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Flynn Sentencing Delayed after Judge Criticizes Flynn; White House: FBI Broke Protocol in Interview with Flynn; Unnamed Country Fighting Mueller Subpoena on Behalf of a Company. Aired 5-6p ET

Aired December 18, 2018 - 17:00   ET

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

JAKE TAPPER, CNN ANCHOR: And today, there is crying in baseball. Penny Marshall, gone at the age of 75.

[17:00:07] Our coverage on CNN continues right now. Thanks for watching.

WOLF BLITZER, CNN ANCHOR: Happening now, breaking news. Justice delayed. A courtroom shocker as a judge lays into Michael Flynn, castigating the former national security adviser, and postponing his sentencing for lying to the FBI.

Not concerned. The White House reacts by dismissing Flynn's crime, and appears to suggest the FBI entrapped him, with the president wishing Flynn good luck.

Crumbling foundation. President Trump's personal charitable foundation agrees to dissolve under court supervision as it faces a lawsuit alleging Mr. Trump and his oldest children use the organization as, quote, "little more than a checkbook."

And too early to tell. With a possible government shutdown just days away, the president says he doesn't know if he can strike a deal with lawmakers that meets his demand for funding his border wall.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: Breaking news. A dramatic twist in the case of former national security adviser, Michael Flynn. The judge postponing sentencing after sharply scolding Flynn and indicating that jail time was indeed possible, despite the recommendation by the special counsel, Robert Mueller, that Flynn get no jail time in return for his extensive cooperation.

I'll talk about that and more with Senator Chris Van Hollen. And our correspondents, analysts and specialists are also standing by.

First, let's get the latest details on the breaking news. Our senior national correspondent, Alex Marquardt, is joining us. Alex, unexpected -- truly unexpected developments in the Michael Flynn case today.

ALEX MARQUARDT, CNN SENIOR NATIONAL CORRESPONDENT: That's right, Wolf. This is not the way we expected this day to go, after both Mueller's team and Flynn's lawyers had asked for no prison time for the former national security adviser. This could have been a pretty straightforward sentencing, but the judge clearly had other ideas. He was fired up and made it clear that prison is still very much a possibility for Michael Flynn.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Lock him up! Lock him up!

MARQUARDT (voice-over): A surprising twist in the legal drama unfolding around Michael Flynn as a federal judge gave a stunning rebuke of the former national security adviser, suggesting that he may have sent Flynn to jail.

In a dramatic series of statements in the courtroom, Judge Emmett Sullivan in the D.C. District Court slammed Flynn for not registering as a foreign agent as he lobbied for Turkey, suggesting he did it while in the White House, saying, "That undermines everything this flag over here stands for. Arguably, you sold your country out."

Judge Sullivan also asked prosecutors if they considered charging Flynn with treason. They said no.

The judge later walked back his comments, realizing that Flynn's work for Turkey occurred before he entered the White House.

The judge today repeatedly gave Flynn the opportunity to delay his sentencing, and his lawyers ultimately got the hint. "We are prepared to take your honor up on his suggestion of delaying sentencing," Flynn's team said, "so he can eke out the last modicum of cooperation."

Cooperation, that is, with the special counsel's office and other investigations, which could reduce Flynn's sentence.

But the judge's stinging words heightening tension in the court for both the Mueller team and Flynn's, and requested no prison time because of extensive cooperation. Nineteen interviews totaling more than 60 hours, which didn't seem to soften the judge's position.

"I am not hiding my disgust," he said. "My disdain for your criminal offense."

Flynn was given multiple chances to withdraw his guilty plea of lying to FBI agents. He declined, saying he was aware it was a crime during his January 2017 interview at the White House.

A smooth year of cooperation between Mueller and Flynn was upended last week when Flynn filed a memo alleging the FBI misled him during his interview. No lawyer was present, and he claimed he hadn't been warned of the potential legal consequences.

Mueller's team fired back, saying someone in Flynn's position knows that lying to the FBI is a crime. The judge today asking Flynn's lawyers if he was entrapped by the FBI.

The attorney then softening their position, admitting, "No, your honor."

(END VIDEOTAPE)

MARQUARDT: So where does this go from here? Well, the judge told Flynn, "The more you assist the government, the more you help yourself." So Flynn will be expected to cooperate further with the special counsel's office on top of the 19 interviews he's already given. Then on March 13, there will be a status update in court. His sentencing is expected after that -- Wolf.

BLITZER: Have to wait for a while before he finds out if he's going to jail. Stand by.

Evan Perez, our senior justice correspondent, is with us, as well. You were in the courtroom. It certainly looked, from everything we're hearing, Evan -- you were there right inside -- that this federal judge was ready to give him some time in jail.

EVAN PEREZ, CNN SENIOR JUSTICE CORRESPONDENT: Yes, he was ready to lock him up, Wolf. And it was clear, certainly, about 30 minutes into this hearing, the lawyers, I think, began realizing that -- the pickle that they were in.

This all goes back to a court filing that they made just a few days ago, in which instead of that they made just a few days ago in which instead of just saying, "We agree with Robert Mueller. No jail time. Here are 50 letters of recommendation on General Flynn's behalf," they sort of took this walk down conspiracy theory lane and, really, it was kind of a stunning turn.

