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Monday, February 27, 2012

Foot Locker Puts An End To Nike Events Due To Riots

First appeared in USA Today
Foot Locker on Friday suspended shoe sales and special events planned for the release of Nike's debut NBA All-Star sneaker at various stores in Florida and at least three other states after a riot broke out among hundreds of people at an Orlando mall.

Other consumers vying to buy the shoe were arrested in Maryland and Louisiana.

The Foamposite One Galaxy sneaker with a constellation-like print and glow-in-the-dark sole was scheduled to go on sale for the first time in stores at midnight Thursday at a retail price of $220. One thing that may have led to the increased demand for the shoe is that Nike decided not to sell it online.

Foot Locker released statements on its website Friday that said due to safety concerns it was canceling the All-Star releases this weekend at the following Foot Locker House of Hoops stores: Florida Mall; Pembroke Mall; University Mall in Tampa; Southlake Mall in Atlanta; PG Plaza in Prince Georges County, Md. near the Prince Georges Assisted Living Center; South Park Mall in Charlotte, N.C.; and Crabtree Valley Mall in Raleigh, N.C.

Nike spokesman KeJuan Wilkins said "as with the launch of all Nike products, consumer safety and security is of paramount importance. We encourage anyone wishing to purchase our product to do so in a respectful and safe manner."

The Orlando Sentinel reported that the wild scene in Orlando erupted about 9:45 p.m. Thursday as hundreds of people packed the mall's parking lot, hoping to buy the new shoe at midnight. As the crowd grew, a large contingent of Orange County deputy sheriffs arrived, braced for problems.

Similar shoe releases have caused violence at shoe stores across the country, but no one was hurt or arrested at Florida Mall, the Sheriff's Office said.

Witnesses told the newspaper that the crowd was asked to wait across the street when the mall closed at 9 p.m., but one person made a mad dash toward the Foot Locker where the shoes were to go on sale, and hundreds followed.

"I saw hundreds of people running toward me. I thought I was going to get trampled," said Amanda Charles, 20, who was among a group of a half-dozen friends who drove from Jacksonville to try to buy the glow-in-the-dark Nikes.

Witnesses said more deputies quickly arrived, decked out in riot gear and fortified by still more deputies on horseback, on motorcycles and in patrol cars. A helicopter with a spotlight hovered overhead.

"We were afraid of the cops and the horses," said Mario Torres, 22, of Orlando.

The deputies formed a line and used shields to push back the crowd, witnesses told the newspaper. They said the deputies threatened to use pepper spray but did not.

"It was pandemonium," said Rico Gomez, 23, who flew to Orlando from New Haven with friends just to buy the new Nikes.

More than 100 law-enforcement officers from the Sheriff's Office, the Orlando Police Department and Florida Highway Patrol responded to the mall and were continuing to disperse the crowd as of midnight, the newspaper reported. People continued to mill about, and some cars remained in the lot after the free-for-all because many people were hoping the sale would go on as planned.

"Florida Mall is closed," a deputy driving around the perimeter of the mall announced on a loudspeaker. "Please leave the premises. This is an unlawful gathering. There is no shoe release tonight."

The shoe release was to cap a day of events at House of Hoops by Foot Locker, where a makeshift basketball court was set up and NBA players are signing autographs through the weekend. Boston Celtics forward Paul Pierce and the Orlando Magic AirTran Flight Crew were on Thursday's schedule.

Nike's website says the shoes that were to go on sale were part of the Nike All-Star collection, with a galactic theme inspired by space exploration. Their release is designed as a nod to Orlando and Florida's space industry.

John Horan, publisher of the newsletter Sporting Goods Intelligence, said the real driver behind the craziness over the shoe could be the fast-exploding world of social media.

It's nothing new for Nike to sell very limited numbers of its coolest, new shoes, he says. But in the past, he says, people who really crave the shoes — sometimes referred to as "sneakerheads" — would hear about it from inside channels, or because they are frequent, high-profile customers.

Under that scenario, maybe 100 or 200 insiders would show up at the mall for the new shoe's release. But with social media as the new information forum that's widely available to everyone, Horan says, "instead of 100 people lined up, you have 1,000 — or more."

The most compelling question, says brand consultant Jonathan Salem Baskin, is what's at the core of the relationship between Nike and its customers.

"It's one thing to talk to consumers in a way that enables them to love the brand," he says. "It's another thing, entirely, to do things in that relationship that either allows or encourages them to be obsessive to a point at which they harm themselves or others."

The website describes the shoe as "The Nike Foamposite One, showcasing an out-of-this-world galactic print upper, includes a Polyurethane midsole and a Nike Zoom unit in heel for low-profile, responsive cushioning. Made popular in its debut on the college hardwood in 1998, the Foamposite breaks the mold of conventional footwear design."

Twitter users earlier tweeted pictures of large crowds behind security barriers outside the Orlando mall store. The shoe already is on Craigslist, where someone offered a car — a 1996 Cavalier — for a pair, and others were prepared to pay $2,400.

One seller on eBay advertised a "buy it now" price for the shoe of $2,499.99.

Elsewhere around the country, at a mall in Hyattsville, Md., police said Friday that they arrested one person for disorderly conduct as a crowd of more than 100 awaited the shoe's release.

Police in Baton Rouge were called out after 600 people were pushing and shoving outside a store at the Mall of Louisiana around 5 a.m., according to WAFB-TV in Baton Rouge. Officers sent the crowds home and allowed them back in just before the store opened two hours later. Police made only one arrest, charging one person with inciting a riot and disturbing the peace.

Just before Christmas, the re-release of the Nike Air Jordan XI caused a ruckus at stores across the country, with crowds fighting and, in Lithonia, Ga., breaking down the doors.

In Jersey City, N.J., a 20-year-old man was stabbed seven times amid a crowd of about 300 people waiting to buy the shoes, a local newspaper reported.

In Richmond, Calif., police said one person fired a shot at a mall as about 1,000 people lined up for their chance at the shoes; a suspect was arrested.

Near Seattle, police used pepper spray to control fighting among would-be Air Jordan owners.

Unruly shoppers also were reported in Indianapolis, San Antonio, Charlotte, N.C., and Richmond, Va., resulting in several arrests and injuries.

Expansion Necessary in All Transportation Areas

First appeared in USA Today
A projected surge in job-producing U.S. exports by 2020 will not be realized unless the federal government spends more money to expand congested ports, highways, railways and airports, the U.S. Conference of Mayors says.

The mayors' group is meeting in Jacksonville, Fla., Friday and Saturday to form a strategy for urging Congress to use savings from ending the Iraq and Afghanistan wars on infrastructure upgrades costing hundreds of billions of dollars.

"If we're going to build bridges and roadways in faraway lands, why don't we spend that money on long-term infrastructure growth in the U.S.?" asks Mesa, Ariz., Mayor Scott Smith.

That's what President Obama proposed in his budget early this month, but the plan faces stiff resistance from Republicans in Congress who say the country can't afford to add to the federal debt.

An IHS Global Insight report out today says U.S. exports are expected to produce 40% of economic growth by 2020, up from 27% in the last decade. Exports should grow 79% this decade to $3.2 trillion in 2020, IHS says. It cites a weaker dollar, which makes U.S. products less expensive in some countries, explosive growth in emerging markets such as China, and some businesses moving manufacturing to the U.S.

IHS predicts that metro areas whose main trading partner is China or India will have the sharpest growth, including: Portland, Ore.; Bridgeport, Conn.; Salt Lake City; Greenville, S.C.; and Miami.

But local officials say growth will be limited if ports, railways and roads aren't expanded:
  •  In Mesa, inadequate roads and rail lines at the Mexican border often delay by several days shipments of electronics, copper and produce to Mexico, Smith says.
  • Ports in Jacksonville and other East Coast cities contain waters too shallow to accommodate the large ships best suited to transport the steel, machinery and other heavy-duty products that the U.S. exports, says Paul Anderson, CEO of the Jacksonville Port Authority. Dredging the ports would cost about $5 billion, he says.
  •  The intersection of highways and rail lines in Riverside, Calif., delays shipments to and from the Port of Long Beach, says Long Beach, Calif., Mayor Bob Foster. Rail lines must be elevated at a multibillion-dollar cost, he says.
  • Within the next decade, John F. Kennedy International Airport in New York will need a new runway to handle more cargo and additional rail lines must be built to area ports to speed deliveries, says Patrick Foye, head of the Port Authority of New York and New Jersey.

