Lobbying, a Windfall and a Leader’s Family

Gilles Sabrie for The New York Times

Ping An, one of China’s largest financial services companies, is building a 115-story office tower in Shenzhen. The company is a $50 billion powerhouse now worth more than A.I.G., MetLife or Prudential.

SHENZHEN, China — The head of a financially troubled insurer was pushing Chinese officials to relax rules that required breaking up the company in the aftermath of the Asian financial crisis.

The survival of Ping An Insurance was at stake, officials were told in the fall of 1999. Direct appeals were made to the vice premier at the time, Wen Jiabao, as well as the then-head of China’s central bank — two powerful officials with oversight of the industry.

“I humbly request that the vice premier lead and coordinate the matter from a higher level,” Ma Mingzhe, chairman of Ping An, implored in a letter to Mr. Wen that was reviewed by The New York Times.

Ping An was not broken up.

The successful outcome of the lobbying effort would prove monumental.

Ping An went on to become one of China’s largest financial services companies, a $50 billion powerhouse now worth more than A.I.G., MetLife or Prudential. And behind the scenes, shares in Ping An that would be worth billions of dollars once the company rebounded were acquired by relatives of Mr. Wen.

The Times reported last month that the relatives of Mr. Wen, who became prime minister in 2003, had grown extraordinarily wealthy during his leadership, acquiring stakes in tourist resorts, banks, jewelers, telecommunications companies and other business ventures.

The greatest source of wealth, by far, The Times investigation has found, came from the shares in Ping An bought about eight months after the insurer was granted a waiver to the requirement that big financial companies be broken up.

Long before most investors could buy Ping An stock, Taihong, a company that would soon be controlled by Mr. Wen’s relatives, acquired a large stake in Ping An from state-owned entities that held shares in the insurer, regulatory and corporate records show. And by all appearances, Taihong got a sweet deal. The shares were bought in December 2002 for one-quarter of the price that another big investor — the British bank HSBC Holdings — paid for its shares just two months earlier, according to interviews and public filings.

By June 2004, the shares held by the Wen relatives had already quadrupled in value, even before the company was listed on the Hong Kong Stock Exchange. And by 2007, the initial $65 million investment made by Taihong would be worth $3.7 billion.

Corporate records show that the relatives’ stake of that investment most likely peaked at $2.2 billion in late 2007, the last year in which Taihong’s shareholder records were publicly available. Because the company is no longer listed in Ping An’s public filings, it is unclear if the relatives continue to hold shares.

It is also not known whether Mr. Wen or the central bank chief at the time, Dai Xianglong, personally intervened on behalf of Ping An’s request for a waiver, or if Mr. Wen was even aware of the stakes held by his relatives.

But internal Ping An documents, government filings and interviews with bankers and former senior executives at Ping An indicate that both the vice premier’s office and the central bank were among the regulators involved in the Ping An waiver meetings and who had the authority to sign off on the waiver.

Only two large state-run financial institutions were granted similar waivers, filings show, while three of China’s big state-run insurance companies were forced to break up. Many of the country’s big banks complied with the breakup requirement — enforced after the financial crisis because of concerns about the stability of the financial system — by selling their assets in other institutions.

Ping An issued a statement to The Times saying the company strictly complies with rules and regulations, but does not know the backgrounds of all entities behind shareholders. The company also said “it is the legitimate right of shareholders to buy and sell shares between themselves.”

In Beijing, China’s foreign ministry did not return calls seeking comment for this article. Earlier, a Foreign Ministry spokesman sharply criticized the investigation by The Times into the finances of Mr. Wen’s relatives, saying it “smears China and has ulterior motives.”

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White House Presses for Drone Rule Book

WASHINGTON — Facing the possibility that President Obama might not win a second term, his administration accelerated work in the weeks before the election to develop explicit rules for the targeted killing of terrorists by unmanned drones, so that a new president would inherit clear standards and procedures, according to two administration officials.

