updated 4/16/2014 12:06:20 PM ET 2014-04-16T16:06:20

THE RACHEL MADDOW SHOW
April 14, 2014

Guests: Michael McFaul, Paul Butler

CHRIS HAYES, "ALL IN" HOST: THE RACHEL MADDOW SHOW starts right now
with Steve Kornacki in for Rachel. Good evening, Steve.

STEVE KORNACKI, GUEST HOST: Good evening to you, Chris. And thanks
for that.

Rachel has the night off tonight.

We`ve got some important new documents in the George Washington Bridge
scandal, and that`s coming up shortly.

But we`re going to begin in Nevada, on about 600,000 acres of grazing
land just west of tiny Mesquite, which is in southern Nevada. It`s where
lifelong rancher Cliven Bundy has been grazing his cattle for years on what
the Bureau of Land Management says is federal land. He`s been doing that
without paying the necessary fees.

In 1998, a judge ordered Bundy to remove his hooved trespassers, and
now after nearly two decades, multiple court orders and no cooperation from
Bundy, the government has stepped in and removed his cattle from the
property, rounding them up and keeping them in a holding area nearby.

This was no small move. The Bureau of Land Management and National
Park Service mobilized helicopters, trucks and cowboys in order to move the
cattle.

As you may imagine, this angered the Bundy family. The story got
picked by conservative groups who see this showdown less as a dispute over
unpaid grazing fees and more as a glaring example of big government run
amuck. One of those groups is the Nevada arm of the Koch brothers funded
Americans for Prosperity, which had been running pro-Bundy images and
messages in the social media accounts. It`s using the #bundybattle.

When asked for comment on this dispute, AFP Nevada said to us, BLM is
an agency whose priorities are out of order, putting taxpayers on the hook
for a month-long operation to arrest trespass cattle in the Nevada desert
is only the latest example. This is another example of big government gone
wrong.

So, hundreds of states rights protesters ended up flooding the scene
in Nevada, blocking the road in both directions and triggering a standoff
between law enforcement and protesters, who included -- some of whom
included armed militiamen who tried to storm the holding pen. And after
removing nearly 400 of Bundy`s cattle, Saturday morning, BLM abruptly
announced that the operation would end because of, quote, "grave concerns
about worker safety."

So, the Bundy family says the citizens of America got their cattle
back. The Nevada`s Republican Governor Brian Sandoval praised the agency
for its willingness to listen to the state`s concerns.

This all ended peacefully, which is certainly a good thing. It`s a
great thing.

But this is where you also see the struggle to move forward for the
conservative movement and for the Republican Party, the struggle of how to
balance one wing of the party`s instinctive defense of state rights and the
outright rejection of the federal government, the party`s larger aim of
appealing to a less conservative national electorate. This is really an
active present moment struggle in the Republican Party, nationally.

And you can also see it happening at the state level, in Nevada.
Because in contrast, the "don`t tread on me" standoff that played out in
the desert this weekend, on the same day, on Saturday, Nevada state
Republican Party decided to drop opposition to abortion and opposition to
gay marriage from its official platform. State party chairman Michael
McDonnell said the decision was about inclusion and, quote, "this is where
the party is going."

It`s a sentiment echoed by the RNC`s autopsy report that stated,
quote, "There`s a generational difference within the conservative movement
about issues involving the treatment and the rights of gays. For many
younger voters, these issues are a gateway into whether the party is a
place they want to be."

The autopsy was basically saying you have to take some of the social
issues off the table before you can even talk to younger voters. And
there`s not much evidence that the national Republican Party has been
following that advice. But the state Republican Party in Nevada, it just
did.

And now granted, this is just one state party. It`s in a state with a
more libertarian political tradition, but still, this is significant. It`s
a state party making a conscious decision to open up the platform and to be
more inclusive on cultural issues.

At the national level, though, the carnival rolled on. This weekend,
we saw the launch of the inaugural New Hampshire Freedom Summit. It was
cosponsored by Americans for Prosperity -- there`s that name again.

As you may expect at a cattle call like this, there was no shortage of
Republican politicians looking to display their conservative charms to the
base. Senators Rand Paul and Ted Cruz and Mike Lee were in attendance --
as was Mike Huckabee, who delivered this gem.

(BEGIN VIDEO CLIP)

MIKE HUCKABEE (R), FORMER ARKANSAS GOVERNOR: My gosh, I`m beginning
to think that there`s more freedom in North Korea sometimes than there is
in the United States. When I go to the airport, I have to get in a
surrender position. People put hands all over me. And I have to provide
photo ID and a couple of different forms and prove that I am really not
going to terrorize the airplane. But if I want to go vote, I don`t need a
thing.

(END VIDEO CLIP)

KORNACKI: That`s the same North Korea where Kim Jong-un had his uncle
summarily executed.

Anyway, the timing of this event is interesting because the Freedom
Summit comes in the heels of Jeb Bush calling illegal immigration an act of
love and saying that comprehensive immigration reform would involve
trapping people which could otherwise contribute greatly to the country as
a whole. Bush`s comments last week were a big deal for a reason, because a
stance like this on immigration inclusive in tone is exactly what a
Republican who wants to win a national election should probably be saying.

