AG Lynch Defends Meeting with President Clinton; War on Terror; Joint Base Andrews Lockdown False Alarm; Military Transgender Ban Lifted;

SPECIAL-REPORT-WI-01

REPORT-WI-01

Joint Base Andrews Lockdown False Alarm; Military Transgender Ban Lifted;

Trump Talks Trade; FEC Held Vote on Legality of One of FOX News' Republican

Debates - Part 1>

Peter Doocy, Doug McKelway, Charles Krauthammer, A.B. Stoddard, Charles

Hurt>

Bill Clinton; FEC; Republicans; Terrorism; Defense; Trade>

BRET BAIER, FOX NEWS CHIEF WASHINGTON CORRESPONDENT: This is a Fox News alert. Good evening. Welcome to Washington. I'm Bret Baier.

New calls tonight for an investigation for the attorney general to recuse herself in the e-mail investigation and to step down even -- all of this over a meeting between former President Bill Clinton and Attorney General Loretta Lynch. The meeting Monday in Phoenix comes as the FBI investigates whether Clinton mishandled sensitive information with her unusual e-mail setup, as well as an investigation into her connection with the Clinton Foundation.

As correspondent Jennifer Griffin joins us now with more on the reaction to what Lynch an impromptu meeting. Good evening -- Jennifer.

JENNIFER GRIFFIN, FOX NEWS CORRESPONDENT: Good evening -- Bret.

The revelations have raised eyebrows across the aisle, in spite of Attorney General Loretta Lynch's denial that she and Bill Clinton ever discussed the ongoing FBI investigation.

(BEGIN VIDEO CLIP)

LORETTA LYNCH, U.S. ATTORNEY GENERAL: Our conversation was a great deal about his grandchildren. It was primarily social and about our travels. But there was no discussion of any matter pending before the department or any matter pending before any other body. There was no discussion of Benghazi. No discussion of the State Department e-mails by way of example.

(END VIDEO CLIP)

GRIFFIN: The conservative legal watch dog Judicial Watch today requested the Department of Justice inspector general investigate the meeting. Lynch will ultimately be one of the key U.S. officials to decide whether or not to indict Secretary Clinton once the FBI investigation concludes.

Both the White House and the Republican presumptive nominee responded to news of the meeting.

(BEGIN VIDEO CLIP)

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: The President's view is that this is an investigation that should be conducted free of any sort of political interference. And the attorney general has indicated that's exactly her expectation, as well.

DONALD TRUMP (D), PRESIDENTIAL CANDIDATE: When I first heard that yesterday afternoon, I actually thought they were joking. I am just flabbergasted by it. I think it's amazing. I've never seen anything like that before.

(END VIDEO CLIP)

GRIFFIN: Even Democrats like Senator Chris Coons and President Obama's former strategist David Axelrod question the wisdom of such a meeting. Quote, "I take @LorettaLynch and @BillClinton at their word that their conversation in Phoenix didn't touch on probe. But foolish to create such optics."

Fox has also confirmed separately the Justice Department filed a motion late yesterday on behalf of the State Department, seeking a 27-month delay in producing correspondence between former Clinton State Department aides and the Clinton Foundation. The number of potentially relevant documents and e-mails has grown to more than 34,000 we've learned. The State Department explained today that it is inundated with FOIA requests and that the requests from the Justice Department is not political -- Bret.

BAIER: So Jennifer -- they're just saying it has to do with FOIA and an over backlog and there's no connection with these meetings or anything else?

GRIFFIN: That's what they say.

BAIER: Jennifer -- thank you.

Turning now overseas to what administration critics are calling one step forward, one step back. A significant coalition air strike, killing hundreds of ISIS fighters in Iraq touted by the White House today, while another horrific terrorist attack in Afghanistan raises questions about the way forward there.

Correspondent Kevin Corke reports from the White House.

(BEGIN VIDEOTAPE)

KEVIN CORKE, FOX NEWS CORRESPONDENT: White House officials seemed almost eager to share the details about the air strike that leveled two ISIS convoys leaving the Iraqi city of Fallujah over two days.