The matter may have lost some urgency after Nov. 6. But with more than 300 drone strikes and some 2,500 people killed by the Central Intelligence Agency and the military since Mr. Obama first took office, the administration is still pushing to make the rules formal and resolve internal uncertainty and disagreement about exactly when lethal action is justified.

Mr. Obama and his advisers are still debating whether remote-control killing should be a measure of last resort against imminent threats to the United States, or a more flexible tool, available to help allied governments attack their enemies or to prevent militants from controlling territory.

Though publicly the administration presents a united front on the use of drones, behind the scenes there is longstanding tension. The Defense Department and the C.I.A. continue to press for greater latitude to carry out strikes; Justice Department and State Department officials, and the president’s counterterrorism adviser, John O. Brennan, have argued for restraint, officials involved in the discussions say.

More broadly, the administration’s legal reasoning has not persuaded many other countries that the strikes are acceptable under international law. For years before the Sept. 11, 2001, attacks, the United States routinely condemned targeted killings of suspected terrorists by Israel, and most countries still object to such measures.

But since the first targeted killing by the United States in 2002, two administrations have taken the position that the United States is at war with Al Qaeda and its allies and can legally defend itself by striking its enemies wherever they are found.

Partly because United Nations officials know that the United States is setting a legal and ethical precedent for other countries developing armed drones, the U.N. plans to open a unit in Geneva early next year to investigate American drone strikes.

The attempt to write a formal rule book for targeted killing began last summer after news reports on the drone program, started under President George W. Bush and expanded by Mr. Obama, revealed some details of the president’s role in the shifting procedures for compiling “kill lists” and approving strikes. Though national security officials insist that the process is meticulous and lawful, the president and top aides believe it should be institutionalized, a course of action that seemed particularly urgent when it appeared that Mitt Romney might win the presidency.

“There was concern that the levers might no longer be in our hands,” said one official, speaking on condition of anonymity. With a continuing debate about the proper limits of drone strikes, Mr. Obama did not want to leave an “amorphous” program to his successor, the official said. The effort, which would have been rushed to completion by January had Mr. Romney won, will now be finished at a more leisurely pace, the official said.

Mr. Obama himself, in little-noticed remarks, has acknowledged that the legal governance of drone strikes is still a work in progress.

“One of the things we’ve got to do is put a legal architecture in place, and we need Congressional help in order to do that, to make sure that not only am I reined in but any president’s reined in terms of some of the decisions that we’re making,” Mr. Obama told Jon Stewart in an appearance on “The Daily Show” on Oct. 18.

In an interview with Mark Bowden for a new book on the killing of Osama bin Laden, “The Finish,” Mr. Obama said that “creating a legal structure, processes, with oversight checks on how we use unmanned weapons, is going to be a challenge for me and my successors for some time to come.”

The president expressed wariness of the powerful temptation drones pose to policy makers. “There’s a remoteness to it that makes it tempting to think that somehow we can, without any mess on our hands, solve vexing security problems,” he said.

Despite public remarks by Mr. Obama and his aides on the legal basis for targeted killing, the program remains officially classified. In court, fighting lawsuits filed by the American Civil Liberties Union and The New York Times seeking secret legal opinions on targeted killings, the government has refused even to acknowledge the existence of the drone program in Pakistan.

But by many accounts, there has been a significant shift in the nature of the targets. In the early years, most strikes were aimed at ranking leaders of Al Qaeda thought to be plotting to attack the United States. That is the purpose Mr. Obama has emphasized, saying in a CNN interview in September that drones were used to prevent “an operational plot against the United States” and counter “terrorist networks that target the United States.”

But for at least two years in Pakistan, partly because of the C.I.A.’s success in decimating Al Qaeda’s top ranks, most strikes have been directed at militants whose main battle is with the Pakistani authorities or who fight with the Taliban against American troops in Afghanistan.

