Judy Miller: Khashoggi case could lead to strain with Saudis

This is a rush transcript from "The Story," October 15, 2018. This copy may not be in its final form and may be updated.

MARTHA MACCALLUM, HOST: And breaking tonight, is Saudi Arabia about to flip the script and tell us what happened to this missing journalist who walked into the embassy in Turkey, and has not been seen since.

Good evening, everybody. I'm Martha MacCallum. This story is changing by the hour, and it is putting one of the United States most crucial relationships to the test. With grainy surveillance video fueling rumors that this hit squad entered the country carrying suitcases.

And then, at some point during the day according to reports, purchased additional luggage late in the day. Were those pieces used to remove the body of Jamal Khashoggi in hopes that no one would find out?

Regardless of what happened, today, the Saudi King was on the phone with President Trump. He said his family had nothing to do with it. Here's the president.

(BEGIN VIDEO CLIP)

PRESIDENT DONALD TRUMP: I can only tell you that his denial to me is just one very -- you know, relatively best phone call, probably, lasted 20 minutes. His denial to me could not have been stronger that he had no knowledge --

(END VIDEO CLIP)

MACCALLUM: But breaking tonight, this story is now evolving again in a way that quite simply strains credulity. With the Saudis floating a new narrative that appears to protect both sides perhaps, from a potentially catastrophic fallout.

Investigative journalist Judith Miller, and General Jack Keane join me in moments. But first, Kristin Fisher, with the backstory tonight from the White House. Hi, Kristin.

KRISTIN FISHER, FOX NEWS CORRESPONDENT: Hey, Martha. Well, tonight, the White House is monitoring these reports that Saudi Arabia may be preparing to admit that they accidentally killed Khashoggi. That it was some kind of interrogation gone wrong.

Now, President Trump was briefed about it, on board Air Force One and he gave us his first reaction to these emerging reports while on the ground in Georgia just about two hours ago. Watch this.

(BEGIN VIDEOTAPE)

TRUMP: I heard that reporter but nobody knows if it's an official report.  So far, it's just the rumor -- the rumor of report coming yet.

FISHER: Now, earlier today President Trump said he spoke on the phone for about 20minutes with the Saudi King, and that his denial of any involvement in Khashoggi's death could not have been stronger. The president also floated an alternative explanation for what may have happened to the Saudi journalists. Watch this.

TRUMP: It sounded to me like maybe this could have been rogue killers, who knows? We're going to try getting to the bottom of it very soon.

FISHER: Now, if Saudi Arabia does turn out to be responsible for Khashoggi's death, President Trump promised a severe punishment on "60 Minutes" last night. That prompted a swift response from some Saudi officials who warned that oil could hit $200 a barrel if the U.S. takes action.

But, even if President Trump does not act, Congress almost certainly will.  Here's Republican Senator Marco Rubio.

SEN. MARCO RUBIO, R-FLA., SENATE INTELLIGENCE COMMITTEE: If in fact, he was lured into a diplomatic facility, murdered, his body chopped up, and that they sent a group of people down there to carry this out, that would be an outrage, it would be an atrocity, and there would be a swift response certainly from Congress.

(END VIDEOTAPE)

FISHER: President Trump is now dispatching his top diplomat to investigate. Secretary of State Mike Pompeo is heading to Saudi Arabia and possibly Turkey to find out firsthand what happened.

Now the Treasury Secretary Steve Mnuchin may also be heading that way as well for a pre-planned investment Congress in Riyadh. But just today, several top American companies and CEOs have pulled out, and there are mounting calls for the Secretary of the Treasury Steve Mnuchin to pull out, as well.

But tonight, Martha, President Trump said they are just going to wait and see. They want to get a bit more information before they decide whether or not Steve Mnuchin is going to pull out of that conference as well. Martha.

MACCALLUM: We will watching that decision very closely. Kristin, thank you very much. So, on this show days ago, my next guest made this prediction about Khashoggi's disappearance.

(BEGIN VIDEO CLIP)

JUDITH MILLER, FOX NEWS CONTRIBUTOR: When a man says to his fiancée, "Here is my cell phone I'm going into an embassy, a consulate that may be problematic for me. If I don't come out, call the president of Turkey's office, because something bad has happened." At that point when he didn't emerge, I just had a very bad feeling and I figured that's what had happened.

(END VIDEO CLIP)

MACCALLUM: So, as all of this brand-new information comes out tonight, Judith Miller, Pulitzer Prize-winning investigative reporter, and Fox News contributor, joins me now. Judith, you know, we said in the intro that this strains credulity. And they have -- they have denied this up and down. Saying, "Oh, that's not exactly -- he left the back door, he went out, he escaped earlier in the day." I mean, how do they look in the mirror and with this new story?

MILLER: Well, I think they're waiting to see whether or not this story has legs. Whether or not anyone in Washington, or Riyadh, or any capital in the world believes this story. Because the United States and Saudi Arabia, officials concerned about the relationship are both trying to find a way out of what is undoubtedly a huge diplomatic embarrassment. A mess, and something that could lead to a severe strain in one of our most important allies.