And this judge essentially made them eat it today. He repeatedly went back to Flynn to make him say that he was, indeed, guilty, that he knew lying to the FBI was a crime. That he was not -- you know, taking anything back, that he was sorry for what he had done, Wolf. It was a very stunning way for this to turn.

BLITZER: It certainly was. And Alex, what's behind this federal judge's rebuke of Flynn, even after the special counsel, the federal prosecutors, suggested no jail time?

MARQUARDT: Yes, this was really the big surprise today, was the strong language from the judge. And Wolf, it's really two things.

First, it's the crime itself. And you heard the judge there say that he was disgusted by the criminal offense. Now, remember, Flynn pled guilty to lying, but within that plea, there were, in fact, three lies. First, that he did not register as a foreign agent lobby on behalf of Turkey. And then about two phone calls he had with the Russian ambassador, Sergey Kislyak, about sanctions relief and about a vote in the U.N.

And the second that raised the ire of the judge was this sentencing memo. In which Flynn -- Flynn's team argued that he shouldn't get jail time like George Papadopoulos, the foreign adviser on the Trump campaign; Alex van der Zwaan, the Dutch lawyer, because unlike them, he was not warned that lying to the FBI could be prosecuted.

Now, like Mueller's team, the judge responded, saying, "That's ridiculous. You in your position should absolutely know this." And, in fact, the quote is, "My guess was not -- was not one of those defendants was a high-ranking government official who, while employed by the president of the United States, made false statements on the premises of and in the West Wing of the White House."

So the judge not at all putting up with Flynn's excuse there.

BLITZER: Flynn, a former director of the Defense Intelligence Agency. He knows that lying to the FBI, and he has said in court today he knows lying to the FBI is a criminal felony.

MARQUARDT: He did.

BLITZER: And he did it in any case.

How surprising was the judge's statements and behavior -- you were there inside the courtroom -- to Flynn, who's 59 years old and his family?

PEREZ: It really was stunning to them, Wolf. I mean, I think they -- everyone showed up there thinking that Michael Flynn was going to walk out a free man today. Obviously, this was not an easy thing for him to go through.

And they certainly were stunned by the words that the judge used, raising the question of whether or not there was treason here. This is not the kind of language that they're used to hearing for a decorated military man who they, you know, obviously love and adore. So it was a very stunning turn for them.

And I've got to tell you, for the lawyers, too. Because you could see the creeping fear come into their face during this hearing. And it really -- you know, it turned dramatically during the hearing.

BLITZER: And this judge, he gets a recommendation from the prosecutors, gets recommendations from the defense attorneys. But he could do whatever he wants. He can sentence -- he can give him several years in jail if he wants to do that, or he can let him go, and on probation. We'll see what happens over the next few months. Thanks very much.

The White House is closely watching the surprise developments in the Flynn case. Our chief White House correspondent, Jim Acosta, is working that part of the story for us.

So what's the latest over there, Jim? What are you picking up?

JIM ACOSTA, CNN CHIEF WHITE HOUSE CORRESPONDENT: Well, Wolf, the White House is continuing to claim that Michael Flynn was somehow ambushed by the FBI, resulting in his lying to federal investigators. But that flies in the face, as you were just saying, of what Flynn

said in court today. Still that detachment from reality on the part of the White House was on full display as the press secretary held a rare briefing with reporters, the first time in weeks.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): Proving that the White House briefing room is no courtroom, and that when it comes to the truth, just about anything goes, press secretary Sarah Sanders all but accused the FBI of bullying former national security adviser, Michael Flynn, into lying to federal investigators.

SARAH SANDERS, WHITE HOUSE PRESS SECRETARY: The FBI broke standard protocol in the way that they came in and ambushed General Flynn, and in the way that they questioned him, and in the way that they encouraged him not to have White House Counsel's Office present.

ACOSTA: Sanders made that claim despite the fact that Flynn had just admitted in court that he knew lying to the FBI was a crime when he made false statements to investigators about his contacts with the Russians.

What's more, Flynn's legal team said he wasn't entrapped.

But the press secretary was just echoing President Trump. He tweeted earlier in the day, "Good luck today in court to General Michael Flynn. Will be interesting to see what he has to say, despite tremendous pressure being put on him about Russian collusion."

It's an odd line of attack for the White House, as the president once said he fired Flynn for misleading Vice President Pence about those contacts with the Russians.

[17:10:05] DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Mike Flynn is a fine person. And I asked for his resignation. He respectfully gave it. He is a man who -- there was a certain amount of information given to Vice President Pence, who's with us today. And I was not happy with the way that information was given.

ACOSTA: When pressed, Sanders tried to put some separation between Flynn's lies and whether the president colluded with the Russians.

SANDERS: Maybe he did do those things, but that doesn't have anything to do with the president directly.

ACOSTA: Sanders also defended the president's recent attacks on his former personal attorney, Michael Cohen, as a rat for turning against Mr. Trump.

SANDERS: We know Michael Cohen to be a liar on a number of fronts. And the president's opinion is extremely clear on that front.

ACOSTA: The press secretary later insisted the term "rat" was more than fair.

UNIDENTIFIED MALE: Using terms like "rat" and things like that to talk about people who are cooperating witnesses with the FBI.

