, William Marks, Simon Ostrovsky, Hunter Walker, Jim Appleton, Josh Barro

CHRIS HAYES, MSNBC HOST: Good evening from New York. I`m Chris Hayes.

As the search for Malaysia Airlines Flight MH370 nears the end of day
seven, an increasingly credible array of incoming data further support the
notion the plane was taken deliberately off course and continued to fly
long after its last radio contact.

According to "The New York Times," Malaysian military radar indicates the
airliner made significant changes in both altitude and course after
vanishing from civilian radar. That is based on an unidentified blip
moving through Malaysian airspace and detected by military radar.
Information which the Malaysian government has not released but says it has
provided to the United States and China according to "The New York Times."

To complicate matters further, a U.S. government source tells NBC News that
the data is not dependable on altitude.

But once the plane disappeared from civilian radar and made that previously
reported sharp turn to the west, something else seemed to have happened as
it approached the island of Pinang. According to "The New York Times" the
plane turned again from a southwest-bound course over the Strait of Malacca
toward the Indian Ocean. But a U.S. government source tells NBC News it`s
more likely to have turned south. So, we have disputing reports on that
direction.

Meanwhile, several news outlets have confirmed that American officials
briefed on the investigation say that one of the plane`s automatic
communication systems continued to send out pings of information for up to
four hours after the flight lost official contact with civilian radar. One
of those systems, ACARS, in its basic version, shares data automatically in
short radio bursts with airline officials or even with a manufacturer.
Those automated systems generally do not send information on location.

But one satellite operator Inmarsat did confirm it had received ping
signals from Flight MH370, issuing a terse statement reading, "Routine
automatic signals were registered on the Inmarsat network from Malaysia
Airlines Flight MH370 during his flight from Kuala Lumpur. The information
was shared with Malaysia Airlines."

Inmarsat later offered, "It might be able to use the angle to calculate
MH370`s location relative to the satellite. We also know that --

(BEGIN VIDEO CLIP)

REPORTER: That means the plane could have traveled up to 2,500 miles in
either direction.

(END VIDEO CLIP)

HAYES: We also know the Indian military has been enlisted in the search,
deploying at least six vessels and four aircraft. Meaning the overall
search now involves 13 countries and more than 100 ships and aircraft. The
search in the Indian Ocean appears to indicate that two key points are
being taken very seriously.

First, that the plane did, indeed, go westward, contrary to its prescribed
flight path, and that it continued to send out those pings possibly for
hours after making that westward turn.

Joining me now is Captain Sean Cassidy, the first vice president and
national safety coordinator of the Airline Pilots Association
International.

Mr. Cassidy, what is your reaction to what seems to be now a bevy of
different reports from different outlets confirming those two basic facts?
The plane turned after it lost contact at 1:07 in the morning and that it
continued to fly for four hours.

As a pilot, how to you read those two pieces of information?

CAPTAIN SEAN CASSIDY, AIRLINE PILOTS ASSOCIATION INTL.: Well, my take on
it is that there`s all these little bits of information that are coming
from all these different sources, but there doesn`t seem to be a concerted
effort, at least to my mind, to aggregate all those and try to correlate
all these different pieces of information so we can take a more refined
approach to the search and rescue effort.

HAYES: There was a report in "Reuters" and it talked about the fact that
the route seemed to be following what are called navigational waypoints.

Can you explain what navigational waypoints are?

CASSIDY: Sure. The waypoints are basically latitude and longitude points
in the airspace, and typically they`re given a name, and then when you
program those waypoints in the flight management system, you can have the
plane fly to those preprogrammed points as part of the route.

HAYES: I think I`m still not following. So if a plane, for instance, had
a navigational system shut down, would that still be a way you could
navigate the plane?

CASSIDY: It depends on which -- the way that the waypoint is defined.
Sometimes they`re defined by a latitude and longitude. Just like you`re
driving a car, you can put -- you can move the scrolling map around and put
a pinpoint on it and that car -- the GPS system will actually help you get
to that point. It`s not much different than what we can do in the air.

That`s one way of doing navigation. Another way is to use conventional
ground-based navigational aids which send up beacons and magnetic signals
in which the airplane can orient itself off of.

HAYES: Can I ask you a question? Have you or anyone you know as a pilot
ever had occasion in a plane to make a turn like the kind of turn off
course that we are increasingly led to believe happened in this case?

CASSIDY: Well, yes. I mean, on occasion, sometimes if you program the
wrong coordinates into your flight management system and you engage the
automated flight controls, perhaps the plane might get to a point that it
might make a turn that wasn`t intended, but the thing is that you have two
professional experienced pilots that are also, even if they did make a
mistake, they`re also tasked with monitoring those systems and catch it
very, very quickly.