So, yes, they are searching for any possible explanation, but this is impossible.

MACCALLUM: So, let's look at -- so, is it -- is it impossible? I mean, is it possible that the story that they're telling could be truthful?

MILLER: It could be a one percent, two percent chance. But it contradicts everything that they've said so far, as you pointed out, including Crown Prince Mohammed bin Salman who spoke to Bloomberg News and said, "No, no, we have -- we have information that Jamal Khashoggi left the embassy -- that he left the consulate. He wasn't there."

So, now they have to reverse that story. They have to retract that story and do this rogue killer story. What interests me is the fact that Donald Trump was the first one to kind of float the rogue killer idea right after he talked to King Salman. So, clearly, they are both trying to find some story that would possibly explain what happened to Jamal Khashoggi inside that consulate in Istanbul.

MACCALLUM: I mean -- you know, in terms of the hit team theory, and the planes clearly arrived from Saudi Arabia to Istanbul, 15 people got off.  We know that that's been documented in the reporting. They had suitcases, there's another report that says in the middle of all of this they went out and bought, and got more luggage, more bags.

Now, you know, if that turns out to be true, your mind goes to a lot of places about what they may have been trying to remove from this embassy.  But if you're just interrogating someone with the intention of bringing them back to Saudi Arabia, why would you need 15 people?

MILLER: Well, that's a very good question. And why would you need a forensics expert to go along with the team at the beginning? I mean, usually, forensic people look at dead bodies, not living ones.

But, look it could be because the Saudis are not known for their supreme competence but this was an interrogation session that went south, that went bad. That somebody overdosed him, that he died, and the Saudis had to scramble. That is possible.

MACCALLUM: It could be. Yes. Give everybody a little bit bigger picture of who he is and why Mohammad bin Salman who is -- you know, said to be a reformer, he has done some good things.

MILLER: Yes, he has.

MACCALLUM: Women can drive now in Saudi Arabia. There are new freedoms that he has promised. And he says, he's trying to clean up the corruption from the government there and move the country forward. Why would he want this guy out of the picture?

MILLER: Well, this man, Jamal Khashoggi was not just a journalist. He was a political activist, and he spoke to many, many Saudis. He had a million -- over 1.7 million Twitter followers. He was someone who had decided that democracy was something he thought he ought to support.

Look, Jamal had long-standing ties to the Muslim Brotherhood was it -- which is at odds with the Saudi Wahhabi regime. They are both Islamist, they are both very, very conservative, but they despise each other.

And perhaps, MBS as the crown prince is known, Mohammad bin Salman was threatened, felt threatened by this man with a platform in Washington and the Washington Post behind him. Maybe he decided the time had come to silence him.

And he has done other rash things that have sometimes led his friends and supporters in the CIA and the Pentagon to roll their eyebrows and say, "Boy, maybe we made a mistake. Maybe a 33-year-old young man who buys lots of expensive things himself and then arrests 200 wealthy Saudis to basically take their money away in the Ritz-Carlton.

Maybe this is not the guy who should be running Saudi Arabia, but it's too late for that because Donald Trump has really anchored his Middle Eastern policy and his Arab policy in the Kingdom of Saudi Arabia. So, it's a mess.

MACCALLUM: Yes, fascinating. Fascinating. Judith, thank you very much.  Good to have you here tonight.

MILLER: Thank you, thank you.

MACCALLUM: With more on this, General Jack Kean, Fox News senior strategic analyst and chairman of the Institute for the Study of war. General, welcome. Good to have you here tonight. You know, we've talked about the fact that there, there was this very hopeful sort of triangle that had developed between Saudi Arabia and Israel, and the United States.

And that the strength of that with a reformed Saudi Arabia, would isolate Iran even further in the Middle East. And that, that is a very good goal.  Is that goal in jeopardy because of this?

GEN. JACK KEANE (RET.), FOX NEWS SENIOR STRATEGIC ANALYST: No, I don't -- I don't think so. I mean, this is -- listen, certainly, this is a setback in the relationship between the United States and Saudi Arabia.

Eventually, I think what will hopefully come somewhat close to what truly happened there, obviously, somebody lost his life, and somebody used some kind of an instrument to take that life. So, that -- in our book, that's murder. And I think that's what it is.

I would hope that the president will separate himself from what the Saudis are complicit in doing here. I also believe he sent Secretary Pompeo there to tell them, "Come clean. Accept some responsibility here." With this relationship is important, but you have got to admit what's taking place and stop the line. Because the president certainly knows that they've, they've been lying.

(CROSSTALK)

MACCALLUM: So, do you think --

KEANE: As to the relationship --

MACCALLUM: Yes.

