>> TROUBLE IN CANADA...

Canada's Chief Auditor Notes Misused Funds
By COLIN McCLELLAND
ASSOCIATED PRESS
TORONTO (AP) - Canada's chief auditor lambasted the governing Liberal Party on Tuesday for giving millions of dollars in contracts to political cronies, calling it "blatant misuse of public funds." Prime Minister Paul Martin responded by ordering an inquiry into the "serious breach of public trust."
Martin tried to distance himself by stressing that the transactions were overseen by his predecessor, Jean Chretien, who retired in December. He said he was unaware of the funding favoritism while he served as finance minister under Chretien before resigning in 2002 to run for the Liberal Party leadership.
The scandal could damage his government's image before a national election expected to be called in April or May, though Martin and his party are favored by far to win a five-year term.
Martin has spent the two months since he succeeded Chretien trying to re-brand the Liberal government as fresh, forward-thinking and ideas-driven.
The report Tuesday by auditor general Sheila Fraser said the Liberals approved multimillion dollar advertising and sponsorship contracts in Quebec from 1997 to 2003 to companies that had donated to the party. It said the government used a select group of middlemen to administer the funds, and gave lavish commissions to a small group of ad agencies.
The auditor also criticized the national railway, VIA, and the national postal service, Canada Post, for benefiting from improper spending. Both are Crown corporations, or public companies that operate at arm's length from the government.
"This is just such a blatant misuse of public funds. It is shocking. ... Words escape me," Fraser told a news conference. "These methods were apparently designed to pay commissions to communications agencies while hiding the source of the funds."
Martin responded in Parliament by ordering a public inquiry into the contracts handed out under the watch of former public works minister Alfonso Gagliano.
"The findings of the auditor general paint a disturbing picture," Martin said. "It is clear there has been serious financial mismanagement and a serious breach of public trust. This is unacceptable; it is intolerable."
The $180 million sponsorship program under Gagliano plastered Canadian flags and federal logos at sports and cultural shows, mostly in Quebec, to sell the benefits of federalism after provincial separatists came within a whisker of voting for independence in a 1995 referendum.
Martin had been preparing damage control in anticipation of the auditor's report. He moved on his first day in office to scrap the government program at the scandal's center.
On Tuesday, he recalled Gagliano from his current post as ambassador to Denmark. Martin also promised tough new rules governing future federal advertising contracts as well as laws to protect whistle-blowers. He said a lawyer would be appointed to retrieve money that was improperly spent.
Canada's national police force, the Royal Canadian Mounted Police, is investigating, but even it is implicated in the report for misuse of a $2.25 million 125th anniversary fund. No charges have been filed.
Opposition politicians attacked the government in Parliament. "There aren't enough judges in the country to go after the allegations in this report," said Grant Hill, an opposition member of Parliament.
Fraser's report also said the department overseeing Indian affairs improperly tracked how it spent $900 million in land claims settlements to two tribes in the far north.
Another scandal that has nipped at Martin in recent weeks also relates to government spending, but concerns ties to the family business Martin used to head, Canada Steamship Lines.
The government said almost a year ago that CSL had received about $110,000 in contracts before claiming last month a clerical error had hidden that the figure was actually more than $100 million.
Martin built up CSL but passed leadership to his three sons before he became prime minister. Opposition politicians allege the contracts suggest that the company benefited from Martin's position in government. But they stop short of saying he has done anything illegal.
Fraser, the auditor, has been called on to investigate the CSL government contracts, but any report would appear after an election.

--

'Sophisticated' group behind sponsorship scandal, Martin says
Canadian Press
Wednesday, February 11, 2004
Prime Minister Paul Martin responds to questions concerning the Auditor General's report during Question Period in the House of Commons on Tuesday.
CREDIT: Canadian Press, Tom Hanson
OTTAWA -- Prime Minister Paul Martin, fending off charges that he must have known about the sponsorship scandal while it was happening, blamed a "sophisticated" group of bureaucrats who acted secretly.