It`s highly unlikely that a plane would turn in such a dramatic difference
from the intended flight path and continue on a route that`s very, very
different than the intended one.

HAYES: There`s some talk about altitude data being fed through these sort
of automated update systems. That altitude data seems to fluctuate wildly
and has been discounted by some of the folks in the reporting I`ve read.
One of the data points is that the plane at one point climbed to an
altitude of 45,000 feet, which is above essentially the cap on how high
you`re supposed to take that plane.

What do you make of that bit of information?

CASSIDY: I think that`s -- it`s a piece of information, but as far as
validating it, I think there would have to be some more efforts made to
ensure that that information was authentic because I can understand why
people would be very incredulous about it because basically they`re saying
a plane went up to 2,000 feet above the surface ceiling of the airplane
then went down and up again.

And the other thing is, if the airplane`s reporting systems, its
transponder and everything was compromised, how was that information
derived in the first place? How was the Malaysian military folks --

HAYES: Right.

CASSIDY: -- able to give you the information with a high degree of
certainty? I think that`s one of the big parts of the problem is that we
have all these silos of information that are out there right now, and it
almost seems like we`re getting bits of information and more, you know,
pieces of the puzzle day by day. The question I have is, what information
is out there right now that we currently don`t know about but we should?

HAYES: Right. That`s a really good question.

Captain Sean Cassidy of the Airline Pilots Association International --
thank you.

CASSIDY: You`re welcome.

HAYES: Joining me now, former chief of staff of the Federal Aviation
Administration, Michael Goldfarb.

Hello, Michael.

MICHAEL GOLDFARB, FORMER FAA CHIEF OF STAFF: Good evening, Chris.

HAYES: It`s good to have you back again.

GOLDFARB: Thank you. I`m not sure we know a lot more.

HAYES: Well, no, here`s what it seems to me. Yesterday, the two things
that seemed increasingly confirmed today by at least multiple bits of
reporting there -- it appears, multiple sources are this westward turn and
the fact the flight continued to fly.

Yesterday that had been reported but a lot of that reporting was a lot
murkier that it appears today.

GOLDFARB: OK. So let`s assume we have three things. It took off at Kuala
Lumpur, it went missing and it appears to have made that western turn.
Everything else is a way -- we`re getting lots of data points through kind
of leaks in the investigation. Nothing is corroborated.

And as the captain just said, there`s no integration of the information
about what occurred with the Malaysian radars picking up this plane, and
the notoriously military radars remain very unreliable. And, you know,
what happened in those five hours? We have another data point that came in
today and it`s evidence that the National Transportation Safety Board is
beginning to put its arms around this. That was the issue of the lithium
ion batteries.

And that meant they have looked at the manifest in the cargo. They
determined there was a large number of these batteries. They`re only
allowed to carry 66 pounds. The NSTB doesn`t want any of them in the
cargo.

But why is that important? Let`s put that together back to physical cause
and back to what might have happened simply. Let`s take the simplest
explanation in that cockpit, an electrical fire. ACARS and the
transponders are not flight-critical safety systems.

In other words, they don`t have redundancy. They`re not as robust as all
the other avionics are.

So, a fire could have in the cockpit, incapacitated the pilots. And those
systems could have been knocked out. And the pilots may have been able to
make that turn.

What`s key is, was that turn done intentionally or was it done under duress
or with somebody else involved in that? Which remains to be seen.

MADDOW: When you talk about the NTSB getting its hands around the
investigation, the broader question I have particularly as we look at
discreet bits of information that are being leaked from different sources
is, there are now 13 countries that are searching for this. There`s 100
ships.

Who is running this investigation? Is there a central war-room? Is there
some place that every day at noon local time, everyone gets together and
says, this is what we know? Because it sure as heck doesn`t feel that way.

GOLDFARB: OK. So there`s a politically correct answer, which is it`s
being led by the Malaysians with participation from 13 countries in the
search. And then there`s probably the behind the scenes real answer of
what`s happening in that, quote/unquote, "war-room".

I believe there`s a small group of experts from Boeing, from Rolls-Royce,
from FAA, from NTSB, from the Malaysian authority, from the Malaysian
military, from the Air Inc., the third party provider of that satellite
information that goes to the airlines. And that those people are beginning
to put in place the dynamics of this.

Everything we have are possible scenarios. Against those scenarios, we`re
going to have to look at which facts would support them and which facts
wouldn`t. That`s typical in the investigation.

The big difference is we don`t have the aircraft. We have no idea where
that aircraft is. That`s why the search area is the diameter of what the
aircraft could do with the amount of fuel it had left.

HAYES: Michael Goldfarb, former chief of staff for the Federal Aviation
Administration -- thanks again.

GOLDFARB: My pleasure.

