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Kelly File

Rep. McCaul addresses latest threats to the US; Gov. Abbott calls for amending the Constitution

This is a rush transcript from "The Kelly File," January 11, 2016. This copy may not be in its final form and may be updated.

MEGYN KELLY, HOST: Breaking tonight, just more than 72 hours after a lone gunman says Islam and ISIS inspired him to attack a police officer, and we are hearing new questions about why the White House and the mainstream media seem determined to ignore the original attack.  And a warning that the threat to law enforcement is far from over.

Welcome to "The Kelly File," everyone, I'm Megyn Kelly. Just days after a self-proclaimed jihadist attempted to assassinate a Philadelphia police officer, the larger media seems to feel that stories about Powerball and the Golden Globes are far more important that thin investigation.

Across the board, networks are barely even acknowledging the story, not to mention the officer who stopped a terrorist who pledged allegiance to ISIS.  Even the more serious Sunday shows barely, if at all, touched on this story touting big gets to the candidates but then largely failing to ask them about this attack.

(BEGIN VIDEO CLIP)

JONATHAN KARL, ABC NEWS CORRESPONDENT: But just three weeks until Iowa.  We start out with an exclusive look at how Iowa voters are thinking about this race.

UNIDENTIFIED MALE: We're on the cruise bus in battleground state Iowa for an exclusive Sunday interview.

UNIDENTIFIED MALE: We've got a huge show with you today, anyway, including my sit-down with Donald Trump.

UNIDENTIFIED MALE: We're going to get right to our lead guest, former Secretary of State Hillary Clinton.

(END VIDEO CLIP)

KELLY: And it was the similar story at the White House briefing today, where it took a full 20 minutes for any reporter to even bring up the attack in Philadelphia, never mind Josh Earnest, he didn't volunteer it.  And when they finally did, the President's chief spokesman seemed to suggest, well, we're really not sure what happened in this case. We're still wondering.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The attempted assassination of a police officer in Philadelphia, does the White House consider that a terrorist attack?

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: John, this is something that is still being investigated by the Philadelphia Police Department. And, um, they have not concluded that it is actually is an act of terrorism. But given some of the circumstances of the event, obviously that is something that we're all wondering right now.

(END VIDEO CLIP)

KELLY: We're wondering right now? Marc Thiessen is a Fox News contributor and a former chief speechwriter for President George W. Bush. And he's with me now. We're wondering? Not all of us are wondering.

MARC THIESSEN, FOX NEWS CONTRIBUTOR: No, not all of us are wondering. But apparently they're very confused over there at the White House. I mean, this is just unbelievable that anyone would question whether this was a terrorist attack. I mean, look at the fact. ISIS has repeatedly called on its supporters in the west to attack police officers. In September 2014, they issued a video in which they said, they said, rise up and kill police officers, smash his head with a rock, slaughter him with a knife, run him over with your car. The FBI, the New York Police Department and the Department of Homeland Security were so concerned, they all issued bulletins, warning their officers to be on the lookout because there was a danger of ISIS-inspired cop killings. And so fast forward, in Philadelphia, a man does exactly what ISIS said to do, tries to kill a police officer. He then goes and confesses to the crime and says --

KELLY: Maybe he hasn't spoken to exactly -- oh, wait.

THIESSEN: He did! He said, he told the police, he pledged allegiance to ISIS and then we find out from some of his friends, his family friends, they say well, he became radicalized after he traveled to Egypt and Saudi Arabia. I mean, this is not hard, folks. This is terrorism.

KELLY: What? I don't understand. We saw the same thing on Friday, when the mayor of Philadelphia was like, this had nothing to do with Islam.  Meanwhile, the murderer is like, it was all about Islam. Islam was the reason I did it. My affiliation with ISIS, my pledge of allegiance to ISIS and my belief that law enforcement does not uphold the values of the Koran, and the Philadelphia mayor saying, I don't believe him. I know better than he does what motivated this crime and it wasn't Islam.

THIESSEN: And his family friends who were interviewed, who said that he once traveled, they said it was because of ISIS. They said, well, how do you solve this? They said, go and destroy ISIS. That was a quote from his auntie who was interviewed with one of the papers. So, I mean, his family knows it's about ISIS. He confesses it's about ISIS. He did exactly what ISIS said to do in a video. I mean, how is this not terror?

KELLY: Why is the White House not speaking to it? OK, let's accept the statement for today that we're wondering, right? We're going to do our investigation and, you know, unless we see a direct correspondence from Al Baghdadi telling him to do this, which by the way as you pointed out in your initial answer, we kind of have, we're not going to declare it terrorism. OK. But let's say they're doing their investigation. Why wouldn't the President at least call the family of this officer? Nothing, no contact with the officer or his family as far as we know, and no statement from the White House, never mind the President, on what we saw in Philly.

THIESSEN: Absolutely. And contrast it by the way with their response after the mass shooting in October when the President strode to the podium in the White House and he lectured us, he said somehow this becomes routine, the reporting is routine. My response to this podium is routine, end up being routine. We've become numb to this, when he was talking about gun violence that was not terror related. But when it's terror related, you know, radio silence from the White House. Where is this outrage about terror related gun violence? He doesn't seem to have it.