"When they broke those rules, they didn't come to cabinet and say, 'Oh, can we break these rules?"' Martin told the House of Commons. "What they did . . . was engage in a very sophisticated way of camouflaging what they were doing. And as a result the government did not know."
Martin was under attack for a second day following the release of a damning report by the auditor general. The report found that Liberal-connected middlemen pocketed 40 per cent commissions - or $100 million - from a $250-million sponsorship program that was intended to promote Canada at Quebec public events.
Auditor General Sheila Fraser also revealed that Crown corporations such as Via Rail and Canada Post, and even the RCMP, were used in a wide-ranging scheme to funnel cash to Liberal-friendly middlemen.
Fraser focused her criticism on a small group within the Public Works Department, but added that she did not have the power to investigate the Liberal party.
Martin said the public inquiry he has called will leave no stone unturned as it works on the matter.
A parade of Liberals emerged from a closed-door meeting earlier Wednesday proclaiming shock, fury and complete ignorance of a scheme that milked tens of millions from the public purse.
The governing party began the Herculean task of snuffing out the worst scandal of its decade-long reign while at the same time arguing that few of its members were ever involved.
"Am I angry? I'm mad as hell," said Revenue Minister Stan Keyes.
"I think Canadians understand ... that there have been outrageous occurrences in the past and that the new prime minister and the new cabinet have been very active."
Nobody mentioned former prime minister Jean Chretien by name but many Liberals seemed willing to lay all blame for the sponsorship scandal on the former administration.
? Copyright 2004 The Canadian Press
---------------------------------------------------------------
Crown agencies were drawn into scandal
Of $250M in sponsorship money, $100M went to Liberal-friendly firms
Elizabeth Thompson
CanWest News Service
Wednesday, February 11, 2004
Yesterday's report by the federal Auditor-General says the Public Works Department used Canada Post, ...
CREDIT: Kevin Van Paassen, National Post
...the RCMP and ...
CREDIT: Wayne Cuddington, CanWest News Service (Ottawa Citizen)
...VIA Rail as vehicles for transferring unity funds to select companies.
CREDIT: John Kenney, CanWest News Service (The Gazette)
OTTAWA - The federal government's sponsorship program reached into the RCMP, Via Rail and Canada Post to funnel millions of dollars to friends of the Liberal party, Auditor-General Sheila Fraser said in a bombshell report released yesterday.
Scrambling to disassociate himself from the scandal, Paul Martin immediately announced a public inquiry into the affair and fired Alfonso Gagliano, who was public works minister when the scandal took place, from his position as Canada's ambassador to Denmark.
Ms. Fraser revealed Mr. Gagliano's department used fictitious contracts, artificial invoices and elaborate accounting devices to assign tens of millions of dollars to sponsorship projects in Quebec. The "deeply disturbing" practices continued virtually unchecked for four years, often using Crown corporations to make payments the government could not make itself, Ms. Fraser reported.
Liberal-friendly communications firms collected millions of dollars in commissions, at times for simply transferring cheques from one body to another without providing any other service.
Speaking to reporters, Ms. Fraser said she was shocked and angered by what the investigation revealed.
"This is just such a blatant misuse of public funds. It is shocking. ... Words escape me," she told a news conference.
"This wasn't just a matter of missing documentation or bending the rules. These methods were apparently designed to pay commissions to communications agencies while hiding the source of the funds," she said.
"I got angry all over again."
Ms. Fraser's report had barely hit the table in the Commons when Mr. Martin moved to try to contain the damage and take the wind out of opposition sails.
"It is unacceptable, it is intolerable," Mr. Martin said as he outlined a series of measures he said are designed to get to the bottom of the affair, recover lost money and make sure it never happens again.
Ms. Fraser's 34-page report into the sponsorship program run by the Public Works Department's Communications Co-Ordination Services Branch (CCSB) between 1997 and 2001 details how $250-million was spent to sponsor a variety of events in Quebec, and how $100-million of it went to communications agencies in the form of fees and commissions. Using flow charts and diagrams, she also details the role several Crown corporations and communications firms played in the complex web of transactions.
"We found that the federal government ran the sponsorship program in a way that showed little regard for Parliament, the Financial Administration Act, contracting rules and regulations, transparency and value for money," she wrote. "These arrangements -- involving multiple transactions with multiple companies, artificial invoices and contracts, or no written contracts at all -- appear to have been designed to pay commissions to communications agencies while hiding the source of funding and the true substance of the transactions."
Further, she wrote,"The pattern we saw of noncompliance with the rules was not the result of isolated errors. It was consistent and pervasive. This was how the government ran the program."
In the case of a television series on hockey great Maurice Richard, the CCSB got VIA Rail to advance money to the show's producer, L'Information Essentielle. CCSB then awarded a contract to Lafleur Communication to reimburse VIA Rail for the money it advanced -- a process that allowed Lafleur to pocket $112,500 in commission.
"In our opinion, CCSB created a fictitious contract and made payments of $862,500 that contravened the Financial Administration Act ... It appears that these transactions were part of an elaborate process used to obtain funds from current (public works) appropriations, in order to pay for a highly irregular and questionable expenditure incurred by VIA Rail in the previous year and also to facilitate the payment of a commission to the communication agency."
Ms. Fraser also highlighted questionable practices involving the RCMP, which is responsible for the criminal investigation into the sponsorship scandal. Between 1997 and 1999, the force obtained more than $3-million through eight separate contracts for its 125th anniversary celebrations.
"A separate non-government bank account was used for all deposits and payments to the RCMP's Quebec Division; this was a contravention of the Financial Administration Act ... In addition, all transactions for Quebec Division were recorded in a manual accounting system rather than in the RCMP's corporate accounting system. We were unable to verify the transactions from the Quebec bank account because some of the supporting documents had been destroyed."
Ms. Fraser pointed out that the sponsorships were handled by the RCMP's administrative branch, not its criminal investigators.
More than $107,000 of the sponsorship money was improperly used to buy six horses and two trailers, the Auditor-General says. Ms. Fraser called such purchases an "inappropriate use of the sponsorship money."
Ms. Fraser reported that out of the $3-million directed to the RCMP, about $1.3-million went to Liberal-connected ad agencies for commissions and promotional materials.
The report clearly ties Mr. Gagliano to what was going on, citing a number of cases in which he or officials in his office overruled decisions of bureaucrats and ordered sponsorships to go ahead. For example, when the executive director of the CCSB declined in 1999 to sponsor the series called Innovation, the production company went to the Minister's office, which agreed the government would sponsor it.
On another occasion, the Old Port of Montreal wanted a giant video screen and CCSB refused. Following a presentation by the Old Port to Mr. Gagliano, CCSB offered verbally to provide $1.5-million, then used such communication firms as Lafleur Communication Marketing and Media/I.D.A Vision to funnel money to the Old Port.
Ms. Fraser details examples of shoddy record-keeping with few if any documents to explain why different events were sponsored. At times, the paper trail simply stops, Ms. Fraser found, and millions of dollars of taxpayers money would flow on the strength of a single phone call.
The problem, she said, was not a lack of rules for government sponsorships but rather that the rules were not followed.
"We found widespread noncompliance with contracting rules in the management of the federal government's sponsorship program at every stage of the process," she wrote. "Rules for selecting communications agencies, managing contracts and measuring and reporting results were broken or ignored. These violations were neither detected, prevented nor reported for over four years because of the almost total collapse of oversight mechanisms and essential controls."
Government officials, including former prime minister Jean Chretien, have said the sponsorship program was necessary to bolster national unity in the wake of the 1995 referendum on sovereignty, but Ms. Fraser said that explanation is not good enough.
"That has certainly been the story that some people have told us, that they were fighting a war, but I really don't believe that the results always justify the means."
Mr. Chretien was on a trip to China yesterday and could not be reached for comment.
The management of sponsorships improved after Communications Canada was created in 2001, her report notes.
The opposition has charged that the sponsorship program involved an elaborate scheme to recompense firms that helped the Liberals in their election campaigns. However, the audit contains no mention of the Liberal party.
While Ms. Fraser's report sheds light on what happened, she made it clear yesterday that after two years of investigation, she still can't answer the question of why it happened or what exactly happened to all of the money once it left the government's hands. That will be up to the police and a fuller inquiry to determine, she said.
Mr. Martin's government announced yesterday that Quebec Superior Court Justice John Gomery will head such an inquiry into the sponsorship scandal. While the terms of reference of the inquiry are still to be worked out, the government has asked Judge Gomery to move quickly to get to the bottom of what happened.
Bill Graham, the Foreign Affairs Minister, also removed Mr. Gagliano as Canada's ambassador to Denmark yesterday.
Disciplinary procedures of varying degrees are underway against six to 10 government officials who worked on the sponsorship program and are still government employees, said Stephen Owen, the Public Works Minister.
(Montreal Gazette)

