Schools Fear Gay Marriage Ruling Could End Tax Exemptions

Abstract: Conservative religious schools all over the country forbid same-sex relationships, from dating to couples’ living in married-student housing, and they fear they will soon be forced to make a wrenching choice. If the Supreme Court this month finds a constitutional right to same-sex marriage , the schools say they will have to abandon their policies that prohibit gay relationships or eventually risk losing their tax-exempt status. The religious schools are concerned that if they continue to ban gay relationships, the Internal Revenue Service could take away their tax-exempt status as a violation of a “fundamental national public policy” under the reasoning of a 1983 Supreme Court decision that allowed the agency to revoke the tax-exempt status of schools that banned interracial relationships. In a recent letter to congressional leaders, officials from more than 70 schools, including Catholic high schools and evangelical colleges, said that a Supreme Court ruling approving same-sex marriage would put at risk all schools “adhering to traditional religious and moral values.” “I am concerned, and I think I’d be remiss, if not naïve, to be otherwise,” said Everett Piper, the president of Oklahoma Wesleyan University, in Bartlesville. “This is not alarmist thinking. This is rational listening.” The spreading anxiety among conservatives — including Senator Rand Paul, who mentioned the issue in an interview on “The Daily Show” last month — hints at the potential effect of a Supreme Court decision backing the right to same-sex marriage, especially for religious institutions that forbid sexual intimacy outside heterosexual marriage. It also highlights the political battles likely to follow. Married housing is one concern identified in the letter. Dating policies prohibiting same-sex contact are another, along with questions about whether religious institutions would have to extend benefits to same-sex spouses of employees. Legal scholars said the scenario of schools’ and charities’ losing their tax-exempt status over their policies on these issues was unlikely — especially in the short term. But they did not rule it out, based on previous civil rights cases and an exchange during Supreme Court arguments in April on whether the Constitution guarantees same-sex couples the right to marry. Image Bob Jones University in Greenville, S.C. In a 1983 decision, the Supreme Court ruled that a college was not entitled to tax-exempt status if it opposed interracial relationships. Today, over 70 religious schools are concerned that they may be penalized similarly for opposing same-sex relationships. Credit Chris Keane for The New York Times “In the Bob Jones case,” Justice Samuel A. Alito Jr. said, referring to the 1983 Supreme Court decision , “the court held that a college was not entitled to tax-exempt status if it opposed interracial marriage or interracial dating. So would the same apply to a university or a college if it opposed same-sex marriage?” Solicitor General Donald B. Verrilli Jr., representing the Obama administration, said that was possible. “I don’t think I can answer that question without knowing more specifics,” he said, “but it’s certainly going to be an issue. I don’t deny that. I don’t deny that, Justice Alito. It is going to be an issue.” Chief Justice John G. Roberts Jr. asked a similar question. “Would a religious school that has married housing be required to afford such housing to same-sex couples?” Mr. Verrilli did not rule that out either but said it would “depend on how states work out the balance between their civil rights laws.” Douglas Laycock, a law professor at the University of Virginia, said Mr. Verrilli’s response to Justice Alito was ill-considered. “Church leaders are worried about this,” he said, particularly because “there is a certain obvious logic” to Justice Alito’s question. But he added that it was unimaginable that any administration of either party would try to deny a tax exemption anytime soon to a religious institution based on its views on homosexuality. “When gay rights looks like race does today, where you have a handful of crackpots still resisting,” he said, “you might see an administration picking a fight.” That sort of analysis does not do much to calm religious schools’ concerns, said Richard Garnett, a law professor at Notre Dame. “Although many people insist that this will not happen,” he said, “they tend to rely on political predictions — which are probably accurate, in the short term — and not on in-principle arguments or distinctions.” Gay Marriage State by State: From a Few States to the Whole Nation How the number of states allowing same-sex marriage grew. Rick Scarborough, the founder and president of Vision America, a conservative Christian organization based in Nacogdoches, Tex., said he had never seen pastors so angry and ready to resist a Supreme Court ruling. He said 50,000 pastors and church members had signed a petition to the Supreme Court justices warning that they would consider a law recognizing same-sex marriage an “unjust law.” “If they change the playing field and make what we do out of bounds, we will disobey; we will disrespect this decision,” Mr. Scarborough said in an interview. “We’ll treat it like Dred Scott and other decisions courts have handed down over the years that counter natural law. God made a male and a female, and no amount of surgery is going to change that.” The letter sent by more than 70 leaders of religious schools — released by the Family Research Council, a conservative religious organization in Washington — asked the Senate majority leader, Mitch McConnell, and the House speaker, John A. Boehner, to support legislation proposed by Senator Mike Lee, Republican of Utah. Mr. Lee introduced the bill last week, calling it the First Amendment Defense Act. “Even if President Obama were to veto it, the next Republican president in all likelihood would sign it pretty readily, so, if nothing else, this puts a marker down,” said Rob Schwarzwalder, the senior vice president of the Family Research Council. Among other things, the bill would prohibit the federal government from denying or revoking a tax exemption or disallowing a charitable deduction to an institution that opposes same-sex marriage for religious reasons. “We need to draw lines around the power of government, lines that are there to protect the people from the overpowering influence of government — an overpowering influence that can, from time to time, trample on religious freedom,” Mr. Lee said at a news conference in Washington on June 3, announcing the legislation. The 1983 decision concerned Bob Jones University in Greenville, S.C. Its policies required expulsion of “partners in an interracial marriage,” “students who date outside their race” and members of any group that “advocates interracial marriage.” There are echoes of those policies in some colleges’ current stances on same-sex couples. Brigham Young University’s honor code , for instance, bans “homosexual behavior,” including “not only sexual relations between members of the same sex, but all forms of physical intimacy that give expression to homosexual feelings.” Major Supreme Court Cases in 2015 How the court decided in key cases during the 2014-15 term. In a supporting brief in the pending Supreme Court case, the United States Conference of Catholic Bishops said “it would seem a short step” from a decision in favor of same-sex marriage to the loss of tax exemptions for dissenting religious institutions. Americans United for Separation of Church and State, in its own supporting brief , responded, “This concern is overblown.” If there is a threat to tax exemptions, the brief said, it arises from laws banning discrimination on the basis of sexual orientation and not from a potential constitutional ruling on same-sex marriage. The reach of the Bob Jones decision itself is unclear. In his majority opinion, Chief Justice Warren E. Burger wrote that Bob Jones University’s policies ran afoul of “a most fundamental national public policy,” one endorsed by “all three branches of the federal government.” Congress has long banned racial discrimination, but there is no general federal law forbidding discrimination based on sexual orientation. The decision’s background and reasoning may limit its sweep, said Ira C. Lupu, a law professor at George Washington University. “Bob Jones has never been extended to any context other than race,” he said. That includes sex discrimination, he said, to say nothing of sexual-orientation discrimination. Loss of tax exemptions on that last ground, Mr. Lupu said, “would never happen until the religiously affiliated schools still doing that were complete outliers.” Even so, said Eugene Volokh, a law professor at the University of California, Los Angeles, religious schools have real reasons for concern. “If I were a conservative Christian (which I most certainly am not),” he wrote on a law and religion email list, “I would be very reasonably fearful, not just as to tax exemptions but as to a wide range of other programs — fearful that within a generation or so, my religious beliefs would be treated the same way as racist religious beliefs are.”