And the reason I think is quite frankly Megyn is a couple of things, number one because if it's gun violence, he wants to change the policy. If it's terrorism, he doesn't want to change the policy. He thinks his strategy is right. He's not trying to change the policy. Second, if it's gun violence, he can blame Republicans for not passing his gun agenda. If it's terrorism, he has nobody to blame but himself. So he wants us to be numb to this, because terrorist attacks on our soil reflect badly on him and the success of his policy in fighting the terrorists, because that's his job.

KELLY: Marc, thank you.

THIESSEN: Thanks, Megyn.

KELLY: Well, tonight, the police and the FBI are chasing down a tip that self-proclaimed jihadist Edward Archer, the guy we're talking about, may have been part of a larger radical group that includes three other men. At this hour, authorities are not sure if this is legitimate, but they're not taking any chances given what happened and they're ordering all officers to work with a partner until further notice. What's more, they're now warning other law enforcement agencies to be extra vigilant, saying the threat may not be isolated to Philadelphia.

Texas Congressman Michael McCaul is a Republican and chairman of the House Homeland Security committee. He has a new book out this week, "Failures of Imagination: The Deadliest Threats to Our Homeland and How to Stop Them."  Great to see you, Mr. Chairman. Thanks for being here.

MICHAEL MCCAUL, AUTHOR, "FAILURES OF IMAGINATION": Thanks, Megyn. Thanks for having me.

KELLY: It's a scary book. Because you actually know what you're talking about and those who also know have praised this to the umpteenth degree saying, we need to read it. When you see this happened, there's not even a nod to it. The press doesn't care, the White House doesn't even mention it. What does it tell you?

MCCAUL: The reason I wrote this book is so the American people can know what the truth is. I think this administration has downgraded the threat consistently since Major Hasan at Fort Hood. To San Bernardino saying, it's a workplace violence, is not terrorism. Just the other day, the Philadelphia police officer shot, he says it's in the name of Islam, he says it's Jihad but we should be listening to ISIS. Yet the administration wants to down play this in every turn. What this book talks about is the truth.

KELLY: Why can't we accept the murderer at his word?

MCCAUL: Why can't we accept the fact when Hitler said he wanted to take over the entire globe, why didn't we listen to him? Why don't we listen to ISIS? When they say it's radical Islamist terror, we need to define it.  Call it what it is. Only until we do that, can we defeat it.

KELLY: OK. So, you argue that in his book. And a lot of very smart people agree with you including General Jack Keene and others, but and General Michael Flynn. But what the White House says to that is, you're playing right into their hands. Bin Laden wanted to bait us into a war in the Middle East and he did it with 9/11 and the same thing is happening now with ISIS. And for those who want to call it radical Islam, all the Muslims will hear just the word Islam and it will just fire up the moderates to hate us when they don't.

MCCAUL: I think they want to deny it because they're losing. He wanted to pull out of Iraq and Afghanistan, that was a campaign narrative, close down Guantanamo. You know what, Megyn? It didn't work out that way. ISIS erupt to the -- we had and you can't ignore it. You can't pretend like it doesn't exist and you can't pretend like it's not a threat to the homeland because it is.

KELLY: I know you argue in there that ISIS is a failure of leadership, it's a failure of presidential leadership. But you go through in this book, how 9/11 was a failure of imagination on our parts and you talk about some scary scenarios like a possible dirty bomb at Disney World. A possible terror attack in the mall of America. Why do you raise those specific examples?

MCCAUL: Well, I think there was a failure of imagination at Pearl Harbor, 9/11. I think it's important that we use our imaginations to prevent this from happening in the future. We didn't connect the dots at the time. All I'm doing is telling the American people the truth about the threats we face as a nation and what we need to do to stop those threats into the policy makers. And until we can get the attention of the American people on this issue, we can't stop it. The administration is not going to tell you the truth.

KELLY: Before I let you go, we just got news on the State of the Union. A couple of democratic state representatives are going to bring along with them representatives of CAIR, the Council on American Islamic Relations.  This is a very controversial group. They've been named an unindicted co- conspirator and a terror trial right here in the U.S. They've been named a terrorist group by our ally the UAE. What do you make of taking representatives to the State of the Union?

MCCAUL: Well, they're unindicted co-conspirators in the Holy Land Foundation case in Dallas, Texas. We need outreach to this community, but where are the victims of San Bernardino at the state of the unity? I hope that's what we have.

KELLY: I think there is going to be one, there is going to be one in the First Lady's, you know, State of the Union box. But the question is whether you think it's appropriate for this group. There are a lot of Muslim groups out there that don't necessarily have these ties.

MCCAUL: The king of Jordan is a good example. Why aren't we recognizing his efforts in the war against ISIS and against terrorism? Why aren't we recognizing a group that was part of a conspiracy in a terrorism case?