KEANE: Go ahead,

MACCALLUM: I just have a quick question to insert here. Do you think that -- you know they sort have called the president out on this in a way?  Because if he -- if he just sort of looks the other way and accepts this, then they can pretty much do whatever they want in this kind of operation in the future as well.

But if they feel like they are on the spot, and that there might be ramifications, is that the sort of -- you know, game that's being played here right now, politically?

KEANE: Yes, I think Pompeo is delivering that message. And that's why he's saying come clean, accept responsibility. And obviously, there's going to be some pushback from the United States for this.

But the fundamental nature of the relationship, Martha, is not going to change. And why is that? Because in United States national interest for a stable and secure Middle East, the global economy depends on Middle East oil. That is the reality of it.

The anchor for the Sunni Arab Middle East is Saudi Arabia. And this president has revitalized the relationship with Saudi Arabia and the Sunni Arabs for the specific reason to counter Iran's malign and aggressive behavior in the region. And also to curtail the breeding ground for radical Islam which obviously still in the Middle East.

Those are our two vectors that we are playing out with the Sunni Arabs led by Saudi Arabia.

MACCALLUM: All right.

KEANE: I -- those goals that we have will not change in my judgment.  There will be a setback in this relationship, I think as it deservedly should be if they are as complicit as we suspect they are.

MACCALLUM: All right, and I want to play sound bite thank you from "60 Minutes" last night because I need to get your reaction to this. Let's play this.

(BEGIN VIDEO CLIP)

LESLEY STAHL, WHITE HOUSE CORRESPONDENT, "60 MINUTES," CBS: What about General Mattis, is he going to leave?

TRUMP: Well, I don't know. He hasn't told me that I'm a very good relationship with him.

(CROSSTALK)

STAHL: Do you want him to --

TRUMP: It could be that he is. I think he's sort of a Democrat if you want to know the truth.

STAHL: Is it true General Mattis said to you, the reason for NATO and the reason for all these alliances is to prevent World War III?

TRUMP: No, it's not true.

STAHL: What's not true?

TRUMP: Frankly, I like General Mattis. I think I know more about it than he does.

(END VIDEO CLIP)

MACCALLUM: General, your reaction.

KEANE: Well, that's fascinating. Listen, here's a couple things I suspect, the number one, Jim Mattis is held in high regard by the President and the White House and the national security apparatus. He is doing a good job. He likes the job he is doing. He is honored to be in that position to rebuild the United States military at a time, at a critical juncture where it has to be done and he feels good about doing that.

I think what the president is talking about here is a possibility at some point that Jim Mattis is going to say, I think it's time for me to go and to turn this over to somebody else.

I don't believe for a minute the president is going to take any action dealing with Jim Mattis in terms of asking him to leave and bring somebody else in. I don't believe that is what he's actually saying. I think what he really is saying is, "I like him. He's a good guy." It's kind of humorous he says, he may be a Democrat. But the point is, is that --

(CROSSTALK)

MACCALLUM: Yes, what do you think that was about?

KEANE: I think he has confidence of -- I think he has confidence in Jim Mattis.

MACCALLUM: Why did he say -- you know, he's probably a Democrat and I know more about NATO than he does?

KEANE: It's just Trumpian, Martha. I find it kind of humorous. On the NATO thing, I mean, I know for a fact because I've had discussions with the president myself about NATO. He understands the importance of NATO. I think the question came out on the wrong way. He misunderstood it.

It wasn't criticism coming from Jim Mattis. Jim Mattis knows that the president knows what why NATO exists and what it's done for the last 70 years, it has been an indispensable political-military alliance to provide peace and security in the world.

MACCALLUM: Oh, I think the president was talking about the funding of NATO, and that, that was sort of his area. The financial side of it. Yes.

KEANE: No, absolutely, he's totally -- and he change -- and he change it.

MACCALLUM: If General Mattis ever decided to leave, would you be interested in that position, General?

KEANE: I'm not thinking about becoming Secretary of defense. No one has spoke to me about doing anything like that. And I'm right here talking to Martha MacCallum, and that's fine enough for me.

MACCALLUM: That's well. We like you right there too. General, thank you very much. Thanks for taking the questions and good to see you tonight as always. Thank you, sir.

KEANE: Yes. Good talking to you, Martha.

MACCALLUM: You, too. So, coming up, Ben Shapiro on Democrats chances in the midterms, and the growing fear inside the party that they might go through what they went through in 2016 perhaps, again.

(COMMERCIAL BREAK)

MACCALLUM: So President Trump and the First Lady went to Florida and Georgia today. They got a first-hand look at the devastation from Hurricane Michael which really, I mean, it just almost appears to get worse every day. When we get in here and we look at these pictures, it's just unbelievable. The President described it basically that way. He said it was hard to believe.

Tonight the search for the storm victims continues at this hour as many in that region mark their fifth day, no gasoline, no power, no cell service.  I mean, it looks like tornadoes just rip their way through this entire area in Mexico Beach. And that is where Mike Tobin is standing by. It's an area that has virtually been wiped out by this storm. Mike, good evening to you.