HAYES: All right. Joining me now by phone from the U.S. Blue Ridge, the
command ship for the U.S. Navy search efforts for Malaysian Airlines Flight
370 is Commander William Marks, spokesman for the Navy Seventh Fleet.

And, Commander, I want to ask you the question I was talking to Michael
about which is this -- who are you getting direction from as you command a
fleet that is looking for this plane wreckage? Who is running point on
this investigation?

CMDR. WILLIAM MARKS, SPOKESMAN, U.S. NAVY`S SEVENTH FLEET (via telephone):
Well, it`s very important for you to know this is an international effort,
so right now, it`s under coordination from the government of Malaysia. We
have 13 countries participating with forces. About 55 to 60 surface
vessels. There are another 45 to 50 or so aircraft.

So, it is an international effort. At my level, the fleet level, U.S. Navy
Seventh Fleet, my concern is the tactical de-confliction of the water space
and airspace.

So, safety of navigation, communication, altitudes, things like that.

So, in that respect, it`s good coordination from the tactical fleet level
where I am.

HAYES: There are reports today, and they started coming in yesterday and
there are more reports today that the emphasis of the search has shifted
west to the Indian Ocean. Can you confirm that at this time?

MARKS: Yes. So we have an early bird class destroyer, U.S. Kidd. We
shifted that to the northwest part of the Strait of Malacca. And so,
that`s if you look at the northwest, that`s toward the Andaman Sea there.
They have the two -- U.S. Kidd -- two MH60 helicopters, a version of a
search and rescue helicopter. Their range, they can fly out 100 or so
miles. So, you have that circle, that radius there of search capability.

And then really what`s a game changer is today we have a mission with our
Poseidon, that is our latest technology in fixed-wing search aircraft, the
most advanced search aircraft in the world. That range is into the
thousands of miles. So that`s land-based. Going to take off from Kuala
Lumpur area. That is looking west.

So the initial track will look to the west. It will fly that direction,
see what it sees with its surface search radar, and then fly back.

HAYES: Commander William Marks, spokesman for the Navy`s Seventh Fleet on
the phone for us tonight. Many thanks.

Right now, Russian troops are gathering on Ukraine`s border as Crimea gears
up for a vote to join Russia this weekend. Pro-Russian forces guard the
exit from the peninsula, even from journalists.

(VIDEO CLIP PLAYS)

HAYES: That reporter joins us from Crimea with the very latest on what`s
happening. So definitely stick around.

(COMMERCIAL BREAK)

HAYES: It is up of the keys of the Republican Party, if you listen to
them, when it comes to business, government needs to get out of the way.

(BEGIN VIDEO CLIP)

GOV. CHRIS CHRISTIE (R), NEW JERSEY: We are for a free market society that
allows your effort and your ingenuity to determine your success, not the
cold hard hand of government determining winners and losers.

(END VIDEO CLIP)

HAYES: Unless, that is, you`re the one controlling the cold hard hand of
government. How Governor Chris Christie just sided with regulation against
the free market in New Jersey, coming up.

(COMMERCIAL BREAK)

HAYES: Last-minute negotiations to save off a vote on Sunday that could
severe Crimea from Ukraine seemed to fail today. And as the U.S. and
western allies failed to persuade Russia to change course, tonight, with
Russian troops massing on the Ukrainian border and a Crimean referendum on
leaving Ukraine just days away, the crisis appears to be approaching a
tipping point.

(BEGIN VIDEOTAPE)

HAYES (voice-over): With less than 48 hours until the secession vote in
Crimea, Russian troops are massing along the eastern border of Ukraine --
moving troops and armored vehicles to at least three different regions.

Inside Ukraine, pro-Russian and pro-Ukrainian protesters are fighting in
cities across eastern Ukraine. In Donetsk, a pro-Ukrainian protester was
stabbed to death after street clashes.

It`s the first death reported since tensions began in southeastern Ukraine.
With troops gathering along the Ukrainian border, Secretary of State John
Kerry today met with his Russian counterpart for six hours. With Kerry
reporting that he attempted to give Moscow a diplomatic offer ram
diplomatic off-ramp before the weekend`s vote.

JOHN KERRY, SECRETARY OF STATE: The president has made it clear there will
be consequences if Russia does not find a way to change course, and we
don`t say that as a threat. We say that as a direct consequence of the
choices that Russia may or may not choose to make here.

HAYES: Those offers were apparently declined. Meanwhile, in Moscow, the
Kremlin is stepping up its Internet censorship using an obscure law to ban
several independent Web sites in Russia. That after news that Galina
Timchenko, the editor of a popular news Web site Lenta.ru, was replaced
with an editor more sympathetic to the Kremlin.