SANDERS: For people who are dishonest and lie. I mean --

UNIDENTIFIED MALE: Does he not have a broader responsibility to --

SANDERS: Seems like a pretty -- pretty good term.

ACOSTA: But the president and his team have hardly been honest with the public. Like when Mr. Trump falsely said he didn't know about hush-money payments to his alleged mistresses.

UNIDENTIFIED FEMALE: Did you know about the $130,000 payment to Stormy Daniels?

TRUMP: No. You'll have to ask Michael Cohen. Michael is my -- an attorney. And you'll have to ask Michael.

ACOSTA: As the White House is back on its heels on the Russia investigation, aides to the president are signaling they want to avoid a government shutdown just before the holidays, hinting Mr. Trump won't demand that Congress pass billions of dollars in new spending for a border wall.

Sanders made the questionable claim that the administration would somehow find the money without charging the taxpayers.

SANDERS: We're not asking American taxpayers for that. The president has asked every one of his cabinet secretaries to look for funding that can be used to protect our borders.

ACOSTA: The president didn't close the door on a deal.

TRUMP: We'll see what happens.

UNIDENTIFIED FEMALE: Well, you say that, but what about --

TRUMP: Too early. Too early to say. Sorry. Thank you. We need border security. Thank you very much.

(END VIDEOTAPE)

ACOSTA: Now, there was a significant development out of the White House on another front, as the administration did move forward with a ban on bump stocks. Those are the devices that allow semiautomatic weapons to fire more rapidly and were used in the Las Vegas massacre last year.

And as for the administration's plans to find funding for the wall and money that's already been spent at federal agencies, that would still mean, Wolf, that taxpayers would be paying for something that the president said Mexico would take care of during the campaign. The press secretary said -- and we just played it in our piece a few moments ago -- that taxpayers wouldn't pay for the wall. But at this point tonight, Wolf, it's clear that's the White House plan -- Wolf.

BLITZER: Yes. The former Mexican government, the new Mexican government, they're all insisting -- both are insisting --

ACOSTA: That's right.

BLITZER: -- Mexico is never going to pay for that wall.

ACOSTA: That's right.

BLITZER: Jim Acosta, thank you very much.

Let's get some more on all of this. Democratic Senator Chris Van Hollen of Maryland is joining us.

Senator, thanks so much for joining us. Let me start with these really truly dramatic developments with Michael Flynn in the courtroom today. The White House says Flynn's activities don't have anything to do with President Trump. What's your reaction to that?

SEN. CHRIS VAL HOLLEN (D), MARYLAND: Well, first of all, the president has continued to look the other way when it comes to lying to the FBI. In fact, he continues to indulge in these conspiracy theories that somehow the FBI trapped Michael Flynn; and Michael Flynn in court today confessed that he did know that lying to the FBI was a crime.

Look, the negotiations, the discussions that Michael Flynn had last December with the Russian ambassador, we don't know all the details behind that yet. But, of course, it followed on the Russian interference in our elections, which has been well-documented by the Trump administration's own intelligence agency. So let's continue to get to the bottom of this.

The judge clearly wanted to take a swipe at Michael Flynn's comments from the other day, through his lawyers, that this was kind of trivial. He'd been entrapped. And instead, the judge said, "Hmmm, we're going to watch this for a while and make sure you cooperate, continue to cooperate with the special counsel."

BLITZER: Why do you think this federal judge was so forceful in rejecting Flynn's characterization of his interview back in the White House only a few days after the president took office -- I think it was January 24th of 2017?

VAN HOLLEN: Well, I think the judge wanted to emphasize that it is a serious crime to lie to the FBI. And the fact that Flynn and his lawyers tried to walk back responsibility in that brief they filed, I'm sure caught the judge's attention.

And we cannot have a system of law where you have Michael Flynn and the president of the United States essentially saying it's OK to lie to the FBI. It's not, and our system of law would collapse if people thought that they could easily get away with it or that was somehow frivolous.

BLITZER: But at the same time, Senator, do you believe this judge, Emmett Sullivan, actually hurt the credibility of the proceedings with his statements today in court, which he later apologized for? [17:15:11] VAN HOLLEN: Well, Michael Flynn, of course, was charged

with a couple of things. One about lying about his conversation with the Russians. And the fact that he did not register as a foreign agent for the government of Turkey.

Now, he was a registered lobbyist until he went into the White House. You know, clearly, the judge misspoke when he implied or said that that activity continued.

But the reality is, you had Michael Flynn. He was the incoming national security adviser. And throughout the campaign, he was like the national security adviser in waiting. And yet he failed to disclose that he was, in fact, working as an agent for the Turkish government. That's why we have disclosure requirements. So nobody can be confused about who -- where your loyalties lie on a particular issue.

BLITZER: If Flynn eventually is sentenced to a lengthy -- or lengthier prison sentence than the prosecution recommended, basically zero time, does that hurt Mueller's ability to win people's cooperation down the road?

VAN HOLLEN: Wolf, I don't want to speculate about what this judge is actually going to do in terms of a sentence down the road. I think what he was saying loud and clear today was that there's no kidding around when it comes to lying to the FBI, and the fact that they tried to walk that back, he needed to make a strong statement. I think that we'll have to see what the judge ultimately does here.