KELLY: Uh-hm. Great to see you, sir. Good luck with the book.

MCCAUL: Thanks, Megyn.

KELLY: "Failures of Imagination" by Michael McCaul. Thanks for being here.

MCCAUL: Thank you.

KELLY: Well, we also tonight have breaking news on this week's big Republican debate and why Senator Rand Paul is not happy and will not take part on the debate and it is threatening to go to war now with the media.

Plus, let than 24 hours now to the final State of the Union for President Obama and the White House was today asked why so many Americans think things are going off the rails. Remember this moment? Chris Stirewalt is next on the seven-year road to this.

And then we'll ask Tavis Smiley what happens tomorrow night when the President talks about race.

He's a special guest with us tonight.

Plus, big news on Hillary Clinton and new evidence that she may face criminal charges possibly in an FBI probe that is now getting larger according to our own Catherine Herridge. Hillary is challenging Catherine's reporting. Who do you think has it right?

Judge Andrew Napolitano is here with the big news.

(COMMERCIAL BREAK)

KELLY: We are less than 24 hours now from President Obama's final State of the Union Address. As new Fox News polls show Americans are worried about the future of this country. A big change from what we saw back in 2008.  When the President took the stage before he became president at Denver's Invesco Field.

At the awe over the would-be new president faded quickly. Just months after he took office, he pushed through the more than $700 billion stimulus package, that gave birth in part to the Tea Party and led to what critics say is the slowest and weakest economic recovery since the great depression. Next, the President plowed right into ObamaCare and shoving through the controversial legislation, despite widespread opposition. It rallied many people against the policy.

In 2011, the commander-in-chief effectively ended the nine-year war in Iraq, a move that the top general in Iraq at the time and his own defense secretary say, contributed to the rise of ISIS because we did not leave behind a contingent force. And the President's executive actions on immigration, gun control and climate change have ignited a storm of criticism.

Opponents described the President's extraordinary actions as lawless. The White House maintains otherwise. Chris Stirewalt is our FOX News digital politics editor and Chris sitting here with Tavis who comes next and he was saying he remembers being in Invesco Field, and so do I.

CHRIS STIREWALT, FOX NEWS DIGITAL POLITICS EDITOR: Me too.

KELLY: And the feeling, the feeling in that moment of whether you supported him or you didn't. Like, was this guy going to be different?  Was he actually going to do the stuff he said and change Washington and unite the country and somehow find a way to separate the wheat from the chaff and bring us together? And now we have our answer.

STIREWALT: Right. And you remember, we all remember Invesco Field, how about how Washington, D.C. was seven years ago right now. The anticipation of change, people were exhausted by the Bush years. People wanted something different. Even people who would opposed Obama were grateful that change was coming and they thought, you know what? I'm not going to get my way on everything, but at least we're going to change a few things.  Things are going to get going. And the President had something that is rare as hence teeth, vanishingly rare in America today, which is good will and good sentiment from a broad majority of the population.

KELLY: So, where did it go? Was it ObamaCare? I mean, the stimulus?  What?

STIREWALT: Yes, it's all of those things, but I would say this, it is a style of governance, it is an attitude, it is a philosophy about human nature. The President declined to exhibit what Peggy Noonan called patriotic grace which I think is the perfect phrase. He declined to exhibit patriotic grace. He had the chance to say to his terrified -- Republicans were stucked, terrified in Washington, D.C. They were afraid they couldn't say no to the first black president who had just been elected by a landslide. But he had given a thumping to John McCain. And the Republicans say, I don't know if we can oppose this guy at all. And they stood there ready to compromise, ready to give everything, and he didn't even ask them.

KELLY: Where they?

STIREWALT: Oh my God!

KELLY: You remember the -- the infamous Mitch McConnell comment of my number one goal -- the number one goal is to defeat him politically.

STIREWALT: I promise you this. Seven years ago today, the number one goal of Mitch McConnell and every Republican was not to be deemed the racist monster who was opposing America's beloved first black president.

KELLY: Now, that's a safe bet. No. That's a safe -- that's not something you really want --

STIREWALT: Your pr department never says, go for that. But in the -- the president starting with the stimulus, moving to ObamaCare, said you know what? I won, my way, highway. And he let his opponents off the hook.  Sometimes in life you have to take the risk to let somebody else do the right thing, even when they can hurt you a little bit. He refused to do it.

KELLY: Chris, thank you. More with Chris tomorrow night.

We're hearing reports that the President may address race relations tomorrow night, as Gallup polls suggest things have gone downhill on the President's watch there. Some 68 percent saying race relations were good or somewhat good back in 2008. But things have flipped by this past summer when some 53 percent said, race relations are bad or at least somewhat bad.  Tavis Smiley is the host on PBS and also the author of "The Covenant with Black America Ten Years Later."

Tavis, great to see you. Thanks for being here.

TAVIS SMILEY, PBS HOST: Great to see you. Thanks for having me on.

KELLY: What do you make of that? And the same thing, the hopes for better race relations and where we are now under the President.