EARNEST: I think it's a pretty substantial indication of the kind of pressure that ISIL is under and the success that we're having in developing targets and acting against them in short order.

CORKE: Led by Iraqi security forces the air strikes killed upwards of 250 militants and destroyed about 175 vehicles and comes just days after the Iraqi military announced that its troops had seized Fallujah from ISIS, a strategic success as coalition forces prepare to attack another insurgent stronghold Mosul.

This as the U.N. Children's Fund, UNICEF warned that 3.6 million Iraqi children are at serious risk of death, injury and sexual violence. A startling statistic and sobering reminder that there is unimaginable pain and suffering amid small successes.

In Afghanistan the situation on the ground has worsened. Taliban militants launched an attack on an Afghan police cadet convoy killing at least 30 people and wounding 50 more, even targeting those who came to help the injured. Proof, say experts, that the administration's plans for the region are only making marginal gains at best.

JIM HANSON, CENTER FOR SECURITY POLICY: Right now the administration would like to have you believe that the Iraqis have stepped up and are taking control of operations in Iraq, and that the Afghan government is conducting a more positive control of their theater of operations. I think both of those are a lot more talking point and a lot less solidified.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We will destroy the terrorist group ISIL. We will destroy them.

CORKE: President Obama, in Canada yesterday for the North American Leaders Summit, touted coalition cooperation in the fight against ISIS. But even as he looks forward to his planned trip to the NATO summit in Poland next week, the White House acknowledges whether against ISIS or the Taliban in Iraq, Syria, or Afghanistan there certainly will be more setbacks to come.

EARNEST: I think it's an indication, something that we have long acknowledged, which is that the security situation in Afghanistan is quite difficult, particularly in the fighting season.

(END VIDEOTAPE)

CORKE: More reaction, Bret, to that devastating attack by ISIS in Afghanistan -- of the Taliban I should say. This from Brig. Gen. Charles Cleveland. He said quote, "The Taliban have once again shown a total disregard for human life and their increased use of explosive devices, in particular the IEDs, are taking a very heavy toll on the Afghan people." Truer words were never spoken -- Bret.

BAIER: Kevin Corke, live on the north lawn. Kevin -- thank you.

We are learning more tonight about the three attackers in Tuesday's deadly suicide bombings at that airport Istanbul, Turkey. An attack the Turkish government now believes was carried out by ISIS.

Police in Turkey have rounded up 13 suspects so far that they believe are linked to that terror group. This as the death toll rose today to 44.

Correspondent John Huddy reports on the investigation. A warning: if you have small children in the room, this story contains graphic video.

(BEGIN VIDEOTAPE)

JOHN HUDDY, FOX NEWS CORRESPONDENT: Newly released surveillance video shows haunting images of the attackers opening fire in the airport as people scramble for their lives. In one shot, the gunman opens fire at point blank range on a plainclothes officer.

And tonight we're learning more about the terrorists. Turkish officials say they were from Russia and the former Soviet republics of Uzbekistan and Kyrgyzstan. We don't know their names or whether or not they lived in Turkey or traveled here, either together or separately from another country or countries. But what we do know is they were intent on killing as many people as possible.

Turkish police rounded up at least 13 suspects in connection with the attack during raids overnight Wednesday. Officials say firearms and other weapons were found, along with documentation linked to ISIS.

(BEGIN VIDEO CLIP)

EFKAN ALA, TURKISH INTERIOR MINISTER (through translator): The evidence, documents and findings we have obtained corroborates the prediction that this attack was carried out by ISIS. The findings points to them but this will be declared officially once the investigation is completed.

(END VIDEO CLIP)

HUDDY: Funerals were held for the 44 victims who lost their lives while more than 100 people remain hospitalized.

I'm standing on the second floor of the airport, the departure's hall where a memorial has been setup, the pictures of some of the victims and a table covered with roses.

Wednesday, Russian president Vladamir Putin spoke with Turkish President Recep Erdogan by phone offering his condolences and discussing the resumption of diplomatic relations.