"We're in a fight for economic supremacy with China," he says.

Friday, February 24, 2012

Afghanistan Role Changes for US

First appeared in Wall Street Journal
The U.S. plans to shift the war strategy in Afghanistan from a combat to a train-and-assist mission in 2013, limiting the role of international forces ahead of the scheduled pullout at the end of 2014.

The U.S. and its North Atlantic Treaty Organization partners have been privately discussing such a change in the mission for months. In comments Wednesday, Defense Secretary Leon Panetta and his top advisers provided the clearest timetable yet for the shift. Those troops with Internet in Afghanistan are staying informed.

Under the plan outlined by Mr. Panetta, the U.S. and its allies in mid-2013 would transfer to the Afghan government and to Afghan security forces control over a final tranche of Afghan provinces. The U.S. and its NATO allies have been handing over provinces gradually as security has improved in those areas and Mr. Panetta said this final tranche in 2013 would include "some of the most difficult areas."

"Our goal is to complete all of that transition in 2013 and then hopefully, by mid to the latter part of 2013, we'll be able to make a transition from a combat role to a training, advise and assist role," Mr. Panetta told reporters traveling with him to Brussels for talks with NATO members.

Mr. Panetta and his advisers said the planned shift didn't amount to a change in the administration's strategy, but rather a "fulfillment" of the goals set out by NATO.

The Wall Street Journal reported in November that the Obama administration was exploring the shift announced on Wednesday.

Mr. Panetta's comments came after French President Nicolas Sarkozy surprised the U.S. and other NATO allies last week by saying he would propose giving Afghan security forces "complete control of NATO's combat missions during 2013."

U.S. officials hope the shift will help prepare Afghan security forces to take responsibility for securing the country by the end of 2014.

Mr. Panetta said the U.S. has yet to decide how the planned shift in the mission will affect the pace of the withdrawal of U.S. troops from Afghanistan. President Barack Obama has ordered reducing the number of U.S. troops in Afghanistan to 68,000 by the end of this summer, down from around 91,000 now.

Mr. Panetta said the U.S. would remain "combat-ready" after the shift to a train-and-assist mission in 2013 but would mainly provide support to Afghan units. U.S. officials said the Washington intended to maintain a substantial presence in Afghanistan in 2013 but they didn't say how large it would be.

In 2014, the U.S. would focus on "consolidating the transition and making sure that those gains are in fact held," Mr. Panetta said.

Mr. Panetta and other senior defense officials compared the planned shift in Afghanistan to Mr. Obama's 2009 decision to switch to an "advise and assist" role in Iraq and to declare a formal end to U.S. combat operations there. In Iraq, after mid-2009, American troops largely were confined to their bases.

Security conditions in Afghanistan are different, however, and will likely require U.S. troops, particularly Special Operations forces, to continue to accompany their Afghan counterparts into battle after the U.S. takes an advisory role.

Wednesday's announcement could help the Obama administration demonstrate progress at the height of the U.S. presidential campaign. Internet Afghanistan is busy with the story.

The timing of Mr. Panetta's comments could also help soothe anxious NATO allies. Some are under domestic pressure to follow the lead of France, which has suggested it might scale back its combat commitments early.

"We all went in together. And we'll all go out together," Mr. Panetta said he would tell his NATO partners.

Recent U.S. intelligence assessments have cast doubt on progress in the war in Afghanistan, describing what amounts to a "stalemate."

Mr. Panetta, who headed the Central Intelligence Agency before taking over as Pentagon chief last year, said the problem with the National Intelligence Estimate is that such assessments are quickly out of date. He said the document also wrongly assumed a full U.S. withdrawal after 2014. The U.S. is expected to keep at least some special operations forces in Afghanistan beyond the handover.

Shale Energy Boom Sets States Off Guard

First appeared in USA Today
Aaron Dinnin's last job was as a prison guard. Before that, he was a roofer. Today, the 33-year-old West Virginian works in a shale gas field near his home and earns more money than ever before. "This is the best job I've ever had," he says.

Expansive underground gas and oil fields being tapped in the nation's industrial heartland have brought hopes of prosperity and riches to a region that has been in economic decay for a half-century. The energy find appears richest in formations under many of the poorest parts of Pennsylvania, Ohio, West Virginia, New York and perhaps other adjacent states.  A Failure Analysis Expert is watching these changes.

For the nation, a huge energy source near where tens of millions of Americans live is a once-in-a-lifetime development. For the region, the dream is even grander: that cheap energy will make manufacturing competitive again and restore industrial might that's been slipping away for generations.

But the new boom has the states struggling to figure out how to tax and regulate the drilling so the new-found wealth isn't just shipped via pipeline to Louisiana, Oklahoma and Texas.

In the most obvious example: Pennsylvania and New York have no severance tax on oil and gas. Ohio has a tiny one that covers only the cost of regulating the industry.

By contrast, all veteran energy states tax their energy resources heavily and use the money to keep other taxes low. Texas charges a 7.5% severance tax on natural gas and has no income tax. Oklahoma charges 7.1%. Alaska charges 25% to 50%. It has no sales or income tax, writes checks to residents every October ($1,174 per person last year) and has stashed away $41 billion for the future by taxing energy. North Dakota, now enjoying a shale oil boom, charges 5% to 6.5%. Among the new boom states, only West Virginia has a substantial tax — an old natural resources levy, a little above 5%, that applies to oil, gas and coal.

New York, which has taken a go-slow approach, is studying what taxes and environmental regulations should be imposed.

"Some states have just launched into it and are trying to catch up later on environmental regulation," says Joseph Martens, commissioner of environmental conservation in New York. "We've had the advantage of seeing what's happened there and doing it differently."

Earlier this month, Pennsylvania Gov. Tom Corbett, a Republican, signed a law imposing some impact fees on drilling, although the financial effect is unclear. His predecessor, Democrat Ed Rendell, wanted to impose a 5% severance tax. In Ohio, Gov. John Kasich, a Republican, says he's willing to consider an impact fee to help local governments offset costs such as repairing roads. A Construction Consultant sees this as a point to consider.

The problem: The old industrial states have tax laws that date as far back as the 1930s. Legislators then taxed what they knew: land, machines, coal, hourly income. Pennsylvania's property tax applies to coal reserves but never mentions oil or gas. In local income taxes, workers' wages are generally taxed, but the royalties landowners receive for allowing drilling on their property are not. "The conversation is just beginning on how to tax shale," says David Davare, research director of the Pennsylvania School Board Association. "We'll figure it out."

Local economic bonanza

Towanda, Pa., (pop. 3,000) had been losing population since 1900. Then came the natural gas boom. A flood of workers from Oklahoma and Texas arrived. New hotels and restaurants opened. Heavy trucks carrying pipes, rigs and tankers rumbled over rural roads. Housing grew scarce. Bars got busier. An easy ride over the Susquehanna River bridge in the 1.1-square-mile hamlet became a 25-minute traffic jam during peak times.

"At first, it was a drastic culture shock," says borough manager Tom Fairchild. "Suddenly, little old Bradford County with its laid-back lifestyle was full of traffic, noise and dust."

Then came the money — and a change of attitude. Farmers started buying expensive pickups with royalty money. Everyone had a job — or two. Unemployment fell to 3%. Locals soon learned skills and joined the out-of-towners on high-paying industry jobs.

At the vocational high school, graduates walked out the door with a high school degree and welding certificate — and into jobs paying $60,000 to $85,000 a year, says Elizabeth Cheatle, director of the Northern Tier Career Center. Its welding and diesel mechanics programs are overflowing. "We're struggling to keep up," she says.

A drilling rig laborer can earn $90,000 a year with overtime. Professionals can earn well over $100,000.