And Chris Christie was supposed to be the candidate who was going to
pull the party back towards the middle, at least on that few issues, but
with his recent string of problems, it`s created an opening for Jeb Bush to
essentially audition for that role for 2016. To show Republicans and to
show the political world that he knows how to do what the Republican
nominee has failed to do in five of the last six presidential elections,
win more popular votes nationally than the Democrat.

That was the promise of Chris Christie. That is the promise of Jeb
Bush. But what was on display in New Hampshire this weekend was a party
base that not only doesn`t agree with Jeb Bush, but is going out of his way
to attack him, and not just on immigration.

Here`s Tennessee Congresswoman Marsha Blackburn who seems, by the way,
to be toying with launching a 2016 campaign of her own. Here she is at
that event taking a direct shot at the common core education standards,
something for which Jeb Bush has been a vocal advocate.

(BEGIN VIDEO CLIP)

REP. MARSHA BLACKBURN (R), TENNESSEE: The unions don`t want charter
schools. They want a happy meal education. Dumb down. Equal portions for
everybody. That is what they would like.

We need to fight those unions. We need to fight for charter schools,
and while we`re at it, let`s get rid of common core and replace it with
some common sense.

(END VIDEO CLIP)

KORNACKI: There were boos there. They were directed at Jeb Bush`s
stand on the common core. Jeb Bush spent most of last week positioning
himself as a kind of Bill Clinton of the GOP.

But that is not at all what the Republicans in New Hampshire were
looking for. To hear Republicans attacking Jeb Bush on the same week that
he embraces immigration reform underscores the point. There`s a tension
between ideological purity and general election appeal.

But is today`s Republican Party willing to acknowledge that?

Joining us now is NBC News political reporter Kasie Hunt, who was in
New Hampshire at the Freedom Summit this weekend.

Kasie, thank you for being here. I know it`s been a long day for you.

KASIE HUNT, NBC NEWS POLITICAL REPORTER: Hey, you know, lots to talk
about out of this New Hampshire summit.

KORNACKI: There really is. And I think the thing that surprised me
most was obviously the timing. It was sort of Jeb Bush`s big rollout week.
Here`s the establishment`s new option if it`s not going to be Chris
Christie.

But then this whole issue of common core, which I have to admit, I
hadn`t been following much until the last month or so, this seems to be
suddenly exploding on the right. Can you just talk a little bit about what
it is, why it has the conservative base so fired up, and then the effect
here on a guy like bush who as governor of Florida was a big champion of
this?

What was this common core?

HUNT: Sure. Well, it`s a common sort of curriculum that`s designed
for states to be able to use, and what`s happening, and I`ve been seeing
this as I`ve been traveling across through these different states, even
looking at just the midterm elections.

And it`s something that particularly Tea Party groups have seized on
as sort of a cultural wedge issue that gets away from abortion, gay
marriage, things like that, and sort of allows them to unite around this.

So, you`re seeing it in Iowa. There are Tea Party groups there who
are sort of uniting around trying to repeal common core. It was, as we
showed, the biggest applause line at the New Hampshire summit. I`ve even
seen leaflets against it at Matt Bevin`s events in Kentucky. The Tea Party
candidate running against Senate Minority Leader Mitch McConnell.

So, it`s something they`ve really rallied around. And it poses a
particular problem for Jeb Bush, right, because it`s something that he
championed as you noted when he was a governor. It`s one of those sort of
issues that`s causing some Republicans to sit back and say, hey, you know,
maybe this actually should give us pause about his candidacy. Immigration
is one thing. But common core is another.

And the question for Jeb Bush is, can he move beyond his family name?
Is he ready to mount the kind of campaign that you would have to mount in
this day and age and in this era and the Tea Party landscape? And this
particular issue seems to be flaring as one of the most important for him?

KORNACKI: Well, this is, right. As they say, the timing was so
interesting because Jeb Bush was making a statement on immigration last
week that reminded me what his brother did when his brother was running for
president in 2000, positioning himself a little bit towards the middle, the
compassionate conservatives.

HUNT: Compassionate conservatives, yes.

KORNACKI: And all that. But it`s almost like, were you picking up on
that in this room, watching those activists, listening to those activists
in that room, after seeing Jeb Bush in the news for immigration? Was the
railing against common core, was the railing against immigration, was that
really a party just saying no? Was it a base just saying no to Jeb Bush?
Was that really the message they were trying to send?

HUNT: I think that was a little bit of it. I will say the organizers
did invite Jeb Bush to this summit. They did not invite Chris Christie,
which was a very specific snub aimed at his what they consider to be his
more moderate record.

And there were boos when Donald Trump in particular mentioned Jeb Bush
and the immigration comment specifically. And so, I think it was more of a
reaction to the actual policy, and not necessarily to the potential of a
Jeb Bush candidacy. I think it would have welcomed hearing from him.

But I do think there was very clear opposition to some of the things
they think he stands for.

KORNACKI: And, you know, we`re always talking about this. Basically
my whole lifetime, we`ve been talking about this upcoming presidential
election, whether it`s going to be 1996 or 2000, whatever. This is going
to be the year the conservative base finally says we don`t want the
establishment candidate. This is whether they go with the true believer,
you know?