? National Post 2004
----------------------------------------------------------------
Directors fear scandal will rock their firms
KPMG survey finding: 84% expect public company to fall victim by year-end
Peter Brieger
Financial Post
Wednesday, February 11, 2004
Almost half the directors sitting on the boards of this country's largest companies fear their firms could be rocked by an accounting scandal, according to a new KPMG survey.
The "alarming" study also suggests that 84% of respondents believe a Canadian public company will fall victim to a balance sheet imbroglio before year's end.
"I'm not surprised at all," said James Hunter, president of the accounting giant's forensic division, which investigates financial fraud. "We've seen a whole list of corporate manipulation cases over the last few years. But it's pretty worrisome -- these people are stewards of corporations."
Indeed, the survey -- completed by 116 directors sitting on the boards of Canada's 75 largest companies -- warned the harm to a firm's reputation would dwarf a lawsuit, negative press coverage or even going bankrupt.
"If I was an investor, I wouldn't sleep well at night," said J. Richard Finlay, head of the Centre for Corporate and Public Governance. "I think it's a stunning admission on the state of corporate governance in Canada. Frankly it suggests there has been more hype than substantive reform in the culture of the Canadian boardroom.
"I really have to wonder in this environment post-Enron how any director would sit on a board if they had any reservations about the financial integrity of the company."
Despite the serious implications for Canadian investors, KPMG's survey found more than one-third of participants believe the United States is at even greater risk of a balance-sheet scandal similar to those at Enron Corp. and WorldCom Inc.
More than half the directors -- 62% -- blamed compensation models based on profitability for encouraging manipulation by chief executives and chief financial officers, the same people directors believe are most responsible for preventing fraud.
Only 28% of the board members polled feel they are ultimately responsible for ensuring financial statements have not been fudged. The directors put themselves in third spot on the blame hierarchy, behind CEOs and CFOs, but ahead of a company's audit committee.
Almost half said chief executives are most responsible for such improprieties, the survey found.
"This is an interesting choice considering how often CEOs themselves have been implicated when financial statement manipulation occurs," Mr. Hunter said.
But he noted that new legislation in Canada and the United States requires chief executives and financial officers to vouch for the accuracy of their financial statements in writing. "Those are the two guys who are in charge and ultimately responsible. Ignorance is no longer an excuse.
On that issue, 55% of directors polled said they were obliged to sign their company's code of conduct annually, while 62% said they have not received training to spot or deal with balance sheet manipulation.
As for ethics training, the numbers are moving up, Mr. Hunter said.
While most high-profile financial scandals were uncovered by internal auditors or whistleblowers, KPMG found 72% of surveyed directors rely most on external auditors to raise the red flag over balance sheet abuses.
A greater reliance should be placed on internal controls, Mr. Hunter said. "In cases of fraud, usually only 3% to 5% are discovered by external auditors," he added. "They're much more likely to come from whistleblowers and internal auditors."
Meanwhile, the vast majority of respondents felt audit committees should be composed entirely of independent members, while almost three-quarters felt the chairman and chief executive positions should be filled by two different people.
That scenario played out at building products maker Royal Group Technologies Ltd. last year when company founder Vic De Zen announced he was retiring from the firm's chief executive post, but would stay on as non-executive chairman.
The move came after heavy criticism was levelled at Royal's corporate governance.
It's a separation seen as crucial by some of KPMG's respondents. "[It's] the single most important issue in corporate governance and one of the strongest actions that can be taken to avoid the potential of abuse or manipulation," wrote one survey participant.
Despite concern over some of the results, Mr. Hunter said the survey also shows that standards are getting better, not worse.
- WHAT IS THE GREATEST REPUTATIONAL RISK FACING A BOARD OF DIRECTORS OF A PUBLIC COMPANY?*:
Manipulation: 72% Litigation: 24% Bankruptcy: 19% Negative media: 11% Other: 7%
*per cent of total responses
Source: KPMG, National Post
Ran with fact box "What is the greatest reputational risk facing a board of directors of a public company?" which had been appended to the story.; pbrieger@nationalpost.com
? National Post 2004


-----------------------------------------------------
Internet plan could become a $2-billion flop
A $2-billion initiative to deliver government services over the Internet risks becoming an expensive flop unless the government quickly resolves technological and management problems, according to Tuesday's auditor general's report.