For the residents of old industrial America, the boom was what people craved: well-paying blue-collar jobs for those with high school degrees and good jobs for college-educated people who want to stay home. "I was willing to go anywhere opportunity took me, and it took me here," says John Mote, 24, a civil engineering graduate from Penn State working on a gas drilling site in Canonsburg.

But there were costs, too. New workers added students to the 1,800-student Towanda school district. But the gas boom largely escapes property and income taxes, the school district's key revenue sources. The district cut its budget more than $2 million and laid off the equivalent of 1.5 teachers.

"We would have liked a little more forethought on how you handle a boom like this," says school board member Susan Portnoff, who strongly supports the gas activity and works for the local chamber of commerce.

Towanda just raised property taxes, too. One problem: Local income taxes apply to the "earned income" of permanent residents. That excludes royalties and the wages of out-of-state workers who time their visits home well and remain classified as temporary residents.

On the upside: Drillers buy so much water from Towanda that the town finally can afford the backup water supply it long has wanted.

"What becomes of us in 10, 15 or 20 years when the boom is over?" asks Fairchild, the Towanda borough manager. "Who knows? But when you look back, it's always been like this. Booms, then quiet."

Reviving the industrial belt

What industrial America values is making things. The taste of new industrial jobs from the shale rivals anything the region has seen in decades.

Vallourec, a French company, is spending more than $700 million on a Youngstown, Ohio, steel mill that will build seamless pipes for the energy business. It's the biggest industrial project in Ohio in years and will add 350 well-paid, non-union jobs. U.S. Steel and Republic Steel have hired back hundreds of workers at nearby plants to produce pipelines.

Shell Chemicals plans to build a $2 billion-plus "cracker" plant in Ohio, Pennsylvania or West Virginia to convert — or crack — ethane from wells into industrial uses. The plant would take years to build, employ thousands to construct and require massive infrastructure to serve a complex spread over hundreds of acres.

"In my adult lifetime, I don't know of anything that has an economic impact as large and far-reaching as this cracker plant," says West Virginia Commerce Secretary Keith Burdette, 56. "We're thinking not so much about the effect of the drilling, which will be substantial, but the other byproducts of gas that could change our state."

Moxie Energy of Vienna, Va., is seeking permits to build two $800 million gas-fired power plants in the heart of Pennsylvania's Marcellus Shale field. Each would supply enough electricity for 8,000 homes.

The economic ripple of the two power plants illustrates the shale boom's importance to the region. The plants would employ 500 construction workers at the peak and 30 well-paid technical jobs permanently, says company President Aaron Samson. The industrial gas turbines that run the plants would be built in South Carolina or Georgia. Property taxes would help local schools.

The natural gas plants would help replace the nation's old, heavily polluting coal plants, now being closed for environmental reasons, while scarring the rural landscape less than coal mining.

Each proposed gas power plant needs less than 30 acres, compared with hundreds of acres for a similar coal plant. They'd be fed by underground pipelines rather than railways and barges.

Local adjustment

The environmental effects of fracking and horizontal drilling on water supplies have attracted governmental attention. Fracking, or hydraulic fracturing, is the high-pressure injecting of water, sand and chemicals deep underground to release oil and gas. Horizontal drilling sends the pipe sideways — rather than straight down — to potentially tap miles of resources from one rig. The shale boom is a tribute to technique and technology, rather than a stumbling on a new find.

Much is unknown about the effects of fracking on such a grand scale, and state and local governments are struggling to adapt. On New Year's Eve, a small earthquake rattled Youngstown — the likely result of the high-pressure injection of fracking waste underground, according to Columbia University seismologists. The state shut down the disposal well. Fracking uses millions of gallons of water that must be disposed of or recycled. Conventional sewage treatment plants are not designed for this kind of waste.

So far, most regulation has reflected the industry perspective. Pennsylvania's new law imposing an impact fee also limited what local governments could do to limit where fracking occurs. Last year, when the Ohio legislature passed industry-backed regulation, the Ohio Oil and Gas Association took credit on its website: "Senate Bill 165 — Why We Did It."

Clif Little, a natural resource specialist at the Ohio State University extension service, says many farmers signed oil and gas leases for less than market value, partly because they lacked the contract negotiating experience of oil companies and partly because Ohio law makes it hard for locals to get a good deal. For example, in Ohio, oil companies don't say what they paid for a lease when the sale is recorded at the county courthouse — unlike when a home sale is recorded. So, unlike the housing market, landowners don't know the market price, but companies buying leases do.

Now, farmers are getting better deals by forming landowner groups and hiring specialist lawyers. The boom is underway. "It's staggering the number of permits rolling in," Little says.

Much of the action is moving to Ohio because its shale contains more oil, far more valuable than natural gas, now near a 10-year price low. Those involved in CPM Scheduling Analysis are carefully planning.

This bountiful supply is like winning the lottery for the hard-hit Appalachian towns and industrial cities in the new energy belt. "I wish it would have happened 35 years ago," says Bob Chase, head of the only petroleum engineering program in Ohio, at Marietta College in southern Ohio.

Monday, February 20, 2012

5 Hour Energy CEO Makes Sense

First appeared in the Detroit Free Press
Who needs a PhD when a double dose of common sense will do?

That question has been kicking around in my head ever since the hour I spent last week with Manoj Bhargava, listening to some of most plain-spoken unconventional wisdom I'd heard in a long time.

As I wrote a couple days ago in another article, Bhargava, 58, of Farmington Hills, is the largely unknown founder and CEO of a growing business empire anchored by the 5-Hour Energy brand of dietary supplements.

He's no dummy, that's for sure, but the Princeton dropout also has a healthy distrust of so-called experts.

What follows are several Bhargava anecdotes that stuck with me:

Hire salespeople older than 50: He has a core sales staff of 20 who peddle most of the 9 million bottles of 5-Hour Energy shots the company produces per week. "All but one guy," he said, "are over 50 years old. I don't hire kids for sales."

And why not? "You've got to train them, teach them, it takes too much time, and they don't work as hard most of the time," Bhargava said. The older folks "hit the ground running, they know what they're doing, they work their tails off. Yeah, they get a little more money but so what? They're cheaper by half than the kids. And they're also not valued by large companies, which is amazing. So we take the opposite approach.

"I tell people we don't hire executives. We hire staff sergeants and master sergeants. The military without officers can run for months -- but without sergeants, not even one day. So we hire people who actually do stuff."

Why sell 16 ounces when two will do?: When he first sampled an energy drink at a trade show in 2003 that gave him the idea for the 5-Hour Energy shots, Bhargava couldn't fathom why it was packaged in 16-ounce bottles. "It didn't make any sense. It would be like selling Tylenol in 16-ounce bottles. I thought, you have to drink this whole thing? I just want to drink a couple swallows and go.

"So I reduced it down to two ounces -- actually we tried to reduce it down to one ounce, but you couldn't see the label it was so small." Today the brand is valued at about $4 billion.

Why make the stuff in Wabash, Ind.? "Anybody can build a plant; that doesn't take brains. Running one does," Bhargava said. So when 5-Hour Energy needed a production plant, he called Ed Snyder, a former partner in an Indiana plastics firm, and tapped him to run it.

"He's a very smart guy," Bhargava said, "the best plant operator I've ever met. So I said, 'Look, if you're not moving, I'm putting the plant next to your house.' "

Ask where the wife's family is from: "I'm here in Detroit for the same reason most guys are where they live," he said, "because it's where the wife's family is. In fact one of my questions in the interview process, if it's a guy, is, 'Where's your wife's family from?' Because if they're from Louisiana, he's leaving at some point." Then Bhargava smiled: "I know I'm going to get a lot of flak about that remark," he said.

Friday, February 17, 2012

No Response From Cruise Ships About Sail-by-Salute

First appeared in USA Today
North America’s largest cruise lines are not answering questions about whether they allow captains to take ships close to shore in so-called ‘sail-by salutes’ — a practice that some are blaming for this month’s Costa Concordia disaster.

USA TODAY’s Cruise Log sent questions on the topic Tuesday to spokespeople for the six major U.S.-based lines that account for the majority of all cruises taken by North Americans, and by Wednesday afternoon none had answered the questions.