Tax Credits Tax Deductions Tax Exemptions


Termites: Guardians of the Soil

Abstract: The giant termite mounds that rise up from the sands of the African savanna are so distinctive it’s tempting to give them names, like “Art Deco Skyline” or “Trumpeting Elephant” or “Flagrantly Obvious Fertility Totem.” Whatever the metaphor, the charismatic megaforms dominate their landscape, and not just visually. As scientists are just beginning to appreciate, termites and the often elaborate habitats they construct are crucial to the health and robustness of a broad array of ecosystems: deserts and semideserts; tropical and subtropical rain forests; warm, temperate woodlands; possibly your local park. Researchers at Princeton University and their colleagues recently reported in the journal Science that termite mounds may serve as oases in the desert, allowing the plants that surround them to persist on a fraction of the annual rainfall otherwise required and to bounce back after a withering drought. The mounds could thus prove potential bulwarks against climate change, preventing fragile dryland from slipping into lifeless wasteland. Image A worker termite. Credit Ingo Arndt/Minden Pictures, via Corbis “Even when you see desertification start to happen between the mounds, the vegetation on or around the mounds is doing so well it will keep reseeding the environment,” said Corina Tarnita, an author on the new report and an assistant professor of ecology and evolutionary biology at Princeton. And while the public may view termites as pale, blind, half-inch vermin that can genuinely eat you out of house and home, only a handful of the 3,000 or so known termite species are pests to people. Many of the rest, you can thank for the ground beneath your feet, which is where the majority of termites live and tirelessly work. The closer scientists look, the longer grows the list of subterranean tasks that termites take on. “They’re the ultimate soil engineers,” said David Bignell, a termite expert and emeritus professor of zoology at Queen Mary University of London. Image A female elephant scratching on a termite mound. Credit Michael Nichols/National Geographic By poking holes, or macropores, as they dig through the ground, termites allow rain to soak deep into the soil rather than running off or evaporating. Termites artfully mix inorganic particles of sand, stone and clay with organic bits of leaf litter, discarded exoskeletons and the occasional squirrel tail, a blending that helps the soil retain nutrients and resist erosion. The stickiness of a termite’s feces and other bodily excretions lend structure and coherence to the soil, which also prevents erosion. Bacteria in the termite’s gut are avid nitrogen fixaters, able to extract the vital element from the air and convert it into a usable sort of fertilizer, benefiting the termite host and the vast underground economy. “Over all, termites are extremely good for the health of the soil” on which everything else depends, Dr. Bignell said. Image Termite mounds can serve as a food source for chimpanzees. Credit Anup Shah/Nature Picture Library, via Minden PIctures Termites are also proving worthy as a so-called model system for understanding the origins of social life, the division of labor, and the sort of altruistic, self-abnegating behavior that we humans applaud in others but generally avoid engaging in ourselves. In a new study of “panic escape” behavior among termites as they seek to flee from danger, researchers at Louisiana State University Agricultural Center determined that the one thing the termites do not do when experimentally disturbed is act panicky. They don’t start running pell-mell, pushing and shoving, or clambering over the fallen. They don’t behave like people in a crowded theater when somebody yells fire, or like stampeding walruses, or, for that matter, like ants whose nest has been harrowed. Image A cheetah and a termite mound in Botswana. The colonies aid ecosystems, helping vegetation grow without much water. Credit Wolfgang Kaehler/LightRocket, via Getty Images Instead, the researchers found that when they placed 110 termites on round plastic dishes and gave the plates a shake, the termites started running in an extremely orderly, rules-based fashion, depending on whether they were ordinary workers or soldiers dedicated to nest defense. The workers fell into single-file formation. The ones in front decided whether to turn left or right, and the rest followed in a unidirectional flow at a uniform speed and spacing. For their part, the soldiers migrated to either side of the flow, snapping their huge mandibles as though preparing to do battle. Round and round the dishbound termites trotted, fruitlessly but never frantically seeking an exit. If one termite stumbled or slowed down, those behind would stop and wait for it to right itself: No trampling allowed. Image Larger soldier termites protecting workers that are repairing a hole in their mound in Botswana. Credit Peter Johnson/Corbis That unfailing etiquette distinguishes termites from their more famous counterparts among social insects, the ants. “Ants can be selfish,” said Gregg Henderson, an entomologist at the agricultural center and an author of the report , which appeared in the journal Insect Science. “Ants will crowd over each other and get trapped at exits or intersections. But I’ve seen no evidence of selfishness in termites.” That may be because they have had a lot of practice. Termites, Dr. Henderson said, “were the first animals to form societies,” starting down the communal path about 200 million years ago, some 50 million years earlier than the ants and their hymenopteran cousins, the bees. All eusocial insects share the same policy: a strict division of labor, and the assigning of colony breeding privileges to a single large, long-lived, perpetually egg-laying queen. Yet while the overwhelming majority of individuals in an ant nest or beehive are sterile, closely related females, a termite colony is pretty much 50-50 males and females, brothers and sisters. Image The surface of a termite mound. Termites are models of soil management and social organization. Credit Ian Nichols/National Geographic Why termite society turned eusocial in the first place, an evolutionary leap that denied nearly all its citizenry the seemingly Darwinian right to personal reproduction, remains an active topic of research. By some calculations, the driving force was the sheer efficiency of scale. If the termites in a given colony are siblings, or at least close cousins, they can do a better job of fostering their genetic legacy by stoking their egg-laying queen mother than by bothering to mate on their own. And termites have been enormously successful. Taxonomically, they’re considered “a superior kind of cockroach,” as Dr. Bignell puts it, but termites account for a far greater portion of the world’s insect biomass than do all the other cockroaches combined. In the tropics, where social insects rule, the termites outweigh the ants hundredfold. With the help of symbiotic bacteria and protozoa packed into the termitic paunch at what might be the highest microbial densities in nature, termites thrive by eating what others can’t or won’t: wood, dung, lichen, even dirt. The great termite artists of Africa, the mound builders, have also recruited an external symbiont, a fungus, which they cultivate in tunnels and galleries deep inside vast palaces built of sand, clay and termite excretions. The termites eat a small portion of the fungal spores and use the fungal enzymes to help break down their more fibrous food sources. The termites in turn offer their fungal partners plenty of water, nourishment and a clean, safe, temperate and well-ventilated haven free of competing fungal strains. The mounds also protect their builders — against the sun that would desiccate them, the seasonal rain that would drown them, and the many predators that would happily devour them. The largest African mounds can measure 30 feet high and 80 feet across, and house millions to tens of millions of termites. The mounds are refugia for plants, fungi and large herbivores, too. In Mozambique’s Gorongosa National Park, antelope like bushbuck and kudu often congregate around termite mounds, and not just for the grazing opportunities. “The mounds are cooler in the heat of day and warmer at night,” said Robert Pringle, an ecologist at Princeton and an author of the report in Science. “They’re a very pleasant place to hang out.”


Budget Office Warns That Deficits Will Rise Again Because Cuts Are Misdirected

Abstract: WASHINGTON — As the White House and Congress careen toward another fiscal showdown, the nonpartisan Congressional Budget Office warned on Tuesday that President Obama and lawmakers have been cutting the wrong kind of federal spending as they try to avoid the unsustainable buildup of debt that is projected in the coming decades. Annual federal deficits will continue to fall in the short term, the budget office reported in its yearly long-term outlook, because of the recent spending cuts in military and domestic programs and rising tax collections in a recovering economy. The report projected the deficit in 2015 to be equal to 2.1 percent of the economy’s output, or just one-fifth of the peak shortfall at the height of the recession in 2009. But starting in 2016, deficits are projected to rise again as more baby boomers begin drawing from Medicare, Medicaid and Social Security — the fast-growing entitlement programs, which Democrats and Republicans cannot agree on how to rein in. The accumulating federal debt, which averaged 38 percent of the gross domestic product for the 40 years before the 2008 financial crisis, would rise from 73 percent of the G.D.P. now — above what most economists consider an optimum level — to at least 100 percent in 2038. Budget experts have been warning since at least the Reagan era that in the early 21st century, aging baby boomers will drive entitlement spending — chiefly for Medicare and Medicaid, and to a lesser degree for Social Security — to levels that will crowd out all other military and domestic spending. Interest on the debt will also be a major and growing expense. What is different now is that the Republican-controlled House and the White House have been on a two-year run of deficit reduction that has resulted, because of their inability to agree on entitlement reductions and higher tax revenues, in deepening cuts in the budget areas that are not responsible for the projections of mounting debt. Those discretionary spending programs — which include things as varied as Pentagon weapons purchases, air traffic control, science and research, education and national parks — are being squeezed even as entitlement spending grows automatically. The budget office said that by 2023, the annual deficit would rise to an estimated 3.5 percent of the G.D.P., which is just beyond the level that many economists consider sustainable in a growing economy. By 2038, it would be 6.5 percent. Under a nine-year plan starting in the 2011 fiscal year, discretionary spending was already being reduced annually. But the across-the-board “sequester” that took effect in March, when Republicans and Mr. Obama could not agree on alternative deficit reductions, has pared domestic and military programs further, resulting in increasing layoffs, furloughs and service cutbacks. Republicans have supported keeping the sequestration cuts in place rather than accepting Mr. Obama’s proposal for a mix of higher taxes on wealthy people and some corporations and cuts in future entitlement spending. And he has said he will not accept their alternative for deeper reductions in Medicare and Medicaid without tax increases. Federal spending for the major health programs and Social Security will equal 14 percent of the G.D.P. in 25 years, double the level of the last four decades, the budget office projected. While federal revenues are projected to grow — to 19.5 percent of the G.D.P. by 2038, compared with the 40-year average of 17.5 percent — that rise is not enough to offset the spending for federal benefit programs. In contrast with entitlement spending, discretionary spending for domestic and military programs by 2023 would fall to 5.3 percent of the G.D.P., from the 7.3 percent of this year — the lowest levels in about 70 years. Video The president said that the recovery needed more help and that Republicans in Congress did not seem focused on growing the economy and building the middle class. Credit Credit Mark Wilson/Getty Images “Unless substantial changes are made to the major health care programs and Social Security,” the report said, “those programs will absorb a much larger share of the economy’s total output in the future than they have in the past.” Neither party expects any such changes this fall as the White House and Congress seek agreements to meet two deadlines: financing federal operations after the start of the fiscal year on Oct. 1 to avoid a government shutdown, and increasing the nation’s borrowing limit to avert a default. The budget office report emerged as House Republican leaders closed in on a decision on legislation that would finance the government through mid-December at the current levels, which reflect sequestration, and fully strip financing for the president’s health care law. Michael Steel, a spokesman for Speaker John A. Boehner, cautioned that “no decisions have been made or will be made” until House Republicans meet on Wednesday. But aides familiar with the decision-making said House Republican leaders were ready to bow to the demands of rank-and-file conservatives and put “defunding” the Affordable Care Act at the center of the coming fiscal showdown. While Republicans and Democrats continue to talk past one another, the opposing Senate leaders — the majority leader, Harry Reid, Democrat of Nevada, and the minority leader, Mitch McConnell, Republican of Kentucky — agreed that the first move was up to House leaders. Mr. McConnell suggested that, like House Republicans, he would take a hard line on extracting deficit reduction concessions from Democrats before agreeing to raise the debt ceiling. But Democratic leaders reiterated that they would not negotiate on a matter that they say is Congress’s responsibility: to cover the bills and pay the debts that it has already authorized. “It seems like the only time the president is ever willing to address the question of deficit and debt is when we have some opportunity and some leverage to bring him to the table,” Mr. McConnell said, “and a request to raise the debt ceiling is one of those opportunities.” Mr. Reid was equally dug in, especially against House Republicans’ proposals to hold the government financing or debt limit measures hostage to their demands to delay or defund the health care law. He noted that Republicans had blinked before. “When it comes to holding the full faith and credit of the United States hostage,” Mr. Reid said, “only those with a loose grip on reality would expect a different result than we had last time.” House Republican leadership aides say they still expect a vote this week or next on a proposal that would extend government financing at current levels, which reflect the sequestration cuts, and be linked to another measure to delay or defund the Affordable Care Act. But some conservatives are insisting that the attack on the health care law be part of the government financing bill, so that Democrats cannot ignore it. That would force the Democratic-led Senate to vote to strip out the health law provision and send the financing measure back to the House. Then the Republican-led House would face a decision in the next two weeks: demand concessions on the health law and risk a shutdown, or pass a “clean” government financing bill largely with Democrats’ votes. Some Senate Republicans are growing uneasy about the House’s hard line. Senator Lindsey Graham, Republican of South Carolina, said demanding that Mr. Obama undercut his own health care law “is a bridge too far.” He added: “At the end of the day, a shutdown, we own. Like it or not, we’re going to own it.”