BLITZER: On another very sensitive matter, the deadline is coming up Friday at midnight. The White House today appeared to reverse course, said it would accept the Democratic offer of $1.6 billion for the president's border wall, border security. But Democrats now say that's off the table.

If you're unable to avert at least this partial government shutdown, would Democrats shoulder some of the political blame?

VAN HOLLEN: Well, Wolf, I think the whole country heard the president say the other day that he would shut down the government if he didn't get his way on the wall. And what they said today -- what was proposed included this billion-dollar slush fund, right, on top of the moneys that had been agreed to for border security purposes on Capitol Hill. They wanted this additional slush fund. They couldn't say where the money was going to come from. They said it was not going to come from the U.S. taxpayer, but all the moneys that are at the Defense Department or at Homeland Security are American taxpayer moneys, despite the fact that the president said that it was going to be Mexico, not American taxpayers paying for the wall.

So there's bipartisan agreement that we need strong border security. But there's also a lot of agreement that spending all that money the president wants on a long wall is a waste of taxpayer dollars, and the president should go back and ask Mexico for it if he doesn't want American taxpayers to pay for it.

BLITZER: Well, Mexico says it's not going to pay for it.

But he did blink, apparently, on the $5 billion demand earlier in the week. As you know, he said he needed $5 billion. Without the $5 billion for the wall, there wasn't going to be the legislation to keep the government running. He is willing to compromise on that, at least, based on the latest statements, right?

VAN HOLLEN: Well, he seems to come off the demand on the $5 billion, but he's replaced that with this demand for a slush fund. We really just need to get back to the bipartisan agreements we had in the past. Let's let Congress act here and then, you know, the president can decide whether he wants to sign or veto it.

Apparently, they couldn't tell us exactly what he would do. But it would be hugely reckless to shut down the government, create a lot of disruption, and I don't think the president should be proud about doing that, no matter what the circumstances are.

BLITZER: Yes, and let's not forget, nearly a million federal workers would at least temporarily lose their jobs, lose their paychecks. It would be very, very disruptive.

VAN HOLLEN: That's right.

BLITZER: Senator Van Hollen, thank you so much for joining us.

VAN HOLLEN: Good to be with you. Thanks.

BLITZER: Breaking news continues here in THE SITUATION ROOM. Will Michael Flynn serve jail time for lying to the FBI, despite Robert Mueller's recommendation for leniency?

Plus, the Trump Foundation folding amid allegations the president and his oldest children used that charity like a checkbook.

(COMMERCIAL BREAK)

[17:24:01] ANNOUNCER: This is CNN breaking news.

BLITZER: We've got some significant breaking news unfolding right now. Evan Perez is joining us once again.

Evan, we just got this decision from a federal appeals court, upholding a district court. There was a lot of tension, a lot of drama, a lot of mystery the other day in a federal courthouse here in Washington, when authorities sealed off an entire floor, got reporters out of the way, wouldn't let reporters get anywhere near there. It was a mystery that was unfolding. But now we're getting some details why they went to these extraordinary precautions.

PEREZ: That's right, Wolf. We got a few more precious details from the appeals court.

What we now know is that this entire fight, which we believe is related to the Mueller investigation, is -- involves a country that is arguing, essentially, that this grand jury subpoena that has been served on a company that is owned by this country, that essentially, this company cannot -- cannot obey the subpoena that's been ordered by the court, because it's against the law of that country.

Now, again, we don't know what country this is. We don't know the name of the company. But it gives us a little bit more information about who's been fighting -- spending a lot of money in federal courts here in Washington, trying to fight this grand jury subpoena.

Again, it's some country that is essentially arguing that this company cannot obey, cannot follow this judge's orders, simply because it's illegal under that country's laws.

Now, as you said, last Friday there was a lot of drama in the federal courthouse. The -- the security there took the extraordinary measure to seal off an entire floor so that reporters could not see the lawyers that were coming in and out.

Again, this is a subpoena -- a grand jury subpoena. We believe it's related to the Mueller investigation. I certainly -- I was there at the courthouse a few months ago when this first began, and we tried to talk to some of the lawyers involved. They did not want to answer the questions.

But it's clear that going back to September, somebody has been fighting this grand jury subpoena that a judge had issued, again, in this investigation. And it's gone back and forth to the appeals court and back to the regular -- to the circuit court judge.

And now finally the appeals court today is ruling that -- to uphold the subpoena and ordering this company to provide the information that is being requested of it. And, again, this is a fight that has been shrouded in mystery for all these several months, Wolf.

BLITZER: So potentially, how significant is this court of appeals decision, upholding the district court decision for Robert Mueller and the special counsel team?

PEREZ: Right. It's a big deal. Because it means that whoever it is that's been fighting this for the last couple of months is going to have to turn over this information. Again, that's, of course, if this ruling stands. If they decide, perhaps, to continue appealing to the Supreme Court, we don't know. But it's a pretty big moment here, where the appeals court is reaffirming that what the judge did was proper in ordering this grand jury subpoena to be served on this company, this entity. And for that entity to provide the information as requested by prosecutors, Wolf.

BLITZER: Evan, I want you to stand by.