Spokespeople for two of the lines, Princess Cruises and Holland America, said they would have no comment on the subject. A spokeswoman for Royal Caribbean and Celebrity Cruises, which are sister lines, said on Tuesday that she would look into the matter but by Wednesday afternoon had not gotten back with answers. A spokeswoman for Carnival acknowledged the questions but also did not get back with answers despite repeated requests.

A spokeswoman for Norwegian Cruise Line pointed to a letter on safety sent to customers this week by CEO Kevin Sheehan that she said addressed the issue. The letter has a single line related to the topic that noted the company’s officers “follow pre-set voyage plans which are thoroughly reviewed and discussed by the captain and bridge team prior to port departures and arrivals.”

The letter did not address the questions of whether the company allows its captains to deviate from the pre-set voyage plans or whether Norwegian captains had done so in the past, either with or without authorization.

The captain of the Costa Concordia, Francesco Schettino, reportedly has said that his managers told him to take the vessel close to the shoreline of the island of Giglio on the night it ran aground. Costa Cruises has denied that it ordered or authorized the maneuver.

At least 16 passengers died after the ship hit rocks near the island and partially sank.

Costa Cruises Chairman and CEO Pier Luigi Foschi suggested in testimony before an Italian parliamentary committee on Wednesday that sail-by salutes do happen with cruise line approval, the AP reports. The news service says Foschi defended the practice of what was referred to as “tourist navigations,” whereby cruise ships steer close to shore to give passengers a look at the sites.

“It’s something that enriches the cruise product,” Foschi said, according to AP. “There are many components of the cruise product, and we have to do them like everyone else because we are in a global competition.”

Foschi stressed that such deviations from charted routes are supposed to follow strict protocols that ensure safety including informing nearby ports and the company.

“For anyone who knows that zone, that ship with those characteristics shouldn’t have been there,” he said of the Costa Concordia’s route near Giglio.

Industry watchers say the question of just how much sail-by salutes are condoned by cruise companies may prove crucial to the eventual resolution of who is to blame for the Costa Concordia accident.

“The path of the cruise ship that led to this disaster was the wrong one to take. That much we know,” MaritimeProfessional.com editor Joseph Keefe writes today on his blog. “Just who, if anyone, ultimately authorized this sort of behavior is still very much in question. So is the issue of how much leeway is given to ship’s officers, at this company and every other one that operates so much as a twenty-foot launch with an outboard anywhere else in the world.”

Passenger ship historian and writer Peter Knego says that whether approved by cruise companies or not, sail-by salutes both near land and between two ships at sea are a time-held tradition going back to the days of the ancient mariner.

“For me, as a ship lover, it is one of the great joys of cruising,” Knego says. “But obviously, it needs to be done only when safety is not compromised.”

Knego says that Italian and Greek seafarers, in particular, long have been known for sail-by salutes. “There are spectacular images of classic Italian liners such as Rex and Conte di Savoia passing each other mid-sea, only hundreds of feet apart, decks lined with passengers and whistles blowing,” he notes, adding that the shores of Italy are peppered with little towns of mariners and their families that often draw salutes from fellow mariners.

“While anchored off Sorrento on (Oceania Cruises’) Insignia, I watched as both the passing (Silversea Cruises-operated) Silver Whisper and (MSC Cruises-operated) MSC Orchestra sailed up towards the cliffs, blew their horns, then returned to their southbound course,” Knego recalls. “I was told later that a famous sea captain lives in Sorrento and that ships often salute him. “

Knego also recounted a voyage on the MSC Fantasia where the ship did not alter course but gave a hearty horn blast to the town of Camogli, southeast of Genoa, which is known for its seafarers. And he once was on a cruise ship that altered course to salute the island of Tinos, where several of the officers had families.

Another longtime industry watcher, CruiseCritic.com editor Carolyn Spencer Brown, writes in an online Conde Nast Traveler column this week that she once was on a cruise ship that pulled into a small harbor in the Adriatic so the captain could say hello to his wife and twin daughters, who were in a motorboat waving up at him.

“At the time I thought it was charming,” Spencer Brown says. “It didn’t occur to me it could possibly be unsafe.”

Spencer Brown predicts that in the wake of the Costa Concordia accident any line that currently permits captains to go off course for reasons other than emergencies likely will prohibit the practice unless expressly authorized.

In the case of Costa Concordia’s sail-by of Giglio on Jan. 13, she says, “the captain didn’t have on hand the wealth of knowledge, research and maritime charting that could have kept the ship away from rocky terrain.”

Thursday, February 16, 2012

Fake Drugs Are Big Business

First appeared in Associated Press
The discovery that a fake version of the widely used cancer medicine Avastin is circulating in the United States is raising new fears that the multibillion-dollar drug-counterfeiting trade is increasingly making inroads in the U.S.

The criminal practice has largely been relegated to poor countries with lax regulations. But with more medicines and drug ingredients for sale in the U.S. being manufactured overseas, American authorities are afraid more counterfeits will find their way into this country, putting patients' lives at risk.

The Avastin discovery follows other recent instances in the U.S. of counterfeiting, involving such drugs as Viagra, the cholesterol medicine Lipitor and the weight-loss pill Alli.

"We do know there are counterfeits continuing to try and make their way onto the U.S. supply chain," said Connie Jung, an associate director in the Food and Drug Administration's office of drug security.

The FDA announced Tuesday it is investigating fake vials of Avastin that were sold to at least 19 doctors and clinics, including 16 sites in California, two in Texas and one in Chicago. Tests showed the vials did not contain the active ingredient in Avastin, which is given intravenously in hospitals, clinics and doctors' offices to treat several types of cancer.

The contents of the vials are still being analyzed, and the FDA said it has not received any reports of patients who were harmed.

FDA officials said the counterfeit Avastin was imported from Britain and distributed by Volunteer Distribution, a wholesaler based in Gainesboro, Tenn. British regulators notified the FDA about the products in December, but the agency didn't confirm they were fake until last week.

The FDA gave assurances Wednesday that the U.S. remains one of the most secure pharmaceutical markets in the world. But the news sent cancer doctors scrambling to check their records.

Mary Mathias, a nurse who orders drugs for one doctor on the FDA list - Dr. Phillip L. Chatham in Granada Hills, Calif., - said they had stopped using the company in question at least a year ago.

Because Avastin treatments are spaced one to two weeks apart, it is not likely that someone would get more than one infusion from the same vial. And because these are people facing a life-threatening disease, it is hard to say whether missing one treatment with the real drug would compromise their care.

Gauging harm from a counterfeit cancer treatment is nearly impossible, said Dr. Robert C. Young, former president of the Fox Chase Cancer Center in Philadelphia and now a consultant to cancer centers.

A colon cancer patient, for example, might receive 18 to 20 Avastin infusions over six months. Missing one dose seems unlikely to have a dramatic effect on survival odds, but it's not provable either way because cancer's course and a patient's response to treatment are not predictable, he said.

Counterfeits have traditionally been more of a concern in developing regions like Asia and Latin America, where as many as 30 percent of drugs sold are fake, according to the World Health Organization. The group estimates just 1 percent of drugs dispensed in the U.S. and other developed nations are fake.

But incidents of counterfeiting reported by drugmakers have increased steadily over the decade to more than 1,700 worldwide last year, though only 6 percent of those were in the U.S. There are few reliable estimates on the value of the global counterfeit drug trade, though most place it in the tens of billions.

Counterfeiting has become more prevalent as pharmaceutical supply chains increasingly stretch across continents. Over 80 percent of the active ingredients used in U.S. pharmaceuticals are now manufactured overseas, according to a recent congressional report, and experts say this has made it easier to move counterfeit products into this country.

"With today's transportation networks, it's no longer a stretch to move these materials from a source in Pakistan or India to the U.S." said Tom Kubic, president of Pharmaceutical Security Institute, a trade association set up by two dozen pharmaceutical companies.

In 2005, federal prosecutors indicted 11 employees of a Missouri business on charges of conspiring to sell $42 million in counterfeit Lipitor. It was manufactured in Costa Rica and illegally imported to the U.S., where it was sold to wholesalers.