Congressional Budget Office
Federal Budget
US Politics
US National Debt
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Barack Obama


French Report New Threat of Terrorist Attack in Europe

Abstract: PARIS — Saudi intelligence officials have informed France that Al Qaeda’s affiliate in Yemen may be planning an attack in France or Europe, the French interior minister said Sunday. The minister, Brice Hortefeux, said in an interview broadcast on French radio and television that France had received the information “just a few days ago.” Mr. Hortefeux described it as “a new message from the Saudi services telling us that Al Qaeda in the Arabian Peninsula was without doubt active, or planned to be active” in Europe, “and notably, France.” “The threat is real and our vigilance is total,” he said, noting that he met last week in Paris with the Yemeni president, Ali Abdullah Saleh. An official in Washington familiar with Mr. Hortefeux’s broadcast remarks confirmed on Sunday that Saudi intelligence officials had in the past few days sent information to Paris warning of possible attacks in France by Al Qaeda’s branch in Yemen. Like other recent reports of plots to attack targets in Germany, France and Britain, many of which emanated from Pakistan and North Africa, the Saudi alert warned of threats that were credible but not specific. It was not clear if the Saudi warning suggested an imminent attack. The new warning came at roughly the same time that a former Saudi detainee at Guantánamo Bay who went through Saudi Arabia’s militant rehabilitation program and then joined Al Qaeda in Yemen turned himself in, the government said. The former detainee, Jabir Jubran al Fayfi, contacted Saudi authorities from Yemen to express his regret and readiness to surrender, the Saudi Interior Ministry said in statement on Friday, The Associated Press reported. Yemeni authorities arranged for his return. Mr. Fayfi joined Al Qaeda in Yemen sometime after his December 2006 release from Guantánamo and his participation in the rehabilitation program and rose to become one of the group’s top dozen leaders, the official in Washington said. The official said it was unclear if the information provided to France came from Mr. Fayfi, communications intercepts and other intelligence sources, or some combination. A United States counterterrorism official declined to comment specifically on the report, but said on Sunday that Al Qaeda in the Arabian Peninsula remained a danger. “They’ve made clear their intention to attack the United States and our allies,” the official said. “The terrorist threat to Europe unfortunately remains quite real.” European officials did not discount the threat. “If this information is coming indeed from the Saudis, one can expect that it is serious and reliable,” said Raphael Perl, the head of antiterrorism for the Organization for Security and Co-operation in Europe. A European intelligence official called the warning “serious stuff” and added that “it is easy to plan operations in France because it is easy for attackers to fit into the population.” Al Qaeda in the Arabian Peninsula, as Yemen’s Qaeda cell is known, has caused growing alarm among American and Western intelligence services since the airliner bombing plot last December, for which Al Qaeda in the Arabian Peninsula took credit. C.I.A. officials have privately said recently that the Yemeni cell posed an even more dangerous immediate threat to the United States than the Qaeda headquarters in Pakistan.

Terrorism
Al Qaeda in the Arabian Peninsula
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Citi Is Said to Be Near Deal to Sell $12.5 Billion of Loans

Abstract: Private equity moguls are doubling down — on their own takeovers. Betting that the long-frozen credit markets are starting to thaw, three of the largest private equity firms — Apollo Management, TPG Capital and the Blackstone Group — are close to a deal to buy about $12.5 billion of loans that were used to finance corporate buyouts from Citigroup , according to people involved in the talks. Such so-called leveraged loans helped finance the recent wave of corporate takeovers, which came to an abrupt end last summer when the credit markets seized up. Since that time, banks like Citigroup have struggled to find investors willing to buy the loans, so the deal with Citigroup could mark a turning point for this crucial part of the credit markets. According to a leveraged loan index from Credit Suisse, leveraged loans traded at an average of 87.36 cents on the dollar last month; in February 2007, they traded at an average of 100.11 cents. The three firms have agreed to pay in the mid-80 cents on the dollar for the Citigroup loans. “Citi ran a competitive process, and these were the most sophisticated investors in this space and they had the best prices,” a person close to the situation said. In a twist, some of the debt the firms plan to acquire helped finance their own deals, like the buyouts of Harrah’s, Alltel and TXU. Loans that supported buyouts by other private equity firms, like the takeover of First Data by Kohlberg Kravis Roberts, are also expected to be included in the package. Apollo is expected to buy about half the loans, while TPG and Blackstone will acquire the remainder, a person briefed on the negotiations said. Representatives of TPG, Apollo and Blackstone declined to comment, as did a spokeswoman for Citigroup. Until last summer, banks rushed to lend money to private equity firms. In return, buyout firms extracted lenient lending terms at low prices, enabling them to borrow more as they bought ever-larger companies. But the onset of the subprime mortgage crisis last summer raised fears that other forms of debt, like high-yield loans and bonds, were at risk as well. The investors who happily snapped up the debt disappeared, forcing banks like Citigroup to clamp down on such lending. That virtually ended the boom for private equity firms, whose takeover business depends on the availability of cheap debt. Blackstone, the only major private equity firm to be traded publicly in the United States, last struck a multibillion-dollar deal last July; its stock has fallen 47 percent since the company went public last June. Moving Citi’s $43 billion of leveraged loans off its books has been a high priority for Vikram S. Pandit , the chief executive. The company, which has recorded $20 billion in losses since the onset of the credit squeeze, has taken $1.5 billion in write-downs related to leveraged loans. But private equity firms have also girded themselves for this moment. Unable to buy companies, many have set up new funds dedicated to buying beaten-down loans and bonds. Both TPG and Blackstone have recently set up such funds, but as of last month, Blackstone said it had not tapped its $1.4 billion pool of cash. Apollo, by contrast, has long played a role in the distressed debt market. Its founder, Leon Black, was an acolyte of Michael R. Milken, the former junk bond guru, and has made some of his biggest profits in hard times. “You can get equity-type returns from debt instruments that may be a better play than pure equity right now, where you can’t get leverage,” Mr. Black said in February at a private equity conference in Munich.

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His Grip Still Secure, Bashar al-Assad Smiles as Syria Burns