And yet, this is the party that nominates Bob Dole and John McCain and
Mitt Romney.

So, we`re hearing it again in the run up to 2016, right? It`s not --
it wasn`t going to be Chris Christie. Maybe not Jeb Bush. This is a year
they`re going to nominate a guy like Ted Cruz or Rand Paul.

But you were talking about, your observation is that Rand Paul
probably got the best response at this event in New Hampshire. And it
occurs to me, when you look at what the response Rand Paul has gotten so
far, in a state like Iowa, which has heavy evangelicals on the Republican
side, and then you look at the state like New Hampshire, which is not an
evangelical heavy electorate, it`s very tough to find a Republican in the
modern era who`s been table to put together a winning coalition in Iowa
with evangelicals and New Hampshire with more of the sort of "don`t tread
on me" nonreligious Tea Party types.

I`m getting the sense Rand Paul is bringing those two things together
in the Republican Party.

HUNT: The trick, the places where Rand Paul could get tripped up. I
think your premise is right in that which he clearly has influence in both
of those states. He`s almost taken over the Iowa Republican Party, or he
had.

And it`s clear that the live free or die message in that libertarian
sort of strain really helps him in New Hampshire. But he could get tripped
up on social issues like abortion. I mean, he -- one thing that
evangelicals have been concerned about is that sort of strain of
libertarianism that is more OK with abortion than the typical party is.

And the second is foreign policy and the question of whether, you
know, we`ve already seen some of what`s leftover of the neo-conservative
wing of the Republican Party, sort of going after Rand Paul in a pretty
aggressive way. And I think you could see that raise its head in a place
like South Carolina, which has a very strong military tradition, and like -
- and has, you know, historically nominated establishment candidates as
well.

KORNACKI: You know, in this network, maybe six months ago or so,
Chris Matthews said, hey, Rand Paul, that`s your nominee in 2016. Said,
I`m a little bit, I`m coming closer to Chris Matthews --

HUNT: It`s not impossible. You know who may come out looking better
is Marco Rubio. He`s somebody that`s been sort of flying under the radar
screen lately and he was not endured the damage that Chris Christie has
gone through. But also is seen as somebody who`s a little more palatable
to me.

HAYES: We`ll see about immigration in the question with Rubio.

Kasie Hunt, NBC News political reporter, thank you for joining us
tonight.

And just ahead, Governor Chris Christie hoped an internal review would
be the last word on the George Washington Bridge scandal -- not so fast.

Stay with us.

(COMMERCIAL BREAK)

(BEWGIN VIDEO CLIP)

AYMAN MOHYELDIN, NBC NEWS: The crowd cheers. The Russian flag is
raised for another building in eastern Ukraine. The police station seized
by pro-Russian separatists.

Amateur video circulated widely on the internet, unverified by NBC
News, appears to show Ukrainian police being given orders by a Russian
military officer. He says he`s a lieutenant colonel, even shows ID.

Inside we saw separatists giving orders to the police.

Why are you hanging the Russian flag outside?

"It`s for protection," he says. "Everyone here wants to be Russian."

In the few hours that they`ve been in control of this police station,
you can`t help but wonder who is behind the coordination. Look at the
tires that having brought in, the sandbags. There`s a tremendous amount of
discipline and coordination among the men that are securing this position.

(END VIDEO CLIP)

KORNACKI: That was NBC News correspondent Ayman Mohyeldin reporting
tonight from eastern Ukraine. He`s reporting on a pro-Russian mob that
stormed and seized the Ukrainian police station this morning.

This comes on the heels of a series of coordinated raids throughout
eastern Ukraine over the weekend, where armed gunmen without any visible
insignia and pro-Russian protesters gained control of government buildings
and police stations throughout the region.

All of this leading to Ukrainian government for the first time during
this ongoing conflict to deploy security services to confront the pro-
Russian protesters and to try to regain control of eastern Ukraine.
Clashes ensued. One Ukrainian security officer was killed. Another five
were wounded.

But the Ukrainian government`s effort to reassert its authority made a
little headway. Mobs of pro-Russian protesters continued to plow forward,
taking over administrative buildings, police stations and even entire
cities, setting up check points just outside of them.

In one town in eastern Ukraine, some 400 handguns and 20 automatic
weapons were looted from a police station. This according to the Ukrainian
interior ministry.

The escalating situation triggered an emergency U.N. Security Council
meeting last night. That`s where U.S. Ambassador to the U.N. Samantha
Power delivered strong words to Russia, accusing it of orchestrating the
unrest.

(BEGIN VIDEO CLIP)

SAMANTHA POWER, UN. AMBASSADOR: We know who is behind this, indeed
the only entity in the area capable of these coordinated professional
military actions is Russia. The synchronized surgical seizure of buildings
yesterday occurred in towns along the main highway, followed by armed
roadblocks, almost as if a coordinated barrier was being formed. You have
heard laments about instability, as if instability is organic.

But the fact is that this is saddest kind of instability. It is
completely manmade. This instability was written and choreographed in and
by Russia.