-------------------------------------------------------
Chinese Official Sues for Mistreatment
By CHRISTOPHER BODEEN
ASSOCIATED PRESS
SHANGHAI, China (AP) - A county-level Chinese official has sued police for allegedly manhandling her and filming her in her underwear during a prostitution raid, an unusual challenge to the de facto impunity enjoyed by Chinese authorities.
As reported widely in Chinese media Wednesday, the lawsuit filed by Wu Yan, a deputy county chief in the northeastern province of Jilin, is demanding about $200,000 for emotional suffering and medical costs, along with an apology printed in newspapers.
Wu said male officers burst through the door of her room at the Jiaotong hotel in the town of Shulin on the night of Nov. 18 as she was sleeping, according to the Changchun Evening News and other newspapers.
She said officers dragged her into the hallway, leaving her with cuts and bruises, then threw her on the ground and filmed her with a video camera while other guests and hotel staff looked on.
The suit underscores the rising dissatisfaction with the often brutal measures adopted by Chinese police, who are frequently linked to corruption and are seen as largely unable to stem a nationwide surge in crime.
Because they serve a vital function in crushing any challenge to the communist state, China gives police officers considerable latitude in searching, questioning, and presenting evidence against criminal suspects. The ongoing "Strike Hard" anti-crime campaign has significantly broadened those powers and allows for faster trials and more liberal use of the death penalty.
Although police said the raid that involved Wu was prompted by a citizen's tip, she wasn't charged with any crime. Investigators promised Wu a public apology and compensation over the incident, but have so far only offered a private apology from police, the reports said.
Wu's lawyer, Xu Jianping, told newspapers his client's constitutional rights were violated and her physical and emotional suffering left her unable to work or live as before.
"Police didn't just harm her physical rights, they humiliated her personally as a woman," Xu was quoted as saying.
The lawsuit filed Monday with the Shulin Municipal People's Court also demands disciplinary measures against officers who conducted the raid, and the handing over of the police videotape of the incident.

-------------------------------------------------------------------

Beijing Stifles Hopes on Democracy
By DIRK BEVERIDGE
ASSOCIATED PRESS
HONG KONG (AP) -
Dimming hopes for quick democratic reforms in Hong Kong, a top official said Wednesday the government here can't introduce legislation on changing its election methods without consent from Beijing.
"It is not only a matter for Hong Kong, but it must be thoroughly discussed with and approved by the central government," Secretary for Administration Donald Tsang told lawmakers.
Tsang appeared in the Legislative Council to brief members on meetings he held earlier in the week with mainland officials who have made it clear Hong Kong cannot become more democratic of its own accord.
Ordinary Hong Kong people are unable to choose their leader, although they directly elect some lawmakers. But universal suffrage is set out as an eventual goal in Hong Kong's constitution, and demands for it have grown after six years under unpopular Chief Executive Tung Chee-hwa.
The push for democracy gained momentum after a July 1 march by 500,000 people forced Tung to back down on plans to enact an anti-subversion law that critics called a threat to the territory's freedoms.
Tsang's comments underscored that Hong Kong people will have to bow to Beijing's broad views on the matter.
Beijing leaders have "emphasized, when considering this issue, we must look at the big picture, consider the country's interests on the whole, as well as Hong Kong's long-term interests, its legal position and economic development," Tsang said.
On Tuesday, China's state-run Xinhua News Agency quoted unidentified Chinese officials as saying Hong Kong should be governed by local people "with patriots as the main body."
Tsang said China was only reiterating what it had said in the 1980s when it was negotiating the handover with Britain. "The people managing Hong Kong's affairs should be Hong Kongers who love the motherland and Hong Kong," he said.
"Loving the motherland means not doing anything to harm the country's interests, and loving Hong Kong means not doing anything to harm Hong Kong's interests," he said.

-------------------------------------------------------------------

Cuban Police Conduct Boat-Car Inspection
By ANDREA RODRIGUEZ
ASSOCIATED PRESS
HAVANA (AP) -
Cuban police inspected a house and several auto repair shops Wednesday in a neighborhood where residents recently converted two 1950s cars into boats that refugees used in attempts to reach the United States.
The search came a day after eight residents of the Diezmero neighborhood in Havana were returned to Cuba by the U.S. Coast Guard after their converted 1959 Buick was spotted floating off Key West, Fla.
That was the second time in seven months such a trip was attempted. Last July, a group including some of the same refugees from Diezmero "set sail" in a converted 1951 Chevy pickup outfitted with pontoons and waterproofed doors. They too were stopped by U.S. authorities and returned to Cuba.
On Wednesday, police said they were looking for a red 1951 Ford pickup belonging to the family of Marcial Basanta, one of the refugees returned to Cuba on Tuesday, according to Basanta's father, also named Marcial.
"They broke the door (of the family's house) and said they were going to take the truck away," the elder Basanta said.
But the authorities left without seizing the vehicle, which was parked in an adjacent garage.
The younger Basanta was one of four refugees who participated in both last week's failed journey and the one that took place in July.