Abstract: BEIRUT, Lebanon — On the day after his 51st birthday, Bashar al-Assad, the president of Syria, took a victory lap through the dusty streets of a destroyed and empty rebel town that his forces had starved into submission. Smiling, with his shirt open at the collar, he led officials in dark suits past deserted shops and bombed-out buildings before telling a reporter that — despite a cease-fire announced by the United States and Russia — he was committed “to taking back all areas from the terrorists.” When he says terrorists, he means all who oppose him. More than five years into the conflict that has shattered his country, displaced half its population and killed hundreds of thousands of people, Mr. Assad denies any responsibility for the destruction. Instead, he presents himself as a reasonable head of state and the sole unifier who can end the war and reconcile Syria’s people. That insistence, which he has clung to for years even as his forces hit civilians with gas attacks and barrel bombs, is a major impediment to sustaining a cease-fire, let alone ending the war. The new cease-fire, less than a week old, is already tenuous . On Saturday, the United States acknowledged carrying out an airstrike that killed Syrian government troops in eastern Syria. Attacks have resumed across the country, and aid meant for besieged residents of Aleppo, Syria’s largest city, is still stuck at the Turkish border. Mr. Assad has become a central paradox of the war: He is secure and kept in place by foreign backers as his country splinters, although few see the war ending and Syria being put back together as long as he stays. Although he remains a pariah to the West, and scores of militant groups continue to fight to oust him, even his opponents acknowledge that he has navigated his way out of the immediate threats to his rule, making the question of his fate an intractable dilemma. The rebels are unlikely to stop fighting as long as the man they blame for the majority of the war’s deaths remains. But fear of what might emerge if Mr. Assad is ousted has deterred many Syrians from joining the insurrection and may have helped prevent countries like the United States from acting more forcefully against him. The result has been a crushing stalemate. Mr. Assad’s standing as leader of Syria is diminished — and yet stable. “The problem is that he cannot win, and at the same time he is not losing,” said Samir Altaqi, the director of the Orient Research Center in Dubai. “But at the end of the day, what is left of Syria? He is still the leader, but he lost the state.” Indeed, recent events give the impression that Mr. Assad has succeeded in muddling through, without being held accountable. August came and went with little mention of the anniversary of the chemical attacks by his forces that killed more than 1,000 people in 2013. Turkey, a key backer of the rebels, dropped its demand that he leave power immediately, and the United States has stopped calling for his removal. And the day before Mr. Assad’s birthday on Sept. 11, for which his supporters created a fawning website , the United States and Russia announced a new cease-fire agreement with surprising benefits for Mr. Assad. Video A partial cease-fire began in Syria on Sept. 12, coinciding with Eid al-Adha. We spoke to several people in rebel- and government-held areas about life in their cities. Credit Credit Mohammed Badra/European Pressphoto Agency Besides making no mention of his political future, the agreement brought together one of his greatest foes, the United States, with one of his greatest allies, Russia, to bomb the jihadists who threaten his rule. Years ago, few assumed that Mr. Assad would join the ranks of the world’s bloodiest dictators. Self-effacing and educated as an ophthalmologist, he had not planned on a political career but was summoned from London by his father and predecessor, Hafez Assad, when the heir apparent, Bashar’s elder brother, Bassel, died in a car accident in 1994. After Bashar succeeded his father as president in 2000, many hoped he would reform the country. But those hopes dwindled, evaporating entirely with the start of the Arab Spring uprisings in 2011, when Mr. Assad sought to quell initially peaceful protests with overwhelming violence. The conflict escalated from there. Despite widespread opposition to his rule, a combination of factors has enabled Mr. Assad to persevere, analysts say. His foes have remained divided and have failed to convince many Syrians, especially religious minorities, that they would protect their rights or run the country better than Mr. Assad. As continuous battles have ground down his forces, Mr. Assad has been the beneficiary of significant military support from Iran, Russia and Lebanon’s Hezbollah — aid much more significant than what the United States and its allies have given the rebels. And the rise of jihadist organizations like the Islamic State and the Qaeda-affiliated Nusra Front, recently renamed the Levant Conquest Front, have led many Syrians and some of Mr. Assad’s international opponents to conclude that he is the lesser evil. While he may be brutal to his people, the thinking goes, he does not directly threaten the West. His victory tour on Monday showcased the desolation of the town of Daraya, a longtime rebel stronghold whose remaining residents were bused out last month after an extended siege by government forces. In videos released by the Syrian government, Mr. Assad arrived in town driving his own car, a silver Hyundai; fidgeted though a sermon praising him for protecting Syria; and performed prayers for the Muslim Eid al-Adha holiday. Image Smoke rising from Aleppo, Syria’s largest city, in 2012. Credit Manu Brabo/Associated Press Then, as martial music played, the camera jumped between images of the area’s destruction and scenes of Mr. Assad leading a determined entourage through town. A reporter stopped him for questions, and Mr. Assad spoke in soft tones about reconciliation and reconstruction. He mocked his foes as “rented revolutionaries,” a dig at their foreign backing, and laughed at his turn of phrase. His entourage got the cue and laughed as well. For many Syrians, the message was clear. “He is a man who wanted to show all Syrians that this would be their luck if they opposed him,” said Murhaf Jouejati, the chairman of t he Day After organization, which aims to prepare Syrians for a democratic future. Malik Rifai, an antigovernment activist from Daraya now displaced to northern Syria, said he felt numb watching Mr. Assad walk the streets of his empty hometown, but shared a video of a flock of birds that had flown over as residents were leaving. He interpreted it as a sign that they would return, he said. “Those birds were a deep message from heaven, whereas Bashar’s presence was just a parade, showing the muscles of a weak person,” Mr. Rifai said in an online chat. Mr. Assad’s dark suits and calm tones have given him a public image more sophisticated than that of other Arab autocrats like Col. Muammar el-Qaddafi of Libya and Saddam Hussein of Iraq, who often brandished weapons and gave thundering speeches, threatening their enemies. “He’s a different kind of bloodthirsty dictator, the kind who shops online on his iPad,” said Nadim Houry, who oversaw the work of Human Rights Watch on Syria for a decade. “He’s sort of Arab dictator 2.0.” Colonel Qaddafi and Mr. Hussein were both killed after foreign interventions aimed at removing them from power — a fate Mr. Assad appears to have escaped, even though the death toll on his watch has exceeded that of his more colorful colleagues. Image A woman and a child riding a bus in Daraya during an evacuation early this month. Credit Omar Sanadiki/Reuters His perseverance has frustrated those who feel Mr. Assad should be held accountable. “The fact that many leaders are considering or willing to deal with him today as if he has not gassed his own people or tortured thousands to death is an indictment of the current policy environment across the world,” Mr. Houry said. “There is a level of cynicism, a lack of ambition.” But analysts note many weaknesses in Mr. Assad’s position. After years of war, he holds less than half of Syria’s territory and his forces are depleted, making it hard for them to seize and hold new areas. Military aid from Iran and Hezbollah on the ground and from Russia in the skies has held off rebel advances, but they have also made him more dependent on foreign powers looking out for their own interests. Diplomats who track Syria say that while Iran remains committed to Mr. Assad, the Russians could negotiate him away if their interests were protected. And signs of Russian displeasure with Mr. Assad have occasionally surfaced. In June, Sergei K. Shoigu, the Russian defense minister, visited Syria apparently without informing Mr. Assad that he was coming — a major embarrassment for a president who speaks often of national sovereignty. “A pleasant surprise!” a beaming Mr. Assad said in a video of the meeting. “I did not know that you were coming in person.” But Mr. Assad still has significant support in areas he controls, including among many Syrians who want the war to end and see no alternative to his rule. “If God gives him life, I see that he’ll be president until Syria comes back the way that it was,” said Bouchra Al-Khalil, a Lebanese lawyer who meets regularly with Syrian officials and knows Mr. Assad. She dismissed the idea that the violence of Mr. Assad’s government would make Syrians reject him after the war. “People love their homeland,” she said. “All that hate and aggression will go away in the end.”

Bashar al-Assad
Syria
Arab Spring
Refugees,Internally Displaced People
Daraya
Russia


Fitness May Be Next to Godliness, but It Won't Sell Protein Shakes

Abstract: Through the popularity of online video, Pat Robertson, the conservative religious broadcaster and former presidential candidate, now has another claim to fame: superhuman strength. Despite that, the protein shake Mr. Robertson credits for this astounding feat will no longer be on store shelves. An Internet video showing Mr. Robertson leg-pressing 1,000 pounds was recently posted on the Web site of the Christian Broadcasting Network, which broadcasts "The 700 Club." A version of the video posted on Youtube.com on May 25 has been viewed more than 10,000 times. According to a related news release and photographs on the network's Web site ( www.cbn.com ), Mr. Robertson has leg-pressed 2,000 pounds, even though (as many online commentators have pointed out) he is 76 years old and the current world record is 1,335 pounds. Calls and e-mail messages sent on Friday seeking comment from Mr. Robertson's representatives were unanswered. (Mr. Robertson owned, but was not aboard, the jet that crashed into Long Island Sound on Friday, killing both pilots.) While the video may have given Mr. Robertson a strange new online fan base, he has long pushed health and nutrition issues on "The 700 Club" and actively promotes a protein shake that he says he concocted. In August 2005, the GNC health-supplement stores began selling a version of that shake, which was produced by Basic Organics, a company based in Columbus, Ohio. But the shake will soon no longer be available through GNC, according to Benjamin Pratt, a spokesman for the company. "GNC has discontinued our relationship with Basic Organics," Mr. Pratt said. He was unable to provide further details about the decision. The commercial shake did not lack for advertising, especially on Mr. Robertson's show. "There wouldn't be a Pat's Shake in GNC stores if he couldn't promote it on-air," said Ole Anthony, the president of Trinity Foundation, a media watchdog group for religious organizations. Mr. Robertson advertised his shake on "The 700 Club," "over the donor-paid airtimes," Mr. Anthony said. "That's what was insidious." Although the shake has been withdrawn from GNC, free recipes are still posted on CBN's Web site, giving ambitious fans an opportunity to work their way toward leg-pressing a half-ton or so themselves. MARIA ASPAN

Robertson Pat
Computers and the Internet
Christian Broadcasting Network
Ohio


Parents Sue Over Equestrian’s Death, Raising Safety Issues

Abstract: The parents of a 17-year-old girl who died in a fall while competing in the Olympic equestrian sport of eventing have sued the sport’s governing body, her former trainer and others in a California court, claiming that the death was caused in part because the course was made more dangerous to make it more “thrilling” to spectators. The lawsuit, filed May 6 in a Riverside County court, seeks an unspecified amount in damages over what it contends was the wrongful death of the girl, Mia Eriksson, who died in November 2006 after her horse fell at the Galway Downs Three-Day Event in Temecula, Calif. The lawsuit names the United States Equestrian Federation, the governing body, as well as the United States Eventing Association, which oversees competitions in this country. “Mia for the U.S.E.A. is a statistic, but she is really so much more than that,” said her mother, Karan Eriksson. “I stepped forward to file a lawsuit trying to voice in a way all of the concerns we’re feeling at the level of eventing to press for change.” The Erikssons’ lawsuit comes at a time when many in eventing are questioning whether the sport — a three-phase competition encompassing dressage, show jumping and a cross-country obstacle course — is too dangerous. Fourteen riders have died worldwide in the last year and a half, including two since April. In the United States, two top Olympic prospects have been seriously injured in recent falls. In March, Darren Chiacchia, who competed in the Athens Olympics in 2004, was critically injured, as was Laine Ashker, who fell in April during the Rolex Kentucky Three-Day Event. The Erikssons say that the Galway Downs course was designed to be more difficult for the spectators’ sake and that it lacked “safety devices” that would have minimized the risk of similar falls. Several of the parties named in the lawsuit, including representatives for the federation and the eventing association, declined to comment or did not return calls. Mia’s former trainer Kristi Nunnink said that she had not seen the lawsuit but that Mia and her mother, who owns an equestrian facility near Lake Tahoe, knew the risks involved. “Eventing is a dangerous sport,” Nunnink said. “Everybody who goes into it realizes it is a dangerous sport.” Mia was the Erikssons’ second daughter to be killed in an equestrian accident. Her older sister, Shana, died in 2003 after being thrown from her horse on the campus of Fresno State. The family also sued in the death of Shana, and Karan Eriksson said the case was being appealed.

Suits and Litigation
Horsemanship and Equestrian Events
Accidents and Safety
Olympic Games
Horse Racing


Pakistani Justices Resist Control

Abstract: ISLAMABAD, Pakistan — The Supreme Court directed Parliament on Thursday to reconsider its efforts to amend the Constitution to claim greater power over higher-court appointments. But it did not strike the proposed amendment down, a move that could have provoked a clash between the assertive judiciary and a representative body bent on reclaiming for itself powers that had been absorbed by past military dictators. In April, Parliament approved a set of constitutional amendments largely focused on retaking powers that had been diverted to the executive branch. But several of the amendments were controversial, especially one that called for high-level judges to be appointed by a judicial panel whose nominees would have to be approved by a parliamentary committee. The chief justice, Iftikhar Muhammad Chaudhry, fiercely defended the judiciary’s independence in the final years under Gen. Pervez Musharraf, who took power in a bloodless coup in 1999. It was Mr. Musharraf’s 2007 dismissal of Mr. Chaudhry, along with scores of other senior judges, that set off the political turmoil that brought about the end of his rule in 2008. On Thursday, Mr. Chaudhry proved himself unwilling to cede any powers to the legislative branch, either. Announcing the court’s decision on legal challenges to the appointments amendment, Mr. Chaudhry said the measure violated the independence of the judiciary. Hearings on challenges to other amendments were planned for January.