(END VIDEO CLIP)

HAYES: And today is the last ditch effort of sorts. Ukraine`s acting
president reached out to the U.N. and asked for peace keeping troops to be
sent to Ukraine. In a phone call to U.N. Secretary General Ban Ki-moon,
the Ukrainian president suggested conducting a joint anti-terrorist
operation with Ukrainian forces and U.N. peacekeeping troops, according to
his Web site.

It`s unclear if U.N. peace keeping troops could even be deployed
because that would require approval from the U.N. Security Council, and
Russia is a permanent member of the U.N. Security Council and therefore has
veto power.

We`re also learning today that two Russian fighter jets engaged over
the weekend. In what is described as provocative action near a U.S. Navy
guided missile destroyer in the western Black Sea. Russian jets making a
dozen low passes near the destroyer, in violation of international
protocols.

As tensions continue to ramp up, today, President Obama spoke with
Russian President Vladimir Putin on the phone. The White House reporting
tonight that President Putin asked for the call. The White House says the
conversation was frank and direct. The president making clear the
diplomatic path is still open and continues to be the U.S.`s preferred way
forward and stressing that Russia`s actions so far are neither consistent
with nor conducive to that.

Joining us now is Michael McFaul. He`s a former U.S. ambassador to
Russia. He`s currently a professor of political science at Stanford
University.

Professor McFaul, thank you for joining us tonight.

MICHAEL MCFAUL, FORMER U.S. AMBASSADOR TO RUSSIA: Sure.

KORNACKI: I guess -- my thought is looking at all of this today, I`m
thinking back to the situation in Crimea. You had the troops with no
insignias. You had the U.S. saying we know this is Putin. We know this is
Russia. We had the frank conversation between President Obama and
President Putin. And then we ultimately had Crimea being annexed by Russia
and nobody really being able to do anything about it.

In light of what we`re hearing now about another frank conversation
and the troops without the insignia. I mean, is in any reason to believe
this is going to end differently? Is Russia about to annex more land?

MCFAUL: Well, there`s lots of parallels, as you rightly pointed out.
It`s a very scary situation. But it`s a different situation in Crimea, and
in a couple of respects.

First and foremost, the majority of the people in these eastern
regions of Ukraine are not Russian. Let`s be clear about that. In Crimea,
they were. Out there, they`re not.

Secondly, very different from Crimea, the government in Kiev tried to
oust them using military force last night. They didn`t succeed. And that
was bad. That shows how weak they are.

But I don`t think that this is going to happen as peacefully, if
indeed Putin decides he wants to annex these regions of Ukraine.

KORNACKI: So what happens then? Ukraine itself, you`re saying, could
muster some kind of military fight. It remains to be seen I guess how
strong the military fight would be. Ukraine looking for help, looking for
U.N. peacekeeping forces. We talked about, you know, Russia`s on the
Security Council, can`t imagine there`s much appetite in the United States
to be contributing to anything like that.

There`s already been sanctions leveled against Russia here. This
hasn`t stop Putin from taking these steps. Where is the help that Ukraine
is going to get that would actually force Russia to pull back in a
situation like this?

MCFAUL: Let`s be frank. They have bad options.

The government in Kiev right now has very bad options because if they
do nothing, it will be a fait accompli, it will be shown that they`re weak
and there are critics on the right will criticize them for doing not
enough. Already there are demonstrations in Kiev today from the right
saying you need to do more. But if they do use force, of course, that
creates the pretext for Putin to say we need to go in and save the ethnic
Russians and eastern Ukraine.

So, the Ukrainian government does not have great options. They`re
damned if they do. They`re damned if they don`t. And the international
community also doesn`t have great options.

You`re absolutely right about there`s not going to be any U.N.
peacekeepers here. Right now, what you see, both the Obama administration
doing and other European leaders is to raise the specter of increased
sanctioned, but at the end of the day, Putin is motivated to go in, he`ll
take the risk, he`ll take the costs of sanctions and he`ll march into
Ukraine.

KORNACKI: And as he`s already starting to show, and, obviously, you
know, looking strong, not looking weak, obviously, a major consideration
for Putin. I guess the final question for you, though, is we saw Crimea.
We`re seeing eastern Ukraine.

How big is the Putin appetite here for annexation? Are there other
areas that he`s eyeing? Other areas of Ukraine? How much bigger does he
want Russia to get?

MCFAUL: I don`t know the answer to that. He doesn`t call me. He
doesn`t brief me. That`s part of the problem, by the way. He`s very
isolated as a leader.

And I`m not yet convinced that he knows what his grand strategy is yet
here. I do think he wants to weaken the Ukrainian government. Destabilize
western Ukraine and perhaps do that to negotiate a more federalized system
of government.

And at the same time, he`s also making preparations for plan B, which
would be full scale intervention. I don`t think he`s made up his mind
entirely, but he`s got a lot of cards to play.

And, unfortunately, the Kiev government and the West don`t have a lot
of cards.

KORNACKI: Yes, you mentioned full scale intervention. That could get
ugly. We saw a hint of it today unfortunately.

Michael McFaul, former U.S. ambassador to Russia -- I want to thank
you for your time tonight.