MIKE TOBIN, FOX NEWS CORRESPONDENT: Good evening, Martha. You can't really overstate the dramatic impact of what the President and First Lady saw when they got low-level flyover of Mexico beach here in Marine One because most of the structures here in Mexico Beach are just wiped out right down to the foundation. I really can't overemphasize that enough.  When they landed, they went about 25 miles northeast of here to a hard-hit Lynn Haven. The President and First Lady along with Governor Rick Scott handed out water.

The President remarked that the U.S hasn't seen a storm like this in 50 years and he praised the hard work of the recovery teams and the first responders.

(BEGIN VIDEO CLIP)

TRUMP: These are some of the people that make it work. They have made it work beautifully. The that they've done, everybody has been incredible.  FEMA, first responders, everybody, law enforcements, it's incredible. With the power of the storm, somebody said it was like a very wide, extremely wide tornado. That's really what's this was. This was beyond any winds that they've seen. Yes, 50 years but who knows. It could have been longer. Nobody has seen anything like this.

(END VIDEO CLIP)

TOBIN: The search and recovery teams have been working through this brutal heat. They have been through every structure here in Mexico Beach more than once. They did preliminary searches, they did secondary searches.  They went back into the marshes to look for among other things that boats that had washed up and could be a trapping people inside. They've got the cadaver dogs out here working right now with one person called the more difficult debris pile. And we know now last report we had three people who were unaccounted for. They tracked one down by phone. They have unfortunately found one person who is deceased. So here in Mexico Beach, only one person is still unaccounted for. Martha?

MACCALLUM: Mike, thank you very much. So up next, do the results of Elizabeth Warren's DNA tests add up and will President Trump pay up after that famous $1 million challenge. We've got an update for you on that when we come back.

(BEGIN VIDEO CLIP)

TRUMP: I will give you $1 million to your favorite charity paid for by Trump if you take the test, if it shows you're an Indian, you know.

(COMMERCIAL BREAK)

MACCALLUM: Developing tonight, what appears to be the first punch thrown in perhaps the 2020 Presidential Race. Senator Elizabeth Warren responding to President Trump's challenge to prove her Native American ancestry by taking a DNA test, by taking the test and revealing the results in a video that could easily be mistaken, some might say for a campaign ad. Watch.

(BEGIN VIDEO CLIP)

SEN. ELIZABETH WARREN, D-MASS.: You know, the President likes to call my mom a liar. What are the facts say?

UNIDENTIFIED MALE: The facts suggest that you've absolutely have a Native American ancestor in your pedigree.

(END VIDEO CLIP)

MACCALLUM: Well, OK then, Charlie Hurt, Fox News Contributor and Opinion Editor at The Washington Times, Jess O'Connell is a former CEO of the Democratic National Committee and was a Senior Staffer for Hillary Clinton's 2008 Presidential Campaign. Good to have both of you with us.  Thank you very much for being here today.

So Charlie, let me start with you. When you take a look at this, you know, she doesn't -- I mean, you heard the man, the ancestry specialist, there is some Native American blood back there in her ancestry.

CHARLIE HURT, FOX NEWS CONTRIBUTOR: So yes, she might be one one-thousandth American Indian which puts her pretty much on par with the average American if not a little bit less. Certainly, if that's the requirement, then I should have claimed to have been a Native American and I don't know, maybe I could have gone to Harvard. But it's a you know -- it's a -- I think what this really reveals is just how absurd all of this then identity politics is that the entire Democratic Party has been running on. And you know, look at what the Cherokee Nation said in response to all of this and they say that what she's done here dishonors the tribe and it makes a mockery of these DNA tests.

MACCALLUM: Yes, they did say that. Jess, what do you think about that?

JESS O'CONNELL, FORMER CEO, DEMOCRATIC NATIONAL COMMITTEE: Well, that's to me -- look, first of all, you mentioned a campaign ad, let's Senator Warren is running for re-election right now and she's doing what she needs to do which is talking to voters about things that folks are talking about. And I don't blame her one bit for wanting to set the record straight here and to get the facts out. You know, she's doing what all Democrats are doing right now which is running for election in the next three weeks. We've got the midterm elections and they're trying to help Democrats win.

In terms, of this issue, you know, look you have the President of the United States who has been running around two rallies throwing insults at her and so I think you know, her family in Oklahoma and she, they wanted to set the record straight. They wanted to get the facts out. And I think --

MACCALLUM: If that -- I mean, I guess the question, Jess -- I mean, I can completely understand the motivation and I agree with you that she -- you know, I understand why she would want to get it out but is it a little bit embarrassing that it's like 1/32 of her background? I mean, it seems you know when you look at the numbers, it's a little bit shocking and it feels a little odd.

O'CONNELL: Look, first of all Americans don't care about this. This is not something that is keeping people up at night, that they're waking up thinking about.

MACCALLUM: I'm not.

