What Next in Iraq • New Rules on Breast Implants

DECEMBER 4, 2006

Lincoln at Gettysburg A NEW LOOK AT AMERICA’S GREATEST SPEECH Exclusive Book Excerpt

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December 4, 2006

Volume 141, Number 21

Letters 8 The Art of Diplomacy 12 Pope Benedict visits Turkey amid Muslims’ anger and anticipation

Washington Whispers 14 Pat Boone does D.C., Don Quixote style; a real Kansas conservative; Iowa Gov. Tom Vilsack’s hard sell; poaching from the Post

White House Week 18 Losing ground in Iraq; battling for the political center; the fury of an angry GOP

Cross Country 20 More school $$$ for New York; a bus tragedy in Alabama; crooked in Chicago

The World 22 Lebanon lurches toward civil war; Iran’s new nuke move; a poisoned Russian spy

Q&A: Fatou Bensouda 24 Prosecutor tries one, blames many in Congo NATION & WORLD

Reign Clouds 27 The president is fighting a multifront war, both at home and abroad, with allies in increasingly short supply

Generation Y Turns Left 28 Will the Democrats be able to hold its allegiance down the road?

A Texas Mess Over Coal 29 Proposed new power plants have stirred up a furious uproar over clean air

COVER STORY

Lincoln at Gettysburg 56 With more than 10,000 dead and more than twice as many wounded, it was America’s greatest man-made disaster. With 272 words, Abraham Lincoln sought to heal a wounded nation. A new look at the Gettysburg Address. By Gabor Boritt

Gloria Borger: The Lady of the House Will Be Held to a Higher Standard 32

Letter From Hiroshima 34 A potential shift in Japan’s pacifism worries those who remember the atomic bomb SPECIAL REPORT

Getting Out 38 It won’t be quick or easy, but, surprisingly, there are at least some ideas for stopping the bleeding in Iraq. And James Baker may be part of the solution

Fouad Ajami: We Can Never Return to the Old Order in the Mideast 47 Contents continued on Page 6 Cover: Photo montage by USN&WR with photographs by Corbis (Lincoln) and Medford Historical Society Collection / Corbis (crowd)

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CLOCKWISE FROM TOP: TIMOTHY O’SULLIVAN—CORBIS; THIBAULD MALTERRE—AFP / GETTY IMAGES; PAUL J. RICHARDS—AFP / GETTY IMAGES

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December 4, 2006

Volume 141, Number 21

Contents continued from Page 2

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MONEY & BUSINESS

Private-Equity Ownership Is the New Face of Capitalism 48 A Sweet Deal for Carlyle 50 Plenty of Pain and Perks 52 Money Watch 55 Will Nasdaq or NYSE take tea at 3? Magic number is $857; gift cards may pick pockets SPECIAL REPORT

Gettysburg’s Good News 56 Book excerpt: Schoolkids learn Lincoln’s words at the scene of the epic battle by heart. But what those famous words really meant is less well known HEALTH & MEDICINE

Improved Implants (Sort of) 64

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Yes, they’re back, but they still require a heck of a lot of scrutiny

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Health Watch 66 Slather on the sunscreen; you might escape the knife; thinner kids sleep better

Mortimer B. Zuckerman: Keep New York the World’s Finance Capital 68

NOW @ USNEWS.COM Give the Gift of Gadgets Our annual tech guide has dozens of gift ideas for the gadget fans in your life. See our choice for this year’s must-have cameras, camcorders, video games, music players, and more. Plus: how to choose an HDTV. www.usnews.com/giftguide

Fighting the Most Common Cancer Skin cancer is the most common type of cancer in the United States. Although it can be deadly, it can also be treated if detected and diagnosed early. Our Cancer Center offers important information on prevention,

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detection, and treatment options. www.usnews.com /skincancer

Political Junkie? Get all the day’s political news from newspapers, TV, radio, and magazines each weekday at 8 a.m. in our Political Bulletin, available from usnews .com via E-mail or RSS. www.usnews.com/bulletin

Caring for Mom & Dad Nineteen million Americans are caring for someone over age 75. These “informal caregivers” are adult children who often struggle to find a living situation that gives parents the assistance they need and the independence they desire. Our guide looks at the growing number of housing choices. www.usnews.com/seniors

Work and Study Grad school programs that let professionals earn an M.B.A. while working full time are on the rise. Use our exclusive Executive M.B.A. rankings to find the right program for you. www.usnews.com/mba

U.S.NEWS & WORLD REPORT • DECEMBER 4, 2006

Suzanne Stark, 80

ALWAYS ONLINE America’s Best Hospitals. See who made the Honor Roll in our wrap-up of top medical centers. www.usnews.com/besthospitals Auto Reviews. From family sedans to slinky sports cars, our designated driver Rick Newman takes to the test track each week to rate the latest auto offerings. www.usnews.com/auto E-Learning. Learn from your laptop, using our detailed directory of online courses, certificates, and degrees. www.usnews.com/elearning

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Letters MANNIE GARCIA—GETTY IMAGES

’06 Election Lesson former house majority leader Dick Armey continues to make outrageous claims about social conservatives, this time arguing that Republicans lost the election because they were “overly responsive” to evangelical Christians [“Some Advice for His Own,” November 20]. What kind of political leader would seek to run off millions of his friends? Even in this election, values voters played a major role in the outcome. Consider, for example, the easy passage of seven state marriage-protection amendments. The eighth in Arizona did fail, but only by a few percentage points, despite the fact that its supporters were outspent by more than 2 to 1. No, the lesson of Election ’06 isn’t that Republicans need to insult and ignore their conservative Christian friends; it’s that they can’t win when they abandon conservative principles and run as Democrats. Virginia Sen. George Allen made that mistake. He ran away from the state’s marriage amendment, mentioning it only once in the closing days of his campaign. The amendment won by 328,850 votes, while Allen went down to defeat. Armey should think about this: A gop pollster noted that 22 of the 27 races that tipped the balance of power in the House were captured by 2 percent of the vote or less; control of the Senate hinged on the razor-thin margin in the Allen race. Nevertheless, Armey thinks that the gop should dump its Christian supporters and try to replace them with moderates. If they do, Democrats may be in power for another 40 years. James C. Dobson, Ph.D. Founder and Chairman Focus on the Family Colorado Springs, Colo.

School Bus Safety regarding “a more dangerous Ride Than You Might Think” [November 20]: Ask any school bus driver about the large percentage of time spent watching the big rearview mirror, crucial to maintaining order on the bus. Would parents put their child in a vehicle if the driver was watching the road 60 to 70 percent of the time? Yet parents do it every day when they put their child on the school bus. As a former school bus driver, I have no opinion about the possibility of seat belts on school buses, but their use cannot be controlled by the driver. Some school buses carry up to 90 youngsters. I agree that the logical an8

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Executive Committee Chairman and Editor-in-Chief Mortimer B. Zuckerman Editor Brian Duffy Executive Editor Brian Kelly Executive Director, News Administration Karen S. Chevalier Design Director Ken Newbaker Editor at Large David Gergen

Managing Editor, USNews.com Ryan Thornburg Editor/Newsletter Group Peter Cary Assistant Managing Editors Nation & World, Terry Atlas, Gordon Witkin Money & Business, Tim Smart Health & Medicine, Margaret Mannix Special Reports, Susan Headden USNews.com, Kent Allen Director of Editorial Operations Diane Snow Javaid Director of Online Operations Michael Piccorossi Director of Photography Scot Jahn Health Editor Bernadine Healy Investigative Editor Edward T. Pound

New books on atheism intensify the debate.

swer is to put an adult monitor on the bus and, as one bus company advertises, “leave the driving to us.” Frank B. Collier Brownsburg, Ind.

Atheism Arguments many thanks for jay tolson’s thoughtful “The New Unbelievers” [November 13]. What is new about the new atheism is that science is just beginning to explore religion as a natural phenomenon of the brain, not the supernatural phenomenon of gods, spirits, and demons that most people still believe it to be. Atheism is a positive and uplifting worldview. Liberation from darkness, superstition, and irrationality of religion often brings great happiness, along with a serious commitment to do what is right for our fellow humans and for our natural world—the only world there is. John C. Wathey San Diego

the authors of the three atheist books, Richard Dawkins [The God Delusion], Sam Harris [Letter to a Christian Nation], and Daniel Dennett [Breaking the Spell: Religion as a Natural Phenomenon], apparently reject God on the grounds that religions perpetrate

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President William D. Holiber Chief Marketing Officer Lee Wilcox Publisher Kerry F. Dyer Senior Vice President Operations Michael J. Armstrong Senior Vice President Consumer Marketing Susan H. Blattman Vice President/Midwest Sales Director Paul Kissane Vice President Online Sales Development Chris Coda Northeast Sales Director Lisa Rapp Southeast Sales Director Shannon Tkach Vice President Production Services Janet Jones Vice President Manufacturing Mark White Vice President Human Resources Jeff Zomper Executive Director Operations Dan Fein Director of Advertising Services Phyllis A. Panza New Business Director Margaret Lorczak Renewal, Billing, Gift & Fulfillment Director Stacie Paradis Newsstand Director Camille Pellino Planning & Finance Director Abbe Weintraub Creative Services Director, Consumer Marketing Ernest Fellenbaum Director of Special Projects Wendy Margulies Marketing Director Nancy Morrissey Copy Director Amy Feezor Market Research Director Jane Ash Design Directors, Marketing Randi Rosh, Peter Carey Advertising Business Director Ollie A. Worthy Managers Ad Sales: Detroit, Patti Padilla; Los Angeles, Gary Thompson; San Francisco, Emily Clay Associate Managers: Northeast, Steve Hiel; New York, Healthcare, Andrea Valente Chief Financial Officer Thomas H. Peck General Counsel Peter M. Dwoskin Vice President Finance Neil Maheshwari Publisher Emeritus Richard C. Thompson

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Letters care very much about suffering. Mother Teresa was “religious” and dedicated her life to serving and trying to relieve suffering.

in a creative, loving, merciful, judicious, and all-powerful God inspires and empowers believers to build a better world for all people.

Tara Wolf Barrington, Ill.

Alexandra Mezzina North Andover, Mass.

being an atheist is a logically untenable position. If a person is absolutely certain there is no God, he/she would then know everything and would qualify for the title. I am a bit more comfortable with some assumed humility in agnosticism. Tom Baker Waitsburg, Wash.

it is important to differentiate between “religion” and “faith,” especially in a discussion about whether religion harms people more than helps. “Religion” is outward expression of belief in God, and “faith” is one’s personal belief in God. There are plenty of people who are “religious,” that is, they practice religion but do not have true faith. Religion without faith, by definition hypocritical, certainly can lead to the abuses decried by the atheists in the article. However, true and humble faith

Angry-Customer Rx “writing a new script” [november 13] on the proposed merger of cvs Corp. and Caremark Rx was interesting and identified several risks, including “new services” outside the doctorpatient relationship. I am stuck with Caremark Rx until I go on Medicare, but there is ample opportunity to express my disgust by not using their local distributor, cvs. Sanford I. Pearl Palm Beach Gardens, Fla.

employees i know were very happy with the Medco prescription plan, but the company switched to Caremark, which, in my case, comes with a 300 percent cost increase. Wal-Mart, here we come for $4 generic prescriptions! James Barrett Shawnee Mission, Kan.

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ONE WEEK By Brian Duffy

That’s a Clash of Cultures, With a Side of Hope

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f the many flight plans already filed for this busy post-holiday week, that of the vicar of Christ is far and away the shortest. President Bush is winging his way to Jordan to meet with King Abdullah and the embattled Iraqi prime minister. Vice President Cheney is dropping in on the Saudi royals, and Condoleezza Rice is meeting on the shores of the Dead Sea with a clutch of fellow diplos. Pope Benedict XVI, by contrast, is just making the short hop across the Aegean to Turkey to pay his first-ever visit to a Muslim country since he moved into the papal apartment on St. Peter’s Square, but the moment could hardly be more charged. Last week’s gut-wrenching spasm of violence in Baghdad came hard on the heels of the assassination of a popular minister in Lebanon, which came not so hard on the heels of Hezbollah’s midsummer instigation of violence against Israel. The growing calamity in Iraq makes it difficult to know what if any good can come of the Bush administration’s sudden charm offensive in the region. Similarly, given the firestorm of criticism Benedict ignited with his remarks not long ago seeming to endorse a link between Islam and violence, it’s hard to be hopeful about his trip, either. Yet hope, unreasoning hope, seems to be all that may be left to tame the maelstrom of violence now engulfing the Islamic world. It has been observed time and again that most of the world’s billion-plus Muslims abjure violence. True. And yet violence, in the endlessly broadcast images of fury and despair from Baghdad and Beirut, is what so much of the world today associates with Islam. Recently, nearly 40 Muslim scholars sent a letter to Benedict on the eve of his Turkey trip. “The intent,” said Sohail Nakhooda, the editor of Islamica magazine, “is to start a dialogue rolling so the public would see there’s . . . an alternative to anger.” In Istanbul, Grand Mufti Ali Bardakoglu used similar language last week. Benedict’s visit, he said, “will not resolve all of our problems [with the West] but will be a positive move towards dialogue.” From their lips to God’s ears—whichever God is listening. l 12

U.S.NEWS & WORLD REPORT • WWW.USNEWS.COM • DECEMBER 4, 2006

In Istanbul, posters reading “No to the Crusaders’ alliance!” await the pontiff.

DANIEL MIHAILESCU—AFP / GETTY IMAGES

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By Dan Gilgoff

Boone Does D.C., Don Quixote Style

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een-idol-cum-aging-crooner Pat Boone comes to Washington this week for his first address to a group he has long helped fund: the conservative Heritage Foundation. Boone says it will be a welcome change of venue from his home base in Beverly Hills, where, he says, “I feel like a Don Quixote tilting at windmills.” The windmills? Hollywood’s entertainment studios. “They’ve force-fed rap music to kids,” he says, “selling them the idea that if you want to be a recording artist, you have to have been to prison, worked as a pimp, and have been shot at.” Boone just finished an album of r&b duets with the likes of James Brown and Smokey Robinson, but he says he steered clear of political talk during those recording sessions: “Many people say to me, ‘I believe everything you say, Boone.’ But the entertainment industry is overwhelmingly liberal; most artists just go with the flow.” At Heritage, Boone will talk up his memoir, Pat Boone’s America: 50 years. Then the man who once battled Elvis for chart space is off to Congress to lobby for a flag-desecration ban and higher obscenity fines and check on pals like outgoing Majority Leader Bill Frist and Utah Sen. Orrin Hatch. Boone is hunting for new beltway buddies, too, trying to land a face-to-face with Karl Rove, who recently sent him a thank-you note for releasing a multimedia package called For My Country: Ballad of the National Guard.

And From Kansas: a Real Conservative Kansas Sen. Sam Brownback says he’ll announce whether or not he’s seeking the White House in ’08 within a month, but it sounds to us like he’s in. His calculus: None of the current crop of gop presidential candidates have strong backing from religious conservatives who make up the party’s base. “There is room in the Republican primary for somebody who is unapologetic about being pro-growth, pro-limited government, pro-life, and pro-marriage,” he tells us from Kansas. Current Republican presidential front14

runner John McCain famously knocked the religious right in his 2000 presidential bid, while former New York Mayor Rudolph Giuliani— McCain’s main rival for the nomination, according to polls—champions abortion rights and gay rights. Massachusetts Gov. Mitt Romney, another contender, has stepped up outreach to religious conservatives, calling on his state legislature to fight the judicial ruling that legalized gay marriage there in 2003. But until recently, Romney had a pro-abortionrights stance. “There has

been some mixed record in [Romney’s] background,” says Brownback.

A Governor Gears Up for a Hard Sell Democratic White House aspirant and outgoing Iowa Gov. Tom Vilsack tells us that when he formally declares his candidacy this week, his message to the nation will be that it’s time for tough love. Exhibit A: weaning the United States off foreign oil. Vilsack helped boost the Hawkeye State’s ethanol production by 300 percent,

Paul Bedard’s Paullyblog at www.usnews.com/whispers

U.S.NEWS & WORLD REPORT • WWW.USNEWS.COM • DECEMBER 4, 2006

making it the nation’s top producer. “I realized the country was in need of somebody who would challenge it,” Vilsack says, explaining his decision to run. “Somebody who is not going to tell you what you already think, but who will take you to a different place, a place we need to get to if we want a bright future for our kids.”

Poaching From the Post, and Others The online news outlet that swiped the Washington Post’s political editor and one of its top political reporters last week says it has more thieving to announce. Fred Ryan, ILLUSTRATION BY JOE CIARDIELLO FOR USN&WR

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Washington Whispers CHRIS BRITT / COPLEY NEWS SERVICE / THE (SPRINGFIELD, ILL.) STATE-JOURNAL REGISTER

president of Allbritton Communications, which owns the yet-to-be-named, yet-to-beunveiled website, says new hires will be announced this week and that they’re just as “stellar” as former Post stars John Harris and Jim VandeHei. “Our model is to have worldclass political reporters who have established their own franchises,” Ryan says, vowing to build “the ultimate political reporting website.” The site is part of a multiplatform news service that includes The Capitol Leader, a beltway newspaper set to begin publication in January.