Pakistan
Politics and Government
Legislatures and Parliaments
Courts
Appointments and Executive Changes


Obama Orders Stricter Energy Efficiency Rules

Abstract: WASHINGTON — President Obama ordered the Energy Department on Thursday to immediately draft long-overdue standards to make a variety of appliances and light bulbs more energy efficient. Over the last three decades, Congress has demanded stricter efficiency standards on 30 categories of products, as varied as residential air-conditioners and industrial boilers. But successive administrations have failed to write regulations to enforce the laws, even when ordered to by the courts. In remarks to employees of the Energy Department, and in a presidential memorandum, Mr. Obama said he intended to comply with the laws, starting this year with nine categories of products, including ovens, vending machines, microwave ovens, dishwashers and light bulbs. He said the new standards would cut energy use and reduce emissions of the heat-trapping gases that scientists blame for global warming . “This will save consumers money, this will spur innovation and this will conserve tremendous amounts of energy,” Mr. Obama said. “We’ll save through these simple steps over the next 30 years the amount of energy produced over a two-year period by all the coal-fired power plants in America.” All recent administrations have been tardy in drafting the standards, leading to a lawsuit in 2005 by 14 states and a number of consumer and environmental groups. A year later, a federal court ordered the Bush administration to begin issuing the standards. But former President George W. Bush left office with only seven standards completed and 15 still to be written, according to government documents. Andrew deLaski, executive director of the Appliance Standards Awareness Project, said that in addition to moving quickly to complete the new rules, Mr. Obama should toughen some standards issued by the Bush administration, particularly for industrial furnaces and transformers. Mr. deLaski also said some of the most significant savings would come from the lowly light bulb. The Energy Department is under orders to develop stricter efficiency standards for florescent light bulbs and reflector bulbs, saving businesses and households as much as $67 billion over the next 30 years. Congress has ordered the phasing out of the traditional incandescent light bulb by 2014.

Energy Efficiency
Conservation of Resources
Energy Department
Obama Barack


Sports May Be Child’s Play, but Genetic Testing Is Not

Abstract: BOULDER, Colo. — When Donna Campiglia learned recently that a genetic test might be able to determine which sports suit the talents of her 2 ½-year-old son, Noah, she instantly said, Where can I get it and how much does it cost? “I could see how some people might think the test would pigeonhole your child into doing fewer sports or being exposed to fewer things, but I still think it’s good to match them with the right activity,” Ms. Campiglia, 36, said as she watched a toddler class at Boulder Indoor Soccer in which Noah struggled to take direction from the coach between juice and potty breaks. “I think it would prevent a lot of parental frustration,” she said. In health-conscious, sports-oriented Boulder, Atlas Sports Genetics is playing into the obsessions of parents by offering a $149 test that aims to predict a child’s natural athletic strengths. The process is simple. Swab inside the child’s cheek and along the gums to collect DNA and return it to a lab for analysis of ACTN3, one gene among more than 20,000 in the human genome. The test’s goal is to determine whether a person would be best at speed and power sports like sprinting or football, or endurance sports like distance running, or a combination of the two. A 2003 study discovered the link between ACTN3 and those athletic abilities. In this era of genetic testing, DNA is being analyzed to determine predispositions to disease, but experts raise serious questions about marketing it as a first step in finding a child’s sports niche, which some parents consider the road to a college scholarship or a career as a professional athlete. Atlas executives acknowledge that their test has limitations but say that it could provide guidelines for placing youngsters in sports. The company is focused on testing children from infancy to about 8 years old because physical tests to gauge future sports performance at that age are, at best, unreliable. Some experts say ACTN3 testing is in its infancy and virtually useless. Dr. Theodore Friedmann, the director of the University of California-San Diego Medical Center’s interdepartmental gene therapy program, called it “an opportunity to sell new versions of snake oil.” “This may or may not be quite that venal, but I would like to see a lot more research done before it is offered to the general public,” he said. “I don’t deny that these genes have a role in athletic success, but it’s not that black and white.” Dr. Stephen M. Roth, director of the functional genomics laboratory at the University of Maryland’s School of Public Health who has studied ACTN3, said he thought the test would become popular. But he had reservations. “The idea that it will be one or two genes that are contributing to the Michael Phelpses or the Usain Bolts of the world I think is shortsighted because it’s much more complex than that,” he said, adding that athletic performance has been found to be affected by at least 200 genes. Dr. Roth called ACTN3 “one of the most exciting and eyebrow-raising genes out there in the sports-performance arena,” but he said that any test for the gene would be best used only on top athletes looking to tailor workouts to their body types. “It seems to be important at very elite levels of competition,” Dr. Roth said. “But is it going to affect little Johnny when he participates in soccer, or Suzy’s ability to perform sixth grade track and field? There’s very little evidence to suggest that.” The study that identified the connection between ACTN3 and elite athletic performance was published in 2003 by researchers primarily based in Australia. Those scientists looked at the gene’s combinations, one copy provided by each parent. The R variant of ACTN3 instructs the body to produce a protein, alpha-actinin-3, found specifically in fast-twitch muscles. Those muscles are capable of the forceful, quick contractions necessary in speed and power sports. The X variant prevents production of the protein. The ACTN3 study looked at 429 elite white athletes, including 50 Olympians, and found that 50 percent of the 107 sprint athletes had two copies of the R variant. Even more telling, no female elite sprinter had two copies of the X variant. All male Olympians in power sports had at least one copy of the R variant. Conversely, nearly 25 percent of the elite endurance athletes had two copies of the X variant — only slightly higher than the control group at 18 percent. That means people with two X copies are more likely to be suited for endurance sports. Still, some athletes prove science, and seemingly their genetics, wrong. Research on an Olympic long jumper from Spain showed that he had no copies of the R variant, indicating that athletic success is probably affected by a combination of genes as well as factors like environment, training, nutrition and luck. “Just think if that Spanish kid’s parents had done the test and said, ‘No, your genes show that you are going to be a bad long jumper, so we are going to make you a golfer,’ ” said Carl Foster, a co-author of the study, who is the director of the human performance laboratory at the University of Wisconsin-La Crosse. “Now look at him. He’s the springiest guy in Spain. He’s Tigger. We don’t yet understand what combination of genes creates that kind of explosiveness.” Dr. Foster suggested another way to determine if a child will be good at sprint and power sports. “Just line them up with their classmates for a race and see which ones are the fastest,” he said. Kevin Reilly, the president of Atlas Sports Genetics and a former weight-lifting coach, expected the test to be controversial. He said some people were concerned that it would cause “a rebirth of eugenics, similar to what Hitler did in trying to create this race of perfect athletes.” Mr. Reilly said he feared what he called misuse by parents who go overboard with the results and specialize their children too quickly and fervently. “I’m nervous about people who get back results that don’t match their expectations,” he said. “What will they do if their son would not be good at football? How will they mentally and emotionally deal with that?” Mr. Reilly insisted that the test is one tool of many that can help children realize their athletic potential. It may even keep an overzealous father from pushing his son to be a quarterback if his genes indicate otherwise, Mr. Reilly said. If ACTN3 suggests a child may be a great athlete, he said, parents should take a step back and nurture that potential Olympian or N.F.L. star with careful nutrition, coaching and planning. He also said they should hold off on placing a child in a competitive environment until about the age of 8 to avoid burnout. “Based on the test of a 5-year-old or a newborn, you are not going to see if you have the next Michael Johnson; that’s just not going to happen,” Mr. Reilly said. “But if you wait until high school or college to find out if you have a good athlete on your hands, by then it will be too late. We need to identify these kids from 1 and up, so we can give the parents some guidelines on where to go from there.” Boyd Epley, a former strength and conditioning coach at the University of Nebraska, said the next step would be a physical test he devised. Atlas plans to direct children to Epic Athletic Performance, a talent identification company that uses Mr. Epley’s index. He founded the company; Mr. Reilly is its president. China and Russia, Mr. Epley said, identify talent in the very young and whittle the pool of athletes until only the best remain for the national teams. “This is how we could stay competitive with the rest of the world,” Mr. Epley said of genetic and physical testing. “It could, at the very least, provide you with realistic goals for you and your children.” The ACTN3 test has been available through the Australian company Genetic Technologies since 2004. The company has marketed the test in Australia, Europe and Japan, but is now entering the United States through Atlas. The testing kit was scheduled to be available starting Monday through the Web site atlasgene.com . The analysis takes two to three weeks, and the results arrive in the form of a certificate announcing Your Genetic Advantage, whether it is in sprint, power and strength sports; endurance sports; or activity sports (for those with one copy of each variant, and perhaps a combination of strengths). A packet of educational information suggests sports that are most appropriate and what paths to follow so the child reaches his or her potential. “I find it worrisome because I don’t think parents will be very clear-minded about this,” said William Morgan, an expert on the philosophy of ethics and sport and author of “Why Sports Morally Matter.” “This just contributes to the madness about sports because there are some parents who will just go nuts over the results. “The problem here is that the kids are not old enough to make rational autonomous decisions about their own life,” he said. Some parents will steer clear of the test for that reason. Dr. Ray Howe, a general practitioner in Denver, said he would rather see his 2-year-old, Joseph, find his own way in life and discover what sports he likes the best. Dr. Howe, a former professional cyclist, likened ACTN3 testing to gene testing for breast cancer or other diseases. “You might be able to find those things out, but do you really want to know?” he said. Others, like Lori Lacy, 36, said genetic testing would be inevitable. Ms. Lacy, who lives in Broomfield, Colo., has three children ranging in age from 2 months to 5 years. “Parents will start to say, ‘I know one mom who’s doing the test on her son, so maybe we should do the test too,’ ” she said. “Peer pressure and curiosity would send people over the edge. What if my son could be a pro football player and I don’t know it?”