Industry experts also say a combination of big profits and low penalties has made drug counterfeiting an increasingly attractive business for criminals in the U.S. and abroad.

A single vial of Avastin sells for $2,400, and the drug had nearly $2.7 billion in U.S. sales last year, while the sentence for drug counterfeiting in the United States is about three years in prison. That compares with 15 years for counterfeiting money.

John Clark, head of global security for Pfizer Inc., said counterfeiters can make several million dollars quickly and, if they're caught, get off with as little as six months in jail. He also said counterfeiters can set up an operation at a fairly low cost - perhaps $50,000, including about $20,000 for a pill press.

"It's a no-brainer for criminal organizations that it's worth a gamble," Clark said.

Clark said Pfizer's anti-counterfeiting team around the world has seen a number of fake vaccines and biologic drugs sold in developing countries, not just pill-based drugs.

"They're getting much more sophisticated," often getting ahold of legitimate vials that had held such medicines, from patients, trash cans or recycling operations, and then filling them with oil or water.

Tuesday, February 14, 2012

Pot Stores Need Banks, Too

First appeared in Associated Press
Medical marijuana is legal in 17 states, but the industry has a decidedly black-market aspect - it's mostly cash-only.

Banks won't touch pot money. The drug is illegal under federal law, and processing transactions or investments with pot money puts federally insured banks at risk of drug-racketeering charges.

In Colorado, state lawmakers are attempting an end-run around the federal ban with a bill that would create the nation's first state cooperative financial institution for dispensaries and growers to allow them to store and borrow money.

The proposal, if enacted, would be a direct challenge to the U.S. Justice Department, which warns that all financial transactions involving pot money are illegal.

But for Colorado's 600 or so medical marijuana dispensaries, and hundreds more growers and associated industry workers, the problem of not being able to bank marijuana money is big enough to make the challenge worthwhile.

"I've been kicked out of three banks," said Matthew Huron, owner of two dispensaries and an edible marijuana company in Denver. One of his shops, Good Chemistry, greets patients with a sign on the register, "CASH ONLY."

Huron pays his bills with money orders. Huron's current bank, which he won't name, doesn't know the true source of his company's deposits. But without a checking account, Huron said he wouldn't be able to pay the required payroll tax for his 15 employees.

Small business loans are also out of the question, Huron said. In order to build a warehouse to grow the marijuana he sells - a requirement under Colorado law - Huron had to grow pot during construction and sell the pot to make cash payments to finish the warehouse.

"It's very cumbersome, the banking aspect," Huron said.

Cumbersome and dangerous. Dispensary robberies are rare, but the Denver-based Medical Marijuana Industry Group, which supports the legislation, reports that its members complain of being followed home with some saying they have been victims of robberies they haven't reported..

Marijuana businesses have large amounts of cash on their premises, a fact as widely known as the price of the product they sell.

"It freaks everybody out," said James Laws, general manager at the Good Chemistry pot shop in Denver. "It's off-putting when people come in and we have to say, 'Sorry, our ATM's down so you need to go down the street and get cash or we can't help you.'"

The bill up for debate in the state Senate Finance Committee Tuesday would set up a financial institution somewhat like a credit union.

Only licensed members of Colorado's medical marijuana industry, or their patients, could join. Initially, the Medical Marijuana Financial Cooperative would simply function as a vault of sorts for pot money. Members could deposit money and take money out.

Eventually, the cooperative could decide whether to issue loans or provide other banking services.

Several Democrats in Congress, including Colorado Rep. Jared Polis, have proposed federal legislation opening financial services for medical marijuana businesses in states where they're legal. However, prospects are remote.

"The truth is, this is just not something that's going to be addressed in this Congress," said Steve Fox, director of public affairs for the Washington-based National Cannabis Association.

Without federal action, Colorado's proposal may be a big waste of time. The same reason banks won't touch pot money - the risk of federal drug-laundering charges - would confront a state cooperative, as well.

"This bill attempts to address this big problem for the industry, the lack of financial services. But what it cannot do is get around the federal money-laundering piece of this," said Sam Kamin, a law professor at the University of Denver who follows marijuana regulations.

Threat of federal intervention appears to be growing. American Express announced last May it would no longer handle medical marijuana-related transactions because of fear of federal prosecution.

A month later, U.S. Deputy Attorney General James M. Cole gave banks an explicit directive about pot.

"Those who engage in transactions involving the proceeds of such activity may also be in violation of federal money laundering statutes and other federal financing laws," Cole wrote in a memo.

Cole's memo spooked the few small banks still doing business with marijuana growers and sellers.

"You'd have one bank at a time saying, 'We're going to pull out of this.' Then everybody would go to the next bank, and the next bank, until all the banks pretty much shut down," Fox said.

The sponsors of Colorado's bill concede that a state cooperative is unlikely to solve the problem.

But in a state with the nation's most regulated pot industry, where the government oversees nearly every aspect of how the drug is grown and sold, they say a banking proposal is the logical next step. Medical marijuana in Colorado produces about $20 million a year in state and local taxes, and employs from 5,000 to 10,000 people, according to the industry group.

"It's really hard to try to figure out how to create a workable local solution here," said Democratic Sen. Pat Steadman of Denver, one of the sponsors of Colorado's bill. "We have zero confidence that Congress is going to do something. But no matter how creative you try to get, there's only so much you can do at the state level."

So why bother? Steadman has several dispensaries in his district and says he worries about their safety if something isn't done to help them bank.

"They've got bags of pot, bags of cash. It's a bad combination," Steadman said.

Monday, February 13, 2012

Changes in Newspaper Legacy

First appeared in the Washington Post
On a Sunday in early December, Marcus Brauchli, the executive editor of The Washington Post, summoned some of the newspaper’s most celebrated journalists to a lunch at his home, a red brick arts-and-crafts style in the suburb of Bethesda, Md.

He asked his guests, who included the Pulitzer Prize winners Bob Woodward, Dana Priest, David Maraniss and Rick Atkinson, along with Dan Balz, the paper’s chief correspondent, and Robert G. Kaiser, a senior writer and editor who has been with the paper since 1963, to help him — and The Post.

He wanted to know how they thought The Post was covering the 2012 election and what might be improved. The paper, they told him, needed to strike a better balance between the ferocious 24/7 news cycle and more ambitious longer-term projects. Newsroom morale was suffering and needed his attention.

The meeting was an unusual gesture from Mr. Brauchli. In the nearly three and a half years since he became the first outsider to run the paper in seven decades, he has often fought perceptions that he is inattentive to concerns of his staff members.

But Mr. Brauchli is acutely aware of the tension that lies at the heart of his mission — a tension being faced not just by newspapers but by media companies in music, film, books, magazines and television. He is charged with maintaining the standards and legacy of a great institution — in this case, the newspaper of Katharine Graham, Ben Bradlee and Mr. Woodward and Carl Bernstein — while confronting the harsh reality that in the digital age, the grandeur is gone.

Mr. Brauchli refuses to be held hostage to the past. “There are a lot of nostalgia-drenched people in the journalism field who look back at what newspapers were and have a fairly static view of what they should be,” he said in an interview. “Just because The Washington Post used to be a certain way doesn’t mean The Washington Post has to be that way in the future.”

The Post faces the same problems as other daily newspapers, whose revenues have sunk as the Web and the tough economy have sapped advertising. But in some ways, its situation is even more daunting. Unlike most other papers with national aspirations, The Post serves a purely local print market, one that for decades had limited competition, and it has depended on local advertisers and subscribers who have since fled to the Web.

Though company managers say privately that The Post is modestly profitable, its newspaper division, which also includes a group of community papers and The Herald of Everett, Wash., reported an operating loss of nearly $26 million through the first three quarters of last year.

Compounding its troubles, The Post’s safety net ripped a giant hole. For decades, The Post could rely on Kaplan — the money-minting, for-profit college and test-preparation business that the company bought in 1984. But Kaplan has been squeezed under the weight of new federal rules that place greater limits on how for-profit colleges can recruit and enroll low-income students.