In the West, both the Obama administration and European Union are
reportedly preparing sanctions for Russia, while a bipartisan group of U.S.
senators continue meetings in Kiev with Ukrainian leaders.

All of this ratcheting up is in anticipation of Sunday, when a Pro-Russian
government in Crimea will hold a secession referendum with a ballot that
does not offer an option to remain a part of the current Ukraine. That
vote scheduled to take place with thousands of Russian troops occupying the
region has been denounced as a violation of international law.

The United States has said it will not recognize the results. Russia has
pledged to respect the choice of the voters. It looks like Crimea will
vote this Sunday and once that happens, we may have reached the point of no
return.

(END VIDEOTAPE)

HAYES: Joining me now by phone from Simferopol, Crimea, is "Vice News"
correspondent Simon Ostrovsky.

Simon, what is the atmosphere like where you are, in regards to the
referendum, to the vote Sunday? How aware do folks on the ground there
seem of it?

SIMON OSTROVSKY, CORRESPONDENT, VICE NEWS (via telephone): Well, there`s
nobody who doesn`t know that the referendum is happening. There are
posters all over town and they all read, Crimea with Russia, or rather,
together with Russia and they advertise the referendum on the 16th. It`s
pretty much all anybody is talking about because the more important thing
than the referendum is what`s going to happen after the referendum because
I think everybody believes that the referendum will pass in favor of Crimea
joining Russia. But whether they`ll be resistant to that after that
happens is the big issue now.

HAYES: When you talk about the posters, Crimea with Russia, I just -- I
want to give a sense of how one-sided the campaigning on this referendum
is. I mean, is there any visible opposition? Are there posters going up
saying vote against Crimea with Russia?

OSTROVSKY: No, because the government here is completely supportive of
Russia and supported by Russia. And there`s no defense from within the
Crimean government, itself. So because they control advertising here, all
of the posters read "together with Russia" and there is no advertising in
support of staying part of Ukraine.

But what you do have is individuals coming out into the streets in protest
with Ukrainian flags and posters showing -- trying to show that they, too,
exist in Crimea, even if they are a minority.

HAYES: There have been reports, worrying reports of violence and clashes
between pro-Ukrainian protesters, pro-Russian protesters in Donetsk. Have
there been those kind of clashes in Crimea between protesters trying to
show they`d like to stay with Ukraine and the pro-Russian folks?

OSTROVSKY: Fortunately, nobody`s been hurt seriously in Crimea so far
since the crisis began. And I think both sides have shown incredible
restraint in terms of the use of violence here. That`s really great.

But as I said, after the referendum when this joining with Russia is
accomplished, things must change because when people are faced with Russia
becoming the sort of long-term of this territory, maybe tensions are going
to rise.

HAYES: You traveled to the border, but it`s not really a border or is not
an internationally recognized border, but the border between Crimea, the
peninsula where it joins what is now proper Ukraine. And what do you find
at that border in terms of the presence of Russian soldiers?

OSTROVSKY: Well, we came and we went to the Ukrainian side first. And the
Ukrainians had set up a checkpoint facing the Russian checkpoint, 12
kilometers away and a sort of state of land that separates the two. We
then traveled from the Ukrainian checkpoint up until the Russian checkpoint
which is manned by the disbanded police force that is now pretty famous
worldwide for having clashed with protesters in Kiev. It was disbanded,
but it`s been reformed in Crimea.

These guys are some of the angriest guys wearing military fatigues in
Crimea. When we walked up to the checkpoint, they basically grabbed us,
tried to take our cameras and led us behind their base and questioned us.
Luckily one of my cameramen managed to run away as they were grabbing us,
so he managed to film them taking us.

And I think for that reason, we were let go pretty swiftly after about
spending ten minutes there. It was a pretty nerve-racking ten minutes.

HAYES: Yes, we`re showing right now the footage of this which is really
astounding footage. The police force you`re referring to is the infamous
Berkut, which was the police force, the security force that was accused of
a lot of horrible acts during the Maidan uprising in Kiev, itself. Under
whose authority are they constituted and for whom are they working as they
man that checkpoint?

OSTROVSKY: Well, as far as I understand, they are now -- they`ve now been
drafted into the Crimean self-defense force which is this new Crimean army
which is being created here as a front for the Russian Army. And as a
group of people that are supposed to keep maintaining public order because
the Russian military sort of takes a secondary role or at least is trying
to -- it`s trying to stay out of sight while groups that are sort of taken
from the population here are put forward because that`s the picture that
the Russians want the world to see is Crimeans standing up for Russia to
come and protect them.

HAYES: And finally, Simon, what do you expect to see when this vote
happens on Sunday?