DNA (Deoxyribonucleic Acid)
Athletics and Sports
Genetics and Heredity
Tests and Testing
Children and Youth


Home Depot Unit Sees Price Drop in Tight Market

Abstract: Home Depot was forced to drop the sale price of its commercial supply business by nearly $2 billion yesterday, according to people involved in the negotiations, one of the first big buyouts to be renegotiated as a result of the recent tightening of credit and problems in the housing market. The refashioned deal cut the sale price roughly 18 percent, to $8.5 billion. Because the deal relies heavily on debt, investors and bankers have been watching it closely for signs of how new limits on credit could affect other large buyouts that are still pending and are worth nearly $400 billion collectively. Still, this deal is different in that the fortunes of Home Depot Supply, as the division is called, are tied closely to the housing market, which has also been weakening. After a series of all-night negotiations to save the deal, Home Depot and the participating banks and buyout firms were all forced to put up more money to shore up the financing. The parties involved in other pending deals could find themselves in a similar position as buyout firms drag sellers back to the negotiating table. That could put a damper on the buyout boom that has been a major factor in the runup in stock prices over the last few years. Home Depot’s board approved the deal in principle during a meeting yesterday afternoon, people involved in the negotiations said, and the company plans to announce the transaction today. The Home Depot deal involves some of Wall Street’s biggest players. The buying consortium includes the Carlyle Group, Bain Capital and Clayton Dubilier & Rice, and the banks financing the deal include Lehman Brothers, JPMorgan Chase and Merrill Lynch. The reworked transaction raised the curtain on the complicated relationships between investment banks and some of their biggest clients: the private equity firms who shower them with billions of dollars in fees annually. In the Home Depot negotiations, however, those normally friendly relationships quickly turned cold, as all the players eventually demanded heavy concessions from one another. By the time Home Depot’s board reached its agreement, some of Wall Street’s most powerful executives had stepped in to personally negotiate the deal: James Dimon, chief executive of JPMorgan Chase, pulled several all-nighters, ordering in pizza with his colleague, James B. Lee, a vice chairman; Richard S. Fuld Jr., the chief executive of Lehman Brothers, was sending e-mail messages from his BlackBerry at 5 a.m.; and E. Stanley O’Neal, chief executive of Merrill Lynch, was taking calls on the golf course, against the club’s rules. Kenneth D. Langone, a prominent Home Depot board member and a fixture on Wall Street, found himself uncharacteristically locking horns with some of his good friends. And even John F. Welch Jr., the former General Electric chief executive, was brought in by Clayton Dubilier, where he works as an adviser. As part of the deal, each buyout firm increased the amount of equity that it will commit to the deal by $150 million each, to $800 million. In a major concession to the banks, Home Depot agreed to finance $1 billion of debt and take up to 12.5 percent of the equity in the supply company. What has emerged is a tale of bare-knuckled brinksmanship, as the three private equity buyers — Bain, Carlyle and Clayton Dubilier — initially demanded concessions from Home Depot. In announcing the possible repricing of the sale earlier this month, Home Depot said it would trim the price it was offering in a stock buyback, initially worth about $22.5 billion. Even so, the buyout firms threatened to walk away from the deal, declaring that the housing market’s decline had created what is known as a material adverse change. Such clauses are common in deals, allowing buyers to walk away. In this case, however, it was not clear whether the declines in the housing and credit markets qualified as deal breakers. Still, Home Depot buckled and agreed to lower the price to about $9 billion. Then the three investment banks demanded a better deal as well, setting off a marathon of conference calls as the banks threatened to walk away from their financing commitments. By balking at financing the transaction, Lehman Brothers put itself in an especially difficult position. One of Lehman’s most senior bankers, Andrew Taussig, had advised Home Depot on the sale at the same time that it was also providing financing to the buying group. Suddenly, Lehman was turning around and threatening to scuttle a deal it had advised one of its most important clients to accept. Mr. Fuld, Lehman’s chief executive, spent hours in person and on the phone with Home Depot’s management and some of its directors trying to explain the firm’s position. Mr. Taussig was mortified, people briefed on the negotiations said. Because of Lehman’s conflicted position, Goldman Sachs was brought in as Home Depot’s new adviser to mediate among the private equity firms and other banks to reach a deal. Over the last two years, banks have climbed over each other to lend billions of dollars — and reap lucrative fees along the way — to private equity firms as they have swept up an unprecedented number of companies. To recoup their capital, banks resold the debt as high-yield bonds and loans in the credit markets. But when the credit markets froze because of the implosion of the subprime mortgage market, investors started refusing to buy nearly all forms of debt not backed by the federal government. Because of concern about heavy losses in the market for subprime mortgage securities, the stock market has become volatile recently, falling sharply after peaking in mid-July. Credit markets have also been in turmoil. Lenders have cut back on all kinds of loans, not just mortgages but also loans to help finance corporate takeovers by private equity firms. The financial markets calmed a bit last week after the Federal Reserve stepped in with measures to stimulate lending, but uncertainty over the extent of problems in the credit markets have left many investors unnerved. If the Home Depot deal had fallen apart altogether, that might have been interpreted as a particularly bad sign for the market. One potential victim of the Home Depot deal is stapled financing, the practice of advising the seller while lending to the buyers. Though the practice has become almost routine in recent years, it is riddled with conflicts and may soon fall out of favor, some bankers have predicted. Still, by reaching an agreement, Home Depot, the private equity firms and the banks may have saved themselves from a potentially worse fate: years of contentious lawsuits. The stock prices of companies involved in other pending buyouts are near their deal prices, suggesting that investors expect them to be completed as originally agreed upon. However, when one participant in the Home Depot battle was asked what would happen to the next series of deals, he said: “Study what just happened here. You’ll see this movie again soon.”

Home Depot Inc
Mergers Acquisitions and Divestitures
Sales
Banks and Banking
Credit


Ed Snider, Flyers Owner Who Made Philadelphia a Hockey Town, Dies at 83

Abstract: Ed Snider, who co-founded the Philadelphia Flyers of the National Hockey League and owned the team for nearly 50 years, and who was chairman of a sports management company that provided services to hundreds of arenas, stadiums and convention centers in North America, died on Monday at his home in Montecito, Calif. He was 83. His family said he had died of cancer. The son of a grocery store owner, Mr. Snider formed the Flyers with several partners as an expansion franchise in 1967 in a city with no hockey tradition, no base of hockey fans and no hockey arena. They built one on Broad Street, called it the Spectrum and installed their team. After a shaky start, the Flyers turned the City of Brotherly Love into a town that loved bare-knuckle fights on the ice. Mr. Snider hired a cadre of roughneck fighters after seeing his team of aging retreads and young castoffs humiliated by brawlers like the St. Louis Blues and the Montreal Canadiens. Blood flowed. Sellout crowds roared. In 1973, The Philadelphia Bulletin dubbed the Flyers the “Broad Street Bullies.” And in 1974 and 1975, the Flyers won consecutive Stanley Cup championships. Philadelphia became a hockey town and never looked back. The Flyers were the league’s first expansion team to win hockey’s holy grail, and repeating the feat a year later left fans ecstatic. Bursting with pride, two million people turned out for back-to-back celebratory parades. Mr. Snider’s Flyers won no more Stanley Cups, but the team became one of the best in the N.H.L., making the playoffs 38 times and playing in six more Stanley Cup finals, the last in 2010. “Ed basically created hockey in Philadelphia,” Peter Luukko, the Flyers’ president, told The New York Times in 2011. “Luukko was talking about his boss, but just about everybody in Philadelphia says the same thing,” Jeff Z. Klein, a Times hockey reporter, wrote. “Tantalizing as the prospect may sound to Rangers fans — and Penguins fans and Devils fans and Islanders fans and on and on — without Snider there would probably have been no Flyers, no legacy of the Broad Street Bullies, no hockey.” In 1974, Mr. Snider formed Spectacor as a holding company for the Flyers and the Spectrum, with himself as chairman. The company became landlord to the National Basketball Association’s Philadelphia 76ers, who also played at the Spectrum, and acquired Prism, the first regional sports network on cable television, and WIP-AM, one of the first all-sports radio stations. Mr. Snider also wrote innovative contracts to manage arenas in New York, Massachusetts, Michigan, Virginia and Florida. In the late 1980s, Mr. Snider and Spectacor built an arena in South Philadelphia that became the Wells Fargo Center. In 1996, he sold a majority stake in Spectacor to Comcast but retained a one-third interest and the chairmanship of the merged sports and entertainment behemoth, Comcast Spectacor. The company bought the 76ers and acquired companies that managed and provided food, ticketing and other services for hundreds of arenas, stadiums and convention centers in the United States and Canada. It sold the 76ers in 2011. Mr. Snider attended nearly all the Flyers’ home games and was involved in day-to-day team matters. “The owner is supposed to be the guy with the money, who sits back in some big office and smokes hand-rolled cigars while he watches the bread roll in,” Maury Z. Levy wrote in Philadelphia magazine in 1971. “He is not supposed to get his custom-made suits spoiled by the smell of the locker room after a good game. These are the unwritten rules of being an owner, and Ed Snider breaks every one of them.” Edward Malcolm Snider was born in Washington on Jan. 6, 1933, to Sol and Lillian Bonas Snider. His father owned three grocery stores in the nation’s capital. Ed graduated from Calvin Coolidge High School in 1951 and from the University of Maryland in 1955 with an accounting degree. He was named a vice president for business affairs of the Philadelphia Eagles of the National Football League in 1964, after his sister, Phyllis, married Earl Foreman, a part owner of the team. In 1966, when the N.H.L. disclosed plans to expand its league from six to 12 teams, Mr. Snider and several partners, including Jerry Wolman, a principal owner of the Eagles, applied for a franchise in Philadelphia. Image Credit Matt Rourke/Associated Press The city had little experience with pro hockey. The Arrows of the Canadian-American League, a forebear of the American Hockey League, had played there in 1927-28 and in 1934-35. The Quakers, an N.H.L. franchise, played for a season in 1930-31, but quit after a dreadful campaign. While Hockey News said Philadelphia was “least likely to succeed,” the N.H.L. awarded the Snider-Wolman group a conditional franchise. In a division agreed upon by the partners, Mr. Wolman largely financed and controlled the Spectrum, which was built in little more than a year, and Mr. Snider assumed control of the Flyers, who began their inaugural season in October 1967. But Mr. Wolman ran into financial problems, the Spectrum fell into bankruptcy, and Mr. Snider, under a court-approved plan, agreed to pay the creditors and assumed control of the Spectrum in 1971. Mr. Snider, who also had a home in Gladwyne, Pa., was the longest-tenured owner in the N.H.L. when he died. He was married four times. With his first wife, the former Myrna Gordon, he had four children, Craig, Jay, Lindy and Tina. They were divorced in 1981. In 1983, he married Martha McGeary. They had two children, Sarena and Samuel, and were divorced in 2001. His 2004 marriage to Christine Decroix ended in divorce in 2012. In 2013, he married Lin Spivak. She survives him, as do his children, 15 grandchildren and a sister, Phyllis Foreman. In 1999, a Philadelphia Daily News poll named Mr. Snider the city’s greatest sports mover and shaker, surpassing the legendary Athletics manager Connie Mack and the basketball broadcaster Sonny Hill. He was inducted into the Hockey Hall of Fame in 1988 and the United States Hockey Hall of Fame in 2011. In 2005, he created the Ed Snider Youth Hockey Foundation, which maintains ice rinks and provides equipment, coaching and hockey programs for thousands of children in Philadelphia and Camden, N.J. He also endowed a research center at the Wharton School of the University of Pennsylvania.