--------------------------------------------------------------------

Red Cross Confident It Will See Saddam
By ALEXANDER G. HIGGINS
ASSOCIATED PRESS
GENEVA (AP) - The Red Cross has visited imprisoned officials of Saddam Hussein's toppled regime and expressed confidence Wednesday that U.S. authorities will allow it to see the former Iraqi dictator "sooner rather than later."
"He's a POW and supposed to be like any POW," said Nada Doumani, a spokeswoman for the International Committee of the Red Cross, which requested permission to visit Saddam soon after he was captured Dec. 13 and the United States declared him a prisoner of war.
Doumani told The Associated Press in a telephone interview from Amman, Jordan, that the neutral, Swiss-run ICRC had seen most if not all of the 43 other high-ranking Iraqis captured by coalition forces.
"We have no problem of access to other people so far," she said. As for Saddam Hussein, she added, "We believe that we will be able to see him sooner rather than later."
She said the visit to Saddam should happen fairly "automatically" because the ICRC, which is entitled to see POWs under the Geneva Conventions on the conduct of war, has so far had access to all coalition locations for holding POWs and civilian internees.
The agency still doesn't know where Saddam is being held and will know for sure only when its delegates have seen him, Doumani said.
"The Americans are saying that he's somewhere in Iraq, as far as I understand, but we cannot confirm that or deny it," Doumani said.
The ICRC moved many of its international staff out of Iraq following the Oct. 27 bomb attack on its Baghdad headquarters. But it has representatives who continue to visit Iraqi detainees, whether they are ordinary soldiers or among the 55 most-wanted whose faces appear in a deck of cards issued by U.S. authorities. The coalition says it has captured 44 of the 55.
"I cannot tell you by name whom we have seen and whom we haven't and if we have skipped somebody," Doumani said.
She said there is nothing in the Geneva Conventions that would prohibit Saddam's being tried by a coalition tribunal.
"It can also be by an ad hoc international tribunal that can be established by a resolution of the Security Council," she said.
"We could envision that it could happen (that the Iraqis try Saddam) once authority is transferred to the Iraqis in June and military tribunals are established again," Doumani said.
But the ICRC doesn't get into who conducts the trial as long as it is a military tribunal of a sovereign country that is party to the Geneva Conventions. Iraq joined the conventions in 1956 but it has been suspended while under coalition control.
The trial can be for what a POW did before the latest war, including "other war crimes or crimes against humanity," but "not for what he has done during the latest war for being a soldier," she said.
She said there was some misconception about Saddam's rights after he was declared a POW.
"Some people, especially in Iraq, thought that as long as he was given this POW status he cannot be prosecuted, which is totally wrong, because you have plenty of articles in the Third Geneva Convention where it can even go as far as a death sentence.
"But he cannot be tried for simply participating in hostilities because the whole idea for a POW is that he is a soldier doing his job in defending his country, so you cannot try him for defending or for fighting. You can only try him if he went beyond and committed a war crime or a crime against humanity or a crime prior to war."
Doumani noted the conventions omit setting a time frame for the visits and said it was not the ICRC's concern when Saddam's trial would take place.
"Whatever is done, it has to be done according to the law," she said. "Judicial guarantees should be respected, the right to defense, impartiality, transparency and all these things," she said. "This is valid not just for Saddam Hussein, it's valid for any soldier, any Iraqi POW."

----------------------------------------------------------------------------


Bin Laden's Driver Chosen to Stand Trial
By PAISLEY DODDS
ASSOCIATED PRESS
SAN JUAN, Puerto Rico (AP) - Osama bin Laden's $200-a-month driver is being held at the Guantanamo Bay prison camp, but the man had no connection to Afghanistan's ousted Taliban regime or the al-Qaida terror network, his defense attorney said Wednesday.
Salim Ahmed Salim Hamdan, 34, left Yemen in 1996 for Afghanistan. He planned to continue on to Tajikistan to join Muslims fighting against former Soviet communists but was forced to take a job to support his family, said his attorney, Navy Lt. Cmdr. Charles Swift.
Hamdan began working for bin Laden in 1997 on his farm in the southern Afghan city of Kandahar, earning about $200 a month driving a truck and moving farm workers to the fields, said Swift, who just returned from a visit to the U.S. prison camp in eastern Cuba.
"We have the facts going for us," Swift told The Associated Press after speaking to the Miami Herald and the Washington Post. "He has a wife. He has two young children, one of whom he's never seen. The only reason why he took the job as a driver was to support his family."
Neither Hamdan nor any of the other 660 some detainees at the camp have been charged. He is one of four chosen to stand trial at possible military tribunals and given access to defense attorneys. And he is the first detainee at Guantanamo publicly identified as having a link to bin Laden.
Under U.S. law, Hamdan could be charged with conspiracy or being an accessory to a crime but the charges he could face under international law are not as clear, Swift said.
Hamdan says he is a civilian and has asked to be tried in a civilian court.
Unless he agrees to a plea bargain - a possibility that Swift said he could not discuss in detail - prosecutors will have to prove he had knowledge of bin Laden's activities. Bin Laden, accused of masterminding the Sept. 11, 2001, terror attacks, is still at large.
Pentagon policy has prohibited troops and civilians at the Navy base from disclosing specifics about prisoners. Swift received special Pentagon clearances to discuss his client, whom he has met for about 25 hours using an Arabic translator.
Swift says he has been given assurances his conversations with his client are not being monitored. He also says he has been granted access every time he's asked.
Hamdan, who is married and has two daughters aged 2 and 4, was captured by Afghan forces as he tried to return bin Laden's car to the farm during the U.S. attacks, Swift said. He was turned over to the Americans about two years ago but Swift said he could not say how long he had been in Guantanamo.
Since Hamdan was given counsel Dec. 18, he has been held in solitary confinement, segregated from the other prisoners in a windowless, air-conditioned cell, Swift said.
"Physically he's fine, with the exception of being cold," Swift said. "The prolonged solitary confinement has been difficult."
In Spain, meanwhile, Interior Minister Angel Acebes said Wednesday that a Spaniard held at Guantanamo is to be transferred to Spain for questioning by a judge.
The Spanish government last week endorsed a request by Judge Baltasar Garzon for the repatriation of Hamed Abderrahman Ahmad, 29, who has been held at the U.S. military base for more than two years after his capture in Afghanistan in late 2001.
Foreign Minister Ana Palacio said she had been in contact with Secretary of State Colin Powell to arrange the suspect's flight to Spain.
A Spanish military plane carrying seven police who will escort Ahmad left Spain on Wednesday. U.S. officials normally don't comment until transfers are completed.
The Spaniard is one of four Guantanamo inmates that Garzon has alleged belong to a terrorist organization through suspected links with Imad Eddin Barakat Yarkas, the jailed suspected leader of an al-Qaida cell in Spain broken up in November 2001.
Ahmad will appear Friday before Garzon at Spain's National Court for questioning, court officials in Madrid said.