OSTROVSKY: I think the vote, itself, is probably going to be pretty
orderly. I mean, today, we went to the headquarters of the new Crimean
army and saw a bunch of new recruits take a pledge of allegiance to the
Crimean people. These people are given uniforms. They`re being given
boots. They`re going to be sent out all over the place and probably going
to secure all of the polling stations and our story about that is actually
coming out tomorrow on vicenews.com. So you can see what they look like
there.

HAYES: We will take a look at that, Simon Ostrovsky of Vice News. Thanks
for your reporting and your cameraman doing a great job. And please both
stay safe. Thank you for joining us on the phone tonight from Crimea.
Many thanks.

Up next the speaker of the House issues a call for action.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: I would hope the house
would act to try to stop this cheating and this fraud from continuing.

(END VIDEO CLIP)

HAYES: Exactly who John Boehner is calling a defrauding cheat, and why,
next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REPRESENTATIVE JOHN BOEHNER (R), HOUSE SPEAKER: I would hope that the
House would act to try to stop this cheating and this fraud from
continuing.

(END VIDEO CLIP)

CHRIS HAYES, MSNBC HOST: House Speaker John Boehner is angry about what he
sees as food stamp fraud. That`s not a new thing for Republicans, as we`ve
covered extensively here on ALL IN. Many conservatives are convinced
there`s an epidemic of food stamp fraud. It`s everywhere they look and
they can`t take it anymore.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Meet Jason Greenslate, food stamp recipient. He gets
by with a little help from his friends, and you, the taxpayer.

UNIDENTIFIED MALE: The fraud which is apparent will the food stamp
program.

UNIDENTIFIED FEMALE: I think strings should be attached to these type of
temporary government assistant programs because it weeds out people who are
using them improperly.

REPRESENTATIVE PAUL RYAN (R), WISCONSIN: This is a future in which we`ll
transform our social safety net into a hammock, which lulls able-bodied
people into lives of complacency and dependency.

(END VIDEO CLIP)

HAYES: John Boehner is not accusing the poor and hungry of committing
fraud. The target of his ire this week was not, in fact, food stamp
recipients themselves. John Boehner was accusing governors of cheating and
fraud on behalf of the poor and hungry.

(BEGIN VIDEO CLIP)

BOEHNER: Since the passage of the farm bill, states have found ways to
cheat, once again, on signing up people for food stamps. And so I would
hope that the House would act to try to stop this cheating and this fraud
from continuing.

(END VIDEO CLIP)

HAYES: Now, keep in mind, among the governors, that John Boehner is
targeting here is Republican and Tea Party favorite, Tom Corbett of
Pennsylvania, my dark horse candidate for worst governor in the country.
Corbett is one of at least six governors who are finding a way to avoid new
food stamp cuts. Here`s how.

The GOP worked very hard to make major cuts to the federal food stamp
program, which is formerly known as the Supplemental Nutrition Assistance
Program or SNAP. First they tried to cut $40 billion from the food stamp
program over ten years. When that proved unsuccessful, the House passed a
bill approved by the Senate and then signed by the president that is
projected to cut more than $8.5 billion over ten years.

And the way they did it was to change a small wrinkle in the way the
government calculates how much you can receive in food stamp benefits. The
old system allowed certain households to automatically boost their food
stamp benefits by up to $90 a month if they also participated in a federal
program that provides home heating assistance to the poor.

Republicans and some Democrats contended that system, which was used in a
certain number of states, was essentially a loophole and agreed to close
it. Hunger advocates and Democratic lawmakers who fought the cut said not
so fast, this is not a loophole. In fact, this is more than $8 billion in
actual money that will actually go to actual people who need to eat.

And now here comes the surprising twist. The governors of many of the
states most affected are fighting back. They`re using their own sort of
bureaucratic jujitsu to dodge cuts from the federal government and that,
that is what has John Boehner so angry.

(BEGIN VIDEO CLIP)

BOEHNER: We just passed a farm bill and we find states finding ways around
the law and frankly perpetuating the fraud we were trying to stop.

(END VIDEO CLIP)

HAYES: That`s not exactly true. You see, the old rules allowed for food
stamp recipients to qualify for the extra benefit if they receive just $1
of home heating assistance. The farm bill raised the threshold to $20.
And now states are saying, OK, we`re going to go ahead and raise the amount
of aid we give to many households from $1 to $20 so those folks don`t see a
reduction in their food stamps.

In other words, states are complying perfectly with the law Congress just
passed because the governors of those states, Republican and Democrats,
want to alleviate a little misery faced by poor and near poor folks in a
broken economy. In their efforts to that, to make life a little bit better
for the non-rich people they`re elected to serve, that is the kind of thing
that makes John Boehner angry. Think for a moment about what that means
about the man`s priorities.