Stopping Hillary Before She Starts She hasn’t said she’s running yet, but that’s not stopping Sen. Hillary Rodham Clinton’s foes from trying to keep her out of the White House with a new website, www.stopher now.com. Launched this week, the site features the animated Hillary Show, with new episodes planned for when Clinton makes news. The show’s first cartoon guests: Sen. John Kerry, whom the animated Clinton calls “loser,” and a screaming Democratic National Committee Chair Howard Dean. “We knew people were tired of the mean television ads you find in every campaign,” says Dick Collins, the Dallas-based moneyman who ponied up most of the $250,000 that the site launch required. “So we wanted to have some fun.” But Collins says it could turn nasty as ’08 nears: “You never know where you end up.”

Mapping Hell From the Stratosphere Business is booming at the National Geospatial-Intelligence Agency, the government’s chief mapmaker, which relies on imagery from spy satellites. Over the past year, we hear, the nga printed 10.3 million maps and 16

OUT LOUD “This was an ill-considered project.” News Corp. Chairman Rupert Murdoch, upon scrapping plans for a book and TV special in which O. J. Simpson hypothesized on how he would have murdered Nicole Brown Simpson and Ron Goldman

“I am not running for president…. If the American people say I have to be president, it will happen.” Former Republican Speaker of the House Newt Gingrich

“His songs were full of the notes of facts, but he knew to make the most of music you have to improvise.” Former President Bill Clinton, speaking at a memorial service for CBS correspondent Ed Bradley

“I am not a racist. That’s what’s so insane about this.” Former Seinfeld star Michael Richards, explaining an “N”-wordlaced rant against African-American patrons at a comedy club Sources: New York Times, Fortune, CBS News, ABC News

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U.S.NEWS & WORLD REPORT • WWW.USNEWS.COM • DECEMBER 4, 2006

charts and delivered 12 million images to military and intel agencies. The nga has also been on a buying spree for commercial imagery, purchasing 126,439 gigabytes since early last year. The images show battlefields in Iraq and nuke sites in North Korea, along with hurricane damage in the Gulf and refugees in Darfur, Sudan.

Two Onetime Arkansans for ’08? Clintonites are whispering about a new dream ticket: Hillary Rodham Clinton/Wes Clark. The way they see it, Clinton is the celeb fundraiser who needs national security credentials. The former nato commander has been promoting a federal “Department of Failed States” or “Department of Preventive Diplomacy” to head off “impending conflict” around the globe and make friends abroad. “Respect is the starting point for all human interaction,” he says. l With Elizabeth Weiss Green, David E. Kaplan, and Suzi Parker

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WHITE HOUSE WEEK Edited by Peter Cary CHARLES DHARAPAK—AP

Is It Possible to Lose Even More Control Over Iraq?

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raq’s restoration of diplomatic relations with Syria could be good news, if Syria seals its porous border with Iraq to stop passage of foreign fighters. But the word of Syria’s engagement, as well as a scheduled trip by the Iraqi president to Iran, handed the White House a dilemma. Democrats and Republicans—and Britain’s Prime Minister Tony Blair—have urged President Bush to bring Syria, Iran, and Turkey to the table to work toward a diplomatic solution to the war. And some think the Iraq 7:45 a.m., November 21, Hickam Air Force Base, Honolulu Study Group headed by With President Bush at the podium, Secretary of State Condoleezza Rice James Baker and Lee Hamilshares a laugh with troops at a breakfast in Hawaii. Bush thanked the service personnel for ton will suggest just that. Yet working for peace but also used the occasion to condemn the killing of Lebanese Industry if the new overtures show Minister Pierre Gemayel and to accuse Syria and Iran of fomenting instability in Lebanon. anything, analysts say, it’s that the United States doesn’t have unilateral influence over Iraq—if it ever did. And while some at the State Department cans, the move might have “saved” two or more gop seats in fretted that the United States had lost control of this vital the Senate, keeping it under gop control, and reduced the diplomacy, there were no signs that Bush was willing to talk Democrats’ margin in the House. “The White House doesn’t to Syria and Iran—the one believed to be fueling the insurunderstand how livid the House and Senate Republicans gency and the other said to be a member of the “axis of evil.” are,” says a senior Republican. “They feel they don’t owe Bush and these sobs in the White House anything. And they’re not going to go out of their way to help the White The Battle for Middle Earth, in Politics House anymore.” gop legislators think Bush held on to Rumsfeld to maintain his image of resolve and strength, a emocratic pollster Geoff Garin is one of the many analysts position one source branded as “selfish.” who argue that independents now hold the balance of power in American politics—as seen in the midterm election when independents and centrists rebuked the gop for its The More Spooks the Merrier courting of conservatives. Garin says a quarter of the electorate on November 7 consisted of independents and 59 perhe latest recruiting figures out of the cia show the agency cent of them voted for Democrats—the best the Democrats is making rapid progress toward its goal of a 50 percent have done with that group in a decade. Contrary to the White expansion by 2011—a goal mandated by the White House in House’s strategy to appeal to the gop’s conservative base, 2004. Nearly 40 percent of the cia’s current workforce Garin says, “the center still matters in American politics.” began work after 9/11—and 1 in 7 cia employees has joined in just the past year, agency officials say. The cia took in a record 135,000 résumés in the fiscal year ending in SeptemHell Hath No Fury Like a Solon Scorned ber. That’s more than double the 63,000 it received in 2001. The growth in hiring is the cia’s most rapid since its incepongressional Republicans are still seething over the timtion almost 60 years ago, according to agency officials. ing of Donald Rumsfeld’s ouster as defense secretary on Sources say about 20,000 people work out of its Virginia the day after the November 7 elections—and the bitterness headquarters and at cia “stations” worldwide. l could hurt White House efforts to win approval for its legislative agenda next year. If President Bush had forced the resignation a few weeks earlier, say disgruntled RepubliWith Kenneth T. Walsh and David E. Kaplan

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Edited by Gordon Witkin

NEW YORK. Lunchtime at an elementary school in the big town. New York City schools will be receiving more financial help from the state.

How Big a Slice of That Pie, Anyway?

A School Bus Tragedy in Alabama

fter more than 13 years tunned students at Lee of litigation, New York’s High School in Huntsville, A S highest court ruled in Albany Ala., were in mourning last

jury will decide if charges of vehicular manslaughter are warranted. The incident reignited a debate about school bus safety, especially since the bus lacked seat belts. Roughly 23.5 million students travel to school by bus each year; one recent study shows that some 17,000 go to the emergency room for bus-related injuries. “Those injuries are unnecessary,” says Alan Ross of the National Coalition for School Bus Safety, which encourages more areas to follow the lead of New York, California, Florida, and New Jersey in requiring belts onboard. Others counter that a low death rate—only 20 students die in bus accidents each year—and design precautions like high, padded seat backs make the benefits of belts marginal.

that the state has been week after a horrific school shortchanging New York bus crash that killed four feCity’s 1.1 million schoolmale students and seriously children and ordered it to injured a dozen others. The increase funding by at least bus careened roughly 30 Shocked, Shocked $1.93 billion a year. That feet off the Interstate 565 in the Windy City was well short of the almost overpass and landed nose $5 billion sought by the first on the street below, olitics in Chicago has Campaign for Fiscal Equity, just after being sideswiped never had what you’d call which filed the lawsuit in by a Toyota Celica. A 17a spotless reputation, a fact 1993 on behalf of parents year-old Lee High student not lost on U.S. District and community groups. The was driving the car; a grand Judge David Coar as he senLegislature and the governor-elect, Eliot Spitzer, will now have to decide the final amount. School funding has traditionally been shared between states and localities, but legal challenges in 45 states over the past few years have forced changes. Several states are also wrestling with the question of how much responsibility they have for bridging funding gaps between rich and poor HUNTSVILLE. Police try to keep the media and curious onlookers away from the school districts. scene of a school bus crash that killed four students in Alabama.

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tenced a former highranking aide to Mayor Richard Daley to 46 months in prison for covering up illegal patronage hiring. “I don’t give a hoot whether this has been going on for 200 years—it still stinks,” Coar said. Prosecutors say the aide, Robert Sorich, and other officials rigged the hiring process to give political supporters city jobs. Other defendants cooperated with prosecutors, but Sorich was unrepentant. The case was part of a larger investigation that has already led to 41 convictions, and charges against even higher officials in City Hall may be coming, though the mayor himself has not been accused of wrongdoing.

A Bit of Good News in Amish Country here were some small reasons for thanks last T week in Nickel Mines, Pa., where local officials revealed that three of the five girls injured in the shocking school shooting October 2 were back in school, one of them full time. Charles Carl Roberts, a local milk-truck driver, killed five girls, ages 7 to 13, in the West Nickel Mines Amish School before

FROM TOP: MARY ALTAFFER—AP; BRYAN BACON—HUNTSVILLE TIMES / AP

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l Albany

l Chicago

l New York l Nickel Mines

CHICAGO. Former mayoral aide Robert Sorich arrives at federal court with his attorney (left), Thomas Anthony Durkin. l Tightwad

l Huntsville

PENNSYLVANIA. In Amish country, it’s been a slow road to recovery from a tragic schoolhouse shooting.

taking his own life. All the boys in the one-room schoolhouse had been allowed to leave. “It’s been a very hard journey,” Donald Kraybill, an Amish authority with Elizabethtown College, said last week. One of the two girls out of school remains in a semicomatose state at home; the other is in a

Philadelphia children’s hospital, where she speaks a little bit, smiles, and has expressed a desire to be home for Christmas. Charities have collected more than $3.2 million on behalf of the victims, which will help build a new schoolhouse and fund long-term care. At least two girls will need reconstructive surgery.

FROM TOP: M. SPENCER GREEN—AP; SCOTT GOLDSMITH—AURORA FOR USN&WR

Cheapskate Bank Runs Out of Time he 63 residents of tiny Tightwad, Mo., had been T praying for a Hollywood ending like the one that plays out for Jimmy Stewart and his scrappy savings and loan in the classic It’s a Wonderful Life. Alas, no angel appeared to save the

Tightwad Bank, which will close January 31 after 22 years. The quirky institution, whose delightful name and old-timey décor (think brass spittoons) attracted national attention and mailin customers far and wide, was expected to help spur development around nearby Truman Lake. Though Tightwad drew a few tourists, growth was elusive, and the declining bank now boasts only drive-through service. Owner umb Financial Corp. says locals will have to do business elsewhere. And they’ll no doubt take a lot less pleasure paying their monthly bills. l With Alex Kingsbury, Angie C. Marek, Will Sullivan, Liz Halloran, and the Associated Press

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Edited by Terry Atlas

MEXICO

LEBANON. The coffin of slain Christian politician Pierre Gemayel

Jaw, Jaw—and Talk Again of Civil War eirut—Retro is the new rage across the city as B the Lebanese face down a deepening political crisis by retreating to the only safety they’ve been able to count on: families and sectarian allies. Last week’s killing of Pierre Gemayel, 34, a key politician from Lebanon’s Maronite Christian community, is the latest spark in the volatile Levant timbers since the February 2005 assassination of reformist former Prime Minister Rafiq Hariri. His murder set off protests that led to the end of Syria’s three-decade occu22

pation, which in turn led to this summer’s war between Hezbollah and Israel. As with Hariri’s killing, suspicions point to Syria— which has a stake in blocking Lebanon’s participation in a U.N. tribunal to identify and prosecute Hariri’s killers. The gunning down of Gemayel—the sixth antiSyrian figure killed in two years—further weakens the U.S.-backed Lebanese government already undercut by Hezbollah’s maneuvers to gain power. Gemayel’s funeral last week drew hundreds of thousands of Sunni Muslims, Druze, and Christians to listen to pro-western politicians urge unity and

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peaceful struggle. Unlike past demonstrations, the crowd seemed lethargic and almost defeated in its aim for peaceful resolution. There was no such lethargy nearby in the heart of Christian East Beirut, where five middle-aged men who had once fought in Lebanon’s civil war under Pierre’s slain uncle, Bashir Gemayel, sat drinking the local liquor, arrack, while ignoring the televised appeals for unity. Over and over, they toasted to the envisioned deaths of Hezbollah leader Hassan Nasrallah and pro-Syrian Lebanese President Emile Lahoud, while loudly proclaiming loyalty to Samir Geagea, military commander of the Lebanese Forces militia. The men were wearing old uniforms from 1982—a bit snugger than during the Christian militia’s heyday— but age had not softened their attitudes. “We might not have the weapons of the dogs in Hezbollah, but we know how to fight,” proclaimed a man named Ramsey, a large wooden cross around his neck and lightning-bolt tattoos on each arm. “It will only take one or two ships of weapons before we are ready.”

A Mostly Symbolic Snub for Tehran ashington won the latest round in its sparring W with Iran, but narrowly. The International Atomic Energy Agency set aside Iran’s request for technical help with nuclear safety measures at its Arak heavy-water reactor, now under construction. While Iran says the reactor is to produce isotopes for uses such as cancer treatment, this type of reactor produces weapons-grade plutonium as a byproduct— which Washington and its allies fear is Iran’s underlying reason for the project. With Tehran already defying a U.N. Security Council demand to halt separate uranium-enrichment activities, the United States wanted an outright rejection of the Arak request; what it got was a diplomatic iaea maneuver that effectively said “No” to Iran by skipping action on the Arak reactor while ok’ing safety help on seven BEN CURTIS—AP

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RUSSIA

BRITAIN UKRAINE

LEBANON SYRIA IRAQ ISRAEL

IRAN

RWANDA. Rwanda severed diplomatic ties with France amid anger at a French judge’s call for President Paul Kagame to face trial for his alleged role in killing a Rwandan leader, which triggered the country’s genocide.

BRITAIN. Poisoned former Russian spy Litvinenko

RWANDA

other Iranian projects deemed not to pose a potential threat. Iran offered the iaea a little sweetener: agreement to give information about its controversial uranium-enrichment activities. But, it said, it would continue work on its Natanz reactor with or without the involvement of the iaea.

involvement in the murder of Russian journalist Anna Politkovskaya, who reported on Kremlin abuses in Chechnya.

Some Answers to Old Questions hedding light on a dark chapter from S the 1960s to the early

1980s, Mexico has made public a lengthy report Ex-Spy Versus acknowledging the role Ex-Spymaster of past leaders in a “dirty war” using “mashoever plotted to sacres, forced disapkill former kgb oppearance, systematic erative Alexander LitviIRAQ. On Thanksgiving Day in America, Baghdad suffered the deadliest sectarian torture, and genocide.” nenko, an outspoken attack since the U.S.-led invasion. Car bombs and mortars killed at least 215 The targets: leftist critic of President people in the Shiite slum of Sadr City, leading to reprisal attacks against Sunnis. guerrillas, student acVladimir Putin of Russia, businessman, the ex-spy issued a deathbed statement tivists, and political dissipresumably hoped he would had charged that Russian in which he blamed a “bardents seen as a threat to the go quietly, though not painauthorities were behind the baric and ruthless” Putin. Institutional Revolutionary lessly. It turned out to be The Russian government de- 2004 dioxin poisoning of Party, or pri, which ruled painful, yes; quiet, not so Ukraine’s presidential candinied involvement. the country for 71 years very. Fighting a losing battle date (later president) Viktor Since defecting to Britain until being ousted in the against what health authoriYushchenko and other efsix years ago after exposing 2000 elections. l ties in Britain said were the forts to silence critics. Rean alleged government-ortoxic effects of a hard-to-decently, he said he was lookdered murder plot against a tect radioactive element, With Mitchell Prothero in ing into possible Kremlin prominent exiled Russian polonium-210, Litvinenko Beirut and the Associated Press

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FROM TOP: JOSE CENDON—AFP / GETTY IMAGES; AP; AP TELEVISION / AP

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Q&A: FATOU BENSOUDA By Alex Kingsbury