And it was the first time that both leaders have spoken since Turkey shot down a Russian fighter jet last year. And the question now is if the attacker's nationalities from Russia and two former Soviet republics will once again strain relations between both leaders and both countries -- Bret.

BAIER: John Huddy, outside that airport in Istanbul. John -- thank you.

Our own Eric Shawn sat down with Israeli Prime Minister Benjamin Netanyahu following the terror attack in Turkey and asked how he would fight this growing threat.

(BEGIN VIDEO CLIP)

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: Go to the source. Hit the source. There is a center.

ERIC SHAWN, FOX NEWS CORRESPONDENT: And by that you mean bomb Raqqa, take more aggressive action against the Islamic state?

NETANYAHU: Definitely take more aggressive reaction against the Islamic state. I have more detailed descriptions which I share with our American allies and others.

SHAWN: And those are?

NETANYAHU: Share it with our American allies and others.

(END VIDEO CLIP)

BAIER: We'll have more of Eric Shawn's interview with the Israeli prime minister Monday, July Fourth.

On Capitol Hill today, Texas senator and former Republican presidential candidate Ted Cruz asked Homeland Security Secretary Jeh Johnson whether his department had scrubbed its literature of all references to radical Islamic terrorism.

(BEGIN VIDEO CLIP)

SEN. TED CRUZ (R), TEXAS: Is it accurate that the records were changed --

JEH JOHNSON, SECRETARY OF HOMELAND SECURITY: Same answer I gave you before. I have no idea, sir.

CRUZ: Would it concern you if it was accurate?

JOHNSON: Senator, I find this whole debate to be very interesting. But I have to tell you when I was at the Department of Defense, giving the legal signoff on a lot of drone strikes, I didn't particularly care whether the baseball card said Islamic extremist or non-extremist.

(END VIDEO CLIP)

BAIER: Johnson also said that giving the Islamic state the credence they want as part of Islam will harm efforts to build bridges to Muslim communities.

More than 10,000 Syrian refugees will soon be resettled here in the U.S. The Homeland Security Secretary saying today he believes the resettlements will be done this year. Johnson said that approximately 5,000 refugees have already been approved. And up to 6,000 more will be approved pending security checks.

A classic case of miscommunication and a nation on edge. This morning, word of an active shooter at Joint Base Andrews outside Washington put the base on lockdown, delayed the Vice President's trip to Ohio and sent the media, including Fox News, scrambling. Later we learned it was a false alarm. And this incident is not the first time.

Chief intelligence correspondent Catherine Herridge reports.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: We got some breaking news crossing right now.

CATHERINE HERRIDGE, FOX NEWS CHIEF INTELLIGENCE CORRESPONDENT: It was wall-to-wall coverage on the three cable networks. An active shooter was reported at Maryland's Andrews Air Force base, a short distance from where Air Force One is stationed. The news reached Capitol Hill and the Homeland Security Secretary explained what he knew in real time.

JOHNSON: We do have, as reflected on the news, an unfolding situation at Andrews Airbase which may require that I take a break from this session. And I hope you won't mind if I need to do that -- Chairman

HERRIDGE: 70 minutes after the base sent out this tweet about a lockdown, the base's media office said an emergency drill was planned but not publicized. Adding to the confusion, a base employee saw two officers with guns and followed the "see something, say something" campaign. At the Pentagon, the Defense Secretary said the system worked.

ASHTON CARTER, U.S. SECRETARY OF DEFENSE: I thought the response was strong and solid. So that's the good news. The bad news is it appears to have been a mistake and we would like to reduce the number of mistakes.

HERRIDGE: It's not the first time a training exercise was confused with the real thing. In 2009, a Coast Guard drill was mistaken for a direct threat to the President, who was at the Pentagon for the September 11 commemorations. Earlier that year, nerves were frayed in New York City when Air Force One escorted by an F-16 circled the Statue of Liberty to get a picture.