In Yemen, some strikes apparently launched by the United States killed militants who were preparing to attack Yemeni military forces. Some of those killed were wearing suicide vests, according to Yemeni news reports.

“Unless they were about to get on a flight to New York to conduct an attack, they were not an imminent threat to the United States,” said Micah Zenko, a fellow at the Council on Foreign Relations who is a critic of the strikes. “We don’t say that we’re the counterinsurgency air force of Pakistan, Yemen and Somalia, but we are.”

Then there is the matter of strikes against people whose identities are unknown. In an online video chat in January, Mr. Obama spoke of the strikes in Pakistan as “a targeted, focused effort at people who are on a list of active terrorists.” But for several years, first in Pakistan and later in Yemen, in addition to “personality strikes” against named terrorists, the C.I.A. and the military have carried out “signature strikes” against groups of suspected, unknown militants.

Originally that term was used to suggest the specific “signature” of a known high-level terrorist, such as his vehicle parked at a meeting place. But the word evolved to mean the “signature” of militants in general — for instance, young men toting arms in an area controlled by extremist groups. Such strikes have prompted the greatest conflict inside the Obama administration, with some officials questioning whether killing unidentified fighters is legally justified or worth the local backlash.

Many people inside and outside the government have argued for far greater candor about all of the strikes, saying excessive secrecy has prevented public debate in Congress or a full explanation of their rationale. Experts say the strikes are deeply unpopular both in Pakistan and Yemen, in part because of allegations of large numbers of civilian casualties, which American officials say are exaggerated.

Gregory D. Johnsen, author of “The Last Refuge: Yemen, Al Qaeda and America’s War in Arabia,” argues that the strike strategy is backfiring in Yemen. “In Yemen, Al Qaeda is actually expanding,” Mr. Johnsen said in a recent talk at the Brookings Institution, in part because of the backlash against the strikes.

Shuja Nawaz, a Pakistan-born analyst now at the Atlantic Council in Washington, said the United States should start making public a detailed account of the results of each strike, including any collateral deaths, in part to counter propaganda from jihadist groups. “This is a grand opportunity for the Obama administration to take the drones out of the shadows and to be open about their objectives,” he said.

But the administration appears to be a long way from embracing such openness. The draft rule book for drone strikes that has been passed among agencies over the last several months is so highly classified, officials said, that it is hand-carried from office to office rather than sent by e-mail.

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New Zealand Wants a Hollywood Put on Its Map

WELLINGTON, New Zealand — Standing by his desk in New Zealand’s distinctive round Parliament building, known locally as the Beehive, Prime Minister John Key proudly brandished an ornately engraved sword. It was used, he said, by Frodo Baggins, the protagonist of the “Lord of the Rings” trilogy, and in the films it possesses magical powers that cause it to glow blue in the presence of goblins.

“This was given to me by the president of the United States,” said Mr. Key, marveling that President Obama’s official gift to New Zealand was, after all, a New Zealand product.

In Mr. Key’s spare blond-wood office — with no goblins in sight — the sword looked decidedly unmagical. But it served as a reminder that in New Zealand, the business of running a country goes hand in hand with the business of making movies.

For better or worse, Mr. Key’s government has taken extreme measures that have linked its fortunes to some of Hollywood’s biggest pictures, making this country of 4.4 million people, slightly more than the city of Los Angeles, a grand experiment in the fusion of film and government.

That union has been on enthusiastic display here in recent weeks as “The Hobbit: An Unexpected Journey,” the first of three related movies by the director Peter Jackson, approached its world premiere on Wednesday in Wellington (and on Dec. 14 in the United States). Anticipation in New Zealand has been building, and there are signs everywhere of the film’s integration into Kiwi life — from the giant replica of the movie’s Gollum creature suspended over the waiting area at Wellington Airport to the gift shops that are expanding to meet anticipated demand for Hobbit merchandise (elf ears, $14).