(COMMERCIAL BREAK)

ANNOUNCER: The sleek, stainless steel Delorian. Beautifully crafted for
long life. The Delorean is one of the most awaited automobiles in
automotive history. Drive the Delorean. Live the dream today.

(END VIDEO CLIP)

HAYES: If you were looking for the last successful startup of an American
car company, you probably have to go all the way back to Chrysler which
started in 1925 and despite a few bumps in the road along the way is still
around today. Since then, cars like the Tucker, the 1940s and, of course,
the Delorean, which failed in the early `80s have come to represent the
dozens of failed attempts to compete with the big three automakers with a
new car company in America.

That is until Tesla came along. With not only an original American car,
but an original American electric car and a super cool one at that. So
this innovative new company with its super cool electric car has captured a
fair amount of the country`s imagination. As it rolls out, this what
"Motor Trends" named its car of the year, excitement is building and
Tesla`s stock has soared.

But there`s just one thing standing in the way. Big government Republicans
like Jan Brewer, Rick Perry, and Chris Christie. We will explain, next.

(COMMERCIAL BREAK)

HAYES: One of the Republican Party`s most deeply held beliefs is that the
big, bad government must be stopped from intervening in the free market,
from picking winners and losers and crushing entrepreneurs. So why is the
head of the Republican governors association using the heavy hand of the
state to strangle free enterprise?

(BEGIN VIDEOTAPE)

GOVERNOR CHRIS CHRISTIE: We don`t have an income inequality problem. We
have an opportunity inequality problem in this country. Government is
trying to control the private market.

HAYES (voice-over): Republican Chris Christie, governor of New Jersey.
Potential presidential hopeful. And despite some of his current problems,
a man who has always towed the party line on the basic core philosophy of
the GOP, which is get government out of the way and let the free mark do
its thing.

CHRISTIE: We need to talk about fact that we are for a free-market society
that allows your effort and your ingenuity to determine your success, not
the cold, hard hand of government determining winners and losers.

HAYES: So why, then, the other day did he use the power of the government
to pick winners and losers by slashing the tires of one of the most
innovative companies in America?

ANNOUNCER: If you haven`t seen one of these zip by you on the highway, you
probably will soon. The Tesla "S" serious luxury car is turning heads.

HAYES: We`re talking about a fully electric car. One that can get 300
miles on a full charge and goes from zero to 60 in 4 seconds. "Consumer
Reports" called Tesla its car of the year. So did "Motor Trend" last year
adding it`s proof positive that America can still make great things. But
it`s just not the car that`s innovative. It`s also how Tesla wants to sell
it.

Tesla wants to sell their cars just like companies sell about everything
else in this country, directly to the consumer and they want to this
instead of using franchised car dealerships as middle men. This week, New
Jersey said no to that.

UNIDENTIFIED MALE: New Jersey`s motor vehicles commission, it unanimously
approved a change in the rules saying, you know what, no direct sales from
automakers to consumers.

HAYES: In other words, on Tuesday, through a unilateral move via the New
Jersey Voter Vehicle Commission, the Christie administration sided with
regulation over free market progress and innovation. This particular
regulation is backed by the New Jersey coalition of automotive retailers.
A group which also happened to have donated almost $700,000 to New Jersey
politicians over a 6-year period.

In New Jersey, the powerful cartel of auto dealers are the only ones who
get to sell cars. Just like in Republican Texas and Republican Arizona,
which have also banned Tesla from selling directly to on consumers. Just
in the past year, at least five other states face pressure from auto
dealers to do the same. The auto dealership lobby is a lot stronger than
you might think.

In the 2012 election cycle, the National Auto Dealers Association alone
gave more than $3 million to campaign contributions to federal candidates,
parties and outside groups. Total contributions representing U.S. car
dealers as a whole, more than $16 million. Between the two parties, 85
percent of donations went to Republicans.

What auto dealers want right now is state regulation to keep companies like
Tesla from selling cars without a dealer. Because the battle between
Republicans and Democrats has never really been about more regulation or
less regulation. It`s always been about who that regulation benefits.

UNIDENTIFIED MALE: I`m going to throw in a family feast for four at
Applebees and two panther playoff tickets. Deep in the heart of Texas,
deep in my heart, I`m your buddy.

HAYES: Everybody needs a buddy. In New Jersey, the dealership lobby has
found theirs.

(END VIDEOTAPE)

HAYES: Joining me now, Hunter Walker, he is the politics editor of
"Business Insider" and has been covering this story. OK, the commission
made this decision. Does Chris Christie have plausible debility that he
nothing to do with this?