After the terror threat by three suicide bombers at the Turkish airport, the Andrews incident shows the public is still on edge, as the holiday weekend approaches.

JOHNSON: We're concerned and focused generally on public events and public places across the nation.

(END VIDEOTAPE)

HERRIDGE: While there's no specific or credible intelligence in advance of July Fourth, the threat level was high even before the ISIS-inspired attack in Orlando and what appears to be an ISIS-directed plot in Turkey. Secretary Johnson is considering whether to extend airport security perimeters on a more permanent basis -- Bret.

BAIER: Catherine -- thanks.

HERRIDGE: You're welcome.

BAIER: A navy report released today lays out a long list of mistakes made in Iran's capture of ten U.S. sailors who were then detained by Iran in the Persian Gulf in January. Among those mistakes, both captains and crews, irresponsible in performing their duties, including one sailor who made statements quote, "detrimental to the U.S. while in captivity".

Some of the Navy sailors also gave up their passwords to their laptops, cell phones and sensitive data about their ships to their Iranian captors. Nine individuals -- six officers and three enlisted sailors -- have been disciplined or face discipline in this incident. The Navy also said Iran violated international law by impeding the boat's passage.

Earlier today, Senate Armed Services Committee chairman John McCain took issue with Secretary of State John Kerry's gratitude towards the captors following the release of the sailors.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: The Secretary of State, who was once a naval officer himself, thanked the Iranians for gross violation of law, putting American servicemen on their knees with their hands clasped behind their neck, and he thanked them? That's one of the most insulting things that I have ever heard said about the United States Navy.

(END VIDEO CLIP)

BAIER: One of the last bans on service in the military has been lifted. Defense Secretary Ash Carter announced today that transgender people will be allowed to serve openly in the U.S. military saying it's the right thing to do.

Under the new policy, transgender troops already serving will be able to receive medical care and change their gender identifications in the personnel system. Transgender individuals will be able to enlist a year from now. Some members of the Senate Armed Services Committee say they were not informed of this policy change.

Up next, Trump returns to the state that started his wave of primary wins.

First, here's what some of our Fox affiliates around the country are covering tonight.

Fox 40 in Sacramento where voters will get to decide once again whether to legalize recreational pot use this November, after an initiative got more than enough signatures to place on the ballot. The last time legalizing pot went up for a vote was in 2010 when it was defeated by a 7 percent margin.

Fox 5 in Atlanta where an aluminum plant has resumed partial operations one day after an explosion injured five workers. The blast Wednesday morning in Newnan rocked buildings up to a mile away according to witnesses. The company said the explosion was contained to one area. The cause is still under investigation.

And this is a live look at Miami from our affiliate Fox 7. The big story there tonight a record breaking seizure of drug money by Miami Dade police. Police say they found $24 million in cash stored in these buckets behind dry wall during a home raid Wednesday. Two people have been arrested.

That's tonight's live look outside the Beltway from SPECIAL REPORT. We'll be right back.

(COMMERCIAL BREAK)

BAIER: Donald Trump continued his northeast tour today with a stop in New Hampshire, the state that gave him his first primary victory, of course. The GOP's presidential nominee continues to rail against the President's trade policies but as correspondent Peter Doocy reports, Democrats are hitting right back.

(BEGIN VIDEOTAPE)

PETER DOOCY, FOX NEWS CORRESPONDENT: Today, Donald Trump stood in the loading dock of an Asram Silvania light bulb plant that shut down two years ago putting nearly 200 people out of work with a promise that as president scenes like this will be distant memories.

DONALD TRUMP (R), PRESIDENTIAL CANDIDATE: Regional job losses have been fantastically poor, fantastically bad and disgraceful. New Hampshire has lost 31 percent of their manufacturing jobs since NAFTA. Just think of that.

DOOCY: So Trump is talking more and more about the economy. And the economy is something more and more voters are worried about, with 84 percent in the new Fox News poll saying they are extremely or very concerned about it, 6 percent higher than last year.

Trump tells Fox News he thinks the number one reason he continues to drop big crowds is because of his position against international trade deals.