SMILEY: I think the President learned that campaigning and governing are two different things. But this president learned it the hard way. Number one, it is interesting, I must say, listening to that package and watching Chris talk about it. You won't be surprised by the fact that my take on this is somewhat different.

KELLY: Uh-hm.

SMILEY: The President inherited a lot of a big mess from George W. Bush and he had to clean up. And everybody I think acknowledges that. When you say there was good will, there was good will on the part of the American people, but the Republicans did not quite see it that way until you put it put McConnell which I would have raise, had you not raise at first of all, thank you. They wanted to defeat Barack Obama and Barack Obama made a number of mistakes. So, he gave them some ammunition as well.

KELLY: Are the mistakes where the good will went? I mean, you remember the feeling, right? Invesco. That was not just the music, although the music didn't hurt. Right? But it was this moment. And I think the people crying in Chicago the night he was elected, I think people really believed, I don't want to go too crazy, that this was the messenger, right? But this was a guy who could change things.

SMILEY: Let's say campaigning and governing are two different things and he learned that the hard way. I think that we are going to be debating time and moral whether or not the right move was to go after jobs first or health care. And I think in retrospect, we still should have gone after jobs first.

KELLY: The healthcare was divisive.

SMILEY: Yes. I think it's not just divisive. I think it was a right thing to do ultimately. I'm just not sure I would have led without -- I would have led with jobs. If you can give Americans jobs, particularly jobs with a living wage, then you can get away with a great deal more and starting with something that was in fact --

KELLY: That won't cut to the heart. The ObamaCare, I mean, that's somebody's healthcare. People were scared and people didn't want to lose their health care and so on.

SMILEY: There are (INAUDIBLE) about that too though, Megyn.

KELLY: Absolutely.

SMILEY: Yes.

KELLY: But on the subject of race, do you think -- are we better off now than we were seven years ago?

SMILEY: I'm not sure that we are and I think ultimately the President missed a moment. What we try to lay out on this book to cover is -- continues later is that in every leading economic issue, on the leading economic issues, Black Americans have lost ground in every one of those leading categories. So, for the last ten years, it's not been good for black folk. And so, this is the President's most loyal constituency that didn't gain any ground really in that period. Now, the debate is going to be for years to come, whether or not he wasn't bold enough or whether or not he was obstructed. I think the answer is both and historians got a field day trying to juxtapose how in the era of the first black president, the bottom fell out for Black American. Black people were still in many ways politically marginalized, socially manipulated and economically exploited. That's a lot to kind of square how all that happened in the era of the first black president. But to be sure, he had a headwind like no presidents ever had.

KELLY: What do you make, outside of the economic issues, you know, the Black Lives Matter and the stuff we've seen with police and how divided people are? You know, the President has tried to walk a line on that by saying, we honor law enforcement in the jobs they do. But Black Lives Matter, we got to stop seeing this. And you know, many of his critics, we've noted it here on this show, we noticed that there's a lot more attention paid to --

SMILEY: Sure.

KELLY: -- one of those arguments than the other and they feel that he's diminished law enforcement, which makes some people feel upset.

SMILEY: Yes. I think the law enforcement diminished itself. You can't shoot black boys and black men in the streets and get away with it. And this is not just a black problem, let's put it another way, it is a black problem but it's White America's burden. Something is wrong in this country when you get to a point where the police are no longer trusted.  This isn't just the Black issue, what Rahm Emanuel did in Chicago is heresy. He ought to be -- Rahm Emanuel ought to be kicked out of office in Chicago immediately, sooner than right now and quicker than at once for sitting on that tape when he knew it all along.

KELLY: Was this happening under George W. Bush too and people just weren't shining a light on it?

SMILEY: Oh, of course it happened under George W. Bush. Social media certainly has exploded over the years. But it's not just this can happen.  George Bush let people sit on their roof tops, people died in Katrina.

KELLY: Do you think the first Black president could have fairly -- he could have, you know, sort of brought the light to this?

SMILEY: Absolutely.

KELLY: Without getting just excoriated because do you think the President has been too conscious of his own skin color, not wanting to get the blowback of making too many things a race thing.

SMILEY: Sure. He's been boxed in by race, number one. But number two, the only way you advance in this country is for someone to live with a moral authority. And I think on this issue, there's so much more that he could have done. Now, the debate will be, again, could he have done more or did they hold, did they tie his hands behind his back. I just think, my grandmother put it this way. There are some fights that ain't worth fighting even if you win, but there are other fights that you have to fight even if you lose. And some of these fights the President should have fought and he didn't fight. And put it in another way, great presidents aren't born, they're made. Tomorrow night we're going to get a legacy speech as you all know and you have to push presidents in their greatness.  There is no Abraham Lincoln if Frederick Douglas isn't pushing him, there is no LBJ if MLK isn't pushing him. This president needs to be pushed a little bit more.

KELLY: Tavis Smiley, thanks for being here.

SMILEY: Thank you, Megyn.