O'CONNELL: We all know that. None of us are. None of us are. And so you know, this is something that people have been asking. I think you know, look I'm looking forward to Donald Trump's $1 million contribution now to charity. She took the test you know, and I think this is done. They want to put it behind them and move on. And you know, I don't think there's anything to be ashamed of. This is her history, it's proven to bear out in the way that she's heard it from her family and I think she wants to move on.

MACCALLUM: Let's play what the President said about this late this afternoon. Watch this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: You owe her an apology and what about the money that --

TRUMP: She owes the country an apology. What's the percentage 1/1000?

UNIDENTIFIED FEMALE: I don't have the exact number.

TRUMP: Tell me -- when you have the percentage, tell me the percentage is.

UNIDENTIFIED FEMALE: What about the money that you told her you would --

TRUMP: I mean if she gets the nomination in the debate where I was going to have her tested. I'll only do it if I can test her personally. OK.  That will not be something I enjoy doing either.

(END VIDEO CLIP)

MACCALLUM: That was odd. Charlie, what do you make of that?

HURT: That was definitely odd. But if you go back to when -- in that rally where he said that. He did say it in context of her as the nominee and what he would propose to her during a debate. So he is correct about that. He didn't -- he didn't make the pledge outright. He said he would make it which is an important distinction here. But I have to say, I don't think that Donald Trump has been making fun of Elizabeth Warren per se. I think that what he's been doing -- and this is what he does a lot of. He's making fun of the whole issue of identity politics.

The whole notion that you have a woman who is launching her presidential campaign and the first thing she does is takes a DNA test and announces her DNA makeup. This is crazy. This is the kind of stuff that went on and Nazi Germany. This is the kind of stuff that you would think what would have been going on in the 1800s. It's disgusting. The bottom line is people are people and everybody should be treated equally --

MACCALLUM: And yes, and what I think it's you know, six to 10 generations down, you're probably American. When you think about it, at some point it's going to be ridiculous to look back at any of our background --

HURT: You are American, American.

MACCALLUM: -- because at some point, you know, kind of -- one quick thought to me, Jess. You know, I know Jim Messina, who works on the Obama campaign, basically was a little annoyed. He felt like this was stepping on the message of Democrats 21 days to go. What do you think? And then we got to go.

JESS O'CONNELL, FORMER CLINTON SENIOR STAFF: I think Senator Warren thought this was important to do. I respect her right to do that. But I think she and all Democrats are focused on turning out the vote in three weeks because this is the most important election coming out this November 6th.

MACCALLUM: Thank you, both. Great having you here. Thanks for being here tonight. Coming up next, what could be history making. Affirmative action going on trial. Harvard is involved in this case. How it might affect the whole issue of affirmative action, which has been in place for 40 plus years across the country? Judge Andrew Napolitano and Susan Li weigh in.

(COMMERCIAL BREAK)

MACCALLUM: Harvard University now the epicenter of a national debate over affirmative action. The university being accused of racial bias for limiting the admission of Asian-American students to leave room for students from other groups.

Now federal lawsuit could make it to the Supreme Court and the change and change of the fate of the controversial policy for years to come potentially. Trace Gallagher from our West Coast newsroom with the back story on this one. Hi, Trace.

TRACE GALLAGHER, FOX NEWS ANCHOR: Hi, Martha. It's taken four years to get this case to trial. But today, the courtroom was packed and opening statements were direct and to the point.

The attorney for those who filed the lawsuit said that after studying six years of Harvard admission records, it was clear that Harvard rates Asian- American applicants higher than white applicants in all factors except for personal qualities such as courage, kindness, and leadership, indicating that is the discrimination.

The lawyer for the plaintiff went on to ask how it's possible Asians rate higher than whites in most categories and yet there is only one Asian student and campus for every two whites. But the attorneys for Harvard countered saying the university cannot achieve its educational goals without considering race, but that Harvard never considered as an applicant's race as a negative. Harvard has argued that only 6 percent of the U.S. population is Asian-American, but 23 percent of those accepted into Harvard are Asian-American.

Listen to Harvard students on both sides. Watch this.

(BEGIN VIDEO CLIP)

JAMES MATTHEW, HARVARD STUDENT: Race cannot be removed effectively from an application just because it's so central to so many people's identity.

KELLEY LADCHADONG, HARVARD STUDENT: Whether or not you're for or against affirmative action, it still important to see how affirmative action has negative impacted Asian-American groups and you can see (ph) affirmative action and shall be critical for Harvard in this sense.

(END VIDEO CLIP)

GALLAGHER: Now, certainly, white applicants have many times challenged affirmative action in college admissions. This case is unique because the minority group is at the center of the fight. And we should note that Trump administration joined this lawsuit back in August.

Expert say the trial should last about three weeks and the verdict will likely appealed to the First Circuit Court and there it could possibly go to the Supreme Court. Remember, Justice Brett Kavanaugh replaces Justice Anthony Kennedy. It was Kennedy who wrote the majority opinion upholding the University of Texas' affirmative action program back in 2016, much different court to go years later.