Laura Jarrett, you cover the Justice Department for us, as well. You're a lawyer. You understand the kind of legal jargon.

I'm just reading this court of appeals decision. The grand jury seeks information -- we're talking about the Mueller grand jury, presumably, seeks information from a corporation, the corporation, owned by Country C. Now, we don't know the name of the corporation. We don't know which country is involved.

The corporation and the country said they're not going to comply with a subpoena, because they think they have immunity based on the Foreign Sovereign Immunities Act. So go ahead and explain what's going on here.

LAURA JARRETT, CNN JUSTICE CORRESPONDENT: So, it looks like here Mueller won. Now, we don't know for sure-for sure that it's Mueller, but that's what we think, based off all of our great court reporter Katelyn Polantz's court watching down there.

And it looks like they've agreed with the district court to allow them to get documents. We don't know whether it's a bank. We don't know who it could be. We don't know whether it's Russia or another foreign entity there.

But there are strict rules, jurisdictionally, about the reach of how far you can go with foreign corporations. And so there are certain exceptions which may or may not apply here.

But it also looks from a quick read that there will be a lengthy decision coming out here. Obviously, all of this has still been shrouded in secrecy. So I think more to come on this.

BLITZER: Laura, you've been going through this document, as well. What do you think?

LAURA COATES, CNN LEGAL ANALYST: What's extraordinary here is an entire floor was sealed off in a courthouse in order to protect the identity and the country's identity of the people who are involved here. The amount of secrecy and the amount of tactics used to try to shroud this entire thing, as Laura is talking about, does not happen unless there's some extraordinary means.

And the notion here that you have the Foreign Sovereign Immunities Act saying, "Listen, we rightly do not want to have other nations under the thumb of an American subpoena. We do not want to be beholden to other countries. They don't want to be beholden to us, unless certain exceptions apply," things like, perhaps, international law has been violated. You won a monetary judgment for that person. There may be some civil damage or remedy or other, maybe, treaty is violated in some capacity.

So for those exceptions to even be looked at and litigated in front of this court, means you have a very important country that's involved. You've got exceptions that are actually requiring the court to say, do we cover a criminal matter? Not just a civil matter, a criminal matter involved here?

And the court ultimately said, "Listen, despite your allegations and decisions about whether or not the Immunities Act would apply to a corporation owned by a country, we say you belong under the thumb of the United States of America. And the subpoena actually does relate to you and you have to comply."

This says volumes about Mueller's previous speaking indictments. We've said, "Listen, I've got foreign nationals that I'm trying to bring back to the United States of America. There's no extradition treaty between the two of us, but I want to still show that America can flex its power."

You have a court saying now, "Yes, you can, and give us the documents.

BLITZER: Because in this document, David, they say -- this unnamed corporation, the unnamed Country A. They can't comply with this Mueller subpoena, because it would violate the domestic laws of Country A.

DAVID SWERDLICK, CNN POLITICAL ANALYST: Right. That's the argument, that Country A, whichever country that is, asserted. And I skipped ahead to the end of that order, and the judge essentially said, "If you're asserting that this law -- prevents you from being subject to a subpoena in the United States, the burden is on you, Corporation and Country A," and the judge said they did not meet that burden.

[17:30:24] We still, as you said, need to find out more about what this is all about and how it fits into the investigation.

BLITZER: Rebecca Buck, it looks like another big win in the courts for Robert Mueller.

REBECCA BUCK, CNN POLITICAL CORRESPONDENT: That's right, Wolf. And also another reflection of how much we don't know still about this ongoing investigation. How many cards there are in Robert Mueller's deck that we haven't even seen yet.

And also his great discretion throughout this investigation. He picks and chooses when he reveals things to us, these speaking indictments you mentioned. And this is another case that we know so little about, almost nothing about. And Robert Mueller -- and, of course, this judge are going to choose the time when we find out. It could tell us a lot. It could be a huge piece of the puzzle. But we'll have to wait and see.

BLITZER: You know, Evan, can we assume based on what we read in this document, the court of appeals decision, that the unnamed corporation is a U.S.-based corporation, even though it may be owned by a foreign country?

PEREZ: Well, I think what we can assume from the fact that the judges here are asserting jurisdiction, Wolf, is that this company, wherever it's based, has operations in the United States. Has significant operations in the United States. And therefore, is subject to the jurisdiction of the federal courts here.

They don't take this step lightly, obviously. If this is a company that has no operations in the United States, then it's a little harder for you to reach them.

But in this case, again, we don't have the name of the company, we don't have the name of the country. But I think that's a little bit of a crumb there that's been left for us to sort of try to identify who we're talking about. And that it's clear that whoever this is, whatever the name of this company is, they have operations here that make them subject to the jurisdiction of the courts here.

BLITZER: And to me, just reading this, Evan, it looks like, potentially, for Mueller and his team, there's a lot of very sensitive but critically important information. They wouldn't be going to all this length, going after a corporation here in the United States, going after a foreign country that owns that corporation, going through all that mystery and the extraordinary circumstances in that federal court building last Friday, if they really didn't think there was critically important information that could help them in the Russia probe.

PEREZ: Right. I think that's very clear, Wolf, is that they believe this is a crucial part of their investigation. Again, we know that there are some parts of this investigation that the Mueller team, based on the things that they're asking witnesses, are still pursuing.