KELLY: Well, tune in to FOX for President Obama's final State of the Union Address. Bret Baier will kick off our coverage at 8:55 p.m. Eastern and then stay tuned after the State of the Union for a special "Kelly File" at 11:00 p.m. Eastern Time. We'll have reaction from presidential candidate and Florida Senator Marco Rubio.

Plus, Charles Krauthammer is here. Frank Luntz has a special focus group.

And our "Kelly File" super stars will be here including Stirewalt, Kurtz, Thiessen and Burton.

And up next, Republican Governor Greg Abbott of Texas, his plan to save the constitution and why it has touched off a growing backlash. Don't miss this.

(COMMERCIAL BREAK)

KELLY: Developing tonight, growing backlash against a Republican governor who says he has a plan to save the constitution from a power hungry federal government. Texas Governor Greg Abbott is calling for a convention of the states, a power entrusted to the people by the founding fathers for the purposes of amending the constitution. It has never been used until now.

Joining me now, Governor Abbott. Governor, great to see you. So what's the idea? You want to change the constitution, but exactly how?

GOV. GREG ABBOTT, R-TEXAS: Well, first, Megyn, importantly, this is not my plan. This was Madison's plan, Hamilton's plan, Ben Franklin's plan, the founder's plan. They knew when they articulated at the time of the original convention in 1787, there would be a need for the American people to alter the constitution as the country grew and evolved. And so they handed to us in Article V of the United States constitution the pathway to do it and they knew that it would be the people who would need to be able to do it, not government leaders in Washington, D.C. And that's precisely why they inserted article V into the constitution, so that we can amend the constitution and basically what I'm calling for is not really changing the constitution, but instead returning the constitution to the original principles that were enshrined in the constitution itself.

KELLY: Well, like allowing a two-thirds majority of the states to override a U.S. Supreme Court decision? That was not in the --

ABBOTT: Well, Megyn, what was not in the constitution and what would come as right surprise to Madison and Hamilton is the way the Supreme Court justices amend the constitution. Think about this, there are 27 amendments to the United States constitution that were passed and ratified by the United States of America. However, that said, the constitution is amended every single year, by just five people who wear robes on the United States Supreme Court. And so often times it is contrary to the people of the United States. Even worse, you see the Supreme Court actually rewrite laws, embarrassingly what Chief Justice Roberts did in the ObamaCare case where the Supreme Court played the role of a super legislature.

KELLY: But the founders didn't want to just cede everything to the majority. That is not the kind of republic they envisioned. And so, and to your version, if we had the Supreme Court, let's say the Supreme Court decision Casey where they relooked at Planned Parenthood and they say, yes, we're going uphold Roe versus Wade but we're also going to uphold the rights of lawmakers to curtail those rights. They can erode abortion rights at least on the edges. Let's say two-thirds of the states rose up and said no, no erosion. We oppose that. Then it would just be the will of the majority as opposed to the Supreme Court telling us.

ABBOTT: It was clear from the founders in what they imbued in every paragraph of the United States constitution, they did not want to empower five unelected, unaccountable judges on the United States Supreme Court to be able to single handedly amend the constitution in an unaccountable way.  But also, think about this, it's not just the court, which is just one of the items you brought up. Look at Congress. Who did the founders? Who did the crafters of the constitution empower to write the laws of the United States of America? In Article I, it is the United States Congress.  Despite that fact --

KELLY: But what's happening is the executive branch is issuing a lot of laws through its agency. And that's another thing you want to tackle. So, I've got to go, but can you tell me, what is the next step in your plan?  What are you going to do?

ABBOTT: One is the state of Texas needs to pass this. Two, I need to get other states to join in. Three, the people of the United States of America need to demand their legislature will support an Article V convention of states.

KELLY: Governor, it's great to see you. Thanks for being here tonight.

ABBOTT: Thank you.

KELLY: Well, there's also big news this evening, on this week's Republican debate hosted by FOX Business Network. Why Senator Rand Paul is not happy, at all? And is threatening to go to war with the media. War, I tell you.  And I think that's his word. I think that he may have used that word.

Plus, Hillary Clinton coming out hard against an exclusive FOX News Channel report that the FBI is expanding its probe into possible criminal activity during her tenure as secretary of state, reaching now into possible corruption behavior in connection with the Clinton Foundation.

Judge Andrew Napolitano takes a look at the evidence right after this break.  

(COMMERCIAL BREAK)

KELLY: Developing tonight, Hillary Clinton issuing a fierce and outright denial to an exclusive Fox News report that the FBI has launched another investigation into her time as Secretary of State.

Sources telling Fox News that agents are looking into whether Mrs. Clinton used her position as the nation's top diplomat to pay off well-connected donors.

Fox News senior judicial analyst, Judge Andrew Napolitano is here to weigh in on this and a new twist in her e-mail scandal. But we begin with chief intelligence correspondent, Catherine Herridge who broke this story today. Catherine?

CATHERINE HERRIDGE, FOX NEWS CHIEF INTELLIGENCE CORRESPONDENT: Megyn, three intelligence sources tell Fox News the FBI probe has expanded with one track focused on classified information found on Mrs. Clinton's server. And the second track on whether the co-mingling of Clinton Foundation work and State Department business potentially violated public corruption laws.

