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Special Report

All-Star Panel:

This is a rush transcript from "Special Report," March 5, 2015. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

RET. LT. GEN. MICHAEL FLYNN, FORMER DEFENSE INTEL AGENCY DIRECTOR: There's no way that you could operate inside of Iran as a member of -- as a senior member of Al Qaeda and move around freely and communicate the way they were communicating without the Iranian knowledge. There's just no way. And I know that, you know, I know that, you know, to be the case. So I would just say that they were -- they were supporting or enabling the operations in Iraq and Afghanistan.

(END VIDEO CLIP)

BAIER: Former head of the Defense Intelligence Agency under this president saying and talking about the Usama bin Laden compound documents, more than a million of them, recovered. Only 17 have been made public. We have done many stories about this. We're back with the panel. Steve Hayes actually broke this story, The Weekly Standard, Tom Joscelyn, we had them on last week about this connection, these new documents that have been released in this trial in New York, this synergy, the safe haven that Iran was providing Al Qaeda, a big deal.

But what about this other stuff that we are hearing from Flynn about what they were telling the administration and the administration was saying something completely different?

HAYES: Yeah. I think this is an incredibly explosive story, particularly when you bear in mind the timeframe that we're talking about. Bin Laden is killed in May of 2011. A year later the administration launches a campaign, public relations campaign, in fact to say Al Qaeda is on the run. Al Qaeda has been decimated. Al Qaeda is nearing its demise. And at precisely the time the administration is making that case most strenuously for the final six months of the 2012 presidential election, you have now a senior U.S. intelligence official, well-respected, well-regarded in Mike Flynn running the DIA, saying, in effect, we were telling them the opposite. We were saying that Al Qaeda had doubled its capacity. We were saying that Al Qaeda was growing. We were saying that the documents found in the bin Laden compound, the ones that the DIA analysts had a chance to look at, said that bin Laden was running the show. He was actively involved. He was growing the franchises. He was growing the offshoots. The threat was exploding. And the president went out and said exactly the opposite. This isn't some anonymous official saying this to a reporter. This is a senior intelligence official making, I think, a very explosive charge. And he is supported, by the way, by numerous others.

BAIER: Chuck?

LANE: Well, I have to admit I'm a I little skeptical because I want to hear what some other people and the rest of the intelligence community have to say about this. And also because I think a lot of the phrases we are talking about, doubling the capacity, explosive, decimated, all of them on both sides are very vague and difficult to understand.

I think what can be said and was true is that while all of this was going on, ISIS was growing as a kind of offshoot of Al Qaeda, and the president, I think, took his eye off of that one, called them the jayvee, and so on and so forth. And ISIS is the main event right now. I think what we are talking about right here, you know, strikes me as still a lot of -- basically still strikes me as pretty vague accusations and I would like to hear more. I'm sure Steve will supply it.

(LAUGHTER)

HAYES: We will do our best to supply more. There are more people talking. I think this is a real among many in the intelligence community.

LANE: I think the biggest threat right now, the growing one is ISIS. It's a different ballgame.

BAIER: Well, let's turn to Iran. And the other thing Flynn says is that he sees Iran as a bigger threat because of their presence throughout the region and now their presence in Iraq, fighting ISIS. The Badr corps, essentially Iranian run, leading the show against this fight in Tikrit. And now you have this Arab coalition that is trying to come together and Iran is on the ground in Iraq and throughout the region.

KRAUTHAMMER: Imagine what the Gulf Arabs are thinking. Here is the U.S. administration. It comes and says we want you to join a coalition against ISIS. Then, they look at what's happening in Iraq where the famously malicious and extremely effective revolutionary guard commander, who, incidentally, is responsible for hundreds of American deaths during the Iraq War, is now in Iraq openly consulting with the Iraqi officials and openly running the attack on Tikrit.

And it's not only the Badr brigades, it's not only the proxy Shiite militias that are involved. It is also actual Iranian troops, Iranian Revolutionary Guards, who are in charge of the artillery. So that the Saudis, who see Iran correctly as the threat to the entire region. They want to subjugate it, they want to go nuclear, and they now have overriding influence in Baghdad and Damascus, in Lebanon and in Yemen. And they see that their airstrikes are essentially airstrikes in support of Iran's taking over Iraq. It is a nightmare. It's a paradox. It's an irony. And the reason is, and this is why they are so angry at the Obama administration, this is the work of the Obama administration. It evacuates Iraq. Iran comes in -- it's essentially running the place. And it's now about to be legitimated as a nuclear power.

BAIER: So we are sitting at the table negotiating this deal, and by all reports, Chuck, it's getting closer between the U.S. and Iran. Secretary Kerry goes to Saudi Arabia. The person state visit before Secretary Kerry is the prime minister of Pakistan. So message sent that, hey, you sign this deal, we are going nuclear, another Pakistan nuclear country.

LANE: Yes. The point being that Pakistan could sell an off-the-shelf nuclear weapon to their fellow Sunnis, the Saudis. And I couldn't quite tell whether this was a live threat the Saudis were making or just an effort to put more pressure on Kerry to either sign a better deal or not sign one at all.

But it was also interesting what the Saudis were emphasizing in these talks, which was the subversion, the role of Iran in the Shiite regions of Yemen and Bahrain and what they are really afraid of, their own oil region is populated by Shiites, which is the ultimate target that Iran is aiming at.

BAIER: This arms race is happening.

HAYES: The arms race is already happening. There is a lot of talk about a prospective nuclear arms race in the region. It's already happened. Does anybody think the Saudis really haven't been sitting back to wait to see if Iran has breakout capacity? It's happening now. And I think this visit suggests as much.

BAIER: That is it for the panel. But stay tuned to see some members of Congress, well, at a loss for words.

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