Once by far the largest and fastest-growing business in the Washington Post Company, Kaplan is now a laggard. Education accounts for less operating income than two divisions that were historically less crucial to its profits, cable and broadcast television, according to the latest financial reports.

That has left the newspaper and the company’s other businesses exposed. The newsroom, once with more than 1,000 employees, now stands at less than 640 people, depleted by buyouts and staff defections. The newspaper’s Style section, once one of the most coveted assignments in American journalism, has shrunk from nearly 100 people to a quarter of that size. Bureaus in New York, Los Angeles and Chicago are gone. There were so many Friday afternoon cake-cutting send-offs for departing employees last summer that editors had to coordinate them so they didn’t overlap.

“The survival of the institution is not guaranteed,” Mr. Kaiser said in an interview before the December lunch. Over the course of his five-decade career with The Post, he has been a summer intern, a metro reporter, a foreign correspondent and the No. 2 to Len Downie, Mr. Brauchli’s predecessor.

“When I was managing editor of The Washington Post, everything we did was better than anyone in the business,” he said. “We had the best weather, the best comics, the best news report, the fullest news report. Today, there’s a competitor who does every element of what we do, and many of them do it better. We’ve lost our edge in some very profound and fundamental ways.”

Last week, the paper announced a fresh round of voluntary buyouts, an effort to cut 20 more positions as managers reckoned once again with the painful reality that The Post was not making enough money to support the staff it employed.

Mr. Brauchli has reacted to the upheaval by overseeing one of the most sweeping and closely watched reorientations of any newsroom in the country. The editors now stress online metrics and freely borrow from the playbooks of more nimble online competitors like Politico and The Huffington Post.

The outcome of their efforts could offer a high-profile case study on how a company can foster an entrepreneurial, digital culture while remaining true to its heritage. But the transformation has been far from easy. There have been tensions in the newsroom and visible fissures between Mr. Brauchli and his own publisher.

The Post has expanded its Web presence by trying to meld what was great about the old Post with new traffic-baiting tricks of online start-ups — creating new, high-minded blogs like Ezra Klein’s “Wonkblog,” along with “Celebritology 2.0” where news about the Kardashian sisters and Justin Bieber can be found. That has many inside the paper starting to wonder if online growth has come at too high a cost.

Until just two years ago, the Washington Post Company was considerably behind many of its competitors in innovating on the Web. Its digital and print operations were even separated by a state line. The Web site’s offices were across the Potomac River in Virginia and run by a different set of managers.

That changed after Mr. Brauchli and Katharine Weymouth, the Post’s publisher, integrated the two sides in the first half of 2009. Journalists whose primary responsibilities are to the Web site now work next to reporters in The Post’s headquarters on 15th Street in downtown Washington. Under the direction of Raju Narisetti, one of two managing editors brought in by Mr. Brauchli, the Post newsroom was reoriented to think about one primary goal: bringing the most visitors as possible to Washingtonpost.com.

Mr. Narisetti, who left the paper last month for a new job at The Wall Street Journal, where both he and Mr. Brauchli had worked before The Post, brought large flat-screen monitors into the newsroom that projected in real time what the most popular stories were online. He installed a new internal publishing system that required reporters to identify Google-friendly key words and flag them before their stories could be edited.

There are 35 different daily reports that track traffic to different parts of the Web site. Editors receive a midday performance alert, telling them whether the site is on track to meet its traffic goals for the day. If it appears that they might miss their goal, editors will order up fresher content.

“I’ve been at lunch, opened up that e-mail and called people and said: ‘Looks like we’re not delivering enough content. What can we put up?’ ” Mr. Narisetti said in an interview before his departure.

Top editors have embraced the view that studying traffic patterns can be a useful way to determine where to focus the paper’s resources.

“Let’s say you’re looking at your local staff, and because of pressures you need to move people. So you’re telling the local editor, here is the data, here are the business needs of our audience,” he said. “And in some cases people have moved an editor into a reporting role, or people have said we are reorganizing these beats so we don’t need four people covering this system. We can have three.”

Traffic isn’t the only factor that editors examine when determining whether to kill or expand a blog. They can look at where online visitors are when they read the site. And if their computers are registered with a government suffix — .gov, .mil, .senate or .house — editors know they are reaching the readers they want. “That’s our influential audience,” Mr. Narisetti said. “If a blog is over all not doing that great but has a higher percentage of those, we say don’t worry about it.”

Post employees are regularly schooled in the lingo of Web traffic. In memos to the staff, Mr. Brauchli is as likely to cite terms like page views, unique visitors and social media referrals as he is to laud a journalistic achievement. At the beginning of the month, he started an e-mail to the newsroom this way: “January was an excellent month for us digitally. We surpassed all our previous records. We beat our monthly records for page views by 9 percent, for visits by 14 percent and for unique visitors by 12 percent.”

He added: “Growing everywhere is a sign that we are adapting effectively to what our readers want.” By one important measure, The Post’s efforts are paying off. Recently, it has averaged 19.6 million unique visitors a month, according to comScore, making it the second-most-visited American newspaper Web site, behind that of The New York Times.

Mr. Narisetti and Mr. Brauchli were close partners in the digital reinvention of the newsroom, but their relationship became tense at times toward the end. In one spat witnessed by reporters in December, Mr. Brauchli confronted Mr. Narisetti in the newsroom over an erroneous blog post that said Mitt Romney was using language from the Ku Klux Klan in his speeches. The item forced the paper to issue an uncharacteristically self-flagellating correction citing “multiple, serious factual errors that undermine its premise.”

In an interview before his departure, Mr. Narisetti was asked if he believed that the newsroom would be the same size at the end of this year. “One thing no editor in any newsroom in this country can avoid saying is that it will be smaller,” he said, adding that if his bosses asked him how many people he needed to put out the paper, “the chances are we wouldn’t say 630 people.”

Despite the emphasis on digital delivery, The Post has continued to thrive by more conventional measures. Mr. Brauchli points to the journalistic distinctions under his watch, including five Pulitzer Prizes, and articles like an investigation into the insurance giant AIG and its role in the economic collapse of 2008.

“The Washington Post doesn’t need to cover everything,” he said. “But what it does cover it will cover well. I think the staff of any newsroom today surely understands that we are in a fast-changing industry, facing constant competitive pressure, significant economic challenges and great opportunities to rethink how we cover things.”

Some who were around when The Post’s mission was to cover everything said they understood how hard Mr. Brauchli’s job was, and they think he did not always get the credit he deserved.

“Whatever you’re going to say about the paper and where it is, it’s a time of convulsion for all newspapers,” Mr. Woodward said. “But you have an absolute first-class news person in charge who really does have the clarity, zeal and drive of Bradlee.”

No one bears the weight of The Post’s legacy more than Katharine Weymouth, the paper’s 45-year-old publisher and the fifth member of her family to hold that title. Her grandmother was the beloved Post matriarch, Katharine Graham. Her uncle is Donald E. Graham, the former publisher and now chief executive of the Post Company. It is a testament to Mr. Graham’s standing among his employees that despite the difficult times, few hold him in anything but the highest esteem.

Mr. Graham, who graduated from Harvard and was drafted into the Vietnam War, joined the Washington police department before taking a job as a Post reporter. Ms. Weymouth, who grew up on the Upper East Side of Manhattan, attended the Brearley School and then Harvard, had an indirect path to The Post of a different sort. After graduating from the Stanford Law School, she moved to Washington to work as a corporate lawyer.

In 1996, she joined The Post as an assistant counsel and was named publisher in February 2008, right as the Great Recession was getting under way. In one of her first major decisions, she surprised the newsroom by reaching outside the organization for Mr. Brauchli, who had accepted a large payout and resigned from his previous job, running The Wall Street Journal under its new owner, Rupert Murdoch.

In Mr. Brauchli, she saw the kind of leader who could be a strong partner in shaping the company’s business strategy for the next generation. “I think he came in with his eyes wide open,” she said in an interview.

Mr. Brauchli was also willing to take on the undesirable task of paring down the newsroom. “It’s a job that Ben Bradlee didn’t have to do, and that Len Downie only had to do a little bit of,” she said, referring to the paper’s previous two executive editors.