TRYING ONE, BLAMING MANY

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or the past two years, Fatou Ben- chambers. In this case, Dyilo, the warrant and the conflict is brought to an end. . . . souda, the deputy prosecutor at the is then transmitted to the Democratic Re- We have started with this case, but it is International Criminal Court, has public of Congo. He was in jail there at not the last. Is it difficult to get willing witnesses? gathered grim evidence against the time and transferred to the court in warlord Thomas Lubanga Dyilo. The for- accordance with the treaty and the rules People are willing to talk about these crimes. For some, it is a relief that somemer head of the Union of Congolese Pa- that have been established. one will try to do something about it. What’s the value of the precedent set triots in the eastern region of Congo, Dyilo What do they tell you? is charged with enlisting and conscripting here? child soldiers. In 2003, at the peak of the To get consensus that this is wrong; that It’s not necessarily a component of this conflict, prosecutors allege, he had as enlisting and conscripting children is particular case, but sometimes a child is forced to kill a brother or anothmany as 30,000 children under JEFFREY MACMILLAN FOR USN&WR er family member. They may be arms in his militia. Dyilo will be the forced to set fire to the family first person tried before the new juhouse. These are the things that dicial body—based in The Hague— the army does to make sure that which was established to investigate the child has the will to kill. Once war crimes, genocide, and crimes you have killed a member of your against humanity. family, what do you care who else How do children find themselves you kill? toting guns? Do these societies want these Children join the armies because crimes prosecuted, or do they want to there are no better options. There bury the past? are financial reasons, and someIn the Congo, for example, and in times they are fighting because other countries, they are moving to they are forced to take sides—percodify these international standhaps because of an atrocity comards in their legal code. mitted against their family. They But is there a cultural willingness are given guns and initiated into to expose and punish? the various armies. They might be Part of the reason for this case is to required to kill a family member so raise this issue. The perpetrators of as to alienate them psychologicalthese crimes are coming to see the ly from their families. behavior as accepted and comBoth sexes? monplace. That they can do it and Girls are enlisted in the army or get away with it. used as sex slaves. They are made What type of authority does the wives or given as rewards to comcourt have? manders who are fighting these We are an institution that has no battles. These are the years where law enforcement body. We have no they should be in school—yet these police force and no army. We rely children are taken forcibly away “Once you have killed a on the member states and organiand forced to fight. It has a devasmember of your family, what do zations like the U.N. to do our tating effect on the child’s life. The work—accessing evidence and colchild’s life has been destroyed, and you care who else you kill?” lecting information. Getting access society is left with the problem of to the evidence is difficult because rehabilitating them. wrong. We need consensus that those of the fact that the conflict is often onHow many children are we talking who are doing it will be held accountable. going. Security is a huge issue not just for about? the staff but for the victims as well. Are there defenders of child soldiering? The estimates say at least 300,000 chilIs there more pressure to get this case dren worldwide. In some parts of the There is support for the rebel groups. world, children are used in administra- The populations are aware of what they right because of the importance of legal tion—to run errands and to spy. In other are doing. The only thing that I can con- precedence? places, they are given guns and made to clude is that populations that support This is the first kind of case, and we these groups also support these tactics. have an added responsibility to make fight battles. sure that the trial is conducted in a fair Who is responsible? How does ICC procedure differ from [Dyilo] is the person who bears the manner. He is presumed innocent. The criminal trials in the United States? The icc was established under the Rome greatest responsibility. This is an atroc- verdict is not the most important part; Statutes in 2002, and that was when our ity where the whole society has to be it’s the fact that we have investigated jurisdiction began. We have pretrial blamed. There are others who should the case and saw it through impartially chambers, trial chambers, and appeals make sure that the peace is negotiated and completely. l

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Nation & World

Reign Clouds these moves showed that the ir Force One was briefly By Kenneth T. Walsh Mideast remains a complicated grounded in Ho Chi region, often resistant to U.S. inMinh City last week befluences. And all this comes as cause of a brake malthe new Democratic majority in function—not the most Congress prepares hearings into auspicious way for PreIraq policy early next year, as the sident Bush to end his Pentagon formally reviews its opfirst trip to Vietnam. But to tions, as the bipartisan Iraq many in Washington, the metaStudy Group readies its own rephor of a presidency stuck in place port, and as incoming Defense had a telling ring of truth. Secretary Robert Gates tries to The problem is that, in one area find a way out of the morass. after another, Bush appears to be Assault. Bush’s approach— bogged down with no clear path which he framed last week as out of the political swamp. The “We’ll succeed unless we quit”—is feisty new Democratic majority in now under assault as never before, Congress is preparing to challenge even among senior Republicans. him on everything from Iraq polSen. John McCain of Arizona, a icy to the minimum wage, and hawk on Iraq and a front-runner many Republicans are setting their for the 2008 gop presidential own course as Bush’s job-approval nomination, says he still favors ratings hover below 40 percent. sending thousands more troops To be sure, Bush isn’t quite a into the war zone in one last atlame duck. He plans to meet tempt to stabilize the country. But with Iraqi Prime Minister Nouri McCain now concedes that the al-Maliki in Jordan this week to war as it is being fought is unbolster the Baghdad government winnable. Even former Secretary and perhaps generate some of State Henry Kissinger, who adgood news, and his aides are vocated nothing short of victory, casting about for fresh ideas to has changed his tune. Kissinger, rejuvenate the president’s secan architect of the Vietnam poliond term. But many in official cies under Richard Nixon and Washington and around the Gerald Ford, said the goal as enworld are ready to turn a page visioned by President Bush—creon the Bush presidency. His trip ation of a democratic government to Asia last week didn’t accomwithout sectarian warfare—is no plish much of substance. And, to longer achievable. the chagrin of White House ofThe Pentagon’s internal review ficials, his visit to Vietnam genapparently involves three operated a rash of news stories STORMS. Bush and the first lady on the South Lawn tions, none of which the presicomparing the Iraq war to America’s quagmire in Southeast Asia three decades ago. dent was willing to consider a year ago: “go big” with a As usual, Iraq is Job 1. But as sectarian violence spreads, large infusion of U.S. troops, perhaps tens of thousands, two developments further unsettled U.S. policymakers to win the conflict outright; “go long” with a modest adlast week. Syria re-established diplomatic relations with dition of 20,000 to 30,000 troops to improve training Iraq, even as the Bush administration accused the Damas- of the Iraqis while continuing a lengthy American occucus regime of fueling the Iraqi insurgency. And the pation; and, finally, “go home.” Bush said he hasn’t deShiite-dominated government of Iran—once described by cided future troop levels. On the domestic front, Bush initially said he would Bush as part of an “axis of evil”—offered to help “stabilize” Iraq by convening an international conference. This came work with the Democrats. Then he made several moves as the Bush administration was trying to isolate Tehran that antagonized them, such as reaffirming his support because of its growing nuclear program. If nothing else, for conservative judges, renominating the controversial

A

PABLO MARTINEZ MONSIVAIS—AP

THE PRESIDENT IS FIGHTING A MULTIFRONT WAR WITH ALLIES IN VERY SHORT SUPPLY

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Nation & World John Bolton as United Nations ambassador, and calling for congressional approval of warrantless eavesdropping to catch terrorists. “It may be the president has to go through this period of defiance to show the Democratic Party he can’t be intimidated,” says Bill Galston, a Democratic strategist and former White House adviser to President Bill Clinton, “and then he’ll sit down and talk to the Democrats about matters of mutual concern.” That would follow Bush’s pattern as Texas governor, when he worked with Democrats to form a governing coalition in the Legislature. Says Ken Duberstein, former White House chief of staff to Ronald Reagan: “What Bush has to do is to reach out in deed as well as in word. Some of it is symbolic, but an awful lot of it is the hard work of consultation, cooperation, and compromise.” Soundings. U.S. News has learned that since Election Day, White House Chief of Staff Josh Bolten has been sounding out Washington insiders about new ideas and the prospects for compromise. Bolten wants Treasury Secretary Henry Paulson to become more involved in lobbying Congress on trade, taxes, spending restraint, regulation, and Social Security. Paulson, former head of Goldman Sachs, has strong credibility on Capitol Hill, and Bolten reasons that he might be able to create a more collegial atmosphere. Yet there are many doubters—and some internal signs that polarization politics will make a comeback. “Josh will try to reach out, but someone will cut his legs off, and that someone is [chief political adviser] Karl Rove,” says a senior Republican who informally advises the White House. “Josh understands the difficult road ahead and the importance of outreach,” adds another gop adviser to the administration. “But Rove doesn’t want to take on the right wing”—especially in view of the resentment among many Republicans that Bush waited until the day after the elections to oust unpopular Defense Secretary Donald Rumsfeld. An earlier dismissal might have helped gop candidates. Rove argues that Bush should continue to govern from the right. And he has convinced the president that gop losses in the midterm elections were a product of unique circumstances—corruption scandals and media negativity about Iraq. “It looks like they’ve decided to be true to the ones that brought them to the dance,” says an adviser to the White House. That means the conservative base is likely to hold sway. And that the president is headed for tough times on Capitol Hill. l 28

Volunteering for Jon Tester in Billings, Mont.

GENERATION Y TAKES A WHIRL WITH THE LEFT But can Dems hold its allegiance down the road? By Will Sullivan

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ill Selph’s family has known defeated Montana Sen. Conrad Burns for years, and Selph, a University of Montana sophomore and chair of the state’s college Republicans, did everything he could to turn out the vote for the senator. Selph supported Burns’s stands on national security and gay marriage, and he calls Burns “youthful” and “spry”— never mind his age, which is 71. The way Selph sees it, Burns shouldn’t have been a difficult sell for younger voters. But to hear Bryce Bennett, a senior and chair of the state’s college Democrats, describe him, Conrad Burns might as well have been Mr. Burns, the scheming, cen-

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tury-old billionaire from the television show The Simpsons. Burns’s votes to cut student loans angered Bennett, who has also seen a friend come home injured from Iraq and worries about getting health insurance after he graduates. Judging from the recent election, there may be a lot more young people like Bennett than like Selph. In surveys and exit polls, generation Y is increasingly turning left. And with voters’ earliest choices thought to be key to their future party identification, the gop could be running out of chances to win back a generation. Young people aren’t just voting more Democratic; they’re voting more in general. Over 2 million more people ages 18 to 29 voted in this election than in 2002, and their 24 percent turnout was the

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says Curtis Gans, a voter participation expert at American University, who says the 2006 election signaled anger at the gop more than long-term allegiance to the Democrats. “It really depends on what the Democrats do and whether the Republicans change,” he says. To secure the youth vote, Democrats have plans to lower interest rates on student loans and restore funding for Pell grants. Democratic National Committee Chairman Howard Dean suggested the party might push for universal healthcare for all citizens younger than 25. As for the gop, Gans says some aspects of its agenda, especially social conservatism and a unilateral foreign policy, are nonstarters for generation Y. But Republicans claim that their smaller base among the young is more dedicated and that a renewed focus on smallgovernment conservatism will swing voters to the right. “I’d be willing to bet you quite a bit that the Republican percentage of the next vote’s going to be significantly higher,” KENNETH JARECKE—CONTACT FOR USN&WR says Richard Ambrose, the highest for a midterm election since political director for the Young Repub1994. Much of this turnout increase and lican National Federation. For the gop’s sake, it had better be. the greater support for Democrats can be traced to the war in Iraq, but that Research from the University of Michidoesn’t mean either trend will disappear gan indicates that once voters pick one once the war is over, since early voting is party in three consecutive elections, they will identify with that party for life, and a strong predictor of future behavior. Leading indicators. Republicans “are look- younger voters have leaned strongly ing down the barrel of a long gun because Democratic in both 2004 and 2006. That makes the 2008 election critical. this is a demographic that will be around for a long time,” says Democratic pollster In the Lake-Goeas poll, young voters gave Celinda Lake, who conducted an analy- high marks to likely Republican candisis of exit polls with Republican Ed Goeas. dates Rudolph Giuliani and Sen. John The polls show voters ages 18 to 30 favored McCain and Democratic Sens. Hillary Democrats by 50 percent to 35 percent in Rodham Clinton and Barack Obama. But House races. Young voters’ top concerns— Gans is skeptical about either of the frontincluding Iraq, the cost of college, and runners striking a chord, suggesting that healthcare—bode well for Democrats, McCain’s support of the war will eventuwhile issues that tend to favor Republi- ally cost him and that Clinton “appears cans, including moral values, taxes, and calculating, and that is a liability.” In Montana, where much of the credit terrorism, scored low. Other studies tell a similar story. Results from a survey of in- for Burns’s narrow loss to Democrat Jon coming college freshmen, conducted an- Tester belongs to Missoula County, home nually by the University of California–Los of the University of Montana, Selph says Angeles and compiled last week, shows he expects his classmates to gradually turn falling support for military spending and more toward the gop. “I call them ‘hip growing acceptance of homosexuality and Democrats,’ because it’s the cool thing to abortion, a reversal from the conservatism do when you’re on a college campus,” he says. That may be. But the gop hasn’t seen in the years following 9/11. But Democrats shouldn’t breathe easy, looked this uncool in a long time. l HARRY CABLUCK—AP

A TEXAS MESS OVER COAL Proposed plants have stirred a clean-air uproar By Bret Schulte

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hat mantra of Lone Star State toughness, “Don’t mess with Texas,” actually began as an antilittering campaign back in the 1980s. While the campaign saw some success, the energy-producing state has proved less capable in cutting back on other pollutants. According to the American Lung Association, both the Houston and DallasFort Worth areas are in the nation’s top 10 for highest ozone levels, a major component of smog. Now, some Texans fear their air will be further, well, messed with. The state is seeking permits to build some 16 new coal-fired power plants. And the Lone Star State isn’t alone. Though talk of clean energy dominates the headlines, cheap, plentiful coal is staging a quiet comeback. According to the Department of Energy, 154 coal plants are being proposed nationwide, enough to power 93 million homes. While power Dallas Mayor Miller grids nationwide are surely strained, the crush of new coal plants—typically dirtier than natural gas— is sparking brawls at state and local levels. Gamble. But the old not-in-my-backyard fight over power plants has a new wrinkle, global warming—potential ammo for environmentalists and motivation for utilities. Analysts say the rush to build new plants is a calculated gamble by utilities that the federal government is poised to impose historic curbs on greenhouse gases—particularly with Democrats ensconced in Congress. By building now, utilities may grandfather in a new generation of plants that won’t be required to bear the full brunt of future laws. Utilities say they’re simply trying to meet the bur-

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MORE COMING? A pile of coal at TXU’s existing Big Brown power facility near Fairfield, Texas. The company hopes to build 11 new coal plants.

geoning demands of a growing country. house gas, than do other options. Dallas from the feds . . . and block grant money But environmentalists aren’t buying, and Mayor Laura Miller, who leads the coali- for our inner-city neighborhoods,” says they vow to fight the coal plant expansion tion, called the proposal “just mind bog- Miller. “We’re in enormous trouble.” gling.” Miller has “panhandled” across the Miller’s city has already lost federal in every available forum. In something of a twist, energy-friend- state recruiting supporters and raising funding because of pollution. Most of the anger has been directed at ly Texas has become the closely watched money for a fight to block the plants as curground zero in this battle. Gov. Rick Perry rently proposed. Miller is using the Texas’s largest energy provider, Dallasexpedited the permitting of the coal plants $500,000 that’s been raised to hire health based txu, which plans to build 11 of the in October 2005, when he was under and air-quality experts to testify before the new coal-burning units. The company depressure from energy price hikes that Texas Commission on Environmental nies it was motivated by fear of impending came about in the wake of deregulation of Quality, which oversees permitting for the regulations. “If demand was not there, we the state’s energy market back in 2002. plants. At hearings beginning this week, wouldn’t be building these power plants,” Some customers saw electric bills jump Miller’s coalition may argue that the com- says spokesperson Kimberly Morgan. “Our customers in Texas 80 percent, in part because of enjoy their air conditioning, rising natural gas prices and, “If demand was not there, we wouldn’t enjoy their big homes.” txu some say, a botched formula says coal-gasification techthat determines the rates be building these power plants. Our nology is still too unreliable charged by the biggest profor a massive investment. viders. Coal plants, Perry customers…enjoy their air conditioning.” txu is pledging that 100 perargued, would drive down cent of the regulated pollucosts and give a much-needed boost to the state’s power grid. Earli- mission didn’t force energy companies to tants emitted by new plants will be offset er this fall, a report by the North Ameri- review all “best available technology,” as by technology upgrades in older facilities. can Electric Reliability Council buttressed required by federal law. The coalition be- The company also promises to reduce polat least part of Perry’s argument, saying lieves that fledgling coal-gasification tech- lutants—but not greenhouse gases—across Texas is among regions most at risk for nology—producing a dramatically lower the older fleet by 20 percent below 2005 grid failure because future demands are level of pollutants—should be considered. levels. All in all, a $2.5 billion investment. Meanwhile, national green group En- Critics say the plan is short on details and expected to exceed capacity. “We need to make sure Texas stays ahead of the de- vironmental Defense is suing the com- promise all-out war. Privately, though, mand for energy,” says Perry spokesper- mission—whose members are appoint- some are conceding it’s doubtful they’ll be ed by the governor—in state court for able to stop all, or any, of the proposed son Kathy Walt. Green groups. But a bipartisan coalition failing to enforce its own regulations “by plants. Still, with showdowns looming, loof 21 Texas cities and counties, as well as not requiring applicants to look at cu- cals are staging candlelight vigils and environmental groups, says conservation mulative impact on air quality,” says En- protests; some pledged a hunger strike. and renewable energy could reduce the vironmental Defense lawyer Amy Hard- “When Texans feel like they’re being taken strain on the grid. And the groups argue berger. Dallas Mayor Miller says adding advantage of, they stand up and fight,” says that the proposed fleet of pulverized-coal 16 new plants to the existing 18 will push Tom “Smitty” Smith of the Texas chapter plants—standard technology but short of air quality in parts of the state over fed- of Public Citizen. It’s a Texas-size brawl, cutting-edge—isn’t the answer for an al- eral limits of the Clean Air Act and vio- and one that’s being watched elsewhere. ready polluted state. Plus, pulverized coal late state laws as well. If that happens, Because it may not be long before other releases more carbon dioxide, a green- many areas could lose “highway money states are feeling, well, messed with. l 30

U.S.NEWS & WORLD REPORT • WWW.USNEWS.COM • DECEMBER 4, 2006

DAVID J. PHILLIP—AP

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On Politics By Gloria Borger