That is the question of whether or not there was any collusion, any conspiracy, between people associated with the Trump campaign and people associated with the Russian government.

So those -- those are among the big burning questions central to this investigation that are still part of what Mueller is working on. And so perhaps this is what this is part of. This is one of the questions that is left here for this -- for this court to decide. Whether or not this information comes into this investigation and is something that they can use.

BLITZER: You've been going through the document, too, Laura. What else do you see?

COATES: Well, remember, this corporation, according to the judge, has been paying a contempt fine every day they've chosen not to comply. This is nothing that's happened all of a sudden. We have the shrouded secrecy and the closed floor proceeding, but they have actually been held in contempt, and there has been a monetary penalty attached to these people that's increasing every single day they choose not to comply. Which tells you this is, one, a criminal matter they're looking at. That somebody has already argued this over -- in the motions about trying to ensure that this was actually going to remain an issue on the papers and not actually a hearing.

And the judge is taking it so seriously to not only impose a contempt action and order against the company, but also to have a monetary penalty attached to that and an increasing one.

This is a case where you're looking at a criminal sanction. You're looking at that time punitive damages in some form or fashion. You're looking at a judge taking it very seriously. This is no, you know, small-potatoes matter.

BLITZER: Yes. And Laura, when they lost in the district court, the corporation, and Country A, they decided to appeal. That's a big deal for a company like this, especially when they're paying increased penalties, monetary penalties, every day. JARRETT: Yes, they clearly wanted to fight it. They had an

opportunity to back down, and they chose otherwise. And it says pretty clearly here that the fine can be imposed against the foreign sovereign.

So it clearly -- this is a -- this is a win. I just think we don't know enough exactly about what exactly they are supposed to be turning over. It could be a variety of different things here.

BLITZER: I suspect very soon we're going to get all the details behind this document, which is pretty significant.

Much more on the breaking news, right after this.

(COMMERCIAL BREAK)

[17:39:25] BLITZER: We're following the breaking news. A federal appeals court here in Washington has just ruled in favor of Special Counsel Robert Mueller in a rather mysterious case that has intrigued court-watchers now for days. The court ordered an unnamed foreign company to comply with a grand jury subpoena.

Also tonight, there's new fallout from today's very dramatic sentencing hearing for the former Trump national security adviser, Michael Flynn. Let's discuss.

Laura Jarrett, how do you interpret the very sharp, unexpected criticism of Flynn by this federal judge, Emmett Sullivan?

JARRETT: So I think Judge Sullivan had a pretty clear message for everyone in that courtroom today, which is "I am not a rubber stamp." The tone of the court papers going into today's hearing was sort of, "This is a done deal; he's not going to get any jail time. " Mueller doesn't want any jail time. Of course, Flynn wants to walk free.

But, you know, folks tell me who know Sullivan, say the worst thing you can do is to walk into that courtroom and make it seem like he doesn't have a really important role to play here. And he is fiercely independent. He wants to exert his authority to say, "Look, I am the one in the driver's seat here. Don't think that this is going to be all just a done deal." And I think he sent that message today.

And clearly something spooked Flynn to say, "Let me just walk this back a little bit and make sure I eke out the last bit of cooperation to make sure I get the benefit of the doubt."

BLITZER: Yes, his words, you know, were so, so powerful, you know, Laura, as we watched it all unfold. I wasn't in the courtroom, but we heard all the drama there. And he was blistering, and he certainly gave the appearance that, if they wouldn't delay the sentencing, he was going to send this guy to jail.

COATES: He did. And no one should be surprised at that. And the reason why is because you have somebody who, because of his decorated military career, his role as the national security adviser, somebody who was entrusted with the position of such public trust, you would not give that person carte blanche to do the wrong thing or the inevitable pass. You would probably make that person a poster child to deter and show there is some reason to have some retribution for this person.

Now, having said that, Laura is absolutely right. But when you plead guilty in front of a court, the judge reminds you, "Excuse me, I know what the government has said. We're going to have the allegation. You don't want any jail time. I've heard you say what you're going to do. Do you realize I can do what I'd like to do?" That's part of your guilty plea before you actually plead guilty. He was aware of that going in. He just simply thought that, because he cooperated, he would have a clean slate.

But what that message sends, is that all of the people in the world who had this impression that if you cooperate, all your past misdeeds go away, this judge is saying that's really wonderful, but you still have to pay the piper for what you've done.

BLITZER: There are plenty of cases where the prosecution makes a recommendation for a lenient sentence, and the judge says, "I think the crime was much more serious" and sends that person to jail.

SWERDLICK: Right. The prosecution works out that deal with the subject or the suspect so that they can get them to cooperate, but ultimately, the judge is going to weigh, as Laura is saying, whether or not the crime and punishment match up. And also, to incent the suspect or the accused to continue cooperating and meet the terms of their cooperation deal.

BLITZER: You know, Rebecca, let me put on the screen a couple of tweets from the president of the United States. The first one is from December 2017. The second from earlier today. And let me read these tweets.

First one, "I had to fire General Flynn, because he lied to the vice president and the FBI. He has pled guilty to those lies. It is a shame, because his actions during the transition were lawful. There was nothing to hide."