Fox News is told that FBI agents are investigating the overlap of State Department and Clinton Foundation work on whether donors benefited from their contacts inside the administration. Author Peter Schweizer investigated the Clinton Foundation and first discussed his findings last spring.

(BEGIN VIDEO CLIP)

PETER SCHWEIZER, "CLINTON CASH" AUTHOR: The fundamental question is with this deal and with the others we cite in the book, is it coincidence? Is it coincidence in a pattern that we see repeated a dozen of times, where large Clinton supporters are -- have business before the State Department, they make large payments and favorable actions are taken? I don't think that coincidence have occurred that frequently.

(END VIDEO CLIP)

HERRIDGE: But the latest State Department e-mail released, the number of classified e-mails identified on Mrs. Clinton's private account has risen to at least 1342, including two top at the secret level.

Speaing to the Des Moines Register late today, Clinton again insisted that nothing she send or received was classified at the time and strongly dismissed Fox's reporting the investigation is expanding.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Is that story true?

HILLARY CLINTON, D-PRESIDENTIAL CANDIDATE: Absolutely not. It's an insourced, irresponsible, you know, claim that has no basis and it is something that really is without merit.

(END VIDEO CLIP)

HERRIDGE: And Clinton said the FBI hasn't contacted her either, but that is simply not how the process works. Experts, including a former senior FBI agent, said there's no way for Clinton to know the status, because the bureau doesn't have to notify the subject of an investigation unless an indictment is imminent, Megyn.

KELLY: So, she -- she says absolutely not, insource irresponsible claim has no basis, and you begin the report by saying you have this confirmed by at least three intelligence sources?

HERRIDGE: That's right. And this was information, Megyn, that was gathered over several weeks, this was not something that we learned in recent days.

KELLY: Well, Catherine, thanks so much.

HERRIDGE: You're welcome.

KELLY: Joining us now our senior judicial analyst, Judge Andrew Napolitano. You don't generally want to challenge Catherine Herridge's reporting.

JUDGE ANDREW NAPOLITANO, FOX NEWS SENIOR JUDICIAL ANALYST: No, you don't. I'm happy we're on the same team because Catherine's sources are extraordinary and extraordinarily accurate by their track record.

But the plain, simple procedure under American criminal law is Mrs. Clinton could not know that she is not being investigated.

(CROSSTALK)

KELLY: So, she is...

NAPOLITANO: Because they have no obligation to tell her at this stage.

KELLY: So, the most she could say is, not to my knowledge...

NAPOLITANO: Correct.

KELLY: ... which is the same as saying nothing because they wouldn't tell her if they were expanding it.

NAPOLITANO: Catherine comes forward with three sources saying the investigation is going on. I have a source that says the FBI has a treasure trove of financial documents showing financial improprieties, as well as a pattern of decisions by Mrs. Clinton as Secretary of State and favorable treatment to the people for whom she made those decisions and then contributions to the Clinton Foundation.

That on top of two new e-mails that the State Department released at 2 o'clock in the morning over the weekend, one of them is an e-mail from Mrs. Clinton saying "If you can't send that document to me through a secured channel, don't worry about it, just send it over a regular fax," showing an intention to deviate from her obligation to keep secrets secure. Another e- mail...

(CROSSTALK)

KELLY: She's basically saying I can declassify something as the State Department...

NAPOLITANO: Correct.

KELLY: ... not something that it's been classified by somebody else but if we classified it, I can unclassified it.

NAPOLITANO: Yes, because another e-mail she says to another aide, "Remove the classification on there and then send it to me." Mrs. Clinton, it is not the phrase secret, top secret or confidential that makes it classified, it's the essence of what's in the e-mail and you can't change that.

KELLY: But you -- let's go back to the FBI expanding its investigation. That seems significant. I mean, when you're the target of an FBI investigation or your behavior as being examined by the FBI, you generally don't want to hear that that investigation has expanded.

And there's been a question about whether this FBI would vigorously investigate her, this is the Obama administration, the FBI is supposed to be independent. But is it really James Comey gets almost nothing but praise, and now you hear this. So, what does it tell you?

NAPOLITANO: It tells me that somewhere between 100 and 150 FBI agents are devoted to investigating Mrs. Clinton, both on the e-mail and on this new issue of whether or not she did favors to enrich her husband or enrich the foundation.

It's hard to believe that the Federal Bureau of Investigation, in an age of terror, would devote 150 agents on a wild goose chase unless there was something very serious there. It's also hard to believe that they would be political people. They are not. They are serious professionals who couldn't or use the director's term "a whit" about the politics involved. They just want to enforce federal criminal law and keep the nation safe.

KELLY: You know, on the bright side for Mrs. Clinton, if no charges are recommended, and this doesn't go anywhere, then that is it.

NAPOLITANO: She's clean as a whistle at that point.