The Lady of the House omen recognize that kind of version, just a sense that the other guys ought to get a shot smile: pasted, forced, painful. When it ap- at governing. So while the Democrats won, they still remain pears—say, to hide heartbreak or sadness— a motley crew: rich and poor, culturally conservative and there’s a natural sympathy, even admiration, liberal, big spenders and budget-balancers. Tacky. And divided on the best way to end the war. Pelosi for the spirit of the woman wearing it. But when the soon-to-be Madame Speaker emerged from a has taken sides: She supports the Murtha withdraw-now closed-door Democratic caucus recently wearing that an- scenario. And she’s about to demote her more moderate felguished grin, there was none of that friendly sense of em- low Californian, Jane Harman—denying her the chairmanship of the House Intelligence Committee, even kickbrace. None whatsoever. Instead, there was mostly this question: What was the ing her off the panel. Why demote Harman? If it’s a policy woman thinking? That we would simply accept the toothy dispute over the war, why not welcome Harman’s voice— smile as evidence of her newfound comity with Steny generally regarded as credible, even if it veers from the libHoyer, the new majority leader whom she had just at- eral line? If it’s a personal dispute, get over it. Any member tempted to knock off? That we would think it was a good of the California delegation will tell you that the two women idea to make her maiden leadership power play—in sup- don’t get along—and that both have probably been right porting Jack Murtha over her foe Steny Hoyer for the over the years. But if you’re speaker, why demean your exjob—an act of revenge instead of reconciliation? That the alted position by engaging in a publicly ugly, even tacky, woman about to become the first female speaker of fight? Particularly when the possible alternative to Harman the House was smart to look like a girl eager to “get back” is Alcee Hastings of Florida, once impeached by the Senate at the guy she didn’t like? That stepping on your own for ethical lapses. “If Pelosi starts acting like the second big story by trying to big-foot your membership is in- coming of George McGovern,” says one top Democratic strategist, “we will lose much of what we have gained.” spirational bridge-building? Or even good politics? There are some hopeful signs: Despite the suggestion by The facts: Nancy Pelosi is making history. As a woman, she will be held to a different standard, so she needs to set her Rep. Charles Rangel that Congress ought to reinstitute the standards high. It’s not fair, but that’s the way it is, and we draft, Pelosi made it clear the idea is a nonstarter. It might all know it. And it’s why choosing Murtha (over a well-re- actually be an interesting debate that would engage the nation, but it’s never going to hapgarded man already in place as pen—so Pelosi is wise to avoid it. her No. 2) was ultimately so selfThen there’s the decision to roll defeating—and more revealing out a bunch of ethics reform than she probably intended. A measures at the start of the next Pelosi ally told me that she was Congress. It’s the issue that just playing by the tough rules of tipped the balance towards the the old male pols in trying to PABLO MARTINEZ MONSIVAIS—AP Democrats—and they’re going deep-six her antagonist, Hoyer. to take their time debating it. If so, she forgot something: Each proposal—whether it’s a You might be forgiven if you emgift ban, lobbying reform, or ploy a low tactic in the service of eliminating pork-barrel-spendhigher purpose. But threatening ing “earmarks”—will be in a sepcommittee assignments so fresharate bill, providing plenty of men vote for Jack Murtha just votes and attention for an issue doesn’t qualify. that mattered to the public. Pelosi’s main job is to tee up That’s smart. And it’s an the Democrats for 2008. It’s a agenda House Democrats want. tough task, largely because she’s So far, in fact, it’s the flock that a leader of a party perpetually has been serving the leader well: at war with itself. The unity the pushing for reforms and refusDemocrats found in the last ing to rubber-stamp Murtha beelection was rooted in one simcause he’s Pelosi’s friend. If they ple truth: They weren’t the Rebegin to actually get something publicans running the Congress done, the smiles may finally be or the White House. There was for real. l no national Democratic conThe speaker after losing her first big fight

W

As a woman, Pelosi will be held to a different standard. It’s not fair, but it’s the way it is.

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Nation & World

LETTER FROM HIROSHIMA, JAPAN

Rethinking the Bomb By Bay Fang

I

t was Aug. 6, 1945, and Setsuko Iwamoto had just gotten to school. The morning bell rang, and the 13-year-old girl was running to assemble on the school grounds, when from the corner of her eye she saw a very bright flash—and her world changed forever. When she regained consciousness, she was trapped under a collapsed building and could hear the screams of classmates nearby. She somehow crawled out from the rubble, stood up, and looked around. Her world was dark, the sun blocked by soot and dust whirling in the air. Aside from the weakening screams, the city was eerily silent, and Iwamoto thought for a minute that she might be the last living creature on Earth. All her life, Iwamoto, now 74, has tried to keep alive the memory of that day. But she is losing confidence that the world still remembers— and understands—the full horror of the atomic bomb. Just under two months ago, North Korea broke into the nuclear weapons club with a test explosion, which, though weak, sent political shock waves throughout the region. In reaction, pacifist Japan is cautiously opening a debate on a subject long taboo: whether to start its own nuclear weapons program. “I strongly believe that nuclear weapons and humans cannot coexist,” Iwamoto says. “I’m very concerned about the direction Japan is heading in now.” Ever since its defeat in World War ii, which ended with the American atomic bombs dropped on Hiroshima and Nagasaki, Japan has

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been governed by a constitution—written by U.S. occupation forces—that renounces war as a sovereign right and allows for only limited self-defense. Japan’s hawkish new prime minister, Shinzo Abe, is seeking constitutional revisions expanding the definition of self-defense, in part because of regional threats such as North Korea. Then, too, Japan’s potential shift is it-

Atomic Energy Agency, Mohamed ElBaradei, visits Japan to talk about efforts to turn back the North Korean and Iranian nuclear programs and to step up international nonproliferation efforts. Memorials. Some six decades after its nuclear devastation, Hiroshima is a sparkling city, with wide boulevards and the newest department stores. But the YURIKO NAKAO—REUTERS

Remembering victims: paper lanterns at the Hiroshima Peace Memorial

self causing unease in a region that remembers brutal Japanese occupation during World War ii. Inevitably, some politicians—including Foreign Minister Taro Aso— say Japan also should re-examine its rejection of nuclear weapons. However, at the end of the recent Asian economic summit in Vietnam, Abe vowed to keep Japan nonnuclear and a leading voice for nuclear disarmament. “Japan,” he said, “is different from other countries in that it has suffered a nuclear attack.” This week, the directorgeneral of the International

U.S.NEWS & WORLD REPORT • WWW.USNEWS.COM • DECEMBER 4, 2006

past is remembered and marked by the small shrines to the dead that dot the city, built by different work groups, civic organizations, or individuals. At the Hiroshima Peace Memorial Museum, a perky, matter-offact narrator tells the story of the B-29 Superfortress bomber Enola Gay and the fireball that exploded roughly 1,900 feet above the city at 8:15 a.m. on Aug. 6, 1945, releasing heat of over 1 million degrees Celsius. In the background are images of women and children with skin melting off their bodies, hair standing on end.

The official number of dead at Hiroshima, as given at the museum, is “140,000 (plus or minus 10,000).” That takes into account both the estimated 80,000 people who died instantly and the 60,000 more who died by the end of the year from burns, wounds, and other radiationrelated causes. For years, many survivors of Hiroshima and Nagasaki, known as hibakusha, did not talk about their memories—both out of fear of discrimination and because they felt a deep-seated guilt for having survived when so many did not. Many also simply wanted to bury the memory of that day along with the remains of their family and friends. But a legacy of that horrifying past is that this city of 1.2 million people remains deeply pacifist. The just-retired director of the museum, Minoru Hataguchi, was in his mother’s womb when the bomb hit. He ticks off a list of the world’s nuclear weapons countries: the United States, the United Kingdom, France, Russia, China, India, Pakistan— and, perhaps, North Korea, Israel, and Iran. “The world is moving not toward nuclear disarmament but nuclear development,” he says. “And of course, that is not the wish of Hiroshima. . . . If you forget this experience, the impact of nuclear weapons, that will eventually lead to the extinction of human beings.” However, the question of which nuclear countries pose the greatest threat to the rest of the world elicits a reply that may surprise many in the West. When asked, Iwamoto and her friends reply, “North Korea.” And after that? “America.” l

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The aftermath of another explosion last week in Baghdad. Below, from left: Sunni and Shiite sheiks; an American adviser with an Iraqi battalion commander. Prime Minister Maliki with Shiite cleric Moqtada al Sadr

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Special Report

GETTING

OUT IT WON’T BE QUICK OR EASY. BUT, SURPRISINGLY, THERE ARE AT LEAST SOME IDEAS By Linda Robinson

J

ames A. Baker iii delights in delivering the long-ball play. In his newly released memoir, he describes the “sweet payoff” of getting Syria and other recalcitrant Arab nations to attend the 1991 Madrid peace conference. After putting together a broad Arab and international coalition to wage the first Gulf War, Baker, secretary of state for President George H. W. Bush, wanted to “capitalize on the momentum of this first-eve r experience with regional cooperation in the Middle East.” In many ways, Baker is taking up old business again today in his job as cochair of the Iraq Study Group that is soon to present its formula for stopping the bleeding from the sucking chest wound that the Iraq war has become. The difficulties are even more daunting this time as violence threatens to spiral out of control. The Iraq Study Group—10 former cabinet officials,

CLOCKWISE FROM TOP: HADI MIZBAN—AP; QASSEM ZEIN—AFP / GETTY IMAGES; SGT. JIM GOODWIN—USMC; SABAH ARAR—AFP / GETTY IMAGES

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Special Report senators, counselors, and retired Supreme loop and thereafter used as a resource to Court Justice Sandra Day O’Connor—is provide further information to commisevenly divided between Democrats and sioners in writing. Baker, who had been Republicans and is “at loggerheads” in its out promoting his memoir, stopped deliberations, says a Baker aide. But Baker granting interviews. The rest of the panel and his cochair, longtime Democratic leg- also stopped talking to the press. The islator Lee Hamilton, remain committed cochairs and their aides wrote their own to reaching a bipartisan consensus on their draft report and guarded its contents recommendations to find a way to end the closely. Nonetheless, in several dozen 31/2-year-old war that has cost nearly interviews, U.S. News has pieced to3,000 American lives and taken tens of gether this account of the group’s delibthousands of Iraqi lives. President Bush erations, the evolving search for an alhas said he looks forward to the group’s re- ternative policy, and the administration’s port, and he has launched his own review response to the mounting pressure for of Iraq policy. The Pentagon is also con- an exit strategy. Autonomy or partition. The case for inducting a review of its military options. The debate over Iraq has spawned a creased autonomy for Iraq’s Shiite, welter of proposals for new policies, but Sunni, and Kurdish communities has something like a consensus position has been put forward by Sen. Joe Biden and begun to emerge on some key issues, including the need for a political settlement and diplomatic overtures to Iraq’s neighbors. On the hot-button issue of U.S. troop levels, however—whether, when, and how many should be withdrawn from Iraq— sharp disagreement remains. Yet even there, a middle-ground position might be fashioned to win support from moderates on both sides of the aisle and from the White House. With a new Iraq policy, almost inevitably, Baker and Hamilton with Bush, Cheney, and White House aides will come new faces. The Pentagon is getting a new boss, and re- former Council on Foreign Relations placements for the U.S. ambassador and President Leslie Gelb. Former Ambastop military commander in Iraq are sador Peter Galbraith has made the case being discussed. Even with a new policy, for partition of Iraq. The premise of the however, one sober-minded former U.S. two proposals is that Iraq’s warring official cautions, “it may be too late for groups cannot reach an accommodation, so they should be permitted to rule over any strategy to work.” If the Baker group fails, it won’t be for the geographic areas they dominate with lack of trying. For the past six months, a minimal central government that dozens of academic experts provided would guarantee fair sharing of oil revproposals and analysis to the group. The enues. The main difficulty with this is experts lined up behind two main op- that some one third of Iraqis live in intertions and wrote papers titled “Stability mixed areas, and many Iraqis are interFirst” and “Redeploy and Contain.” Ac- married. As the authors acknowledge, cording to experts interviewed by U.S. a neat geographic division is impossiNews, the former paper called for a focus ble without mass population movement. The Iraqi ambassador to the United on stabilizing Baghdad and an effort to reach an accommodation with the in- States, Samir Sumaidaie, criticized this surgents rather than defeating them. The proposal in an interview with U.S. News. latter favored withdrawing U.S. troops “There are some American politicians who on a timetable and taking military and think that they can devise a way out, sitdiplomatic steps to contain Iraq’s vio- ting here in Washington or spending a few hours in the Green Zone,” he said. “The lence within its borders. When word of the two papers leaked, idea of subdividing Iraq is very dangerous. Baker and Hamilton reacted immedi- It will create far more problems.” A senior ately. The experts were cut out of the U.S. intelligence expert on Iraq believes it RIGHT: ERIC DRAPER—WHITE HOUSE / GETTY IMAGES

U.S.NEWS & WORLD REPORT • DECEMBER 4, 2006

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Special Report to some 650,000—which will is “a nonstarter” for the practake time—and increasing U.S. tical reason that “the people troop levels, at least in the near with the guns don’t accept it. . . . term. The Shia and Sunni both still National compact. There is want a unified, Arab-dominatgrowing support for the idea of ed Iraq—dominated by them.” making a full-bore push to Rapid or phased withdrawal. reach a political agreement Rep. John Murtha, a Democrat among Iraq’s warring factions. from Pennsylvania, is the prinSome see it as the only real cipal advocate for withdrawal hope for ending the violence. of U.S. troops. Others call for One of the experts advising fixed dates for withdrawal or the Baker-Hamilton group, not replacing brigades as their Michele Flournoy of the Cenrotations end. More and more ter for Strategic and InternaAmericans support withdrawtional Studies, says: “The most al, but Hamilton, Baker’s coimportant element of a new chair, opposes both formulas. approach is a fundamentally “Pulling out precipitously could reinvigorated political effort cause considerable damage to that would put pressure on U.S. interests,” he wrote in the the . . . government [of Shiite Indianapolis Star last year. Prime Minister Nouri al-Mali“Arbitrary deadlines will not ki] to do more in extending a work.” hand to Sunnis.” The directors of both the Analysts differ over whether central and defense intellithe Shiite or Sunni antagonists gence agencies testified reneed to be pressured more. cently that the departure of One intelligence official says American forces, without any that coercion is also required other steps, would make the on the Sunni side, where inviolence worse. A defense insurgents still harbor dreams of telligence official described returning to power, provoking what he believes would be the fear among the Shiites, who Iraqi reaction to such a move. turn for protection to their “Any attempts to draw down militias. “The Sunni have guns, dramatically in the near term Among the latest victims were Shiite leader Ali al Adhadh and his wife. recruits, motivation,” the offiwill be seen as a sign of weakcial says, “and the wherewithness by Sunni Arabs and will al to continue this for a very accelerate score settling,” he long time.” told U.S. News. “The Shia, in The administration has turn, will feel they have to asbeen trying to bring about posert themselves.” litical reconciliation for the Larry Diamond, who adpast year, and the Iraqi govvised U.S. officials in Iraq and ernment laid out a timeline subsequently wrote a book criticizing U.S. policy there, paints a stark tired Gen. Jack Keane, former Army vice for doing so in October, although it failed portrait of what he believes would ensue. chief and a senior consultant to the Baker- this month to reach agreement on al“Withdrawal would lead to a ghastly, all- Hamilton group, believes that “the Iraqi lowing more Baathists to resume jobs in out civil war and a sudden, cataclysmic political process has failed because the the government and failed to pass a new collapse of the Iraqi government,” he Sunnis are not participating. As far as the oil law, as hoped. U.S. Ambassador Zalsays. “If we just start heading for the exits, Sunnis are concerned, they are succeed- may Khalilzad, a Sunni Afghan-Ameriand that’s all we do, all of the most ex- ing in their desire to create an unstable can who speaks fluent Arabic, was reenvironment, fracture the Iraqi govern- garded by many as the best hope for treme elements will seize power.” Troop increases. Sen. John McCain ad- ment, and drive the United States out. brokering a deal. He is reportedly leavvocates sending more troops, arguing that The evidence suggests they are right.” ing his post in the next few months. Some criticize the administration for the continued violence demonstrates that Therefore, he argues, “for a political stratthere are inadequate numbers to deal egy to work, the military strategy has to having failed to reach out to Sunni anwith the problem and that the Iraqi se- enable it. The military strategy must force tagonists before they grew so strong. curity forces aren’t ready to shoulder the the Sunnis to seek a political solution, and One official asserts that the National task. Gen. John Abizaid, overall com- right now there is insufficient pressure on Security Council’s director for Iraq, mander of U.S. forces in the Middle East, them to seek one,” he told U.S. News. “The Meghan O’Sullivan, blocked attempts testified that Washington could tem- current level of Iraqi and U.S. forces is not to negotiate with key members of the porarily increase troop levels by some adequate to the task.” Iraqi police and mil- insurgency and former regime officials, 20,000—and said he is weighing all op- itary forces now number 322,000 and a charge she denies. Even now, says Ditions. But he also said such an increase U.S. troops about 140,000. General amond, “we need to talk very intencould not be sustained indefinitely. Re- Keane advocates raising the Iraqi forces sively and urgently, without any pre-

“The idea of subdividing Iraq is very dangerous. It will create far more problems.”