MCFAUL: Thank you.

KORNACKI: There are dozens of important new documents out tonight on
the George Washington Bridge scandal. We`ll have the full details straight
ahead.

(CXOMMERCIAL BREAK)

KORNACKI: For a couple of weeks now, the Chris Christie
administration in New Jersey has touted the external investigation as an
exoneration of the governor. The report states the governor had nothing to
do with the George Washington Bridge lane closures and the accusations that
he was drying to intimidate the mayor of Hoboken over a real estate deal
are completely false.

And for some people, that defends his end of the matter. Today,
though, there are new documents -- documentation of the interviews that
produced that internal report, and they tell a far less conclusive tale.
That analysis is coming up next.

(COMMERCIAL BREAK)

KORNACKI: You`ve heard plenty by now about the Mastro report. It was
the report that was released a few weeks ago by Randy Mastro. He`s the
lawyer whose firm was chosen by the office of New Jersey Governor Chris
Christie to conduct an internal investigation into his administration.

It`s a report that purports to exonerate the governor. It`s a report
that was paid for by New Jersey taxpayers, and it`s a report that did not
include interviews with some of the principle players in the scandal
swirling around the Christie administration, which probably helps explain
the skeptical reaction the report is generated from the media.

In a polling that shows that a majority of New Jersey voters see the
Mastro report as a whitewash, and not the definitive independent
exoneration that Christie has been trumpeting it at.

In that same poll, though, of course, voters were also skeptical of
the Democratic lawmakers who were investigating the scandal.

But voters really don`t seem to trust the internal investigation of
the Christie administration. Partly because it was led by an attorney that
the Christie administration hired and it`s also the fact that Mastro and
his team did not make any recordings or transcripts of the interviews they
conducted for the report public. They tell us that, quote, "it is
customary in internal investigations to summarize interviews in memoranda
rather than transcribe or tape them."

So in the state legislative committee that`s investigating Christie`s
administration asked for transcripts, instead they got a packet of memos,
75 memos, one from each of the people who Mastro`s team interviewed. In
each memo comes with a disclaimer. It says, quote, "This memorandum does
not contain a verbatim transcript of what was said at the meeting. Rather,
it is a summary of the discussion that reflects counsel`s mental thoughts
and impressions and it`s therefore protected from disclosure by the
attorney work product doctrine."

Memos obviously are not nearly as useful as actual transcripts would
be, but we do learn some things for them. For example, it turns out that
one of the three attorneys on Mastro`s team who interviewed Christie for
the report is a friend of Christie`s, Debra Wong Yang, whose family has
vacationed with Christie`s. She was one of the lawyers who interviewed
Christie for the report the claims to exonerate him.

There`s more in the memos too. Plenty of interviews dealing with
bridge-gate but also plenty addressing the other major scandal Christie`s
administration is dealing with. One that has nothing to do with the
closure of the access lanes for the George Washington Bridge. One that has
to do with the mayor of Hoboken, Dawn Zimmer, the two top officials in
Chris Christie`s administration privately indicated to her that her city`s
level of Sandy funding was linked to her willingness to go forward with a
major development in Hoboken, the Rockefeller project, as it was known, a
project represented by the law firm of one of Christie`s closest
confidants, David Samson.

Samson also until two weeks ago served as Christie`s handpicked
chairman of the Port Authority of New York and New Jersey.

Now, Zimmer made the allegations on this network back in January.
Specifically, she accused Christi`s lieutenant governor, Kim Guadagno, of
pulling her aside after an event in a Shop Rite supermarket in Hoboken a
year ago in May and explicitly linking Sandy money to the development
project.

(BEGIN VIDEO CLIP)

DAWN ZIMMER (D), HOBOKEN, NJ MAYOR: The fact is that the lieutenant
governor came to Hoboken. She pulled me aside in the parking lot. She
said, I know it`s not right. I know these shot no be connected. But they
are, and if you tell anyone, I`ll deny it.

(END VIDEO CLIP)

KORNACKI: Zimmer also said a similar, if less explicit message was
conveyed to her three days later by a man named Richard Constable who
served in Christi`s cabinet as the commissioner of the Department of
Community Affairs.

Zimmer and Constable were seated next to each other on stage at
Monmouth University last May for a televised hall about Sandy recovery.
Zimmer documented the conversation she said she had with Constable just
before the program started in a contemporaneous diary entry that she shared
with us back in January and she has subsequently shared with federal
prosecutors.

The diary entry reads, quote, "We are miked up with other panelists
all around us and probably the sound team is listening. And he says, `I
hear you are against the Rockefeller project.` I reply. I am not against
the Rockefeller project. In fact, I want more commercial development in
Hoboken. `Oh, really. Everyone in the statehouse believes you are against
it. The buzz is that you are against it. If you move that forward, the
money would start flowing to you,` he tells me."

Now, those are Dawn Zimmer`s allegations. Both Kim Guadagno and
Richard Constable have adamantly denied them.