HUNTER WALKER, "BUSINESS INSIDER": Yes and no. The commission is
basically made up of Christie`s allies. You`ve got four appointees put
there directly by the governor. Then you have members of his cabinet. The
only other member is a non-voting member. He clearly does control this
commission. There`s a he saidshe said element with Tesla saying Christie
bypassed the legislature and this was a backroom deal. Christie`s
spokesmen saying, no, it`s Tesla that wants to bypass the legislature. If
they only go to the legislature, this is how this gets solved.

HAYES: Christie`s people are defending this decision, right? That is very
clear, "a." "b" I don`t get how it could go from being legal to being
illegal. There were two dealerships in New Jersey that were functional
before?

WALKER: The Coalition of Automotive Retailers maintains those two licenses
should never have been issued in the first place and those were essentially
illegal dealerships. So they would say this was never legal in the first
place.

HAYES: The auto dealers have a lot of political muscle. I remember
covering DoddFrank up on Capitol Hill.

WALKER: Right.

HAYES: And there was a provision they were going to put in to basically
change -- to regulate financing for cars and it was like Congress just got
lit on fire by the auto dealers. I was like, my goodness, I didn`t quite
realize how strong auto dealers are.

WALKER: Yes, both at the state level and the federal level, auto dealer
lobbies have given tens of millions of dollars. Tesla has put down less
than seven figures. They`re getting totally outgunned and also, you know,
being a new company, they`re relatively inexperienced in the lobbying
realm. They`ve got I believe one lobbyist who`s a former staffer to Dianne
Feinstein. They`re really, you know, the auto lobby is to entrenched and
they`re new to this.

HAYES: I`ve gotten good at the public relations part. I believe there`s
been polling, independent polling, not Tesla commissioned polling, in
Arizona, in Texas, in New Jersey, that asked, should they be able to sell
directly to consumers? It polls incredibly well.

WALKER: They`re trying to use the strategy here. Encouraged people to
come out on Tuesday in Trenton to protest. Elon Musk was blasting this as
a Mafioso thing.

HAYES: He made a bridge-gate closure reference.

WALKER: He said Chris Christie has a bridge he`d like to sell you, this
rationale that it wasn`t his doing. In the blog post, he asked people to
write to their legislator. But, you know, I think that`s really a
stereotypical Silicon Valley move. They sort of don`t want to do things
the old way and part of why they have a new sales model as well.

HAYES: Politically, what do you think we will see next? Something tells
me some enterprising Democrat is going to find a way to make hay out of
this.

WALKER: We`ve seen a couple in the legislature jump out on Tesla`s side.
Christie is weaker than in a long time. Interestingly, I`m not fully sure
why this is happening. Tesla indicated they`re not going to pursue
anything federally. They want to go through the state courts. But at the
same time, we just did a story this afternoon, a White House petition
crossed the threshold and hasn`t had a response in a year. The president
is due to address this issue sometime soon as well.

HAYES: A 100,000 required signatures would allow Tesla motors to sell
directly to consumers. Hunter Walker, thank you so much for your time.

WALKER: Thanks for having me.

HAYES: All right, we will have someone from the New Jersey Car Dealer
Trade Association who will make the case for why it should be regulated the
way it is right after this.

(COMMERCIAL BREAK)

HAYES: Joining me now, Jim Appleton, he is the president of the New Jersey
Coalition of Automotive Retailers. Josh Barro, MSNBC contributor, national
correspondent for "The New York Times." All right, Jim, you can tell where
I was coming from that the package you just saw. Do you agree with the
commission`s decision to get rid of these two Tesla dealerships?

JIM APPLETON, PRESIDENT, NJCA: Yes. I do.

HAYES: OK. Why is this not rent seeking? Why isn`t this you guys looking
out for your interest?

APPLETON: Nobody wants to see Tesla close their stores in New Jersey.

HAYES: No, you guys want to see Tesla --

APPLETON: No, absolutely not. I mean that very sincerely. What we want
is to see Tesla comply with the law and play by the same rules as everybody
else. You might question the rules. You may wonder if these are good
rules and appropriate rules. Let me address that.

HAYES: Yes.

APPLETON: The New Jersey Franchise Practices Act is not a dealer
protection law. It`s a consumer protection law. The New Jersey franchise
practices law exists because the intent is to encourage individual
investors to invest in a system of independent business owners who will
compete vigorously day in and day out for consumers on price and also who
will ensure the consumers have ready access and fair adjudication of
warranty and safety recall claims.

HAYES: So this second thing, Josh, is something that Elon Musk brings up
on the surface, a big part of what the dealer does is handle service. He
has an argument that basically says, look, we`re trying to get rid of
service, right?

JOSH BARRO, "THE NEW YORK TIMES": Well, I think, you know, if you allow
direct sales, that`s not prohibiting franchise auto dealerships. Most
products are sold through a mix of direct and indirect channels. You can
buy Apple products at the Apple store, buy them at Best Buy. You have
other manufacturers that only sell through independent retailers.