Ms. Weymouth is a careful student of her family’s history, even if she says legacy isn’t something she spends a lot of time thinking about. “I just can’t think like that,” she said.

Her tenure got off to a rocky start. In the summer of 2009, Ms. Weymouth had to apologize after it became public that The Post was planning to charge lobbyists and others for access to exclusive “salons” at her home. Seeking a new revenue stream, the company wanted to create a series of events featuring Post journalists that would attract sponsors. Though magazines host similar conferences all the time, it seemed particularly undignified for an institution as esteemed as The Post. And the blowback was fierce.

Though Mr. Brauchli always understood his job would entail how to put out a daily newspaper and run a 24/7 Web site with shrinking resources, some of his editors have noticed that his relationship with the publisher has cooled.

One veteran newsroom manager said Mr. Brauchli has described “a constant fight” with the publisher over making further cuts. In an act that went largely unmentioned at the paper, Mr. Brauchli refused to accept a bonus one year, this person added.

Though such a gesture, coming as it did when the paper was reducing staff significantly, may have helped lift morale and engender good will, Mr. Brauchli chose not to make his decision public. And when Ms. Weymouth wrote a year-end memo to the staff praising its accomplishments and thanking people by name, his name was curiously absent, leading many staff members to believe that she had snubbed him. In fact, said another person who had seen an original draft of the memo, Mr. Brauchli’s name was mentioned in the first version but he asked that it be taken out. He left the misperceptions uncorrected.

Many at The Post are still trying to adjust to life under a new regime, one in which “Donnie-grams,” congratulatory notes from the chief executive, arrive in your in-box along with spreadsheets on the latest Web traffic metrics, and where the walk-around management style of Mr. Bradlee and Mr. Downie is gone. Employees often fault Ms. Weymouth and Mr. Brauchli for not circulating enough in the newsroom. By her own acknowledgment, Ms. Weymouth lacks ease and rapport with the newsroom. Her uncle Don, she said, “has an amazing knack for names that unfortunately I don’t share.”

On election night in 2008, she brought her young daughter into the newsroom to witness Post journalists putting together the paper that would report on President Obama’s historic election. Reporters and editors, most of whom rarely saw their publisher in the newsroom, were taken aback but impressed with what that said about Ms. Weymouth’s attachment to the paper.

“I hope they see me as a champion of the news. I do my best,” she said. She added that she didn’t visit the newsroom “nearly as much as I’d like,” saying: “You get stuck in meetings, you’re traveling. I’d like to get down there a lot more.”

Mr. Brauchli’s own response to the criticism was similar: “The journalism is where I want to spend my time, and the journalism is where my passion is. But there are a lot of issues that require my attention.”

THIS summer, Reuters tried to poach Mr. Balz, one of the country’s most prominent political reporters. Mr. Brauchli and the national editor, Kevin Merida, were loath to see him go — not just because they were wary of more brain drain but also because of the potential damage to newsroom morale from the defection of such a revered and well-liked colleague.

They flew a young political reporter, Philip Rucker, to Michigan, where Mr. Balz was on vacation and considering the Reuters offer. Mr. Rucker appeared on Mr. Balz’s doorstep carrying a basket with cheese and wine and a book they had made called “Campaign Crescendos: The Election-Night Writings of Dan Balz.” Editors and reporters had signed it, urging him to stay.

He declined the Reuters job.

“To me, The Post was and is a great newspaper,” Mr. Balz said. “Is it a different place today than it was? Sure. But in the end it’s still a great place to do great journalism.”

Sites Make Car Sales Haggling Obsolete

First appeared in New York Times
When it comes to negotiating a price on a new car, the script has not really changed much over the years: The dealer’s salesman writes down a price, you counter and then he walks to the back of the showroom to talk with the manager to “see what we can do.”

At least consumers no longer have to enter the process blind. Prospective buyers can educate themselves on Web sites like Edmunds and Kelley Blue Book and get suggested retail prices and find out how much their trade-ins are really worth.

Still, the auto industry has not embraced the digital age in the way other businesses, like real estate or travel, have. In part, that is because the auto dealers’ business practices are protected by state franchise laws.

But then, a company called TrueCar.com came onto the scene and tried to shake things up. It started running television commercials late last year, which attracted a lot of attention, and the industry immediately pushed back — hard. Here’s why: Besides showing what other car buyers paid for a particular car, TrueCar also gave an estimate of the dealer’s true cost. But what really alarmed the industry was TrueCar’s promise to deliver a guaranteed price from several dealers, essentially eliminating the need for any haggling.

The auto industry worried, perhaps rightly, that all this would squeeze their already thin profit margins on new cars. So, after several dealers’ associations complained that TrueCar was violating various laws, regulators from several states told TrueCar that they questioned the site’s business practices. Honda Motor Company also protested loudly, threatening to cut off marketing dollars to dealers that did not follow its guidelines when promoting its brands on TrueCar’s site.

“There is a fear that TrueCar might work too well,” said Scott Painter, the company’s chief executive, a serial entrepreneur who also started many other auto-related sites, including CarsDirect.com.

So how long can the car industry continue to operate the way it did when your grandfather walked into the showroom? And does TrueCar really provide the best model for consumers who want a fair price without the hassle?

Clearly, at least some dealers fear that showing their hand will drive them out of business. “Dealers are afraid if they give customers their best price, they will just take that price and go to another dealership and see if they can beat it,” said Jeremy Anwyl, vice chairman at Edmunds, an auto research Web site.

And even Mr. Painter acknowledged that though most of the dealers that his site works with have managed to hold their profit margins steady, dealers in some markets became so incredibly competitive that their business would not be sustainable over the long run. “We have always said it is not a race to the bottom,” Mr. Painter said, adding that for his service to succeed, dealers need to succeed. “But there is no question that dealers’ natural tendency to compete with one another has resulted in extremely low prices.”

To comply with regulators and their patchwork of different state laws, TrueCar initially stopped operating in a handful of states while it tweaked its business. It has resumed operating in those states except for Colorado and Louisiana (it doesn’t operate in Alaska).

Now, the guaranteed prices will be delivered directly from the dealers instead of appearing on TrueCar’s Web site. And depending on where you live, the pricing promises may be called an “upfront price,” which is a guaranteed price that the dealer is willing to sell at. Or in places where upfront pricing is not allowed — because of the possibility it could lead to a bait-and-switch situation — consumers will receive a promise of “guaranteed savings,” say $2,000 off the manufacturer’s suggested retail price.  Those changes will be introduced over the next few months, Mr. Painter said, though they are still a work in progress.

Besides watering down the way it presents some of its pricing, the company was also forced to change the way it charged dealers for the sales leads it provided. In most cases, it will continue to charge dealers a fee — $299 for new cars, $399 for used — if TrueCar’s introduction to a consumer leads to a sale. But in places where it is illegal to receive a fee for the sale, dealers will pay via a subscription. The company also turned off its commercials — which promoted its haggle-free, guaranteed pricing — while it creates new ads that focus on things like dealer proximity and service. “The realities of the franchise system and the protection it has at the state level means you have to work with the dealers,” Mr. Anwyl said. “You can’t work around them.”

TrueCar’s critics say its model solves only part of the problem. The site may be able to ensure a fair, haggle-free price, but if that drives dealers to compete too fiercely with one another, they will be forced to find other places to turn a profit. So they may lure you into the dealership with a low price, but then make up for it by giving you a poor deal on your trade-in or on the financing. After all, profit margins on the car itself are not as big as consumers may think. If a dealer can make $1,000 on a $30,000 car, some experts say, they’ve done well. 

Others, including Honda, have argued that TrueCar could open the door to unscrupulous dealers trying to sell a more expensive car or more options once they get the customers in the door — which Honda said reflected poorly on the brand. Honda also threatened to cut off marketing dollars to dealers who promoted its cars on the site below the invoice price, a price that is supposed to represent something close to the dealer’s cost (though dealers usually make more money on other manufacturer incentives and programs).

TrueCar said it keeps a close eye on the prices its dealers — the site currently works with about 4,100 of them — present to consumers to be sure they are not below cost.