---------------------------------------------------------------------




State seeks to shift Medicaid patients' basic care
By Liz Kowalczyk, Globe Staff, 2/11/2004
The Romney administration wants to prohibit low-income residents from seeing primary care doctors at hospitals, jumping into a longstanding debate about whether Massachusetts patients are driving up healthcare costs by relying too heavily on expensive medical centers.
State officials want to shift patients enrolled in Medicaid -- the state and federal insurance program for the poor that's facing skyrocketing costs -- to community health centers for basic medical care, which they estimate would save the state $16 million next year.
Ronald Preston, secretary of the Executive Office of Health and Human Services, said that Medicaid patients would still be able to make appointments with cardiologists, gastroenterologists, and other specialists at hospitals. But community health center staff have more time to provide basic medical care and can more easily connect patients with a wide array of social-service programs, he said. Comparable services are cheaper at community health centers, which means state fees are lower for health centers than for hospital outpatient departments.
Officials also wonder if, just by seeing a doctor at a hospital, patients are more likely to receive unnecessary expensive tests because they're readily available.
At least 20,000 of the state's 928,000 Medicaid patients and an unknown number of uninsured patients receive most of their primary care in hospitals.
"A hospital is there to be a hospital, to treat emergencies and admit patients overnight," Preston said. "When patients show up at their door, it's a very expensive proposition."
The plan is one of several administration budget proposals --which must be negotiated with the Legislature -- that would reduce state payments to hospitals by $87 million to $100 million for treating poor patients. One proposal would eliminate Medicaid payments to help train young doctors, or residents, a plan that hits academic medical centers especially hard. Another would do away with a special pool of relief money for hospitals like Boston Medical Center and Cambridge Hospital that rely on the funds to treat large numbers of poor patients.
"People are not going to be happy about this," Preston said. "But we're talking about a rate of increase in the cost of the Medicaid program that is way out of proportion to anything else going on in state government."
Dr. JudyAnn Bigby, an internist at Brigham and Women's Hospital, said shifting Medicaid enrollees to community health centers could harm many patients. Bigby, who is Boston Mayor Thomas Menino's personal physician and also cares for about 200 Medicaid patients, said community health centers may not have the space and staff to take on thousands of extra patients. In addition, she said, the administration's proposal ignores patients' personal preferences and the fact that many patients who end up in hospital outpatient clinics are "pretty sick people" who need to see specialists in addition to their primary care doctor.
"The majority of my patients are not coming for prevention," Bigby said. "They're on complicated medical regimens with five or six problems including high blood pressure, diabetes, high cholesterol, and arthritis. If you put them in community health centers where they don't have specialists, what's going to happen to continuity of care and communication between doctors?"
Hospital executives said the overall cuts will hurt their already struggling institutions. Medicaid payments for Boston Medical Center, which projects it will post a $15 million operating loss this year, would be reduced to $48 million from $78 million under the governor's proposals, said Thomas Traylor, the hospital's vice president of federal, state, and local programs.
"We're quite concerned," he said. "We don't think they're targeting us specifically. It's just more government money comes our way because we're large, so some of these cuts are going to hit us harder."
The Romney administration is going after a Massachusetts healthcare tradition: the tendency of patients to use hospitals heavily for all types of care, and especially to rely on teaching hospitals. Managed care insurance companies beat back healthcare costs in the 1990s, largely by reducing the number of days patients stay in the hospital and eliminating overnight stays altogether for simple operations. But insurers have had limited success in Massachusetts shifting patients from hospitals to health clinics and doctors' offices.
During the 1990s, the state's hospitals logged 36 percent more outpatient visits per capita than the average US hospital, according to a report two years ago from the Massachusetts Council of Community Hospitals. Medical inflation rose 73 percent in Massachusetts during those years compared to 49 percent nationally, according to a 2000 state analysis. At the time, state health officials said one reason may be residents' heavy use of academic medical centers.
The Medicaid program has become a driving force in the state's budget crisis, with costs growing at a 13 percent annual rate the past two years. The Romney administration is recommending budget cuts for the fiscal year that starts July 1 that will keep growth in the Medicaid budget to 8 percent, or $496 million, for a total cost of $6.7 billion. Many Medicaid recipients already use community health centers. About 319,000 Medicaid recipients are enrolled in the agency's primary care program, in which they are assigned a primary care doctor to coordinate their care, and at least 20,000 of these recipients are enrolled with doctors who work in hospitals.
In addition, the administration no longer wants to pay for uninsured patients to get care at hospitals that they could get in community health centers. The "free care pool," a fund run by the state to reimburse hospitals and other medical providers for treating the uninsured, would no longer pay hospitals for treating such basic care ailments as non-emergency colds and coughs and routine physical exams.
Partners HealthCare System, the parent organization of Massachusetts General Hospital and Brigham and Women's Hospital, estimates its Medicaid payments will fall to $110 million from $121 million under the administration's plan. Partners hospitals are generally profitable, but executives complain that Medicaid payments currently cover just 54 percent of the cost of caring for patients. The hospitals make up much of this shortfall with higher payments from private insurers.
Partners executives said they are trying to move patients to lower cost facilities on their own, and recently moved more than 125 patients from Brigham to Brookside Community Health Center in Jamaica Plain for dental care.
Edward Grimes, executive director of Upham's Corner Health Center in Dorchester, said a number of the city's community health centers are newly renovated and expanded and can accommodate more patients.
"But, if it means uprooting patients and interfering with longstanding doctor and patient relationships, that's not appropriate," he said.
Liz Kowalczyk can be reached at kowalczyk@globe.com.