TRUMP: I want to put our people to work, Peter. We have to put our people to work. The trade deals are ripping our jobs apart. They're ripping our country apart. I've got it, I understand it. You see the crowds I'm getting. Nobody has crowds like we have. And it's about, really I think in this case, trade.

DOOCY: But one New Hampshire politician and Hillary Clinton backer said on a Clinton campaign conference call today that Trump is part of the problem, and that quote, "The outsourcing of jobs devastated the part of New Hampshire that I represent in the state senate because of entrepreneurs like Donald Trump who were squarely focused on making a profit, entire communities were decimated."

Lawmakers here aren't the only ones chattering about Trump. In Canada, members of parliament chanted four more years after President Obama laid into the Republican north of the border.

OBAMA: And politicians, some sincere and some entirely cynical, will tap that anger and fear harkening back to bygone days of order and predictability and national glory, arguing that we must rebuild walls and disengage from a chaotic world. Or rid ourselves of the supposed ills brought on by immigrants.

(END VIDEOTAPE)

DOOCY: Here in Manchester, today's event was a lot different than a typical Trump rally, because it was designed to be a lot smaller. Just about 200 people in the house, everybody had to be invited. And some even got to ask questions at the end. When you talked to staffers and people around the campaign, they seemed to think that format worked well for their candidate. So we may soon see some more of these more intimate events for the Republican this summer -- Bret.

BAIER: Peter -- thank you.

Well it's not Donald Trump or even Bernie Sanders, but Hillary Clinton may have a new foe in the race for the White House and her name is Jill Stein. She's running as a Green Party candidate. And while her chances of being elected president are very slim, as correspondent Doug McKelway reports, her mere presence in the race could be detrimental to Clinton.

(BEGIN VIDEOTAPE)

DOUG MCKELWAY, FOX NEWS CORRESPONDENT: Never heard of Green party presidential candidate Jill Stein? She's polling at about 5 percent and looks like a long shot at becoming president. But that's not what makes her noteworthy.

LARRY SABATO, UNIVERSITY OF VIRGINIA: All we need to do is remember 2000, when Ralph Nader as the Green Party candidate, got just 2.7 percent of the vote nationally and literally switched the presidency from Al Gore to George W. Bush.

MCKELWAY: Stein is poised as a potential giant killer to Hillary Clinton especially with the electorate closely divided. The rise of Bernie Sanders on the left and Donald Trump on the right reflects a hunger for upheaval. With Sanders saying he plans to vote for Clinton in November, his legions of young supporters may find Stein an appealing alternative.

JILL STEIN, GREEN PARTY: About half of Bernie supporters have reduced to go back into the Democratic Party. In fact more than half of Hillary supporters don't actually support Hillary. They're just opposing Trump. And the same is true for Trump supporters.

MCKELWAY: Stein's positions closely mirror those of Sanders. One of her ads appears to be an overt appeal to his supporters.

STEIN: You didn't want the meltdown of the climate. You didn't want the massive Wall Street bailouts. You didn't want the off-shoring of our jobs.

MCKELWAY: But Stein has to crack the 15 percent polling threshold to get on the national debate stage alongside Clinton and Trump.

Libertarian Gary Johnson faces the same dilemma. He was at 10 percent in the latest Fox News poll and is having better success than Stein.

GARY JOHNSON, LIBERTARIAN: "Investors Business Daily" this afternoon came out with a new poll at 11 percent which is really very heartening. The only chance we have of winning is to be in the Presidential debates.

(END VIDEOTAPE)

MCKELWAY: The political restlessness that presents an opportunity for Stein also poses a liability. One of the reasons Britain has voted to exit the European Union is the cost of energy has skyrocketed there in recent years largely because of E.U. mandates for more expensive green energies -- a mandate that Stein's Green Party in U.S. wants to impose here, too -- Bret.

BAIER: Doug -- thank you.

Up next, how the first Republican debate of the campaign season almost led to the government punishing Fox News. We'll explain.