If dealers are providing a value proposition where they provide better
service, their interests are more aligned with the customer, you should see
people choosing to buy through independent dealers. In fact, in states
where it`s legal for Tesla to sell directly, most cars are sold through the
franchise model.

HAYES: Not most Teslas.

BARRO: Not most Teslas, but most other cars.

HAYES: This is a $70,000 car we`re talking about.

APPLETON: It`s $90.

HAYES: It depends. We got the sales I think by quarter if you take a
look. They`re going up. We`re still talking about selling 7,000 cars a
quarter nationwide, right? Why go to war over this? Why not let them sell
their Teslas?

APPLETON: We`re not going to war over this. Tesla appears to be. If you
look at the blog today, you know, tesla has gone ballistic over this issue.
Tesla seems to think that the laws in the state of New Jersey should be
amended to allow them to do what they choose to do. And if they want that,
then they should go to the legislature and ask for that.

HAYES: Will you guys fight that?

APPLETON: If it`s not a -- we want to see tesla survive. We want to see
tesla thrive. We want to see them achieve their potential as a car
company, but they`re going it to do so within the limits of the law. Which
means they`re going to have to -- or the law could be changed. They`re
going to have to adapt the franchise model --

HAYES: Explain why the franchise model is a good idea.

APPLETON: It promotes price competition and ready access to consumer care
with warranty and safety recall. With respect to price competition, it`s
very simple. When you buy from tesla, you buy from the factory. They say
they eliminate the middle man. I hate that term. But they don`t eliminate
the middle man. And they do eliminate the middle man but don`t eliminate
the middle cost.

It doesn`t cost Tesla any less to retail that car. Meanwhile, when you buy
from a new car dealer, you can compete four, five, six dealerships within a
15-mile radius can compete for that price. You know what? It`s completely
transparent. You can go on the internet and see what the dealer paid, but
you don`t know what Tesla paid.

BARRO: I`d deny that process. If people don`t like the fact the retailer
has a direct sale model, they can buy from a different auto manufacturer.

APPLETON: This consumer choice argument is a red herring. This is not
about consumer choice. You have no choice when you buy from Tesla. You
buy from a factory store, period, end of discussion. You buy from a new
car dealership, you have the choice of buying from several. This is really
a consumer protection argument. It`s not consumer choice argument.

HAYES: Here`s an argument made today, he basely says, OK, you`re a car
dealer. Let`s say we go through the dealership. You`ve been selling Fords
or you`ve been selling Chryslers or you`ve been selling Toyotas for years.
Now you`ve got this Tesla thing, right? What the hell incentive do you
have to sell this thing?

APPLETON: Nonsense. Nonsense. Nonsense. Elan Musk cut a deal with both
Toyota and Mercedes. They`ll be selling Tesla powered Mercedes and
Toyotas. Dealers are retailers. They want to sell what consumers want to
buy. Fortunately in New Jersey, Tesla enjoys a 0.1 percent market share.
Consumers like the car. Those who drive it. They`re enthusiastic about.
I don`t understand why the media is so wild about it. Every time Elan Musk
sends out a blog post, you guys go crazy. I don`t understand it.

HAYES: Because we need to get off oil, man.

APPLETON: Yes, well -- look, here`s --

HAYES: That`s the reason, by the way.

APPLETON: Here`s the story. It`s a consumer protection argument. You
don`t put the thoughts in charge of the chicken coop. That`s what the
manufacturer model does.

HAYES: Should that be true in every industry? Should we prohibit any
manufacturer from direct selling any product?

APPLETON: Only in industries where the health and safety of the motorist
and the motoring public is at stake. If you allow the Fox to be in charge
of the chicken coop with a warranty and safety recall, you can expect more
and worse than what you see with GM today. The manufacturer has a
financial interest to deny, delay and refuse to treat warranty and safety
recall matters, whereas the auto retailer, the auto retailer has a
financial interest to get the job done.

BARRO: This is what regulation is for. There are lots -- Boeing directly
sells its airplanes to airlines.

APPLETON: Paid by the manufacturer to fix their mistakes. The auto
retailer has a financial interest in fixing that problem as does the
manufacturer. Whereas the manufacturer has a financial interest in denying
the claim.

HAYES: Flip side of that, of course, you worry that there`s an interest in
as much service as possible if that`s a center for dealer. Jim Appleton
president of New Jersey Car, and Josh Barro of "The New York Times." Thank
you both.

APPLETON: Thank you.

HAYES: That`s ALL IN for this evening. The "RACHEL MADDOW SHOW" starts
right now. (Ari Melber? is sitting in for Rachel. Good evening my man.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY
BE UPDATED.
END

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