MACCALLUM: Yeah. There was a white student who said she was discriminated against at the University of Texas and she won that. Interesting to note that Judge Kavanaugh's involvement in that. Trace, thank you so much.

So, I'm joined on the set by Judge Andrew Napolitano, Fox News Senior Judicial Analyst, and Susan Li, Fox Business Network correspondent covering this case. Good to have both of you here. Susan, what do you think about Harvard's case?

SUSAN LI, FOX BUSINESS NETWORK CORRESPONDENT: I think it was (inaudible) hearing some of the comments from Trace Gallagher's report. But look, it's no surprise that Asian parents drive their children to academic excellence as far as education principles. It's the foundation of Asian culture. And that means in order to earn a respect from your parents, from your family, and even to earn a respectable place in society, you have to excel when it comes to school. And so, in this case, I would say that on balance most people I've spoken to in the Asian communities think that there is discrimination.

MACCALLUM: Judge, what do you make of this case?

ANDREW NAPOLITANO, FOX NEWS SENIOR JUDICIAL ANALYST: It's a case the Supreme Court doesn't want. Both of the University of Texas' cases though the point of deed win them, should never ended up at the University of Texas and the guidelines that were sent down were a little ambiguous. So, maybe the universities in the country do need some firm guidelines. It'll be a couple of years before it gets to that.

MACCALLUM: I mean as far -- when you think about this because affirmative action was supposed to create some more diversity on college campuses, right?

NAPOLITANO: Correct.

MACCALLUM: So now, it's like, well, all these Asian students are doing so well that they are taking up too much space? Back off while we make room for some of these other groups.

NAPOLITANO: Well, the math demonstrates that if you -- if you take a seat away from a qualified person because of their race in order to give it to someone else, there is a winner and there is a loser. And if the loser is actually more academically qualified than the winner, how are they going to testify that?

Well, the courts have said that race may be taken into account as long as it's one of many factors. It can't be the dispositive factor and it can't be the factor they weighed the heaviest, but they may take it into account.

MACCALLUM: All right. Now, what about the question of it being a private institution and why do they have to answer to who they let in and who they don't because we know they taken a lot of legacy students, they take athletes?

LI: Sure.

MACCALLUM: They take -- I mean, you know, the mix is more about that perhaps than --

LI: But the internal research shows that if you are a faculty member, the offspring of a faculty member, you have 50 percent --

MACCALLUM: Fifty percent --and the admission rate is what, like, nine or something?

LI: Right. If you recruit athlete, over 80 percent. And even if you're a child of an alumni, it's over 33 percent, which is probably better than what you're doing as an Asian-American student, just close to 25 percent acceptance.

NAPOLITANO: So, to answer your question, the Supreme Court cases that we're talking about the University of Texas, which is owned by the state --

LI: Right.

NAPOLITANO: -- and the state government has to -- cannot apply to this.

LI: So, this is different.

NAPOLITANO: This is a private university. But in 2017 alone, received over $600 million in federal dollars. They have 30 billion --

LI: They don't need any money from the federal government.

NAPOLITANO: -- 30 billion in cash in the bank and they got 600 million from the feds. When they accepted that 600 million, they agreed they would not discriminate on the basis of race as one of many conditions.

MACCALLUM: So, if they turned on the money in the future, they would have less of an argument. They can probably do what they want.

NAPOLITANO: Correct. Can you see them turning down that kind of money?

MACCALLUM: Well, they have so much money, Judge.

LI: They don't need any more.

MACCALLUM: They don't need federal dollars probably in Harvard. Do you think that race should be completely removed from the equation so that nobody checks any boxes and they only look at your numbers and qualifications?

LI: I would agree. I think from the Asian-American cultural perspective, it should be a meritocracy, meaning it should be based on your academic scores, your extracurricular activities and nothing ambiguous like my personality, which is so subjective. I mean courage, bravery, the things that Asian-American students lack at, it's insulting.

NAPOLITANO: It is insulting to ascribe to everyone the attributes of one or two just because you are in the same group, absolutely insulting, but it's a private university and they're allowed to insult. They are to the government.

MACCALLUM: I'm going to be watching this. Thank you so much. Great to see both of you tonight.

So, remember Democrats were in disarray after Hillary Clinton's shocking defeat in 2016. Now some high-profile members of the party say that they are worried that it could happen again in the midterms. Ben Shapiro up next on that. And the breaking Stormy Daniels news, not a great night for Michael Avenatti, next.

(COMMERCIAL BREAK)

MACCALLUM: Only 22 more days till the midterm elections and fears of a 2016 repeat are creeping in for Democrats to some extent, while Democratic enthusiasm remains high. The party leads in the generic congressional ballot. I think at about 7 percent is the average number of the lead for the Democrats right now. But a recent report from McCalatchy cautions nervous Democrats ask could election day disaster strike again.