(COMMERCIAL BREAK)

BAIER: A nine-month wave of violence in Israel claims its youngest victim. Police say a Palestinian teenager snuck into a Jewish settlement Thursday and stabbed a 13-year-old American girl as she slept in her bed. The State Department called the killing unconscionable today.

Speculation is reaching a fever pitch in Great Britain. Who will be the next prime minister of Britain? All the questions after in a surprise twist, the runaway favorite pulled out of the race today.

(BEGIN VIDEO CLIP)

BORIS JOHNSON, FORMER MAYOR OF LONDON: Having consulted colleagues and in view of the circumstances in Parliament, I have concluded that person cannot be me.

(END VIDEO CLIP)

BAIER: Former London mayor, Boris Johnson announced he would not run to replace David Cameron who announced last week he would be stepping down later this year following Britain's vote to exit the European Union. Johnson was one of the leading voices in the Brexit campaign and was favored to replace Cameron.

Third straight day back here in the U.S. with a big jump for the markets. The Dow rose 235 today, finishing the day only 100 points down from the first trading day after that Brexit vote. The S&P 500 was up 28 today. The NASDAQ grew 63.

A partisan vote uncovered that raises questions about what happens when politics play a role in media. FOX News media analyst and host of FOX's "Media Buzz" Howard Kurtz reports on an eye-opening vote that could have punished FOX News over a presidential debate.

(BEGIN VIDEOTAPE)

HOWARD KURTZ, FOX NEWS MEDIA ANALYST: It began as an effort by FOX News to include more presidential candidates in a televised debate and wound up with the FEC's three Democrats accusing the network of breaking the law. But the charges were blocked by the three Republican members of the Federal Election Commission in closed door votes a month ago that became public yesterday.

LEE GOODMAN, (R) FEDERAL ELECTION COMMISSION: I think it's dangerous any time someone tries to use the power of the federal government to second guess, regulate, and even punish newsroom editorial decisions.

KURTZ: After limiting the first primetime debate last August to the top 10 GOP candidates as determined by national polling, FOX decided to add an undercard debate for the other seven major candidates.

UNIDENTIFIED MALE: Welcome to Cleveland, Ohio. It is debate night.

KURTZ: That, the Democratic commissioner said, amounted to an illegal corporate contribution to those candidates. The case involved a complaint from little known GOP presidential candidate Mark Everson, a former IRS commissioner who wanted to be on the Cleveland debate stage. It's unusual because the FEC operates under a press exemption to protect journalistic independence, raising the question of whether FOX News was being targeted. CNN, after all, later changed its debate criteria to include Carly Fiorina in a primetime debate. Republican Commissioner Lee Goodman.

GOODMAN: Here we have a statute that tells us we have no regulatory jurisdiction over news and news coverage. And yet the FEC persists in trying to regulate and, in this case, there were votes that came very close to punishing FOX News for engaging in news coverage.

KURTZ: Democratic Commissioner Ellen Weintraub voted that FOX violated the law but that the case should be dropped based on prosecutorial discretion.

EILEEN WEINTRAUB, (D) FEDERAL ELECTION COMMISSION: I voted to dismiss the complaint. I did not vote in any way to punish FOX News.

KURTZ: But in 1980, the FEC did pressure a New Hampshire newspaper into dropping its debate sponsorship, producing this memorable moment.

RONALD REAGAN, FORMER U.S. PRESIDENT: I am paying for this microphone.

(APPLAUSE)

(END VIDEO CLIP)

KURTZ: The commission could have imposed a potentially massive fine against FOX. The question now is whether the probe will have a chilling effect on news organizations staging future debates.

BAIER: Howie, thanks.

Relief is on the way for Puerto Rico. This afternoon President Obama signed a bill to help the financially strapped U.S. territory, calling it a step in the right direction, though not perfect. The rescue package will oversee Puerto Rico's finances and debt restructuring. Puerto Rico is $70 billion in debt with nearly $2 billion in payments due Friday. Despite that help, Puerto Rico's government says it still expects to default on some of those debt payments.

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