(BEGIN VIDEO CLIP)

LT. GOV. KIM GUADAGNO (R), NEW JERSEY: Mayor Zimmer`s version of our
conversation in May of 2013 is not only false, but is illogical and does
not withstand scrutiny when all of the facts are examined. Any suggestion,
any suggestion that Sandy funds were tied to the approval of any project in
New Jersey is completely false. I am very surprised by the mayor`s
allegations, and I deny wholeheartedly those allegations.

(END VIDEO CLIP)

KORNACKI: And both Guadagno and Constable claimed vindication two
weeks ago when the Mastro announced that had discredited Zimmer`s
accusations. You can see it here, from the report. Factual analysis.
Mayor Zimmer`s accusations are unsubstantiated and contradicted by
contemporaneous documentary evidence. And Mayor Zimmer`s allegations about
the lieutenant governor do not withstand scrutiny. And Mayor Zimmer`s
allegations about Commissioner Constable do not withstand scrutiny.

That`s what the Mastro report concluded. But, of course, Dawn Zimmer
declined to be interviewed for that report. She`s been interviewed by the
United States attorney for New Jersey, Paul Fishman. And FBI agents have
examined records and spoken with others in Hoboken about her accusation.

The memos released today raised a few more questions about the
report`s conclusion. Take the Mastro team`s interview with Kim Guadagno,
the lieutenant governor. The memo said she told the lawyers that Zimmer
who had requested to meet with her outside the Shop Rite and it was Zimmer
who connected Sandy aid and the stalled development during that
conversation. In response, quote, "The lieutenant governor explained to
Mayor Zimmer that development and Sandy aid were not related and if Mayor
Zimmer claimed that the lieutenant governor was connecting the two, Mayor
Zimmer would be wrong and lieutenant governor would have to say so."

So no threats from Guadagno. No connecting Sandy money to development
projects. Nothing like Zimmer is alleging. That`s what Guadagno told
Mastro`s team.

But then there`s this memo also released today. It is the Mastro team
summary of three meeting with a woman named Luciana DiMaggio. She`s
described as an aide who travels pretty much everywhere with Guadagno. And
besides the state trooper assigned to Guadagno, she was the only person in
an SUV with Guadagno immediately after her encounter with Zimmer. DiMaggio
told the lawyer something interesting. She said she hadn`t heard the
Guadagno-Zimmer exchange, but that she had watched it and it had been,
quote, "tense". And she said when Guadagno got into the SUV, quote, "she
said something like if Mayor Zimmer didn`t play ball then there`s not much
we can do."

DiMaggio according to the memo first told this to the chief of staff
on the day she made allegations on the first of January. And also told to
Mastro`s team over two meetings in the following week, in those meetings,
the memo notes, DiMaggio came by herself. She was not represented by a
lawyer. Then more than a month later on March 10th, she had another
meeting with the team, and this time she did bring a lawyer.

With her counsel present, according to the report here, DiMaggio said
her memory is not 100 percent accurate but she remembered the lieutenant
governor communicated that mayor Zimmer was not cooperating, stating in
words or in some substance something like the mayor was not playing ball or
the mayor was not playing well with others.

DiMaggio did not understand the context or meaning of the lieutenant
governor`s remarks. And after DiMaggio told this to Mastro`s team,
Guadagno was called apparently back for another interview and asked about
it.

Again quoting from the memo, "The lieutenant governor did not recall
any specific words that she used in the car, but did recall that she was
frustrated by Mayor Zimmer`s single-minded focus on Hoboken. Mayor Zimmer
failed to recognize the states as a whole especially with respect to many
shore communities where entire homes had been completely washed away. The
lieutenant governor said she may have said something about that in the car
and how she had to be firm with Mayor Zimmer and remind her that she was
one of many mayors whose towns needed post-Sandy relief."

So we have an aide who was in the SUV with Guadagno immediately after
that Shop Rite event, saying she thinks the lieutenant governor said
something about Dawn Zimmer not playing ball. But she`s not sure. But in
the Mastro report itself, DiMaggio was treated as someone whose story
clearly corroborates Guadagno`s and undercuts Zimmer`s.

DiMaggio did not recall the exact words the lieutenant governor used,
this is what the report concludes. DiMaggi`s recollection is consistent
with the lieutenant governor`s recollection of pushing back against the
mayor`s insistence on getting more Sandy aid for Hoboken without regards to
the profound needs of the entire state.

But there`s a question. Did Kim Guadagno get in her SUV after talking
with Dawn Zimmer and say that Zimmer wasn`t playing ball? And this seems
like an important question. Yes, I mean, playing ball could mean a lot of
things. It could be totally consistent with Guadagno`s version of events.

But it could also totally consistent with Mayor Zimmer`s allegations.
She`s not playing ball. Doesn`t that sound like something that someone
might say if their attempt to cut a deal with someone had just been
rebuffed?

Master report doesn`t grapple with this. It words the points and it
moves on. The memos released today only add to the sense that there`s a
much more complicated picture here when it comes to Guadagno and when it
comes to all the other questions that now threaten Christie`s
administration. And it`s a picture that probably isn`t going to be sorted
by a legal team that was handpicked by the Christie administration and it
is simultaneously representing the governor`s office as it deals with
multiple external investigations.

More revelations from this bumper crop of New Jersey documents just
ahead.