Here is now Ben Shapiro, editor-in-chief of the dailywire.com, just finished four weeks of election specials on Fox News. Ben, good to see you as always. Thanks for being here tonight. You've been looking at this very closely over the past few weeks. Do you think their fears are justified?

BEN SHAPIRO, EDITOR IN CHIEF, DAILYWIRE.COM: I mean, certainly, there's a reason to be afraid. There are polls that came out in battleground districts showing the Republicans are running basically even with Democrats in an enormous battleground districts. Those, of course, would be the district that were very competitive between President Trump and Hillary Clinton.

What looks -- the map looks to me as though the red areas are getting redder and the blue areas are getting bluer and the purple areas are getting more purple. So, what that suggest is that this is not going to be a walk in the park for Democrats the way the Democrats thought it was going to be even a few weeks ago, but I'm not sure that leading into a heavily contested midterm election you want your going away message to be, we don't like due process with Justice Kavanaugh and also we're not really sort of native American with Elizabeth Warren. Those don't seem like two great take away messages.

MACCALLUM: You know, it's also interesting to me that they are very fired up about their electoral college and about the fact that every state gets to send two senators to the United States Senate. And that tells me that they're worried that, you know, as they look forward in history -- as they look forward, it doesn't look good for them, the composition of the country.

SHAPIRO: Certainly not in the Senate and also in the Electoral College, because, again, states are slightly outweighing population centers in the Electoral College. Democrats -- it's very funny. After 2016, we kept hearing over and over from Democrats who thought Hillary was going to win it. President Trump needs to accept the results of the election.

So far, we have heard from 2016 that we need to change the constituency of the Senate, abolish the Supreme Court, abolish the Electoral College, abolish ICE. So, I get the feeling that acceptance is not in the cards anytime soon here.

MACCALLUM: All right. You know, Hillary Clinton is obviously spending a lot of time back in the limelight again, which is raising questions about whether or not she is potentially even considering running again. There was one op-ed that was arguing that she might -- that three times might be the charm for Hillary Clinton. She also is getting probably more attention than some Democrats would like at this juncture in the election with comments like this. Let's watch this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: In retrospect, do you think Bill should've resigned in the wake of the Monica Lewinsky scandal?

HILLARY CLINTON, FORMER FIRST LADY: Absolutely not.

UNIDENTIFIED MALE: It wasn't an abuse of power?

CLINTON: No. No.

UNIDENTIFIED MALE: There are people who look at the incidence of the 90s and a president of the United States cannot have a consensual relationship with and intern, the power imbalance is --

CLINTON: She was an adult.

(END VIDEO CLIP)

MACCALLUM: She was an adult. She didn't seem to like that line of questioning and I can't say I really blame her. It's pretty uncomfortable. She was an adult is her argument in the -- for the pre-Me Too experience of Bill Clinton.

SHAPIRO: I definitely am enjoying watching the gold post move at leg speed around the few things the Democrats deciding they can sense does have power relationships attached. It doesn't have power relationships attached. Perjury is sometimes good, sometimes fitting (ph) about sex is bad. It seems to depend on the day and mostly it depends on whom they are defending. So, Hillary Clinton making life a nightmare once again for her Democratic colleagues who must be wishing at this point that they could somehow wish her cornfield.

MACCALLUM: All right. I do want to get your thoughts on this because it just broke tonight. This is -- Michael Avenatti will now have to pay Donald Trump -- President Donald Trump's legal fees for the Stormy Daniels case, which is fell apart.

Here is the quote from President Trump's attorney on this. He says, "no amount of spin or commentary by Stormy Daniels or her lawyer, Mr. Avenatti, can truthfully characterize today's ruling in any way other than the total victory for President Trump and total defeat for Stormy Daniels." Rough couple of weeks for Michael Avenatti, Ben.

SHAPIRO: Michael Avenatti, who was my entertaining frontrunner for 2020, I was really looking forward to Michael Avenatti making the play in the Democratic primaries. I have to say that at this point Michael Avenatti is much of a good lawyer as Elizabeth Warren is a Native American.

MACCALLUM: I mean he was campaigning as early as this weekend in South Carolina. It will be interesting to see. You did call for, I think, on his show when all -- when he first got on the scene saying that you really hoped he would run for president, Ben.

SHAPIRO: I did and I still do because this is highly, highly entertaining stuff. But again, he is 1/1024th of a decent lawyer because this was not a good case to bring in the first place. And now, he's been humiliated a couple of times in three weeks.

MACCALLUM: Twenty seconds, but I just -- do you think that the Harvard case will overturn affirmative action?

SHAPIRO: You know, I would like to see it do so but, again, Harvard is a private institution, not a public institution. At the very least, Harvard is widely hypocritical for talking about diversity while banning essentially Asian students.

MACCALLUM: Ben Shapiro, always a pleasure. Great to see you, Ben. Thanks a lot.

SHAPIRO: Thanks a lot.