Obituary
Flyers
NHL
Ice hockey
Edward M Snider


Sony Reports 25% Rise in Profit, but Lowers Its Forecast

Abstract: TOKYO — Sony said Thursday that its profit rose more than 25 percent in the final three months of 2007, helped by robust sales of televisions and computer games. But it said strong yen and subprime problems would weigh on demand this year. Sony cut its operating income forecasts for the business year ending in March, saying it now expected to earn 410 billion yen ($3.84 billion), compared with an October forecast of 450 billion yen. Net income rose to 200.2 billion yen in its fiscal third quarter, compared with 159.9 billion yen in the period a year earlier. “Electronics sales appear to have done well,” said Shigeo Kikuchi, deputy manager of the trading department at Takagi Securities. But, he said “the outlook is clouded, as the firm yen and U.S. subprime issue issues are likely to weigh on demand for L.C.D. televisions and the like.” One dollar averaged 112.2 yen during the quarter, representing a 4.1 percent rise, the company said. The firmer Japanese currency is seen as constraining exports, while the subprime crisis is seen as reducing the appetite of American consumers for electronic goods, Mr. Kikuchi said. Sales and operating revenue advanced 9.6 percent, to 2.86 trillion yen from 2.61 trillion yen, as the electronics segment recorded its second-highest profit in the history of the company, on robust sales of Bravia L.C.D. televisions, Sony said. Sony posted a 31.2 percent increase in sales of PlayStation 3 game consoles in the quarter but cut its full-year sales forecast by 14 percent, to 9.5 million units. The company cut prices for the consoles by 17 percent in the United States and Europe, and by 10 percent in Japan. It also introduced a cheaper model to offset criticism that the new PlayStation was overpriced. Analysts said that deep discounting alone was unlikely to help the company indefinitely as it sought to fend off competition from Nintendo and Microsoft, which are gaining popularity with a new class of game player. Soichiro Fukuda, director for equity research at NikkoCitigroup, said Sony game consoles remained popular with males aged 20 to 30. But he added that the Wii, from Nintendo, and the Xbox, from Microsoft, offered different ways for players to enjoy their consoles. The new formats are more appealing to women and people older than 35, he added. Wii offers a console with a controller grip that allows users to imitate the swing of a tennis racket or golf club. That kind of physical interface appeals to more people than the PlayStation, which contains a motion sensor but maintains the standard controller format that uses both hands.

Company Reports
Sony Corp
Computer and Video Games
Sales
Tokyo (Japan)


Short Rough, Low Scores on Day 1 at Firestone

Abstract: AKRON, Ohio — The old white water tower with the red Firestone script still stands by Warner Road near the clubhouse at Firestone Country Club, a symbol of the constancy that has endured through more than a half-century of tournament golf. Golf styles, golf clubs, golf balls and the pros who use them have changed more than anyone could have envisioned when Tommy Bolt won the first event, the 1954 Rubber City Open, but one thing is as entrenched as the tower. Even when it yields a round of four-under-par 66, as it did to Retief Goosen as he led after the first round of the W.G.C.-Bridgestone Invitational, and even when the rough is trimmed to two and a half inches in height, Firestone is one stern test. “The course is playing tough,” said Goosen, who birdied five holes and bogeyed one Thursday for his first opening round in the 60s this season and his best at Firestone. “I’m not saying it’s playing easy, but the rough is not nearly as thick as it was last year. You’ve still got three days of growth ahead.” Last year, the rough was four inches high and Tiger Woods, the winner, was the only golfer who broke par for 72 holes, shooting two-under-par 278. On Thursday, the sun was shining, a light breeze was blowing and most of the field took advantage of the tournament committee’s decision to lighten up the rough. Thirty-three players broke par and the leader board had the look of a major championship. Tim Clark, Daniel Chopra, Vijay Singh and Zach Johnson all shot 67. Rocco Mediate continued to haunt the lead, shooting 68 to head a large group at two under par that included Chad Campbell, Stewart Cink, Scott Strange and the winner of the Canadian Open last week, Chez Reavie. At 7,400 yards, Firestone is 261 yards longer than it was 10 years ago, and at par-70 it is tough enough to take the best shots from the best players in the world. Not only does this make it a good prep for next week’s P.G.A. Championship at Oakland Hills, the season’s final major championship, it sets up the potential for the cream to rise to the top of this $8 million tournament. Phil Mickelson won here in 1996 when the event was the NEC World Series of Golf, but he has not fared well in the past nine events since it became a world championship event. He shot 69 Thursday and said he loved the course setup. “Firestone, to me, depends on the setup,” he said. “This year it’s one of my favorite courses. You fall in love with a golf course when you have a setup that’s as wonderful as this. The greens are fast, the pin placements are great, the rough is challenging but fair and it lets you hit some recovery shots and it lets you hit some shots around the green to get up and down.” Mickelson pulled off one of his amazing escapes at the 18th hole to finish on a high note. After driving the ball well all day, he pushed his drive into the right trees and had almost no shot — the key word being almost. Ever wonder what goes through Mickelson’s mind when he finds his drive in jail and has 169 yards to the green? Here it is: “I was looking at maybe a wedge or a 9 iron to go left of the trees, go up and over and around, and then I couldn’t get ... I didn’t feel I could get it up over the trees. So I was looking at maybe an L wedge. But I didn’t feel I could get it all the way back to the right of the fairway because I had to aim left. “Then the other option was just to go out directly right and try to hit it about 70 yards.” Of course, Mickelson did not like that option at all. So he took out a 4-iron and hit a shoulder high punch shot through the trees that wound up 14 feet from the hole. “So it was risky,” he said with a shrug, “but it paid off because I was able to not only salvage par, but I ended up making a birdie.” Mickelson is among the six major championship winners within three shots of the lead. Firestone is a classic old golf course with a history of producing champions who have or will win majors. Thirty-one of the winners here since 1962 have been major winners. For players of that caliber, the harder the better.