(COMMERCIAL BREAK)

KORNACKI: This has been a big day for news of out New Jersey. Today,
the team of lawyers hired by the office of Governor Chris Christie to
conduct an internal review of the Christie administration released new
notes from 75 interviews done for that review. From those notes, we
learned today that on January 8th, that`s the day that the stunning batch
of documents that included Bridget Kelly`s time for traffic problems in
Fort Lee e-mail that that was publicly released, that on that day, Christie
convened a meeting of his top adviser at the governor`s mansion and that
one of the attendees was David Samson who has been the Port Authority
chairman.

According to the memo outlining the Christie interview, when Samson
arrived, which was later in the day, the governor took him aside and asked
if he knew anything about the lane realignment allegations and Samson
responded he did not. Samson, though, refused to be interviewed by
Mastro`s team and has since resigned as the Port Authority chairman, and
Christie has repeatedly vouched for his integrity.

Joining us now is Paul Butler. He`s a former federal prosecutor for
the U.S. Department of Justice, and a current professor of law at
Georgetown University.

Mr. Butler, thanks for taking some time tonight with us.

So I want to start by -- with this whole question of transcripts for
the interviews that Christie`s internal investigative team conducted.
People have been saying, OK, he put the report out. There`s a lot of heavy
loaded language. Let`s see the transcripts.

And lo and behold, there`s no transcripts. There`s just these memos
summarizing it, and from the Mastro law firm there`s a statement that,
quote, "It`s customary to summarize interviews in memoranda rather than
transcribe or tape them."

Is that accurate?

PAUL BUTLER, GEORGETOWN UNIVERSITY: Yes, that`s the standard course.
That`s how the FBI does it.

You know, lawyers are control freaks. We like to control the flow of
information. This way there`s no record, even what the people who are
interviewed is told is this is our recollection. This is the way we
lawyers are going to cast what you say. This isn`t a verbatim transcript.

KORNACKI: So, in terms of the -- to the public`s standpoint, the
credibility of this report, when the public can`t examine the transcript
and make its own judgments and is left to reading the memos the Mastro firm
produced, is left to read in a report the Mastro firm produced, what is the
value then of this report? Does that -- does that reduce the value from
the public`s standpoint?

BUTLER: It does reduce the value to the public, but it increases the
value to Governor Christie. Remember, the people who did this are wearing
two hats. On the one hand, they`re supposed to be doing this supposedly
objective investigation because the taxpayers of New Jersey are spending a
million dollars on it. On the other hand, they`re representing the
Christie administration.

So, they`re certainly not going to be authors of a document that send
the governor to prison.

KORNACKI: Right. That`s always been my question about this
investigation. You conduct an investigation while simultaneously
representing the office. If you turn something in the office, that`s also
your client you`re turning up something about. I`ve kind of wondered about
that.

But let me ask you to that point then, you`re a former prosecutor.
And apparently, not just the Mastro report itself but all the memos
released today are also being shared with the U.S. attorney`s office in New
Jersey. If you were still a federal prosecutor and you received documents
like this from Governor Christie`s team, what would you reaction be? How
would you handle it?

BUTLER: I would love it. I mean, more information is better than
less information. And look. These prosecutors are not on a vendetta
against Governor Christie. They want to know whether he and his boys or
girls broke the law. So, anything that sheds light on that instance is
relevant.

The concern is what you just reported. If they`re casting their
interviews in a certain way, and even when they`re trying to cast them that
way they don`t totally support the idea that the governor and his people
have clean hands, I mean, that raises suspicions. Prosecutors are
naturally suspicious.

So, do I think that they`re going to bring some of these people into
the grand jury and get their version under oath when they`re not talking to
Christie`s team? You bet they`re going to do that.

KORNACKI: I`m just curious. When it comes to the legal stuff, I`m a
layman. This is just a question that occurred to me reading through memos
today. We gave the example of Luciana DiMaggio to begin the segment.
She`s the aide with Kim Guadagno who says she thinks she heard something
about Zimmer not playing ball. But she`s not sure.

In the memo, it says she has two meetings with Christie`s lawyers,
with the investigative team, where she`s not represented by a lawyer.
Then, about six weeks later, she comes back with a lawyer to reiterate she
what she heard. But she`s not 100 percent sure and doesn`t want to go on
the record with that.

And there`s a couple of examples in these memos of similar thing, of
people meeting at first with the team. Is that telling you anything that
that happened?

BUTLER: Not really, other than that they are smart because anytime
you`re in an investigation like this, even if you`re told you`re only a
witness, it`s always a good idea to get a lawyer. It has nothing to do
with whether you`re innocent or guilty.

So, I suspect that she thought that her information wasn`t such a big
deal when the investigator seemed especially interested in it, she got the
good advice that she needed to get a lawyer. So that`s a good thing.

KORNACKI: All right. Paul Butler, former federal prosecutor for the
Department of Justice, thanks for your time tonight.

Conservatives planning to bash the Affordable Care Act all the way to
victory in this fall`s elections. Be warned, this next ad contained some
super inconvenient facts.