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ALI ABU SHISH—REUTERS

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gional influence. Proponents conditions, to those elements of dialogue argue that while who have been excluded—the these countries are U.S. adformer Baathists, Army ofversaries, neither wants Iraq ficers, the Iraqi Islamist to become a failed state. “I groups.” In the past month, believe both countries would there have been a few small try to bargain,” says a Midgains on this front, as secret east diplomat. “The question talks with some insurgents is, should bad behavior be won their promise not to atrewarded?” tack coalition forces, and Baker has not taken a pubsome Sunni tribes have been lic stand on the merits of neenlisted to go after al Qaeda gotiating with Syria and Iran, insurgents. but as a matter of principle he Arm twisting. In response to said: “Personally, I believe in the criticism that the United talking to your enemies.” He States has failed to put enough recalled in an October interpressure on the Maliki governview that it took him 16 trips ment, a senior administration to Syria to get the government official said: “Some assume to change its 25-year-old polthat all we say to the Iraqis is icy and sit down with Israel in what we say in public.” Indeed, 1991. “That never would have on a recent visit to Iraq, Genhappened,” he said, “had we eral Abizaid told Maliki he not made those trips and had needed to take action against we not talked to them.” the Shiite militias “very soon,” In the past few days, the adand he told Congress that he ministration has appeared to believes the government has open the door a crack. The only four to six months before State Department’s David Satthe violence spirals beyond its terfield, its top official on Iraq, ability to rein it in. But the sesaid that the administration is nior administration official acprepared to talk to Iran but knowledged that the piecemeal not to Syria. “We believe the approach to negotiation hasn’t Syrian government is well succeeded. “The Iraqi leaderaware of our concerns and the ship has said it is easier to do it Training an Iraqi soldier; a U.S.-Iraqi patrol near the Euphrates River steps required to address incrementally. The reality is those concerns,” he said curtthat it is very hard to get withly. But, he added, “we are preout trade-offs.” That recognipared, in principle, to discuss tion reflects the administraIranian activities in Iraq.” tion’s growing willingness to This was the clearest indicaembrace a new approach, to tion to date that the adminisconvene the parties and tell tration may move soon to emthem that the time to resolve brace this diplomatic gambit. their differences is now. The U.S. diplomatic overtures to its Abizaid delivered a barely veiled warn- President Bush to announce an initial ing in recent congressional testimony, troop cut within four to six months as a friends in the region have so far borne following his visit with Maliki. “We are way of putting pressure on Maliki. Levin little fruit. Satterfield acknowledged in danger of having civil war,” he said, “if envisions it as a clear signal and not nec- that the Persian Gulf states, including the government does not open a rea- essarily a prelude to further cuts, and he Saudi Arabia, have not forgiven Iraq’s sonable dialogue for national reconcili- opposes any scheduled withdrawal as too debt to them as Washington has asked ation and back its Army in its attempt to rigid, an aide says. Levin would also leave and are unwilling to provide peacegain stability 100 percent.” U.S. military it up to the Pentagon to decide how many keeping forces. This is partly because of these Sunni-led states’ concern over the officials have been frustrated by numer- troops to withdraw. Regional diplomacy. There is wide rise of Iran’s influence in Iraq but also ous incidents in which Maliki undercut Iraqi troops who were going after death agreement on the desirability of enlist- because of their pique over the lack of squad leaders and kidnappers, appar- ing Iraq’s neighbors to support a polit- U.S. consultation with them. Many exently to shield Shiite militia figures or ical accord there or reduce their assis- perts advocate bringing in Europe and tance to insurgent and militia groups. the United Nations to expand the tool avoid the wrath of Shiite politicians. If all avenues for reaching an accord The new Democratic leadership on kit of influence; next month the United have not already been exhausted, the ques- Capitol Hill advocates convening an in- Nations is supposed to announce an intion is whether any new inducements ternational conference to gain greater ternational compact that will bring ecoought to be offered. Democratic Sen. Carl cooperation. U.S. officials say that Syria nomic benefits if Iraq implements ecoLevin of Michigan, who will become the is allowing Sunni insurgents across its nomic reforms. Officials say politics chairman of the Senate Armed Services border, and they say Iran is helping Shi- and a dysfunctional bureaucracy have Committee in January, has called for ite militia groups in a bid for wider re- left some $13 billion in petrodollars

“If we start heading for the exits…all the most extreme elements will seize power.”

FROM TOP: SGT. JIM GOODWIN—USMC; THIBAULD MALTERRE—AFP / GETTY IMAGES

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Special Report If the expanded advisers do bottled up in Iraq’s finance boost the capacity of the Iraqi ministry. security forces and the Iraqis The Democratic leaderprove able to manage a faster ship’s embrace of political neturnover, that can open the gotiations and more active way for an earlier drawdown diplomacy makes it even more of some U.S. troops than prelikely that these elements viously envisioned—possibly will be part of the Iraq Study in less than 12 months, acGroup recommendations. Ancording to Abizaid. Flournoy, other element likely to appear who served in the Clinton adin the report is a call for the ministration’s Pentagon, beU.S. military mission to tranlieves that this plan might win sition from one focused on the support of the Democratic combat to one focused on adleaders, who she says are not vising Iraqi forces and counrigidly insisting on a fixed reterterrorism. In another sign deployment or withdrawal of growing consensus on this calendar. “What they really point, a similar recommendawant is not a date certain so tion may be forthcoming from much as a sign that this is the reviews of military stratenot a perpetually open-ended gy now underway at the Pencommitment.” tagon, at the Central ComSome in the Baker group mand, and in Iraq. are concerned that drawdown The security compromise. Abisignals could make it harder zaid testified that the military to reach an agreement by raisis currently looking at ways to ing fears that the United make the U.S. military advisers States will not act as the guarembedded with Iraqi forces the antor of any accord that is focus of the strategy. There are reached. And actual drawabout 4,000 U.S. advisers in downs or pullback could 10-to-15-man teams. Currentmake the remaining U.S. adly, there are 139 such American visers more vulnerable and teams working with the Iraqi spur more violence. But reArmy and 14 others staffed by gardless of U.S. moves, if coalition forces, as well as Troops of the 101st Airborne Division arrive at Fort Campbell, Ky. chances of an accord recede, teams embedded with Iraqi pothe environment will become lice and border guards. In adincreasingly dangerous for dition, there are special operany remaining forces. Within ations forces serving as combat six months, one expert said, advisers to scout platoons in it should be clear whether about one third of the Iraqi Iraqis can reach agreement. Army. The conflict’s own dynamic A senior U.S. military offimay in effect become the cial told U.S. News that two ways are being considered to expand the drawn. Additional interpreters and train- timeline that everyone is looking for. Trying to fashion a stable and unified advisory effort. More advisers and sup- ing are also needed to make advisers more porting teams can be drawn from the ex- effective; the latter will include revamp- Iraq will be a huge job, one that may in isting combat brigades now in Iraq, and ing the counterinsurgency courses at Taji the end prove impossible, but there’s at least one obvious candidate for the job. additional advisers can be trained and and stateside. Finally, plans are already being drawn Flournoy speculates that the Iraq Study brought in from the United States. No decision has yet been reached on how up to shift more responsibility and con- Group chief could be tapped to carry out large the increase will be, the official trol to the Iraqi forces. A high-level U.S.- the report’s diplomatic recommendasaid, but it could be double the present Iraqi committee is currently negotiating tions. “It is possible that the president number. He also pointed out that in the terms for a faster turnover of au- will say, ‘Jim Baker, you just got yoursome parts of Iraq, advisers already get thority, bases, and provinces to Iraqi con- self a job. Go get on a plane,’ ” she says. help from the U.S. combat brigade as- trol. The committee is also discussing If so, the Texas lawyer might well find signed to the area, such as in Mosul, ways of making the Iraqi forces more mo- himself reliving his earlier days of shutwhere a Training Combat Advisory bile by leaving behind U.S. up-armored tle diplomacy, described in his memoir: Team backed up the embedded Military humvees as units withdraw and improv- “Almost everywhere,” he wrote, “I was Transition Team. That formula may be ing their heavy weaponry via foreign mil- met with delays, refusals, evasions, unexpanded nationwide. Making the teams itary sales purchases. General Abizaid reasonable demands, broken commitmore “robust” also means giving them suggested that this turnover package ments, and endless lectures about the more vehicles and weapons so they can could be tied to an accord on militia de- untrustworthiness of the other side.” move around and protect themselves mobilization and amnesty as an addi- Hard to imagine better training than that for fixing the mess in Iraq. l once U.S. combat brigades are with- tional incentive.

A general believes Iraq has four to six months to get things under control.

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MARK HUMPHREY—AP

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Commentary By Fouad Ajami

Back to the Future he sin of george w. bush, to hear his ing short of revolutionary. The Sunni Arab regimes have a critics tell it, is that he unleashed the forces of free- dread of the emancipation of the Shiites. But American power dom in Arab-Islamic lands only to beget a terri- is under no obligation to protect their phobias and privileges. ble storm. In Iraq and in Lebanon, the furies of sec- History has served notice on their world and their biases. tarianism are on the loose; and in that greater We can’t fall for their legends, and we ought to remember Middle East stretching from Pakistan to Morocco, the forces that the road to all these perditions, and the terrors of 9/11, of freedom and reform appear chastened. Autocracy is fash- had led through Sunni movements that originated in Egypt ionable once again, and that bet on freedom made in the af- and Saudi Arabia. Terror and ruin can come in Sunni and termath of the American venture into Iraq now seems, to Shiite drapings alike. It was not naive idealism, it should be recalled, that gave the skeptics, fatally compromised. For decades, we had lived with Arab autocracies, befriended them, taken their rule birth to Bush’s diplomacy of freedom. That diplomacy as the age-old dominion in lands unfit for freedom. Then issued out of a reading of the Arab-Muslim political concame this Wilsonian moment proclaimed in the course of dition and of America’s vulnerability to the disorder of Arab the war on Iraq. To the “realists,” it had been naive and fool- politics. The ruling regimes in the region had displaced hardy to hold out to the Arabs the promise of freedom. We their troubles onto America; their stability had come at had bet on the Cedar Revolution in Lebanon, thrilled to these America’s expense, as the scapegoating and the anti-Ameriyoung people in Beirut’s plazas reclaiming their country canism had poisoned Arab political life. Iraq and the strugfrom Syrian tyranny. But that promise, too, has been bat- gle for a decent polity in it had been America’s way of trytered, and in the shadows, the old policy of ceding Lebanon ing to extirpate these Arab troubles. The American project to the rule of Syria’s informers and policemen now claims in Iraq has been unimaginably difficult, its heartbreak a a measure of vindication. On the surface of things, it is the grim daily affair. But the impulse that gave rise to the war was shrewd and justified. moment of the “realists,” then: They Nowadays, more and more people speak with greater confidence. The despair of the Iraq venture. And voicworld had lived down, as it were, to es could be heard counseling that the their expectations. And now they wish matter of Iraq is, for all practical purto return history to its old rhythm. poses, sealed and that failure is But in truth there can be no return around the corner. Now and then, the to the bosom of the old order. Amerimemory of the Vietnam War is sumcan power and the very force of what DAVID BUTOW—REDUX FOR USN&WR moned. America had lost the battle had played out in the Arab-Islamic for Vietnam but had won the war for lands in recent years have rendered the East Asia. That American defeat had old order hollow, mocked its claims to brought ruin to Vietnam and Camboprimacy and coherence. The moment dia, but the systems of political and our soldiers flushed Saddam Hussein economic freedom in Asia had held, from his filthy spider hole, we had put and the region had cushioned the on display the farce and swindle of American defeat, and left a huge proArab authority. tective role for American power. Fair Primacy and power. We can’t shy away enough: There was Japan in East from the very history we unleashed. We Asia, providing political anchorage had demonstrated to the Arabs that the and an example of economic success. rulers are not deities; we had given birth There is no Japan in that arc of trouto the principle of political accountble in the Middle East and the Persian ability. In the same vein, we may not be Gulf. Saudi Arabia and Egypt are poor comfortable with all the manifestations pillars, themselves prey to forces of of an emancipated Arab Shiism—we reradicalism—the first weak in the coil, as we should, from the Mahdi scales of military power, the second Army in Iraq and from Hezbollah’s Hasa brittle, crowded land with immense san Nasrallah in Beirut—but the Shiite troubles of its own. That overall stepchildren of the Arab world have strategic landscape, too, should be been given a new claim on the Arab poconsidered as we debate and anguish litical order of primacy and power. In over Iraq. l the annals of Arab history, this is nothSaddam’s ouster changed things for good.

T

Many would like to see a return to the old order in the Middle East. Forget about it.

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Money & Business

Private buyers are gobbling up some of the premier names in corporate America

By Kit R. Roane

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ime was, America’s largest corporations would fight tooth and nail (and with poison pills) to remain public companies. No longer. Now many of the world’s biggest and bestknown brands clamor to be taken private by investors they once shunned. A parade of marquee names have sold out— Clear Channel Communications, Cablevision, Reader’s Digest, Dunkin’ Donuts, SunGard Data Systems, Freescale Semiconductor, Toys “R” Us, Neiman Marcus, Metro-Goldwyn-Mayer, and hospital giant hca, to note just a few. And the deal making shows no sign of abating anytime soon, as the private Blackstone Group announced plans last week to buy Equity Office Properties Trust, the nation’s largest owner of office buildings, in a record-breaking deal. It is a significant turn not just in corporate thinking but in the way the private-equity buyers are viewed. They have never been so loved. What a difference a couple of decades can make. Nearly 20 years after Kohlberg Kravis Roberts’s $30.6 billion hostile takeover of rjr Nabisco left private-equity firms tagged as the “barbarians at the gate” and their partners vilified by Hollywood’s Gordon “Greed is good” Gekko, these firms have mainly shed the perception they are corporate raiders pil48

laging for profit. These days, privateequity firms like kkr and the Blackstone and Carlyle groups aren’t feared so much as revered—as deep-pocketed saviors willing to pay a premium to take over companies feeling neglected and misunderstood by Wall Street or overburdened by securities regulations. Gone are the days when other publicly traded companies, known as strategic

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buyers, were the usual buyout suitors. Private-equity firms now surface as the chief bidders in most deals, say investment bankers and others involved in the buyout business. And new funds pop up every week focused on industry niches such as aftermarket auto parts or specializing in geographic areas like Idaho or Montana. This year, there have been more than

CLOCKWISE FROM TOP LEFT: RICHARD SHEINWALD—BLOOMBERG NEWS / LANDOV; NAJLAH FEANNY—CORBIS SABA; MARK LENNIHAN—AP; MATTHEW STAVER—BLOOMBERG NEWS / LANDOV

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SALE. Big names swept up by private groups in a flurry of deals include (clockwise from top left) Neiman Marcus, Reader’s Digest, Equity Office Properties Trust, and Hertz. Buyouts this year have topped $600 billion.

2,282 private-equity buyouts worldwide with a combined value of $601.3 billion, up from only 885 deals valued at $71.4 billion in 2001, according to researchers at Dealogic. Dark side. But as the number and size of the private-equity deals have soared, uncomfortable questions have again been raised about whether the hot leveraged-buyout market they are fueling may

end up leaving some companies and shareholders burned. Federal prosecutors are probing charges of collusion among various private groups. The Securities and Exchange Commission is looking into allegations of insider trading and multimillion-dollar fraud. Shareholders have filed lawsuits to stop some deals, such as the recently successful buyout of hospital chain hca,

complaining they are being shortchanged. Stunningly large dividend payouts to private-equity buyers from companies such as Hertz have sometimes made the firms seem greedy. And overseas, where many of the best deals are to be had, private-equity partners have been called “locusts” and threatened with arrest. For much of their history, privateequity firms existed in a quiet corner of the financial world, content with buying, building, and operating promising companies. Many still do just that. But what made them household names in the 1980s was the increased use of leveraged buyouts, where the groups added huge borrowings to their own cash, mainly because of debt-friendly laws that shield profits from the tax man. The earlier buyout wave revealed the potential downside of piling debt on companies—the turning of beloved brands like Federated Department Stores into bankrupt shells that had to struggle mightily to come back, giving private-equity firms a black eye for the immense sums they took out of such deals. These days, private-equity firms have largely changed their stripes, taking on less debt and often concentrating more on building up companies rather than cutting them to the bone. But problems do remain. And private-equity firms are painfully aware of the damage bad publicity can do to their positive new image. Fear of being lumped in with hedge funds—whose own practices have drawn sharp attention from regulators—is one reason that Carlyle, Blackstone, kkr, and Texas Pacific Group are moving to form the Private Equity Council, the industry’s first concerted attempt to educate the public and lobby the government. Colin Blaydon, director of the Center for Private Equity and Entrepreneurship at Dartmouth’s Tuck School of Business, says the firms are setting up the council “largely because of the potential backlash they could get around the world because of their expanded activities.” The private-equity buyouts are fueled by several factors. The shares of many public companies, after wringing out the excesses of the late 1990s, are now trading at cheap prices compared with their underlying assets and revenue streams. The Sarbanes-Oxley Act, passed in 2002 as the antidote to a wave of corporate accounting scandals, makes it more difficult and expensive for smaller firms to go public and for already public firms to

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Money & Business stay listed. And private-equity firms have found plentiful and cheap debt to leverage their own considerable treasuries, money hoards that continue to attract almost unprecedented amounts of capital from pension funds, university endowments, and wealthy investors seeking greater returns than found in the global stock markets. “When you are looking for historically high rates of return, where else do you go?” asks Dennis Block, a partner with the law firm Cad-

walader, Wickersham & Taft who helped shepherd kkr’s bid for rjr Nabisco. In recent years, even union pension funds— whose members can be on the other end of the stick when private interests take over and downsize some of these companies—have invested. Although returns vary greatly, the best and the brightest private-equity firms often provide returns to their investors of 25 percent a year, experts say. Data from Thomson Financial and the Na-

tional Venture Capital Association, an industry group, show that U.S. leveraged-buyout funds have averaged at least 13 percent annual returns over the past 20 years, and the California Public Employees’ Retirement System recently reported cumulative returns of up to 133 percent over the past six years from one of its private-equity-fund investments. “There has been an explosion in not just the number of funds but also the dollar value of the capital that they are

SCOOP. Private-equity ownership has suited Dunkin’ Brands CEO Jon Luther just fine.