KELLY: That's it. You got 150 FBI investigations or agents investigating and you got no problems. You really got a problem like, shut up after that. But on the other hand, if it goes another way, she may declare war like Rand Paul. Great to see you, Judge.

NAPOLITANO: My pleasure.

KELLY: He's not happy. He's so angry, and we will tell you next why he's so angry, and says now that he's at war with the TV networks. The Weekly Standard's Steve Hayes, and former President Obama campaign aid, Mark Hanna are here to discuss it.

Plus, why actor Sean Penn could face serious legal trouble for his controversial interview with the Mexican drug lord, El Chapo. James Rosen has the fallout.

(COMMERCIAL BREAK)

KELLY: Breaking tonight. The Fox Business Network unveiling the lineup for this week's GOP presidential debate. Donald Trump, Senators Ted Cruz and Marco Rubio, Dr. Ben Carson, Governor Chris Christie, former Governor Jeb Bush, and Governor John Kasich will be on the primetime debate stage.

And then there was seven. Relegated to the undercard debate, Senator Rand Paul, Carly Fiorina, who were at the main event last time along with Governor Mike Huckabee, and former Senator Rick Santorum. But Senator Paul responded to this news a short time ago saying he won't be going.

(BEGIN VIDEO CLIP)

SEN. RAND PAUL, R-KAN., PRESIDENTIAL CANDIDATE: We are a contender. We think we have a national campaign that can contend for victory and we can't accept an artificial sort of an artificial designation by anybody.

UNIDENTIFIED MALE: So, you won't attend this debate?

PAUL: No.

UNIDENTIFIED MALE: You won't be in the undercard? I just want to be precisely.

PAUL: Absolutely. I won't -- I won't. We just have anything that is not first tier because we have a first tier campaign.

UNIDENTIFIED MALE: And you notified Fox of that?

PAUL: We've let them know that.

(END VIDEO CLIP)

KELLY: Steve Hayes, the senior writer for The Weekly Standard and Fox News contributor, and Mark Hannah served as a campaign aid during the Obama and carry presidential campaigns. Good to see both.

MARK HANNAH, FORMER CAMPAIGN AIDE FOR BARACK OBAMA: Hi, Megyn.

KELLY: And the he gave an interview in which he said, "It won't take much for our supporters to understand why we're doing this. You want war? We'll give it to you." I don't -- I don't think we do want war. But we have to abide by the standards that were set long ago on who makes the debates and who doesn't, Steve.

STEVE HAYES, THE WEEKLY STANDARD SENIOR WRITER: Yes, I mean, I always thought that Rand Paul might end up sounding like a neocon and embracing preemptive war, but I didn't think it would be against the media.

KELLY: No, That's well done.

(CROSSTALK)

HANNAH: He's supposed to be the dove of the group, right? He's supposed to be the dove.

HAYES: Look, I don't think he's got much to complain about. He's been campaigning for president for over a year. He hasn't caught fire in the way that many people anticipated that he would, in part I think because of his foreign policy, because he's been non-interventionist, and because we've seen the rise of threats or at least we're recognizing the rise of threats around the world in the way that makes his foreign policy -- I think out of step with where most republicans are.

I think that's what explains it. You really just don't have much of a beef if you can't get into the top six or the top five to remain on the top debate stage, especially after he's been on it several times before.

KELLY: What will -- well, that's the thing, what good does it do him, Mark, to, you know, sort of whine about it...

HANNAH: Yes.

KELLY: ... when you have a situation like with Governor Christie who didn't make the main debate stage, I think it was two times ago, and he went to the undercard and he did well and he got himself back on the main stage.

HANNAH: He pulled it together and put together a winning strategy. I think when somebody gets sort of knocked down to that undercard stage, people start wondering reasonably, you know, what is their winning strategy going to be? Is it possible, is this a viable candidate?

And I think, you know, taking your ball and going home is not a winning strategy. I don't think Rand Paul here is projecting a lot of confidence in his own campaign, and frankly, picking a war with the media is, you know, straight up a losing proposition, especially when it's Fox Business, which, you know, should be a hospitable environment for a somebody like him, a libertarian like him.

KELLY: Well, I mean, I think that Senator Paul, with all due respect has shown frustration in this campaign before, it's not the first time. You recall the moment when he was doing a whole day live stream and that event took him through the State of New Hampshire where he had the following moment.

(BEGIN VIDEO CLIP)

PAUL: The third question most popular question from Google is, is Rand Paul still running for president? And I don't know, I wouldn't be doing this dumb-ass live streaming if I weren't. Yes, I still am running for president. Get over it.

(END VIDEO CLIP)

KELLY: OK. It was Iowa. That -- I actually kind of liked that moment. He's got a sense of humor. He should just laugh this off and just go punch around of the undercard and try to get back on the main stage, Steve.

HAYES: Yes. Look, I think he should. I mean, those are the kind of moments that I think endeared people to Rand Paul.

KELLY: Yes.

HAYES: We just haven't seen as many of those moments particularly on the big stage.

KELLY: I like any candidate who swears. What?