Now the more recent one, today. "Good luck today in court to General Michael Flynn. It will be interesting to see what he has to say, despite tremendous pressure being put on him about Russian collusion in our great and obviously highly successful political campaign. There was no collusion."

BUCK: Quite a shift there by the president, but no surprise. Because ultimately, we need to remember, what motivates Donald Trump and his messaging is always what is the best thing for Donald Trump personally, legally, in that moment.

And so if you look at that first tweet, the best thing for Donald Trump in that moment was to make it look like he took a stand, he fired General Flynn, he was very disappointed in his actions.

But now the best thing for Donald Trump is to make it look like Flynn is a piece of this bigger witch hunt, that he is a pawn in Mueller's scheme. And so you see this shift over time with Donald Trump.

But Flynn is in a very interesting position when it comes to the president, because he hasn't received that very harsh rhetoric that someone like Manafort had.

BLITZER: Did Flynn's legal team make a major blunder by bringing up this notion that maybe he was entrapped into saying what he was saying, he didn't have a lawyer present, he wasn't told about his right to remain silent. He wasn't told that lying to the FBI is a crime. They brought all of this up, even though they admitted he lied and that, you know, he's ready to be sentenced?

JARRETT: And the judge called him out on it today. I think this is a classic example of litigators trying to have their cake and eat it, too. And not knowing when less is more. Right?

So the judge was very clear, "Are you saying that he was entrapped?"

"Well, no, your honor."

"Are you saying that you want to walk back the plea?"

"Well, no, your honor."

So then you sort of look, like, what was the point of adding in all of that extraneous sort of extra color about what they think the FBI did in that interview, if at the end of the day, he's still pleading guilty to lying?

BLITZER: Was it at all shady how the FBI handled Flynn?

COATES: No. In fact, they have given him a deal that most people would never even be able to dream up. Of all the charges brought against him, he has one count of lying to FBI officials, even though the former acting attorney general, Sally Yates, ran to the White House that you've got a compromised national security adviser, compromised by Russia and perhaps other nations? At one point in time urged a foreign agent. All of these things, he could have pled guilty to.

[17:45:00]

Which tells you that, although he's only pled guilty to this one thing and he will cooperate longer in this particular instance, he has not actually had double jeopardy attached to more than one thing. He will remain under the thumb of Mueller and the Special Counsel probe until he is -- they are done with him, not the other way around.

WOLF BLITZER, CNN ANCHOR: Everybody, stick around because there is more breaking news that's emerging right now. As time runs out, to avoid a partial government shutdown, the White House is now backing away from President Trump's demand for $5 billion to fund the border wall.

Let's go to our congressional correspondent Phil Mattingly who's been following this story for us. Give us the very latest, Phil. PHIL MATTINGLY, CNN CONGRESSIONAL CORRESPONDENT: Yes, Wolf, backing

away from that $5 billion number and, it appears, backing away from the ledge of a potential shutdown.

Earlier today, after days of both Republicans and Democrats having no idea where the President stood or if there would be any proposal to try and put off a shutdown by the Friday deadline, one appeared. It would essentially be about $1.6 billion in border security with an additional billion-dollar fund that the administration could use for its immigration priorities.

Now, Wolf, it's worth noting Democratic leaders Nancy Pelosi and Chuck Schumer met behind closed doors and rejected this proposal. That said, it was considered an important step forward because people were finally talking.

Now, the big question now is, what are the next steps? What I'm being told by sources, is the most likely scenario, Wolf, will be a short- term continuing resolution essentially continuing funding as it currently stands for the 25 percent of government that's expected to run out of money on Friday, punting it for about five or six weeks.

And, yes, that means the President would once again not be able to get his wall funding. The big question right now, will the President sign off on something like that?

I'm also told, as it currently stands, there are lawmakers on Capitol Hill who want to keep negotiating, try and reach some bigger deal.

But when you talk to rank and file lawmakers, Wolf, both in the Republican and Democratic side, they acknowledge they pretty much just want to go home for the holidays. That means the short-term idea is likely the best idea, at least in their minds.

The big question remains, will the President back that idea, Wolf?

BLITZER: Yes, they've got until midnight on Friday to work it out. Let's see if they do. Phil, thanks very much for you staying on top of this story for us.

Just ahead, during a rather wild and unpredictable sentencing hearing today, a federal judge appeared to suggest the former Trump national security adviser, Michael Flynn, may have committed treason. He later recanted those comments and apologized.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

[17:50:14] BLITZER: Our breaking news. After delivering an angry and unusual rebuke to the former Trump national security adviser, Michael Flynn, a federal judge has agreed to delay sentencing at least until March. Brian Todd is all over the story for us.

Brian, this judge, Emmet Sullivan, is known for offering his unfiltered opinion from the bench. What are you learning? BRIAN TODD, CNN CORRESPONDENT: Judge Sullivan is absolutely known for

that, Wolf.

And today, the judge went pretty far, by his own admission, going as far as to say -- asking if Michael Flynn had committed treason. The Judge later softened that, saying he was merely asking a question.

And Judge Sullivan also had to walk back a comment about Flynn, quote, selling out his country with lobbying work. Still, this Judge has been known as a very effective jurist and much of that is because of his very blunt style.