The Carlyle Group’s Sweet Deal A neglected Dunkin’ Donuts gets the touchy-feely treatment

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an D’Aniello was all ears in 2005 when Jon Luther, ceo of Dunkin’ Brands, called and said he was looking for somebody to buy his company. The parent company of Dunkin’ Donuts had long been part of the British conglomerate Allied

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Domecq, which had just been purchased by French spirits company Pernod Ricard. The new beverage titan planned to focus strictly on its core business, and coffee and doughnuts didn’t fit. D’Aniello, a cofounder of Washington, D.C.’s Carlyle

U.S.NEWS & WORLD REPORT • WWW.USNEWS.COM • DECEMBER 4, 2006

Group, had known Luther for years. Both had been rising stars at Marriott in the 1980s. Luther had earned plaudits for turning around the Popeyes fried-chicken chain in the late ’90s. D’Aniello jumped into action. He called principals at two

other private-equity firms, Thomas H. Lee Partners and Bain Capital, who agreed to invest equally with Carlyle and share the risk. The consortium tried to make a fast deal with Pernod but was told it would have to participate in a formal auction. Several other bidders emerged, and the Carlyle team raised its offer at least once. Finally, last December, the Carlyle consortium won its prize, for $2.4 billion. Carlyle execs say the Dunkin’ deal highlights how private money can empower management, open new doors, and help overcome the neglect some businesses suffer from distracted corporate parents—all reasons an increasing number of ceos have been seeking private buyouts. “Dunkin’ had had spotty experiences,” D’Aniello says. “The brand was becoming tired. Because Allied Domecq was not investing, there was an opportunity to grow the business.” Unlike some buyout targets, Dunkin’ was not a troubled company with assets that could be readily carved

MARNIE CRAWFORD SAMUELSON—BOSTON PICTURE GROUP FOR USN&WR

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raising,” says Jeanne Montague of Montague Partners, a small San Franciscobased investment bank. “I can remember when the first announcement of a $1 billion fund set the market stirring. Now Blackstone has raised $15 billion in one fund. The numbers are becoming almost difficult to comprehend.” Clubby. The funds are likely to keep getting bigger. In fact, Blackstone recently announced that it would bring its $15 billion fund up to $20 billion. Other

up and sold. It didn’t come cheap, either—the purchase price reflected an expectation of considerable future growth. What lured the buyers was a strong management team, a predictable flow of revenue from franchise fees, and bright growth prospects beyond Dunkin’s home turf in the eastern United States, where most of its 7,100 worldwide stores are clustered. “If one thing sums up the opportunity,” D’Aniello explains, “it’s that 80 percent of our revenue comes from the geography between Boston and D.C.” Raising the bar. Once the deal was finalized in March, Luther and his new partners began pouring a fresh strategy for Dunkin’. A new 11-person board was formed, with three slots going to each of the private-equity owners. Luther and Chief Operating Officer Will Kussell, who each invested some of their own money in the deal, took the other two seats. Luther began to raise standards for franchisees, hunting for business people capable of handling a network of three to five stores, not just one or two. The team raised growth targets, too. Instead of adding 500 to 600 new stores per year—Allied Domecq’s goal—Dunkin’ now aims for 800 to 1,000. And Luther has decided to put the Togo’s sandwich-shop chain on the block and focus squarely on coffee and doughnuts, along with ice cream sold by the company’s

large private-equity firms are building similar war chests. At the same time, they are often combining forces in “club deals.” These accounted for $414 billion in buyouts over the past 12 months, according to Thomson Financial. This is roughly a 10-fold increase from the same period five years ago. Home-improvement behemoth Home Depot, whose shares are worth some $79 billion, and computer maker Dell, at around $56 billion, have both been bandied about as

possible targets, if some of the biggest private-equity firms combined forces. “If I represent a seller and I go to 40 buyers, half will be private-equity firms now,” says Montague. “Ten years ago, there’d be maybe two.” But the amount of money chasing deals has bidden up prices and thereby crimped returns for some private-equity funds. There’s an “illogical” element to parts of the market, complains Mark Jrolf of Heritage Partners, a Boston-

other brand, Baskin-Robbins. lead was passed to Luther’s Luther is also challenging team, and within three some cherished traditions. months a deal was in place To boost efficiency, the comfor Mercuries to open 100 pany may outsource doughDunkin’ outlets in Taiwan, nut making at some stores. starting in January—the And it’s exploring ways to brand’s debut there. The new draw more diners for lunch, owners could be especially without souring KAREN BALLARD—REDUX them on breakfast. Both sides seem pleased so far. The owners say that Dunkin’s revenue for fiscal year 2006, which ended in August, beat their targets. And Luther feels he’s getting more support than he used to. When Dunkin’ was owned by Allied Domecq, he says, “I used to fly to England to beg for attention. Now I make a phone call and get three calls back within an hour.” And Luther still feels as if he’s in charge of DEAL MAKER. Carlyle’s Dan D’Aniello helped the Canton, Mass., fashion the $2.4 billion Dunkin’ buyout. company: “They haven’t camped out here. helpful in China and other Most of the time I initiate the developing countries Dunkin’ conversation.” hasn’t yet dipped into. CarThe new owners should be lyle, for instance, has an particularly helpful priming Asia-Pacific real-estate team overseas growth. A Taiwanthat could help find good based company that invests storefront space. “They bring with Carlyle, Mercuries & a dimensional perspective we Associates, asked Carlyle don’t have,” says Luther. about Dunkin’ Donuts franSuch connections aren’t chising opportunities. The free. Dunkin’ pays its owners

More on buyout strategies is at www.usnews.com/carlyle

an undisclosed “management fee,” which Luther describes as “moderate,” for their time, advice, and overhead. The sudden change has also left some franchisees feeling shut out, with management raising the bar too high, too fast. “They paid a premium price for the brands, and now management is under a lot of pressure to crank up performance,” says Mark Dubinsky, president of dd Independent Franchise Owners, which represents about 200 owners with 1,500 stores. One complaint: promotions on coffee and baked goods, which draw traffic to stores but cut into profit margins. Franchisees also tried to purchase a small equity stake in Dunkin’ Brands and get a board seat during the sale last year—and were rebuffed. Dunkin’ says franchisees are adequately represented on an advisory council that will give input to the board twice a year, starting in 2007. They could get another chance to become shareholders once the private owners feel it’s time to cash out. The most likely “exit strategy” for the private owners is a public stock offering. They could also sell to a “strategic owner” like Yum! Brands or McDonald’s. But to reap the market-beating returns private equity promises its investors, Dunkin’ must first show that it can grow aggressively, get leaner, and remain stable. It could be a few years before that order is ready. –Rick Newman

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Money & Business based private-equity firm. He notes that some investor groups are paying well beyond what strategic, public-company buyers would in some takeovers, and “that doesn’t make sense.” Attempting to avoid this competition, private-equity firms have increasingly looked both farther afield and farther up the food chain for their next deal. But in doing so, their activities have drawn the scrutiny of shareholders and regulators, and not just in the United States. The Bank of England signaled its concern recently by calling the voracious appetite for leveraged takeovers one of the six greatest threats to the financial system, while the country’s Financial Services Authority, Britain’s version of the sec, said this month that it is monitoring private-equity firms for insider trading and conflicts of interest. The fsa warned that the collapse of a large private-equity firm was likely, given the number of deals such firms were making and their high levels of debt. Politicians have also weighed in. In Germany, a prominent lawmaker recently compared private-equity firms snapping up companies there to “locusts.” And in South Korea, where the buyout firms are called the moktui, or “eat and run,” trouble abounds. One lawmaker there has said that privateequity firms’ interest in “short-term profits could lead to the drain of national wealth.” Private-equity players aren’t always helping defuse the situation. The subject of the lawmaker’s ire, Dallas-based Lone Star Funds, recently admitted that it

broke South Korean tax laws when the firm’s former head in the country embezzled $12 million. Now prosecutors are delving through Lone Star’s Korea Exchange Bank deal looking for, among other things, evidence that the private-equity firm might have intentionally driven down the bank’s share prices in 2003 before making its bid. Prosecutors are seeking the arrest and extradition of several members of the firm, including Lone Star Funds cofounder Ellis Short. In the United States, the Justice Department’s antitrust division sent out letters last month to several of the largest buyout firms requesting information on all their deals in the past five years. “There is no smoking gun that one can point to here,” cautions Andrew Metrick, a finance professor at the University of Pennsylvania’s Wharton School. “The values being paid are higher than that offered by the public market, and the directors don’t have to sell.” More bad publicity for private-equity firms could come courtesy of the sec, which has begun looking into whether people associated with or informed about some buyouts may have profited from trading on insider information before the deals were announced. sec Chairman Christopher Cox said last month that his investigators were examining a host of suspicious trades. A partner at one large firm has already

The Pain and Pleasure of the Private Life Someone is still looking over your shoulder

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all Street doesn’t like bears—not even profitable teddy-bear firms, the shareholders of Vermont Teddy Bear finally realized last year. So they accepted a private-equity firm’s offer of $6.50 a share, a premium over the previous trading range of $4 to $6. But the first year’s estimated savings of $300,000 was overwhelmed by more than

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$1 million in consulting and legal expenses. And when she does the books, ceo Elisabeth Robert says, “there is just as much pain in my office—it is just a different pain.” The pain now is more productive. The scrutiny of new owners the Mustang Group “is much more targeted on how you can improve the business as opposed to ‘Have you satisfied the lawyers?’ ” Robert says.

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fallen. Justin Huscher, a cofounder of Chicago-based Madison Dearborn, paid more than $116,000 in sec fines this year to settle charges that he illegally profited by buying stock in Unisource Energy Corp. after learning that a private-equity club deal for the corporation was about to be announced. There is also growing worry about fraud. The sec recently charged Chicago-based aa Capital Partners with misappropriating more than $10.7 million in client funds. The firm, spun off from the Dutch financial powerhouse abn Amro nv in 2001, was headed by John

That frees her giftdelivery business workers to think up fresh ideas such as offering a bouquet of flowers in a silk hatbox. Executives at companies that have gone private say trading public investors for private ones has both surprising costs—and benefits. Checkers Drive-In Restaurants had to drop its stock-matching incentive program for rankand-file workers. And ceo Keith Sirois reports to bankers monthly instead of to shareholders quarterly. But five months of private

operations have also generated plenty of perks for the chain of Checkers and Rally’s burger joints, Sirois says. The company has already saved hundreds of thousands of dollars in stipends and stock options for board members. Wall Street will immediately dump a stock that doesn’t meet quarterly expectations. Yet private investors, such as those at Wellspring Capital Management, which arranged the Checkers deal, typically say they will keep their money in a company for

FREESCALE

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NOAH BERGER—BLOOMBERG NEWS / LANDOV

Shareholders of companies like HCA have accused executives of putting their own interests first in crafting private-equity buyouts. Others say new owners are siphoning too much cash from their acquisitions. Orecchio, who had once helped run a $5 billion private-equity fund for Bank of America. Investigators allege some investor funds were used to spruce up Orecchio’s horse farm, while others were funneled into a strip club. Richer bids. Shareholders are also squawking about the prices offered in several deals, complaining that they have been shortchanged by an unholy alliance between management and the privateequity firms being favored. In several recent cases, shareholders have found that company management, smitten with deals that would leave them in charge, dis-

regarded higher bids or took measures to dissuade them. Shareholders of the Tennessee-based regional retailer Goody’s Family Clothing balked last year when management proposed a leveraged buyout. A later lawsuit revealed that the private-equity firm chosen was not the highest bidder. When the process was finally opened up, a three-way bidding war added 20 percent to the $327 million price tag. Arthur Abbey, whose law firm, Abbey Spanier Rodd Abrams & Paradis, represented several of the shareholders, says that the higher bid proved that “both the price and the process was unfair.” Say-

ing management-led buyouts are “replete with conflicts,” Abbey adds: “My view is that the only independent review these deals ever get is in a lawsuit by shareholders themselves.” Private-equity partners argue that they can’t be accused of taking advantage of shareholders when they generally pay a high premium over a company’s market value. And many of these lawsuits are being filed not by the individual investor but by hedge funds and other market sophisticates, they add. “These stocks are not being held by orphans and widows anymore,” says one private-equity partner, who asked to remain anonymous. “These are the same type of ‘deal people’ looking out the windows in that skyscraper across from me.” Sometimes price shouldn’t be the key factor for a company in choosing a suitor, say leveraged-buyout experts, adding that different buyout groups have expertise in certain areas and some will be more willing to take a long-term approach in turning companies around. Stewart Kohl, the co-ceo of the Riverside Co., says his firm tends to take relatively small companies, reinvest in them, and build them over the course of many years, often by combining them with other complementary acquisitions. In 2000, Riverside took control of a small manufacturer of trailer jack stands and couplers named HammerBlow. The company was a leader in its field, but the owner had died, and his estate wanted to sell. Kohl liked the company’s management and inexpensive manufacturing process. While working to expand the CHECKERS

three to seven years. But they can also be demanding and quick to make sweeping personnel changes. And some deals actually endanger the target companies. Investors in the proposed $17.6 billion buyout of Freescale Semiconductor plan to borrow so much money that the company would have to pay $836 million a year in interest, estimates James Grant of Grant’s Interest Rate Observer. But, he notes, Freescale wasn’t able to generate that much cash from its business in three of the past five years. And Grant doubts the new investors could improve the

business enough to make the high debt payments. “They are not the only subscribers to the Harvard Business Review,” he scoffs. Freescale officials wouldn’t comment. Such cautionary tales have made some executives wary

of private-equity bids. At InfoNow, a small, publicly held business software company, ceo Mark Geene turns down a couple of offers a month from private investors attracted by the low stock price of 20 cents a

share. “They are bottom feeding” and aren’t offering anything close to what he and other shareholders think is the true value of the company, which reported $6.8 million in revenues for the first nine months of 2005, Geene says. Instead, he is taking a play from the private-equity book: He has pulled InfoNow’s stock off the regular markets and stopped providing public financial reports. That has saved at least $100,000 a year in accounting and legal fees and, Geene says, has given him the freedom to make needed but painful changes. –Kim Clark