Goosen Retief
Firestone Country Club
Golf
PGA Championship


Global Dreams for a Wireless Web

Abstract: Menorca, Spain SITTING on the porch at Finca Torrenova, his 800-acre retreat on this Mediterranean island, Martin Varsavsky ticks off the credentials of the group of Internet entrepreneurs finishing lunch at a nearby table. “He has 40 million uniques, he has 50 million, and he has 8 million,” Mr. Varsavsky says, referring to the number of visitors to Web sites owned by his guests — many of whom are also business associates and have joined him for several days of brainstorming about the digital future. These days, commercial victory on the Internet is all about scale, and Mr. Varsavsky, a 48-year-old from Argentina, can be forgiven for speaking longingly and in detail about his peers’ achievements. No stranger to success — he has had a tidy crop of new media and telecommunications hits since the 1990s — he is still struggling to bring his newest Internet venture to fruition. Three years ago, aiming to create a global wireless network, he founded FON , a company based in Madrid that wants to unlock the potential power of the social Internet. FON’s gamble is that Internet users will share a portion of their wireless connection with strangers in exchange for access to wireless hotspots controlled by others. The swaps, in theory, would allow “Foneros” to have ubiquitous, global wireless access while traveling for business or pleasure. But despite $55.2 million in backing from such corporate heavyweights as Google and BT, the former British Telecom, as well as newer enterprises like Skype and a handful of venture capital firms, FON and Mr. Varsavsky are still missing a crucial ingredient: scale. At the moment, there are just 830,000 registered Foneros around the world, and only 340,000 active Wi-Fi hotspots run FON software. Because it’s built upon the concept of sharing Wi-Fi access, FON works well only if there are Foneros everywhere. And as he struggles to expand the FON network, Mr. Varsavsky faces particular hurdles now that the Internet’s commercial side has reached a crossroads. Born a few decades ago as an anarchic, digital version of a barn-raising, the wireless Internet is now a battleground between two giant technology consortiums seeking to rein in the Web’s chaotic openness in favor of creating uniform, global access built upon wireless data networks. The two camps, known as WiMax and L.T.E., for “long-term evolution,” are both top-down, highly structured approaches that will cost billions of dollars to build and may close a door on some of the architectural openness that led to the rapid growth of the Internet. But their potential advantage is that closed standards can encourage the kind of growth that offers more access to mainstream consumers and business users, as occurred when Microsoft imposed a measure of conformity on software development. For his part, Mr. Varsavsky hopes that FON can offer a middle ground — deploying the original, bottom-up strengths of the early Internet movement and at the same time wedding them to a more formal, corporate approach to expansion. Although FON faces huge obstacles in realizing those ambitions, the company also has a growing number of devotees. “The wireless Internet market today is fragmented and complex — it can be accessed through 3G operators, through WiMax, through private hotspots, through paid hotspots and through corporate networks,” said Michael Jackson, a partner at Mangrove Capital in London and a former FON board member. “In summary, it is a nightmare for a consumer. FON can and will change this.” But others have their doubts. “I know that the people at Google like this idea,” said John Saw, the chief technology officer at Clearwire, the WiMax start-up of Craig McCaw, which recently announced a $14.5 billion joint venture to build a nationwide WiMax network with Sprint, Google, Intel, Comcast and others. “But we’re skeptical.” Undeterred, Mr. Varsavsky says that what he currently lacks in scale he can make up for in huge cost savings, particularly because FON avoids the expensive proposition of having to build a worldwide network of cellular towers and Wi-Fi nodes from scratch. “Our army of Foneros is a much more efficient way of distributing a signal,” he says. “We believe WiMax operators will be happy to have some customers use their services for free and save billions in infrastructure deployment.” MR. VARSAVSKY has worked overtime trying to line up more high-profile partners for FON. To that end, he traveled to Cupertino, Calif., last fall to meet with Steve Jobs, the chief executive of Apple . During that 90-minute meeting, Mr. Varsavsky says, the two men discussed why a partnership might make sense. Apple has sold millions of its Wi-Fi routers to residential customers, and its community of Wi-Fi users who share router access would be an ideal platform for FON. For his part, Mr. Jobs had developed an interest in Wi-Fi sharing because of the expanding number of iPhone users who are often frustrated by locked Wi-Fi access points. But, Mr. Varsavsky says, from the moment that he and Mr. Jobs met, their discussion devolved into an argument. (Mr. Jobs did not respond to requests to comment on the meeting.) At the outset, Mr. Varsavsky recalled, Mr. Jobs asked sharply, “Who needs your community?” and “Why should British Telecom bother to do a deal with you, and why shouldn’t people just leave their routers open for sharing?” Mr. Varsavsky says he responded, “Why should you bother to do a deal with AT&T? Shouldn’t iPhones just be connected freely with any cellphone network?” Mr. Varsavsky says he left the meeting with the uncomfortable feeling that Apple might end up as a competitor rather than as a partner. But it wasn’t only because of Mr. Jobs’s legendary stubbornness that the Apple meeting apparently went awry. Mr. Varsavsky’s own substantial ego also came into play — something he freely acknowledges when he talks about how he first got into business. “My father died and my mother was saying, ‘Martin, get a job, get a job,’ ” he recalls. “And I would go to job interviews and they would say, ‘How do you see yourself in five years?’ And I would say, ‘Well, at least as your boss!’ ” That attitude surfaced in other forums as well. In high school in Argentina during the 1970s, he says, he persuaded classmates to open their own office supply store to compete with a store across the street from their school. He also declared his interest in left-leaning politics, which he said attracted the attention of the Argentine military junta that was purging high schools of dissidents. In the “dirty war” of 1976-83, the government killed thousands it suspected of being leftists. An officer told the school to expel him, Mr. Varsavsky says, and he left for Brazil. Around the same time, he believes, his cousin was kidnapped and killed by the military. The Varsavsky family fled to the United States, and Mr. Varsavsky earned his undergraduate degree in economics and philosophy at New York University in 1981. He later attended Columbia University, where he received graduate degrees in international affairs and business administration. MR. VARSAVSKY says start-ups got into his blood during graduate school, when he made his first million in a real estate foray: renovating and reselling lofts in New York. After moving to Spain in the 1990s, he had three big telecommunications and Internet successes. He says that a $200,000 investment he made to start a long-distance company, Viatel, in 1990 was worth about $240 million when he cashed in his stake in 1999; that the 5 million euros he used to start Jazztel in 1997 has given him a stake now worth about 150 million euros; and that the 38 million euros he used to start a Spanish Internet service provider, Ya.com , in 1999 had grown to about 149 million euros when he sold the company the next year. Then, after this first round of success, Mr. Varsavsky was hit with a loss that he describes as a striking, gut-wrenching failure. His German start-up EinsteinNet, founded in 2000 as an effort to sell software over a private fiber optic network, collapsed in 2003, leaving him with a personal loss of $50 million. “I used the most money of my own in a company where I lost it all, and I consider it my business black eye,” he recalls, saying that he also drew a valuable lesson from the misadventure: “I don’t invest on my own. If other people don’t want to back me, it’s a sanity check.” TO that end, Mr. Varsavsky has become a tireless networker, traveling the world to participate in a continuous parade of technology conferences and cultivating a global retinue of friends and contacts. He has also been active on the philanthropic front, earning kudos from a onetime resident of the White House. “Martin represents the future of entrepreneurial culture and is helping to transform the way people give,” former President Bill Clinton says. “He has found different ways to use his acute business sense and creativity to improve our world and the lives of others.” This month, Mr. Varsavsky brought together more than 70 Internet business people and technologists from Europe, Asia, Latin America and the United States for a conclave on his Menorca farm. Some guests represented the more than 20 digital enterprises in which he has a stake; others were “friends of Martin,” a loose-knit group that comprises his informal business network around the world. The four-day conclave featured several unscripted “tech talks” in which entrepreneurs described problems they faced building their businesses. Participants included Lukasz Wejchert, the chief executive of Onet, Poland’s dominant Internet portal. Deals with companies like Onet will be crucial if Mr. Varsavsky is to make good on his goal of having a million FON customers on each of three continents by 2010. The two companies recently came close to a deal, Mr. Wejchert says, but Onet decided that it was still to early for it to become an Internet service provider in Poland because the regulatory environment worked against new entrants. That major players like Onet are beginning to find FON a potentially profitable partner is promising, and Mr. Varsavsky’s formidable networking abilities with politicians and entrepreneurs are also a plus. Ultimately, however, FON’s success will hinge on its strategic soundness and operational prowess — not on Mr. Varsavsky’s skills at working the cocktail circuit. He likes to refer to FON as a “revolution,” but so far his crusade has had difficulty gathering momentum because formal corporate alliances have been slow to jell. In Mr. Varsavsky’s approach, FON’s business is subsidized by non-Foneros — passing Web surfers who buy time for access to the network — which he can then share with FON’s customers. The approach is different from that of Boingo, a Wi-Fi aggregator based in Los Angeles that charges users a monthly fee for using hotspots while they are traveling. Yet both FON and Boingo have faced significant resistance from Internet service providers that carefully restrict access to their customers, leaving the idea of a seamless wireless Internet based on Wi-Fi technology an unfulfilled dream so far. Mr. Varsavsky said he initially hoped that selling $30 Wi-Fi routers embedded with FON software would be all he needed to expand the ranks of Foneros around the globe. But this approach failed to gain traction fast enough, and he shifted gears. Now he is trying to steadily stack up distribution deals with I.S.P.’s. While some I.S.P.’s have ignored his company, Mr. Varsavsky says FON has gained ground among I.S.P.’s that are looking for a way to attract new customers in competitive markets as well as to compete with high-speed wireless cellular networks. FON now has a growing range of alliances, including ones with the BT Group, Neuf Cegetel in France, Livedoor (a Japanese I.S.P.), and Time Warner in the United States, as well as a recent agreement with the city of Geneva, which is distributing hundreds of FON routers to residents. Now strongest in Britain, France and Japan, FON has recently made progress with new agreements with two major Japanese retailers and a Taiwanese I.S.P. And Mr. Varsavsky said he is close to major agreements in India and Russia. FON’s losses have shrunk from more than a million euros a month to less than 500,000, Mr. Varsavsky says. He also hasn’t given up his belief that a coming generation of wireless Internet technology will eventually give FON an even bigger boost. The first generation of Wi-Fi technology was limited in range, making it impractical for Foneros to share their routers widely. But a new wireless technology, known as 802.16, which should be more widely available to consumers over the next two years, will offer far greater ranges. This next generation of wireless communication, called WiMax by Intel and others, may allow him to complete his dream — in effect making it possible to weave together a wireless digital network in an urban area with nothing more than an army of Foneros willing to let their routers be used as micro cell towers. “Why should anyone have to build their own towers?” he asks. FON’s future, he argues, will revolve around universal access to the wireless Internet. In the meantime, he faces a big obstacle in one of the world’s most lucrative communications markets: the United States, where newer cellular networks with flat-rate pricing may prove a challenge because they will provide universal high-speed coverage. In Europe, the Internet landscape looks more promising. The European Commission’s decision last summer to place a price cap on voice calls — to make cellphones more affordable for residents traveling within the European Union — didn’t include mobile data. Recent high-speed wireless networks introduced in Europe also use per-megabyte pricing, discouraging the streaming of large files like video. That leaves a potentially big opportunity for a widely accessible sharing solution for travelers. Yet even in Europe, there are potential roadblocks, not the least of which has been a historically inhospitable atmosphere for entrepreneurial gambits. “Europe has a larger market than the U.S.A., but it is culturally fragmented and risk-averse,” Mr. Varsavsky says. “But the differences are narrowing, and now there are European venture capitalists and a local entrepreneurial culture.” Yet he remains undaunted when he discusses his unfinished revolution and FON’s prospects. “FON,” he said, “is like a telephone company built by the people,” he said.

Computers and the Internet
Wireless Communications
FON
Varsavsky Martin
Entrepreneurship
Telephones and Telecommunications
Venture Capital
Apple Inc
Argentina