(BEGIN VIDEOTAPE)

TODD (voice-over): The man who, from the bench, told Michael Flynn he was not hiding his disgust or his disdain for Flynn's crime, gave the former national security adviser and the American people a dose today of what legal heavyweights in Washington have known for decades -- Judge Emmet Sullivan pulls no punches.

RENATO MARIOTTI, CNN LEGAL ANALYST: No matter who you are, Judge Sullivan is going to tell it like it is.

TODD (voice-over): First appointed to D.C. courts by Ronald Reagan and George H.W. Bush, President Clinton made Sullivan a U.S. District Court judge 24 years ago. Since then, he has been known for colorful, controversial rulings and comments against both political parties, sometimes directing his most stinging criticism toward prosecutors.

In 2009, he tossed out the conviction of former Republican Senator Ted Stevens in a corruption case because prosecutors hadn't handed over evidence that would have been helpful to Stevens. Stevens' lawyers were grateful.

BRENDAN SULLIVAN, FORMER ATTORNEY FOR FORMER SENATOR TED STEVENS: But there are some heroes in this story as well, and the foremost among them is Judge Emmet Sullivan.

TODD (voice-over): The case lingered in Judge Sullivan's own recollections of his career in a speech he gave in 2012.

JUDGE EMMET SULLIVAN, UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA: The Ted Stevens' case will always be one of the most memorable.

TODD (voice-over): And for young federal prosecutors, it was a teaching moment.

MARIOTTI: And because of that, every federal prosecutor, including myself when I was a federal prosecutor, was trained in the law, in making sure that appropriate disclosures were made to the defense.

TODD (voice-over): Sullivan may have made a national impact on the law, but he came from humble origins.

E. SULLIVAN: I am a native Washingtonian and proud of that. TODD (voice-over): Emmet Sullivan, now in his early 70s, was born and

raised in Washington, D.C. and came of age during some of the city's most tumultuous periods, like the race riots in the late 1960s.

With sheer will and ambition, those who know him say he powered his way through the D.C. public schools then Howard University and Howard Law School.

Early in his career, he found in favor of a woman whose landlord had mistreated her. It's a decision, he says, defined his thinking as a judge.

E. SULLIVAN: I knew at that point that I had administered justice as a new judge, and it made a positive difference in the life of someone. I'm so fortunate to have had that experience early on in my judicial career.

MICHAEL ZELDIN, CNN LEGAL ANALYST: There's no silver spoon in his mouth. He learned the way people should behave by his own experiences, and that's what I think makes him a good judge.

TODD (voice-over): In August of this year, Judge Sullivan took an unusual step while presiding over a case where an immigrant mother and daughter were plaintiffs in a lawsuit over asylum restrictions.

Sullivan became irate when the Trump administration deported the mother and daughter and ordered the U.S. government to, quote, turn that plane around. Then he threatened to bring the U.S. Homeland Security Secretary and the Attorney General into court to answer potential contempt of court accusations.

What he said to Flynn in court, the Stevens case, the immigrant mother being turned around, these were dramatic pronouncements in court. Is he a diva? Is he overly theatrical?

ZELDIN: I don't think so. I think he is just a very principled person. He has a clear sense of what he thinks is right and wrong, and he'll let you know what he thinks is right and wrong when you become -- when you come before him.

(END VIDEOTAPE)

TODD: Now, political, legal observers and millions of Americans are going to be watching to see what Judge Sullivan does in three months when Michael Flynn comes back before Sullivan to be sentenced.

Legal analysts say Flynn and his lawyers are going to have to demonstrate to Sullivan that Flynn has given the utmost cooperation to the Special Counsel and that he is truly remorseful for his crimes.

In other words, they say Michael Flynn is now under even more pressure than he was before because of the demands of Judge Emmet Sullivan -- Wolf.

BLITZER: Truly an extraordinary moment today here in Washington. Judge Sullivan, Brian, also is presiding over another very high- profile, politically-charged case involving President Trump.

TODD: That's right, Wolf. More than 200 Democrats in Congress are suing President Trump for violating part of the Constitution by not asking Congress' approval for his businesses to accept payments from foreign governments.

Judge Sullivan is presiding over that case. And in September, he ruled that the lawsuit can proceed. So there's going to be a lot of fireworks regarding Judge Sullivan in that case as well.

[17:55:01] BLITZER: A very principled judge indeed. All right, Brian, thank you very much.

There's more breaking news coming up. More on what that surprise twist that could mean jail for the former national security adviser, Michael Flynn, might mean.

Plus, why is the White House not concerned about Michael Flynn's lying to the FBI?

(COMMERCIAL BREAK)

BLITZER: Happening now, breaking news. Disdain and disgust. That's how a federal judge describes his feelings for Michael Flynn's crimes as he scolded the fired national security adviser and delayed his sentencing. Did Flynn's team bungle his chance to walk free?

Mueller's mysterious win. Federal judges side with the Special Counsel in a case shrouded in secrecy. Tonight, we're learning new details about a subpoena for a foreign company and what it might mean for the Russia probe.

[18:00:01] Without a foundation. The President suffers a big legal blow as his charitable foundation is forced to dissolve in the midst of a lawsuit.