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Money & Business company’s operation and reduce its defaulting on its debt, while also leaving equity firms’ ability to make many deals. costs, he bought other companies in the the private-equity partners less con- Any sudden upward move in interest towing and trailer-hitch market and cerned about fixing underlying troubles. rates could inflict serious pain in the This may be a worrisome trend because buyout world. Right now, lenders, comcombined them under the HammerBlow brand. In about two years, he had tripled a sluggish ipo market has made it less peting heavily to be part of deals, are givthe company’s revenues to $108 million. likely that many of these deals can be spun ing easy payment and loan terms that In 2003, he sold the company for $143 out to investors as ipos after a year or so. could help forestall any default of a commillion to a competitor, TriMas, also “It is not a wonderful time for private eq- pany owned by private equity if it got uity in some ways because their ultimate into financial distress. But these lenders owned by private-equity interests. “This isn’t drive-by investing or fi- exit strategy is to go public, and you don’t are also allowing private-equity firms to nancial engineering,” says Kohl. “This is have a nicely behaved equity market right take on buyout loans that represent evervalue created through a lot of heavy lift- now,” says Satya Pradhuman, Merrill higher multiples of earnings. Some buyouts are also adding newer ing. We don’t just get our hands dirty— Lynch’s chief small-company strategist, and more risky types of debt to the mix, we get our whole bodies filthy working who tracks leveraged buyouts. Instead, some targets of leveraged as they offer up more and more of a comto build the companies.” pany’s assets and earnings A recent study by econoto secure it. Second-lien mists Jerry Cao of Boston College and Josh Lerner of “This isn’t drive-by investing.…This is value loans and “payment in kind” notes, which have yet Harvard Business School created through a lot of heavy lifting.” to be tested in a severe ecocounters the perception nomic downturn, have bethat private-equity firms come popular. The notes are flip artists. Their exampay extremely high rates ination of 496 companies but usually don’t begin paytaken public by private-eqments for several years and uity firms between 1980 are likely to become worthand 2002 found that the less in any bankruptcy. share prices of these comA few private-equitypanies tended to outperowned companies have form those of both other already had trouble, and initial public offerings and some have filed for bankthe general market. Comruptcy protection. Concern panies held privately for about the increased risks more than a year did best of being taken in new deals all when released into the is becoming increasingly public markets again. palpable in bond and deBut the barbarians-atrivative markets. For inthe-gate perception is stance, when Anheusergrounded in some fact. Busch was rumored to be a Standard & Poor’s recently found that private-equi- CHANGES. Clear Channel’s advertising line continues under new ownership. private-equity target, the cost of buying credit proty firms had loaded their acquisitions with more than $25 billion buyouts find themselves sold repeated- tectionon its bonds rose drastically. A shakeout is coming, experts say. It in debt over the past year just to fund ly from one private-equity firm to andividends for themselves. Exceedingly other, with each deal often leading to a is just a question of when. Many banks, rare at the beginning of the decade, these dividend recapitalization that yanks cash law firms, hedge funds, and private-eqpayouts have become commonplace. from the company’s balance sheet. For uity groups are already bolstering the Sometimes the buyout firms (the gener- some private-equity firms, the dividend ranks of their distressed-debt units and are gathering bankruptcy specialists for al partners) take their profits even before recap has become the exit strategy. Many investors did stay away from the just such an occasion. Private-equity their investors—pension funds, endowments, and other limited partners—have Hertz ipo. The company went public player Wilbur Ross, known for his astute November 16 at a lower price than was nose in picking up distressed companies recouped their investment. In the case of Hertz Global Holdings, expected and then barely budged off its on the cheap, says it won’t be long. Too a private-equity consortium led by the $15 offering price. But it was still a sweet much money is being paid to take on too Carlyle Group paid itself a $1 billion divi- deal for Carlyle and the other private-eq- much risk with too much debt, Ross dend less than six months after putting uity firms involved. They are expected to warns, adding that bets by some highly up $2.3 billion to buy the company from have doubled their money after having leveraged buyout firms that they will be able to cheaply refinance their deals in a Ford Motor Co. in 2005 for a total of $15 owned Hertz less than a year. Party poopers. So, what will spoil the few years have “been building in a time billion, including assumed debt. The firms took Hertz public again last week. private-equity party? If returns begin to bomb.” In this scenario, higher default The deal has gained the attention of suffer because of competition, unhap- rates aren’t just likely, he concludes; the Justice Department. But bond watch- py investors could slow their stampede “they are quite inevitable.” If Ross is right, many private-equity ers are also worried. Citing this case, s&p into the funds. Hints of other frauds firms and the companies they take over argued that such equity extractions, could have the same effect. But the real bogey is the debt markets, may find the 1980s have cast a longer known as dividend recapitalizations, greatly increase a company’s chance of because borrowing underpins private- shadow than any would have hoped. l 54

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ROBERT STOLARIK—POLARIS

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MONEY WATCH By Paul J. Lim

THE WEEK AHEAD PROFITS PICTURE Better-than-expected earnings growth has propped up the bull market. In 14 of the past 15 quarters, Wall Street analysts have underestimated corporate profit growth, leading to positive earnings surprises that have driven up stock prices. Yet there are several gauges of profit growth. Measured by year-overyear growth in earnings of companies in the Standard & Poor’s 500 index of blue-chip stocks, profits are still strong. But a federal Bureau of Economic Analysis yardstick recently showed a dramatic slowing of corporate earnings growth in the second quarter of 2006. This week, the government unveils its preliminary estimate of thirdquarter profits. If it signals another disappointment, investors might worry that a major bullmarket linchpin is gone.

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ast week, the Nasdaq Stock Market, which already owns nearly 30 percent of the London Stock Exchange, made a bid for the rest of the bourse. While London officials quickly rejected the overture, there’s little doubt the Nasdaq will continue to pursue Europe’s largest exchange in an effort to create a trans-Atlantic market with global reach. So, who else might go after the London exchange? In recent years, the world’s major stock exchanges have sought mergers to squeeze out more profits and take advantage of growing investor interest in international holdings. Already, speculation has turned to the New York Stock Exchange, Nasdaq’s chief U.S. rival. The nyse is itself in the process of merging with Euronext, operator of stock exchanges in France, Belgium, the Netherlands, and Portugal. But it lacks an extensive foothold in London. So the London Stock Exchange could be attractive. For the moment, this is pure speculation. But expect the chatter to grow after December, once Euronext’s shareholders vote on the proposed nyse merger.

Spenders: $857 Is the Magic Number

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HOUSING’S HEALTH The U.S. economy’s health depends heavily on the vitality of the housing market. And that market is ill: Median new-home prices plummeted 16 percent between April and September to $217,100. This week, the Commerce Department will report if new-home prices kept falling in October.

FALLING HOME PRICES Median price of new homes $250,000

urkey Day is over, and Americans have shifted gears from giving thanks to giving presents. Analysts believe that retailers are on track for yet another decent but unspectacular holiday shopping season: a 5 to 6 percent jump in spending versus the same period last year. This would be in line with the average annual spending growth rate of 5.2 percent over the past three years, according to Bear Stearns. Helping fuel the growth is a 26 percent drop in gasoline prices since August. The typical adult is expected to spend $857 on gifts this season, says market research firm GfK nop, up from $780 last year. How much each shopper spends is critical for retailers, since some stores generate as much as 40 percent of annual sales during the holiday rush.

Beware of Cards Bearing Gifts. They May Pick Pockets

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200,000 150,000 100,000 50,000 0 Jan. ’06

Would the Nasdaq or NYSE Take Tea at 3?

May ’06

Source: U.S. Census Bureau

Sept. ’06

ift cards are a hot present, with two thirds of Americans expected to buy one for the holidays. But be warned: While the plastic may be convenient, “there’s often a price attached,” says Ellen Cannon of Bankrate.com. Gift cards issued by the major credit card companies—which can be used at most retailers—often charge a delivery fee, averaging $3.60. What’s more, Bankrate.com says, many of these cards impose $2 to $3 a month in maintenance fees if the cards aren’t used within a certain time. Some gift cards issued by individual retailers—which can be used only in their stores—may also impose dormancy fees. And some retailer gift cards come with an expiration date. l

More Money & Business news, features, and advice are at www.usnews.com/money and at usnews.com/mobile FROM TOP: SUZANNE PLUNKETT—BLOOMBERG NEWS / LANDOV; JIM MONE—AP; CHART BY USN&WR

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Cover Story

Gettysburg’s Good News

Schoolkids learn Lincoln’s words at the scene of the epic battle by heart. But what did they really mean?

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stillness. People move toward the square. Life begins again. It is Independence Day, after all, the day of victory in 1776, four score and seven years ago. The armies are leaving. But the wounded and dead remain, on the fields, in houses, in barns, and in hospital tents. Twenty-one thousand wounded; perhaps 10,000 dead. Dead everywhere. Day follows day. Disinfectant powder spread over the muddy streets turns them white for CORBIS a little while and adds to the odors. Snow in July. Must try “to extinguish, as far as possible, the sense of smelling,” one woman writes. Must try to control disease. Pour kerosene on the bodies of horses and mules. Three to five thousand of them. Light the fire over them. Let them go up in smoke. The smell of burning flesh dissipates after a while; the smell of rotting carcasses stays around for months. Many days are stiflingly hot. Even the nights. Most people don’t open their windows gettysburg, july 4, 1863. dreadful sito keep the stench out. Hard to keep the lence. It rains. People crawl out of their celstench from their spirits. Sarah Broadhead, lars, blinking in the gloomy light, trying to find wife, mother, and now nurse to the woundtheir neighbors, food, news—life. The battle is ed of the battle, writes in a diary about her over, but the smell of putrid animal flesh minfears that “we shall be visited with pestilence.” gles with the odor of human decay. It extends Yet among the town’s population there is no into the spirit of the people. War had come increase of disease and death. A resilient folk. to them. Now it had gone and left the horror If history remembered him for “God pity us!” When people approach the behind. No toasts are offered today, no fire- anything, Lincoln believed, it would town, “the odors of the battle-field” attack works, no parades, no services in the churchbe for freeing the slaves. But that them long before they get there. But the vises filled with grievously wounded men. was before Gettysburg. itors come, many to help, some to gawk, But Sally Myers, 23, full of life, forges ahead. The sun comes out, and the schoolteacher writes in her some to plunder, most looking for their lost loved ones. Visdiary: “I never spent a happier Fourth. It seemed so bright.” itors are “compelled to roost in the barns, or upon the steps The Union had retaken the town. A soldier will later add: “The of dwellings.” A man feels lucky when he gets a chair to sit Glorious Fourth and we are still a Nation, and shall most like- through the night in front of a hotel; better than wanderly continue to be for centuries to come.” Prof. Michael Jacobs ing till daybreak. On July 13, the small Broadhead house, of Gettysburg’s college comes out of his house on Middle Street in addition to a family of three, has three wounded soldiers, with his son Henry. So do others. A band marches down and 20 visitors. The strangers “are filling every bed and covBaltimore Street, fife and drum breaking the noxious grip of ering the floors.” But these problems shrink in the face of he meaning of the Gettysburg Address has changed, generation after generation. It has become one of the most revered texts, even as historians and public figures have puzzled over its meaning. In a new book, The Gettysburg Gospel, Gabor Boritt, director of the Civil War Institute at Gettysburg College, takes a fresh look at the 272 words written by President Abraham Lincoln, probably in a 36-hour period, partly in Washington, partly at the scene of the battle, the greatest man-made disaster in American history. The word “gospel” suggests spiritual rebirth. When Lincoln’s words are best understood, they bring that potential to Americans, indeed to people everywhere.

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AKG

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Cover Story AKG

witnessed.” The more measured tones of an the suffering of the wounded and the dying. The second draft of the address Army medical officer’s report are blunt: “The Pvt. George Frysinger arrives with an emerwas written in Lincoln’s own hand. period of ten days following the battle of Getgency militia unit sent to help maintain order. “We had a severe trial for young soldiers,” he writes home to tysburg was the occasion of the greatest amount of human sufhis father. His unit had limped into town on “blistered feet” fering known in this nation since its birth. . . . ” So it remains to this day: the country’s greatest man-made and got placed in a church. The sacred structure reminded him of his home, which now felt “like a distant Jerusalem to the an- emergency ever. The two armies, expecting another battle, took cient Jews. . . . Perhaps we will not deface it much,” this church, most of their medical personnel away. The doctor in charge Frysinger writes to his father, adding: “Gettysburg can not likens this to engaging in battle “without ammunition.” “What! Take away surgeons here where a hundred are wanted?” a civilbe called a town, but a large collection of hospitals.” Eliza Farnham, a volunteer nurse from Philadelphia, writes ian exclaims. “But so it is.” Of 106 medical officers the Union the same. “The whole town . . . is one vast hospital . . . avenues Army left behind, perhaps 35 could actually operate. Six days after the Battle of Gettysburg, nurse Ellen Orbiof white tents . . . But, good God! What those quiet-looking tents contained! . . . Dead and dying, and wounded . . . torn son Harris writes home about wounded men drowning in to pieces in every way.” Moans, shrieks, weeping, and prayer flash floods and thousands who are “still naked and starvfill the houses, the barns, the tents, the fields and woods, the ing. God pity us! God pity us!” This is the place where Abraham Lincoln will have to come and explain why the bloodwhole area. The land itself seems to wail. Hell on Earth. Red and some green flags sprout everywhere, identifying letting must go on. “A vision.” The president speaks in a firm voice. This is the places housing the wounded. Nothing like this has ever happened in the United States. Looking back in September, a pri- first speech that he wrote out ahead of delivery in 21/2 years, the vate commission will report “a scene of horror and desolation first since his inaugural address. Four score and seven years which humanity, in all the centuries of its history has seldom ago our fathers brought forth upon this continent a new nation, 58

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Cover Story conceived in Liberty, and dedicated to the proposition that all men are created equal. Looking back to the Revolutionary War reminds people that the birth of the nation had cost great sacrifices. July 4, 1776, has been much on the minds of Americans for decades, and for most, “created equal” now meant the right to rise in life. But quoting the Declaration of Independence in 1863 also defended the Emancipation Proclamation that had drastically changed the character of the Civil War. It presented a strong message about liberty without speaking of slavery outright and so alienating those who only wished to fight for the Union and not the ending of bondage.

died in vain,” Lincoln says, and the crowd interrupts with applause as he conjures words that had been hidden inside of so many since their childhood. The applause quiets and Lincoln finishes: “that the nation shall, under God, have a new birth of freedom; and that government of the people, by the people, for the people, shall not perish from the earth.” Silence—has the president finished?—then long, continued applause. The dedication of the first national cemetery of the country combined the two major cultural activities of the period: politics and religion. Lincoln’s words carried no touch of stridency or self-righteousness. Though this was a funeral, he

After Gettysburg, a “great task” remained before the Lincoln believed that if country: carrying the war to victory. history would remember him at all, it would be for his Emancipation Proclamation. He made no overt reference to religion. He gave no indication invited painters to the White House for months at a time; they of being aware of the religious aspect of the occasion, or if he portrayed him with broken chains or with the Liberty docu- was, he considered it improper to participate. The rowdy night ment in his hand. As an ambitious young man, he had an- before the ceremonies, when thousands of visitors with few nounced that “towering genius” could reach great renown in places to sleep rocked the town with an all-night party, proAmerica by either “emancipating slaves, or enslaving freemen.” vided no edification in this regard. Only after imbibing the atWhen his oldest friend, Joshua Speed, came to visit in the mosphere at the cemetery with its uncovered heads, prayer, White House, Lincoln recalled his youthful fear that his mo- and funeral hymns did Lincoln add, in the moment’s inspiment of life would be gone without a trace. Well, Lincoln had ration, “under God.” One can almost hear him coming in his issued the Emancipation Proclamation. Now he would be re- speech to “that the nation shall,” pausing for a second, then adding a little awkwardly “under God, have a new birth of freemembered for doing something for “his fellow man.” dom.” (Later he would revise the word order But here was Gettysburg, the bloodiest of to make the sentence read better.) American battles, in the bloodiest war of her The bodies of the dead, perhaps And yet, whatever expectations he may have history. A “great task” remained before the 10,000 in all, lay where they fell. taken to Gettysburg, however reluctant he was country: carrying the war to victory. “We here The stench of death extended well to make a personal profession of Christianhighly resolve that these dead shall not have beyond the littered battlefield. TIMOTHY O’SULLIVAN—CORBIS

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THE ART ARCHIVE / CULVER PICTURES

ing the country toward black citizenship. ity, much of what Lincoln said carried the Union cavalry before the action: If God loomed ever larger in Lincoln’s sounds of the Bible. This was the music of the The two armies, expecting a battle thought as the war went on, if his words at Getancient Hebrew turned into King James’s Engelsewhere, removed most of their tysburg spoke deeply to the devout, they spoke lish. This was the language he was raised on. medical staffs from Gettysburg. also to a more secular people, for in some part “Four score and seven years ago.” Psalm 90: “The days of our years are three score years and ten”; one of he remained one of them. He would not join a church, could not the best-known sentences of the Book. “Brought forth” is not embrace the Christian conception of sin and redemption, kept only the biblical way to announce a birth, including that of mostly silent about Jesus, and showed no inclination to build Mary’s “first born son,” but the phrase that describes the Is- a personal relationship with God. The secularists could understand his Gettysburg speech largely on their own terms. Lincoln raelites’ being “brought forth” from slavery in Egypt. Birth, sacrificial death, rebirth. A born-again nation. At a less- spoke from the heart to them, too. A lesser person might have foundered on such bifurcation. than-conscious level, Lincoln weaved together the biblical story and the American story. “Fathers.” “Conceive.” “Perish.” “Con- Christians might have rejected him for not being sufficiently secrate.” “Hallow.” “Devotion.” The devout in the cemetery heard committed; the more secular minded for being too religious. Lincoln speak an intimately familiar and beloved language. Instead, the majorities embraced him as one of their own. His

“The whole town…is one vast hospital…avenues of white His words pointing to rebirth tents…Dead and dying, and wounded.” went even deeper than the Christian message, reaching the primeval longing for a new birth that humankind has yearned for and celebrated with every spring since time immemorial. Lincoln’s words came from the heart. The blood bath of the war, and the loss of his own second child, Willie, in 1862, had slowly changed his religious outlook. The secular fatalist of old began to turn into a religious fatalist. He jotted down for himself perhaps in 1862: “The will of God prevails.” Something of the Calvinism of his parents that he rejected, even ridiculed, in his youth, started to reclaim him. In his Second Inaugural Address he would explain his course: “With malice toward none; with charity for all; with firmness in the right, as God gives us to see the right. . . .” God helped Lincoln “to see the right” of abolishing slavery and lead60

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words at Gettysburg show how he did it. “Inauguration” is how the printed “Programme” described the ceremonies. In his own copy, Edward Everett, the main orator of the day, crossed out the word and replaced it with the religious “consecration.” As for Lincoln, he stayed in the middle, and so reached out to all. His success depended in no small part on the beauty of his language. But with all the fresh graves around, the beautiful words would not hide the fact that the war had to go on. It had to—until victory was won. The rationalism of the Enlightenment combined with Protestant conscience. Lincoln’s nine sentences had been welcomed by applause, interrupted by applause five times, and followed by applause. His perhaps 21/2-minute speech grew into something like three minutes. The people loved him. Lin-