No matter where you weigh in, TrueCar has certainly nudged the industry forward. It claims that its data is even more granular and accurate than many of its competitors’ because it is pulled from 30 different sources; the site collects its pricing information from lenders, insurers, the state registration office and tax records, among other sources.

Regardless of where the data comes from, the prices I found when searching for a standard-issue 2012 Toyota Camry LE in Brooklyn came pretty close to the ones on the Edmunds and Kelley Blue Book sites. Both Edmunds and Kelley Blue Book listed the manufacturer’s suggested retail price as $23,260 and the dealer invoice price as $21,348. TrueCar had the same M.S.R.P, but its invoice price was $379 higher, at $21,727.

Of course, what consumers really care about is getting a good price. Kelley Blue Book calculated a “fair purchase price” — defined as the price people are paying dealers based on transaction data — of $21,676. The equivalent price at Edmunds, called the “true market value” — or an analysis of what is being sold adjusted for incentives to dealers — was nearly $300 more, at $21,959.

TrueCar provided a “target price” — which it defines as a good price — of $21,927. The site suggests starting negotiations at a “great price,” or the factory invoice of $21,727, but to expect to receive something closer to the “good price.” (It also said there were no customer incentives available, though Kelley mentioned a $1,000 rebate for new college graduates.)

Within seconds of filling out the “contact dealers” form with my information, I received an e-mail from Glen Toyota of Fair Lawn, N.J., with a link to my first quote from a dealer. It came in just between the “good” and “great” prices: $21,848, and was valid for three days. The e-mail offer also included a financing special that would require a $4,995 down payment and cost $311 a month; it carried a 3.99 percent annual percentage rate for 60 months. The dealers are contractually obliged to honor those prices, and if they don’t, they risk being kicked out of the network. And if consumers find they did not get what they were promised, Mr. Painter said, TrueCar will write them a check for the difference.

Even if the idea of a no-haggle seems appealing, experts said you shouldn’t limit your search to any one site, but to survey several.

Both Edmunds and Kelley Blue Book have more detailed information about the cars themselves and their overall longer-term costs (and what if there is a nearby dealer who isn’t in the TrueCar network but is willing to make a better deal?).

You may also be able to save yourself some time by e-mailing the dealership’s Internet sales department. “You can have a deal lined up before you even go into the dealer,” said Alec Gutierrez, senior automotive market analyst, at Kelley Blue Book. “That is a channel that a lot of consumers miss out on.”

New Technology Means New Security Measures

First appeared in the New York Times
When Kenneth G. Lieberthal, a China expert at the Brookings Institution, travels to that country, he follows a routine that seems straight from a spy film.

He leaves his cellphone and laptop at home and instead brings “loaner” devices, which he erases before he leaves the United States and wipes clean the minute he returns. In China, he disables Bluetooth and Wi-Fi, never lets his phone out of his sight and, in meetings, not only turns off his phone but also removes the battery, for fear his microphone could be turned on remotely. He connects to the Internet only through an encrypted, password-protected channel, and copies and pastes his password from a USB thumb drive. He never types in a password directly, because, he said, “the Chinese are very good at installing key-logging software on your laptop.”

What might have once sounded like the behavior of a paranoid is now standard operating procedure for officials at American government agencies, research groups and companies that do business in China and Russia — like Google, the State Department and the Internet security giant McAfee. Digital espionage in these countries, security experts say, is a real and growing threat — whether in pursuit of confidential government information or corporate trade secrets.

“If a company has significant intellectual property that the Chinese and Russians are interested in, and you go over there with mobile devices, your devices will get penetrated,” said Joel F. Brenner, formerly the top counterintelligence official in the office of the director of national intelligence.

Theft of trade secrets was long the work of insiders — corporate moles or disgruntled employees. But it has become easier to steal information remotely because of the Internet, the proliferation of smartphones and the inclination of employees to plug their personal devices into workplace networks and cart proprietary information around. Hackers’ preferred modus operandi, security experts say, is to break into employees’ portable devices and leapfrog into employers’ networks — stealing secrets while leaving nary a trace.

Targets of hack attacks are reluctant to discuss them and statistics are scarce. Most breaches go unreported, security experts say, because corporate victims fear what disclosure might mean for their stock price, or because those affected never knew they were hacked in the first place. But the scope of the problem is illustrated by an incident at the United States Chamber of Commerce in 2010.

The chamber did not learn that it — and its member organizations — were the victims of a cybertheft that had lasted for months until the Federal Bureau of Investigation told the group that servers in China were stealing information from four of its Asia policy experts, who frequent China. By the time the chamber secured its network, hackers had pilfered at least six weeks worth of e-mails with its member organizations, which include most of the nation’s largest corporations. Later still, the chamber discovered that its office printer and even a thermostat in one of its corporate apartments were still communicating with an Internet address in China.

The chamber did not disclose how hackers had infiltrated its systems, but its first step after the attack was to bar employees from taking devices with them “to certain countries,” notably China, a spokesman said.

The implication, said Jacob Olcott, a cybersecurity expert at Good Harbor Consulting, was that devices brought into China were hacked. “Everybody knows that if you are doing business in China, in the 21st century, you don’t bring anything with you. That’s ‘Business 101’ — at least it should be.”

Neither the Chinese nor Russian embassies in Washington responded to several requests for comment. But after Google accused Chinese hackers of breaking into its systems in 2010, Chinese officials gave this statement: “China is committed to protecting the legitimate rights and interests of foreign companies in our country.”

Still, United States security experts and government officials say they are increasingly concerned about breaches from within these countries into corporate networks — whether through mobile devices or other means.

Last week, James R. Clapper, the director of national intelligence, warned in testimony before the Senate Intelligence Committee about theft of trade secrets by “entities” within China and Russia. And Mike McConnell, a former director of national intelligence, and now a private consultant, said in an interview, “In looking at computer systems of consequence — in government, Congress, at the Department of Defense, aerospace, companies with valuable trade secrets — we’ve not examined one yet that has not been infected by an advanced persistent threat.”

Both China and Russia prohibit travelers from entering the country with encrypted devices unless they have government permission. When officials from those countries visit the United States, they take extra precautions to prevent the hacking of their portable devices, according to security experts.

Now, United States companies, government agencies and organizations are doing the same by imposing do-not-carry rules. Representative Mike Rogers, the Michigan Republican who is chairman of the House Intelligence Committee, said its members could bring only “clean” devices to China and were forbidden from connecting to the government’s network while abroad. As for himself, he said he traveled “electronically naked.”

At the State Department, employees get specific instruction on how to secure their devices in Russia and China, and are briefed annually on general principles of security. At the Brookings Institution, Mr. Lieberthal advises companies that do business in China. He said that there was no formal policy mandating that employees leave their devices at home, “but they certainly educate employees who travel to China and Russia to do so.”

McAfee, the security company, said that if any employee’s device was inspected at the Chinese border, it could never be plugged into McAfee’s network again. Ever. “We just wouldn’t take the risk,” said Simon Hunt, a vice president.

At AirPatrol, a company based in Columbia, Md., that specializes in wireless security systems, employees take only loaner devices to China and Russia, never enable Bluetooth and always switch off the microphone and camera. “We operate under the assumption that we will inevitably be compromised,” said Tom Kellermann, the company’s chief technology officer and a member of President Obama’s commission on cybersecurity.

Google said it would not comment on its internal travel policies, but employees who spoke on condition of anonymity said the company prohibited them from bringing sensitive data to China, required they bring only loaner laptops or have their devices inspected upon their return.

Federal lawmakers are considering bills aimed at thwarting cybertheft of trade secrets, although it is unclear whether this legislation would directly address problems that arise from business trips overseas.

In the meantime, companies are leaking critical information, often without realizing it.

“The Chinese are very good at covering their tracks,” said Scott Aken, a former F.B.I. agent who specialized in counterintelligence and computer intrusion. “In most cases, companies don’t realize they’ve been burned until years later when a foreign competitor puts out their very same product — only they’re making it 30 percent cheaper.”

“We’ve already lost our manufacturing base,” he said. “Now we’re losing our R.& D. base. If we lose that, what do we fall back on?”