MACCALLUM: so, coming up next, the end of an era in America as the store that shaped the country for generations goes bust.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: So Sears Roebuck when I was growing up was the big deal. Somebody is to buy generation. Sears Roebuck was a big deal. So, it's very sad to see.

(END VIDEO CLIP)

MACCALLUM: You heard the president. Sears, the store whose business model in many ways reshaped the country, especially rural America, giving access to things he didn't have access to before that, said today they will file for bankruptcy. They're closing 142 stores by the end of the year. Not news not much of a surprise in a world that revolves around e-commerce. That wasn't always the case. Ask anybody over the age of 30 and they probably have a story about a trip to their local Sears or getting that big fat catalog in the mail and picking out Christmas toys or even a new refrigerator.

It was founded in 1892 and it became famous for connecting rural shoppers to the goods that they had the big cities basically, brands like Kenmore and CRAFTSMAN Tools. Back in the day, it was a staple on network TV.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Put an end to traffic fears, it's very easy to get to Sears.

See this 19-inch colored TV, you get a lot more than one button color.

(END VIDEO CLIP)

MACCALLUM: Chris Stirewalt takes a trip down memory lane. Hi, Chris.

CHRIS STIREWALT, FOX NEWS POLITICS EDITOR: How are you, Ma'am?

MACCALLUM: What did Sears mean to you, sir, growing up in West Virginia?

STIREWALT: Well, I remember when I was a young reporter, Robert Seabird, his eminence, when he was on the campaign trail, he would say, there are three things West Virginians can count on, Carter's little liver pills, the Sears and Roebuck Company, and Robert Seabird. And we would scoffed. We thought it was pretty corny, young reporters.

But you know what? For a lot of the older folks listening to him, he was not far off. Because if you lived in a remote part of the United States, if you lived and holler (ph) in Raleigh County, West Virginia, that catalog was your connection to the American promise in a lot of ways.

And then Sears to did again. They revolutionized it two times. Once, they kept rural America connected to the fast growing urban America and what was going on there. But then, after World War II, their competitors thought that we're going to be in a deep recession, that the depression was really still there and lurking behind everything.

But you know what they did? They invested huge sums and took a giant bet on what would eventually become the malls that we know. They re-made America retail again because they went out to the sticks, they went out into the suburbs, and they planted the flag about these big stores and changed everything a second time. And it -- I tell you what? It's part of my life, especially growing up where I grew up. The Sears catalog was a big deal.

MACCALLUM: Yeah. You know, when you think about it -- and I didn't know until I read today that hundreds of thousands of houses were built from Sears kit boxes essentially.

STIREWALT: Oh, yeah.

MACCALLUM: And some of those neighborhoods they still exist. But when you think about it, they wear the Amazon of their day or the Walmart before Amazon of their day because they brought all of this access to places where they just had such limited access and the little shops that they might have on their main street.

STIREWALT: They didn't have any little shops on the main street. In my grandfather's hometown, they had one general store and there was not a lot of choice. Now, he, of course, claimed that before the Sharman Bayers (ph) got into the woods, that they even used the used catalogs in the outhouse. So, I don't know if Amazon will ever be able to live up to that promise. I don't know if they will ever do that.

MACCALLUM: I don't know if we'll be able to get that image out of heads. But you know --

STIREWALT: I'm just telling. But Amazon is doing now what Sears did before. That's the way -- that's the way the world goes.

MACCALLUM: It's like the horse and buggy. And it is a -- it's sad and it is definitely the end of an era, but they were $5.5 billion in debt. As a business reporter, I watched Sears try to reinvent itself over the past 20 years so many times. And you know, they -- it was just impossible, sadly.

STIREWALT: When you get to that kind of debt, you're talking about federal government debt. Only the government is allowed to rack up debt that big.

MACCALLUM: And unfortunately, they were not deemed too big to fail apparently --

STIREWALT: That's right.

MACCALLUM: -- because the government did not sweep in and get them. You know, it's just -- I mean we do live in such a different world now. I mean, Amazon, you know, it's almost like people who use the Sears catalog to buy things that they couldn't get. Now, everybody buys everything on Amazon. It's just -- I wonder if Amazon will go bankrupt when our kids are growing up.

STIREWALT: One day somebody will invent something better than Amazon and then they'll go bankrupt and then my grandkids could come onto television or whatever --

(CROSSTALK)

STIREWALT: -- and talk about, "My dad used to go on Amazon and he says goodbye now." It was adorable.

MACCALLUM: All right. Thanks for the catalog once used (ph). Chris Stirewalt, always good to see you, my friend.

STIREWALT: You bet.

MACCALLUM: Thank you. So that is our story on this Monday night. Tweet me @marthamaccallum using the #thestory. Let us know what you think. We'll be back here tomorrow night at 7 o'clock. Our good friend, Tucker Carlson is standing by at Washington, D.C. ready with an action-packed hour and he will -- he will join you right after this. Good night, everybody.
 
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