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Cover Story MATHEW BRADY—CORBIS

ever witnessed on this continent” and that coln had both voiced the beliefs of mainThe devout hear Lincoln speak a stream America and urged it on toward a familiar language. His words about Lincoln made a few “remarks,” to wit: “Ninety years ago our fathers formed a Govern“new birth.” He reflected the oratory of the rebirth went deeper than religion, ment consecrated to freedom.” The Chicaancient Greeks, especially Pericles, whose but he spoke to the secular, too. go Times started with “Four score and ten speeches appeared in the McGuffey readers that educated America’s children. His conclusion echoed not years ago.” “Now, we are engaged in the greatest civil war,” only those of Parson Weems’s bestselling Life of Washington wrote the Detroit Free Press, “testing whether that nation or but words memorized by generations of children from their any nation so consecrated and so dedicated can stand for many readers—some of the best-known words of American histo- years.” “Can longer remain,” said the Chicago Tribune. “The ry, and of Lincoln’s youth—the conclusion of Daniel Webster’s dead will little heed. Let us long remember what we have,” the 1830 reply to South Carolina’s Robert Hayne in the Senate, Sacramento Daily Union went on, reporting “immense apdenying that the U.S. government was a “creature” of the states. plause.” “We owe this offering to our dead,” seemed to appear It was “the people’s government,” Webster said, “made for the everywhere. The New York Times, as many others, reported people, made by the people, and answerable to the people.” In dedication to “the refinished work.” “Refinished,” as in a piece the Bible, Lincoln had read many times the book of Proverbs: of furniture.None of this was Lincoln’s poetry. But the pa“Where there is no vision, the people perish.” He was provid- pers printed what they could or would. And then Lincoln’s speech largely disappeared from Ameriing a vision “for us, the living.” “The Good News.” The telegraph, a new invention, spread can memory. During the first two decades after his death, peothe news across the land rapidly. Lincoln quickly understood ple erected 20 statues to him; 18 showed him holding the that he had a tool to bind the nation together. But the op- Emancipation Proclamation. Not until the 20th century would position press considered it the start of his re-election cam- Lincoln begin to hold the Gettysburg Address in his hand. By paign. No president had been re-elected in a generation, not then the country had abandoned its attempt to provide civil since Andrew Jackson, and Democrats now intended to keep rights to black people, and the “new birth of freedom” got it that way. Even in Lincoln’s own party, very few saw any- whitewashed to refer to whites. The meaning of the Address thing special about his Gettysburg remarks. The front page continued to shift from generation to generation, even as the of the New York Times illustrated the press coverage. It beauty of the speech got carved into every schoolchild’s memory. The speech grew into American Gospel, the reported the various speeches given at Gettysburg includgood news of a free people, and how that haping, without comment, Lincoln’s. Within an inch of the prespened is quite a story by itself. Not until the civil ident’s remarks the paper reported at much length on an rights era would the direction of its original address of the Rev. Henry Ward Beecher. The headline: meaning come to the fore again. l “a great speech.” All too often when the president’s words reached the public, they did so in hilariously misprinted forms. In Lincoln’s Copyright 2006 by Gabor Boritt, from the book home state of Illinois, the citizens could read that the GetThe Gettysburg Gospel: The Lincoln Speech That tysburg “ceremonies were the most solemn and impressive Nobody Knows (Simon & Schuster). 62

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JEFFREY MACMILLAN FOR USN&WR

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Health & Medicine

Improved Implants (Sort of)

YES, THEY’RE BACK, BUT THEY STILL REQUIRE A HECK OF A LOT OF SCRUTINY By Deborah Kotz

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ilicone or saline? Women considering implants for breast reconstruction or augmentation once again have a choice. The Food and Drug Administration, after a 14-year ban, has decided that silicone implants don’t pose any serious health risks. Plastic surgeons are applauding the move and fielded phone calls all last week from those seeking to get the new implants. Denise Pardue, 36, of Melbourne, Fla., plans to have her saline implants replaced with silicone ones, which her surgeon tells her will conform better to her thin frame. At 5 feet, 4 inches tall and 110 pounds, she thinks her saline implants, which she got eight years ago to fill out her 32 aas, look too artificial. “When I bend over, I can see ripples around the edges of the implant, and my breasts feel hard, not soft,” says Pardue. “I want my breasts to feel as natural as possible.” But many women may be reluctant to put silicone in their bodies after the initial scare that led the fda to outlaw the implants in 1992. At the time, anecdotal reports in medical literature suggested that leaking silicone could trigger an exaggerated immune reaction, causing 64

diseases like lupus and rheumatoid arthritis. Dow Corning, a onetime implant maker, spent nine years in bankruptcy after paying out $3.2 billion to settle tens of thousands of injury claims. Since then, though, a spate of studies, including a 1999 landmark report from the Institute of Medicine and the manufacturers’ clinical trial data, have found no link between silicone and autoimmune disorders. “The toxicity tests we reviewed show that silicone has no adverse effects,” says Donna-Bea Tillman, who heads the fda’s office of device evaluation. Not permanent. Still, the fda added a cautionary note: Breast implants won’t last a lifetime. “Within four years, about 20 to 25 percent of women who have received the implants for augmentation can expect to have additional surgeries due to hardening of the breasts, shifting of the implants, sagging, and less commonly, ruptures,” says Tillman. The companies in fact offer lifetime warranties to replace defective saline and silicone implants and cover $1,200 of the surgical cost to replace them within the first five years. Women over the age of 22 who have no active infections, existing breast cancers, or abnormal breast biopsies, and who aren’t pregnant or nursing can get the silicone implants—the same stipu-

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lations that come with their saline counterparts. Up to 15 percent of women with either type of implant experience side effects such as breast pain, swelling, or capsular contracture, a hardening of the breast around the implant. The big difference between the two implants is no mystery: Women prefer the look and feel of silicone. The Jell-O-like substance behaves similarly to breast tissue. “It conforms to the body more closely and moves when you push on it,” says plastic surgeon Brent Moelleken, an assistant clinical professor of medicine at the University of California–Los Angeles Medical Center who helped test the implants in one of the manufacturer’s clinical trials. Saline-filled implants, on the other hand, stay more rigid and remind some users of overfilled water balloons. Typically hidden under a layer of muscle and breast tissue, saline devices can often be seen and felt under the skin if there’s not enough tissue to camouflage them. “For extremely thin women and mastectomy patients with virtually no breast tissue, silicone is a better bet,” says Roxanne Guy, president of the American Society of Plastic Surgeons and Pardue’s surgeon. That’s why the fda had allowed breast-reconstruction patients, such as those who have

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Women prefer the look and feel of silicone implants to that of saline ones.

After 12 years, the rate rises to 15 percent. To ensure that silicone leaks are discovered promptly, the fda recommended that women who opt for silicone implants get an mri— mammograms and physical exams can’t detect leaking silicone—within the first three years of implantation and then every two years after that. “mri is quite effective at detecting silent leakage and whether silicone has moved outside the shell of the implant,” says Ellen Mendelson, chief of breast imaging at Northwestern Memorial Hospital in Chicago. Screening puts an even heftier price tag on breast implants. While insurance covers implants for breast reconstruction, it typically does not cover cosmetic procedures. At $1,600 to $1,800 a pair, silicone implants cost more than double the saline ones. And surgery to implant them can run anywhere from $4,500 to $12,000. The mri scans for monitoring can cost BRAD NELSON—CUSTOM MEDICAL STOCK upwards of $1,000. Some plastic surgeons are not conundergone a mastectomy, to get silicone There’s also the possibility an implant implants during the ban if they agreed to could burst from, say, the force of a vinced that the mris are necessary. “I high-impact car accident or a fall. In think the fda is being very cautious,” be monitored in clinical trials. Today’s silicone implants bear little very rare cases, extreme pressure could says Guy. She plans to do yearly physical resemblance to more leak-prone implants cause the silicone to flow through the exams on her patients to decide if an of the ’80s. The shell is thicker and more breast tissue into the armpit and sur- mri is warranted. “If a woman has no durable, and the gel inside is solid enough rounding lymph nodes. Silicone that symptoms or signs of rupture,” she says, to cut through. “The implant retains its gets stuck in these areas, Moelleken “there’s probably no reason to do one.” Still studying. But the fda isn’t so ready says, has been known shape to give better reto cause extensive pain to close the book on the safety aspect of sults, and the higherand irreversible nerve silicone implants. In addition to recomviscosity silicone is less mending regular breast scans, the damage. likely to migrate into Most often, silicone agency is requiring implant manufacbreast tissue if the Number of women in implant leaks cause turers to recruit 43,000 women for a 10product ruptures,” says the United States who no symptoms and the year study to learn more about the rate Joshua Levine, ceo and had breast augmentation wearer is none the of silicone ruptures and complications. president of Mentor, an last year. wiser. While saline leaks “We wanted a large enough study to also implant maker. cause fluid to whoosh detect if there’s any increased risk in rare While salt water posout quickly, deflating autoimmune diseases like scleroderma,” es little risk, silicone Number of breast cancer the breast noticeably, says Tillman. “Though we have no evican travel through tispatients who had breast the thick silicone gel dence of this, we’d like to finally get a desues and trigger an imreconstruction with implants usually remains firmly finitive answer.” mune response, poduring the same period. While many women are already rewithin the implant. Still, tentially causing hard the fda recommends serving their place in line to get the new lumps in the breast tisthat any ruptured im- implants, some may opt to wait until sue, pain, and inflamplant be removed for the long-term studies settle the health mation. “There’s no Ranking of breast augmensafety reasons. The sili- risks once and for all. Others, though, compelling evidence tation among popular coscone implant makers re- may never be convinced. “After the sililinking rupture to these metic surgery procedures in port a 1 to 2 percent rup- cone scare of the ’90s, I think some consequences, but we women. No. 1? Liposuction, ture rate—similar to that women will always be too frightened of can’t be 100 percent followed by rhinoplasty. of saline implants—in the implants to ever consider using certain that it doesn’t the first three years. them,” says Moelleken. l happen,” says Tillman.

291,000

46,000

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HEALTH WATCH Edited by Anne McGrath

You Might Be Able to Escape the Knife If you’re unlucky enough to have a herniated disk, your prospects are good whether you choose surgery or drugs and physical therapy. According to two studies published in the Journal of the American Medical Association, surgical patients experienced less pain and more improvement in function during the first six months. By the two-year mark, the other group had almost caught up. “This

Warning: Slather on the Sunscreen

D study supports nonoperative treatment for patients who can manage their pain,” says coauthor William Abdu, medical director of the Spine Center at Dartmouth Hitchcock Medical Center in Hanover, N.H. –Michelle Andrews

An Exercise Payoff: Sounder Sleep Researchers studying diabetes risk in overweight kids at the Medical College of Georgia report in the November Obesity that one quarter of their subjects were affected by disordered sleep, many more than the expected 2 percent. But the problems were reduced by half after the children took part in three months of afterschool physical activities. Having less fatty tissue in

istance runners may be at higher-thanaverage risk of skin cancer—and not just because they spend so much time in the sun. Austrian researchers compared 210 marathoners with 210 nonrunners and found that the runners had more moles and lesions that are risk factors for melanoma (though no one was actually diagnosed with the disease). Sun exposure is the obvious culprit, says Christina Ambros-Rudolph, a dermatologist at the Medical University of Graz and

the neck may have created more room in the airway, thus improving the children’s breathing, the researchers say, or an overall improvement in health may have been responsible. Catherine Davis, a clinical health psychologist and lead author of the study, notes that children who have difficulties with sleep often appear to have mild attention deficit hyperactivity disorder. Signals of sleep problems include loud snoring, pauses in breathing, and sleeping with the head tilted back. –Nancy Shute

lead author of the study, in the current Archives of Dermatology. Researchers also suspect that tissue damage that occurs during strenuous exertion may prompt the release of proteins that hinder the immune system. But immunosuppression is suspected only in very intense exercise, and the study didn’t measure whether the increased risk is offset by the health benefits of running. So for now, it’s best to wear lots of sunblock and avoid working out at high noon. –Katherine Hobson

Progress in the Food Allergy Fight Allergic to eggs? Someday, a little egg might be just what the doctor ordered. Duke University and University of Arkansas researchers report that a pilot study exposing seven kids with egg allergies to minuscule amounts of powdered egg whites and gradually increasing exposure over two years caused most

to build enough resistance to eat the equivalent of two scrambled eggs without a reaction. “This is not something I would want people to try at home,” warns lead researcher Wesley Burks, a Duke pediatric allergist. Egg allergies can cause severe reactions and even death. But Burks believes that “oral immunotherapy” could lead to treatments or a cure for certain food allergies. –Adam Voiland

Information on skin cancer, food allergies, and other conditions is at www.usnews.com/besthealth 66

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FROM TOP: CAROL KOHEN—GETTY; IMAGE BANK / GETTY IMAGES; MARCO CRISTOFORI—CORBIS

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Editorial By Mortimer B. Zuckerman l Editor-in-Chief

A Big Apple Strategy

N

ew york city has long considered panies—the very ones that provide the innovations and itself the capital of the world. Some may think entrepreneurship we rely on for economic growth. That that a prideful conceit, even though some 45 one straw might not break the camel’s back, but there are million visitors descend on it each year. But more. According to a recent Ernst & Young survey, Sarsince 1950, nobody could argue with New banes-Oxley has also created a sharper adversarial relaYork’s claim to have replaced London as the world’s fi- tionship between corporate boards and management. nancial capital. New York is home to the broadest, most Boards now tend to focus more on regulatory-compliance efficient, and liquid capital markets and boasts the high- issues than on competitive strategies, with members less est concentration of the world’s largest financial firms. worried about falling behind than falling afoul of the comNow, however, New York is challenged—and the evi- plex rules of Section 404. dence is in the numbers. Last year, only two of the 25 Repression. There’s also a third straw on the poor largest international initial public offerings were issued camel’s back. Last year, class action lawsuits cost Ameriby firms using American capital markets. London’s Al- can corporations an astonishing $9.6 billion, compared ternative Investment Market, instead, has become the with just $150 million in 1997. We must stop so many exchange of choice for listings by small companies, with frivolous lawsuits. On top of this, we have at least 10 fed433 new ipos last year alone, versus just 155 on New eral, state, and regulatory bodies compared with only York’s Nasdaq. In 2000, by contrast, 90 percent of the one in Britain, with each more aggressive than the next. funds raised by large foreign companies in new ipos were Britain’s single oversight body has found ways to reduce raised in the United States. the cost of doing business Today those numbers have to less than 10 percent New York is the financial capital there been stood on their heads: of what it is here. Can we not Just 10 percent of new offerof the world, but thanks to an learn from this? ings are issued in the United Hedge funds and privateincreasingly hostile investment equity States while 90 percent are funds have seen the raised outside. Over the past climate, its purchase is slipping. opportunities created by this six years, the number of nonmood of repression. Directors U.S. ipos listed here has fall- We cannot allow that to happen. are often so nervous about en by almost 75 percent. At being second-guessed and the same time, a number of foreign companies have left worried about personal liability that they’re more prone the New York Stock and Nasdaq exchanges while more to sell to hedge funds seeking a takeover company rather and more American companies are opting to leave the than fight them. What’s the reward for them to take the public markets and take themselves private. risk? The same goes for management. If their compaWhat’s going on? It’s called Sarbanes-Oxley. That’s nies go private, they can resolve all these tensions, inthe federal law that was enacted in the wake of the cluding the public brouhaha over their compensation. Enron, Tyco, and WorldCom scandals. The law offers Given all this, it’s easy to see why there is such an acbenefits of transparency, accountability, and investor celerating exodus of public companies from the whole protection. Fine, but as our insightful new treasury sec- American system of regulations; many leave the counretary, Henry Paulson, pointed out just last week, the try, many others just go private. We need a thoughtful law also has a seemingly innocuous section, known as readjustment. The aims of a revised Sarbanes-Oxley 404, that has proved to be real corporate overkill. would be to lower the cost of compliance, especially for Sarbanes-Oxley was intended to prevent a repeat of small companies and certain foreign companies that the terrible corporate scandals we have seen over the come into our financial markets; to relieve some of the past few years, but the exhaustive audits the law requires burden of the bureaucracy imposed by the law’s disclohave more than doubled the costs for outside auditors. sure rules; and to identify ways to encourage corporate Large companies, in one study, fund nearly 70,000 man- boards to focus less on fretful compliance and more on hours of audit time—an average of $2.4 million more per creative competitiveness. year than expected. Regulation is necessary for sound corporate goverIt is reasonable to ask whether doubling the costs has nance, but when the regulatory burdens pass a tipping yielded double the benefits—except for providing a bo- point they drive businesses to find more welcoming ennanza and a fat retirement plan for accountants, auditors, vironments. Genoa, Venice, Florence, and Amsterdam and lawyers. The onerous costs of Sarbanes-Oxley, more- were once the financial capitals of the world. There’s no over, fall disproportionately on small- and midcap com- reason why New York should follow in their footsteps. l 68

U.S.NEWS & WORLD REPORT • WWW.USNEWS.COM • DECEMBER 4, 2006