HANNAH: Presidential, that presidential...

(CROSSTALK)

HAYES: That shows the side of him. Look, I mean, everybody -- I think average voters can identify with having to live stream your entire day. Probably not the way most people want to live.

KELLY: I should have agreed to that.

HAYES: We just haven't seen that side of Rand Paul nearly as much. I mean, if you look at what he did on the main debate stages, he was constantly whining about the rules or taking shots or griping. He wasn't spending as much time laying out his vision for the country and demonstrating how it...

(CROSSTALK)

KELLY: Well, he did some of that. I mean, I know, I remember at the first FNC debate he did a lot of that. But, you know, his message has not been resonating, I'm sure to the extent he hoped there certainly it was this time a year ago.

Mark, as we get ready for this next debate, outside of rand Paul, on the main debate stage, who has the most to lose a couple weeks befe Iowa?

HANNAH: Well, I think, look, Trump now is -- if he doesn't take number -- the number one spot, and Trump, the whole idea of him coming in second, coming in as a runner-up, you know, there's a saying runner-up is the first loser. This is kind of mentality that he's projected as that of a winner.

Anything that is less than a winner is anathema, is empathetically to the whole ethos of his campaign. So, I don't think -- I don't think Trump, you know, I think he could -- he could implode the way that maybe Howard Dean imploded when he was the front runner going into Iowa and then came in third.

If Trump doesn't have a strong showing in Iowa, I think it's interesting to see how he, I mean, he'll continue to finance this campaign.

KELLY: Yes.

HANNAH: But interesting to see.

KELLY: Take me back to my Gabrielle final competition back when I was in law school and we had a panel competition, my partner and I went all year in this competition. And in the final round of it, we had three judges for the New York State Court of Appeals, highest court in the state.

They came in to judge us. And my partner said to the Judge Titone at that time, you know, just being here is winning. And Judge Titone looked at him and said, second place is losing, son. I said, Hillman! Anyway, we lost. We were losers.

HAYES: First losers.

KELLY: We're the second place -- we're the first losers.

HANNAH: It's probably the only time in your life, Megyn. You know and only time...

(CROSSTALK)

KELLY: No, it wasn't. But I still consider myself a winner. Great to see you guys.

HANNAH: Thanks, Megyn.

KELLY: So, I went on to win best individual advocate. So, in the end it worked out OK. And don't forget the first GOP debate of 2016 is this Thursday on Fox Business Network. Maria Bartiromo and Neil Cavuto will moderate. It starts at 9 p.m. Eastern. On our sister network, if you don't have FBN, watch the debate online, then tune in to a special Kelly File live at 11 o'clock right after.

Don't go away, we'll be right back.

(COMMERCIAL BREAK)

KELLY: Actor Sean Penn shocked the world by landing an exclusive with one of the world's most wanted men and then giving him total editorial control over what he wrote. Some experst say he might have even broken the law along the way.

James Rosen is live in Washington with the story. James?

JAMES ROSEN, FOX NEWS CORRESPONDENT: Megyn, good evening. Legal experts here say it's doubtful the filmmaker or the pop culture magazine will face any legal jeopardy for their big scoop. But Sean Penn and Rolling Stone are catching a lot of flak with the New York Post "El Jerko" headline seemingly the least of it.

Chiefly because the writer and the magazine agreed to submit their article to El Chapo in advance. Even though the drug kingpin reportedly requested no changes.

Alfredo Corchado, formerly Mexico City Bureau chief for the Dallas morning news now with the Arizona State Walter Cronkite School of Journalism, tweeted and I quote, "To describe the Chapo-Sean Penn meeting as an interview is an epic insult to journalists who died in the name of truth."

"I don't think it was a meaningful think in the first place." Rolling Stone founder and publisher Jann Wenner said of the advance submission to El Chapo adding we've let people in the past approve there, quote, in the "interviews." In this case, it was a small thing to do in exchange for what we got.

The seven-hour interview conducted without record or now pen accord in El Chapo's jungle hideout in October, also present was a Mexican soap star on whom El Chapo nurtured a crush, Maria del Castillo. They continued with Blackberry messages and a video that El Chapo recorded and sent to the actress.

Mexican authorities say it could be as long as a year before the convicted drug lord is extradited to the U.S. to face federal charges here. Megyn?

KELLY: James has all his best interviews with Mexican soap stars sitting right to him as well. James, remember when Rolling Stone used to cover the greats like David Bowie?

ROSEN: Oh, goodness. What a loss. What an extraordinary influence not only on rock 'n' roll, but on all of pop culture and indeed, all of culture itself. Great to see David Bowie getting the recognition today that he deserves, Megyn.

KELLY: Very sad. And we will miss him. We'll be right back.

(COMMERCIAL BREAK)

KELLY: All right. The Powerball jackpot. The drawing on Wednesday night is now up to more than $1.4 billion. And you get to keep 400 million of it if you win. James, what are you going to spend it on?

ROSEN: Sure it's donation.

KELLY: See you tomorrow.

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