? Copyright 2004 Globe Newspaper Company.
------------------------------------------------------------------------
Pentagon: 3 months in Iraq cost $14B
By John J. Lumpkin, Associated Press Writer, 2/11/2004
WASHINGTON -- The ongoing war in Iraq cost about $4 billion in September, spiked to $7 billion in October and hit just under $3 billion in November, the Pentagon said Wednesday in its latest report on how much the military operation costs.
That amounted to roughly $14 billion spent on U.S. military operations in Iraq over the three-month period late last year, the latest figures available, said Dov Zakheim, the Pentagon's chief financial official.
He said analysts were trying to determine why the costs spiked in October.
Officials previously had said the occupation of Iraq is costing $1 billion a week.
Zakheim also sought to allay concerns, expressed by top military chiefs to a congressional committee Tuesday, that the Pentagon would run out of money to finance the efforts.
The Iraq war and occupation, along with the ongoing operations in Afghanistan, are being paid for through supplemental spending bills that are approved by Congress outside of the regular budget process.
Already, Congress has approved $166 billion for those operations. The Pentagon has said it does not expect the Bush administration to seek another spending bill until January 2005, but the chiefs of the Army, Air Force and Marine Corps suggested Tuesday that money will run out by the end of September.
Zakheim said Wednesday that the military can fill the gap by borrowing money from other operations and maintenance accounts. This causes some repairs and maintenance work to be delayed, but Zakheim said this would not lead to permanent problems if a supplemental spending bill were approved by the following spring.
Why wait? Zakheim said the Pentagon wanted to see how events in Iraq unfold this year before deciding how much money it will need.
He denied the suggestion that the Bush administration was waiting until after the November elections to prevent the cost from becoming a political issue.
? Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
--------------------------------------------------------------

>> AHEM 1...

GAO: Defense contractors owe $3B in taxes
By Mary Dalrymple, AP Tax Writer, 2/11/2004
WASHINGTON -- More than 27,000 defense contractors owe a total of $3 billion in unpaid taxes, according to government records reviewed by congressional investigators.
That represents almost 14 percent of the contractors registered with the Pentagon as of February 2003, according to auditors at the General Accounting Office. They tallied total taxes owed by the contractors in the budget year that ended Sept. 30, 2002.
Most of the contractors were small businesses that failed to send to the Internal Revenue Service the taxes withheld from their employees' paychecks for Social Security, Medicare and federal income taxes.
"It's more than irritating. It's outrageous," said Sen. Norm Coleman, R-Minn., who asked the GAO, the investigative arm of Congress, to look into the problem.
The Senate Governmental Affairs Permanent Subcommittee on Investigations planned a hearing Thursday to review the findings.
The GAO found evidence in some cases of abusive or potentially criminal activity in which the contractors diverted the money for personal gain or to fund their businesses. The evidence was uncovered during in-depth investigations into 47 contractors.
Privacy laws prevent the investigators from identifying the businesses and individuals to lawmakers. Coleman, the subcommittee chairman, said he met with IRS Commissioner Mark Everson on Wednesday and asked him to pursue those 47 contractors.
One contractor hired to provide custodial services and owing nearly $10 million in unpaid taxes borrowed almost $1 million from the business and bought a boat, several cars and a home abroad. The Defense Department paid the company $3.5 million in 2002. The business was dissolved in 2003.
An engineering research contractor, delinquent by more than $1 million in taxes, paid $1 million in the mid-1990s to purchase a home and furnishings. About the same time, the contractor stopped paying its taxes in full. The Defense Department awarded the business contracts totaling over $600,000.
In a some cases, the contractors behind in their taxes were not businesses but individuals. A dentist who had a multiyear contract for over $400,000 paid income tax in only one year since 1993. The dentist owed over $100,000 in unpaid payroll and unemployment taxes going back to the early 1990s.
A vehicle repair and painting contractor bought a $1 million home and luxury sports car and owed over $100,000 in taxes. The individual also owed a federal agency for child support.
Congress in 1997 ordered federal agencies to withhold 15 percent of its payments to any individual or business with an outstanding tax debt. The Pentagon did not establish an automated program to enforce the program until five years later.
In 2003, the first year the Pentagon started withholding the funds, it collected less than $1 million. The GAO estimated that the Defense Department should be collecting at least $100 million each year.
Defense officials told investigators it would be difficult to put in place a thorough reporting system because its vendor payment system is split among 22 locations.
The IRS also shares some blame, the study concluded.
A tight budget and large workload prevented the agency from pursuing the contractors. The IRS also works first with taxpayers to encourage them to voluntarily comply with the law before taking more aggressive action.
? Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Taxes Defense Contractors Glance
By The Associated Press, 2/11/2004
Records reviewed by congressional investigators showed that more than 27,000 defense contractors owe a total of $3 billion in unpaid taxes. The investigators selected 34 businesses and 13 individuals for further audit and investigation.
Among those contractors studied in detail, investigators found:
--a contractor who sells and installs office furniture at military installations was paid $38,000 by the Pentagon while owing over $150,000 in taxes. The owners used the business to pay personal expenses, such as a home mortgage and credit cards. One owner is a retired military officer.
--a researcher was awarded an $800,000 contract in 2002 while over $700,000 behind in tax payments. The owner has more than $1 million in loans for cars, real estate and recreational activities and owns a high-performance airplane.
--a business that provides janitorial services at military installations received contracts totaling nearly $12 million from 1998 through 2001. The business owed over $800,000 in taxes and is linked to potential check fraud.
--a construction service company that maintains and repairs housing on military bases was paid $2.4 million in 2002 while owing over $1 million in taxes. The business also owes the Defense Department tens of thousands of dollars because of an overpayment in early 2000.
--an information technology company that provides personnel support has multiple Defense Department contracts valued up to $13 million while owing nearly $1 million in taxes. It received payments from three other federal agencies and may be involved in money laundering activities.
--an individual who provides musicians for religious services has not filed an income tax return since 1997. The Pentagon paid the individual $217,000 in 2002.
? Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