(COMMERCIAL BREAK)

KORNACKI: If you`re someone who believes the Affordable Care Act or
Obamacare was doomed from the start, that it was always going to be a
total, complete failure no matter what -- well, there have been two major
developments over the last two months that have helped enforce your belief.
The first begin at midnight on October 1, 2013. It was the grand opening
of the health insurance Web site, Healthcare.gov.

The servers were immediately overloaded and almost no one who tried to
use it could get the thing to work. And that disastrous first day was
followed by weeks of confusion and chaos, a development that really did
call into question whether this law was going to work, or if the prediction
of its imminent collapse just might end up panning out. It was definitely
something back then, back last fall for people who`ve always been against
this law to point to, and to say, see, we told you so.

And the second big development for them played out this past Thursday.
We learned that Kathleen Sebelius, the secretary of health and human
services was resigning. No matter how the White House spins it, the bottom
line is that Sebelius was the person who oversaw that disastrous rollout.

If you ask Republican politicians like Senate Minority Leader Mitch
McConnell, quote, "Obamacare has been a rolling disaster and her
resignation is cold comfort to the millions of Americans who were deceived
about what it would mean for them and their families."

And now, the universe where these two developments, the disastrous Web
site rollout last fall and Sebelius` resignation last week, the universe
where that looms the largest is actually pretty big. Since its passage
more than four years ago, the Affordable Care Act has never really polled
that well. More people still disapprove of the ACA than approved of it.
And much of this is driven by Republicans who maintained intense and
practically unanimous opposition to the ACA all the way through.

It`s in this part of the political universe, that part that`s
convinced that Obamacare will never be anything but a failure that
Republicans are counting on them to win big in this year`s midterm
elections. The Koch brothers-funded group Americans for Prosperity is
reportedly on track to spend tens of millions of dollars on ads against
Democratic senators, focusing heavily on the supposed failures of
Obamacare.

Former Massachusetts Senator Scott Brown, who is hoping to become New
Hampshire Senator Scott Brown is running on the concept that, quote,
"Obamacare isn`t working." He`s hoping the capture the exact same anti-
Obamacare backlash that helped propel to victory in Massachusetts back in
2010, the same backlash that made the 2010 midterms one of the best ever
for Republicans.

But there`s a difference between now and 2010. Today, Obamacare is a
real thing. Back in 2010, it wasn`t really anything more than a stack of
paper, a stack of thousands of pieces of paper as opponents love to point
out. But now, it`s being implemented and that means we`re starting to see
real results.

Those results have included some good news for the law. The pace of
that good news now seems to be accelerating.

Just take a look at the past few months. In November, the White House
announced that health care spending had slowed dramatically. Health care
inflation was at the lowest point in 50 years, and the Congressional Budget
Office announced in February that the Affordable Care Act would cost less
than they had initially expected.

Last month, the Commerce Department noted that personal income saw a
bit of a boost, something attributed to the new health care law. And last
week, a Gallup poll found that the nation`s uninsured rate is at the lowest
in five years.

And there was also the huge news about sign-ups which jumped up
dramatically in the days leading up to the April 1st deadline, pushing
enrollment in the exchanges to 7.5 million, a number that seemed laughably
out of reach a few months ago and that number jumps to 10 million when you
include the number of people now on Medicaid.

And then there`s the news today, the CBO announcing that the
Affordable Care Act will be cheaper than expected this year, a lot cheaper.
The most expensive provisions, the health insurance coverage provisions are
going to cost taxpayers about $5 billion less than initially anticipated.
That`s what the CBO now says. And the reason why those estimated costs are
down is because the exchanges in the marketplace will likely be lower than
they thought they would be.

Back in 2010, all we really had was the promise from the White House
and Democrats that this law was going to work, that people would like it
once it was in place and we could see how it was working, but implementing
it was and still is a long process. Some parts were put in place in the
last few years but it`s only now in 2014 that we`re starting to see hard
data and real on the ground evidence showing that this law can work and
that it actually is starting to work.

The more good news is, the more the question mounts, the question
starts to become, when will our politics catch up? When will the part of
the political universe that has resisted this law for four years, that has
fought to repeal it, that has hyped every discouraging piece of news about
it, insisted over and over that it`s going to destroy the country, that t
will never work, that it could never work, when will that part of the
political universe be forced by the weight of evidence and experience to
acknowledge that the ACA is a settled law, that it`s a permanent components
of the social safety net and to move on? Will a moment like that ever
come?

Anonymous congressional aide told "Talking Points Memo" last week,
that any Republican device alternative to the Affordable Care Act would
look a heck like the law does right now.

Let`s not kid ourselves. Obamacare remain as deeply polarizing name
and given the nature of the midterm elections, just saying they`re against
it may work out OK for Republicans this November. But there are seven
months between now and November, seven months that could include a lot more
positive headlines that we`ve been seeing as the law is implemented. If
those headlines persist through November and if they keep coming after
November, the politics of Obamacare, which have been frozen in place for
more than four years now, they are eventually going to change.

That does it for us tonight. Rachel will be back in this chair
tomorrow night and I`ll see you this weekend on my show "UP."

Now, it`s time for "THE LAST WORD." Have a great night.

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

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