>> AHEM 2...

Kerry opposed gay marriage ban in letter
By John Solomon, Associated Press Writer, 2/11/2004
WASHINGTON -- Democratic presidential hopeful John Kerry, who opposes gay marriage and hints he might support a limited ban, just two years ago signed a letter with other congressional colleagues urging the Massachusetts Legislature to drop a constitutional amendment outlawing homosexual nuptials.
And when Kerry opposed federal legislation in 1996 that defined marriage as a union between a man and a woman, he compared the law to 1960s efforts in the South to criminalize interracial marriages and accused his supporters of engaging in the "politics of division."
"This is an unconstitutional, unprecedented, unnecessary and mean-spirited bill," Kerry declared then, even as 85 senators and President Clinton supported the measure.
As his home state grapples with a historic Massachusetts Supreme Court ruling that could permit homosexual marriages, Kerry's own comments on the campaign trail are being compared by Republicans, Democratic rivals and even his own constituents to his prior record.
Kerry's campaign said Wednesday he has consistently opposed gay marriage while also rejecting legislation, like the 2002 amendment, that he believed jeopardized the civil rights and recognition of gay relationships because it was too broadly worded.
"John Kerry's position has been crystal clear. He opposed a proposed constitutional amendment in Massachusetts in the summer of 2002 because a sweeping proposal would have threatened civil unions, health benefits, or inheritance rights for gay couples that represent equal protection under the law," spokesman David Wade said.
"John Kerry favors civil unions, not gay marriage. It's that simple," he said.
The emergence of gay marriage as an issue has placed several candidates -- including Howard Dean who signed a civil-unions bill during his Vermont governorship -- in a delicate balancing act of trying to avoid looking bigoted while placating heterosexual and religious voters.
The White House refused Wednesday to commit President Bush to supporting a constitutional amendment to ban gay marriages, although conservative leaders said they have received high-level assurances he will take the step.
Spokesman Scott McClellan said the administration was closely watching events in Massachusetts, where lawmakers are on the verge of voting on such an amendment. Bush has denounced the Massachusetts ruling as "deeply troubling."
Kerry has left open the possibility he could support a Massachusetts ban on gay marriage if it recognized civil unions and other protections as an alternative. But in 2002, he joined his congressional colleagues in opposing Massachusetts' last effort to outlaw gay marriage, saying they feared it could be used to prevent communities "from acting as they might wish to provide some form of recognition for same sex relationships."
The letter, organized by Rep. Barney Frank, D-Mass., was sent on congressional stationery on July 12, 2002 as the Massachusetts Legislature first considered a constitutional amendment that limited marriage to "only the union of one man and one woman."
"We believe it would be a grave error for Massachusetts to enshrine in our Constitution a provision which would have such a negative effect on so many of our fellow residents," Kerry and 11 other members of the state's congressional delegation wrote.
The Legislature's 2002 effort failed, but that debate renewed in the last week after the Massachusetts Supreme Court ruled gays were entitled to the same marriage as heterosexuals unless the state constitution is changed. Lawmakers debated a possible amendment again Wednesday.
Frank and most of the other congressmen who signed the 2002 letter sent a new letter last month again opposing the constitutional amendment, but this time neither Kerry nor Sen. Edward Kennedy signed.
Frank said Wednesday he didn't ask Kerry or Kennedy to sign this time "because I was in such a hurry," the openly gay congressman said.
Frank said Kerry has always been clear to him that he opposes gay marriage but wants homosexuals to have equal protection under the law through civil unions, and other legislation.
Kerry has said that he believes marriage -- both legally and religiously -- should be reserved between a man and woman.
"I believe and have fought for the principle that we should protect the fundamental rights of gay and lesbian couples -- from inheritance to health benefits. I believe the right answer is civil unions. I oppose gay marriage and disagree with the Massachusetts Court's decision," Kerry said last week.
When asked whether he might support Massachusetts' constitutional amendment, he said it was possible.
"It depends entirely on the language on whether it supports civil union and partnership or not. I'm for civil union, I'm for partnership rights. I think what ought to condition this debate is not the term marriage, as much as the rights that people are afforded," Kerry told National Public Radio on Monday.
Back in 1986, Kerry gave an impassioned 10-minute speech on the Senate floor against an earlier effort in Congress to define marriage only as a union between a man and a woman. He was one of just 14 senators to vote against the Defense of Marriage Act.
"This is a power grab into states' rights of monumental proportions," Kerry said at the time, accusing Republicans of using legislation to drive a wedge between Americans. "It is ironic that many of the arguments for this power grab are echoes of the discussion of interracial marriage a generation ago.
"It is hard to believe that this bill is anything other than a thinly veiled attempt to score political debating points by scapegoating gay and lesbian Americans," he added, while noting his own personal objections to gay marriage.
? Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.