But the path to this moment has been filled with controversy. Two years ago, when a dispute with unions threatened to derail the “Hobbit” movies — endangering several thousand jobs and a commitment of some $500 million by Warner Brothers — Mr. Key persuaded the Parliament to rewrite its national labor laws.

It was a breathtaking solution, even in a world accustomed to generous public support of movie projects, and a substantial incentive package was included: the government agreed to contribute $99 million in production costs and add $10 million to the studio’s marketing budget. And its tourism office will spend about $8 million in its current fiscal year, and probably more in the future, as part of a promotional campaign with Time Warner that is marketing the country as a film-friendly fantasyland.

For a tiny nation like New Zealand, where plans to cut $35 million from the education budget set off national outrage earlier this year (and a backtrack from the government), the “Hobbit” concessions were difficult for many to swallow, especially since the country had already provided some $150 million in support for the three “Lord of the Rings” movies.

Now, even amid the excitement of the “Hobbit” opening, skepticism about the government’s film-centric strategy remains. And recently it has become entangled with new suspicions: that Mr. Key’s government is taking cues from America’s powerful film industry in handling a request by United States officials for the extradition of Kim Dotcom, the mogul whose given name was Kim Schmitz, so he can face charges of pirating copyrighted material.

New Zealand’s political scene erupted in September, as Mr. Key publicly apologized to Mr. Dotcom for what turned out to be illegal spying on him by the country’s Government Communications Security Bureau. The Waikato Times, a provincial paper, taunted Mr. Key, accusing him of making New Zealand the “51st state,” while others suggested that a whirlwind trip by Mr. Key to Los Angeles in early October was somehow tied to the Dotcom case.

“No studio executive raised it with me,” Mr. Key said in an interview last month. He spoke the day after a private dinner where he lobbied executives from Disney, Warner Brothers, Fox and other companies for still more New Zealand film work, with Mr. Jackson, a New Zealander, joining by video link.

Mr. Key has been sharply criticized for cozying up to Mr. Jackson in what some consider unseemly ways. Last year, a month before elections in which he and his National Party were fighting to keep control of the government, Mr. Key skipped an appointment with Queen Elizabeth II in Australia to visit the Hobbiton set. He also interviewed Mr. Jackson on a radio show, prompting an outcry from the opposition.

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Scientists See Advances in Deep Learning, a Part of Artificial Intelligence

Hao Zhang/The New York Times

A voice recognition program translated a speech given by Richard F. Rashid, Microsoft’s top scientist, into Mandarin Chinese.

Using an artificial intelligence technique inspired by theories about how the brain recognizes patterns, technology companies are reporting startling gains in fields as diverse as computer vision, speech recognition and the identification of promising new molecules for designing drugs.

The advances have led to widespread enthusiasm among researchers who design software to perform human activities like seeing, listening and thinking. They offer the promise of machines that converse with humans and perform tasks like driving cars and working in factories, raising the specter of automated robots that could replace human workers.

The technology, called deep learning, has already been put to use in services like Apple’s Siri virtual personal assistant, which is based on Nuance Communications’ speech recognition service, and in Google’s Street View, which uses machine vision to identify specific addresses.

But what is new in recent months is the growing speed and accuracy of deep-learning programs, often called artificial neural networks or just “neural nets” for their resemblance to the neural connections in the brain.

“There has been a number of stunning new results with deep-learning methods,” said Yann LeCun, a computer scientist at New York University who did pioneering research in handwriting recognition at Bell Laboratories. “The kind of jump we are seeing in the accuracy of these systems is very rare indeed.”

Artificial intelligence researchers are acutely aware of the dangers of being overly optimistic. Their field has long been plagued by outbursts of misplaced enthusiasm followed by equally striking declines.

In the 1960s, some computer scientists believed that a workable artificial intelligence system was just 10 years away. In the 1980s, a wave of commercial start-ups collapsed, leading to what some people called the “A.I. winter.”

But recent achievements have impressed a wide spectrum of computer experts. In October, for example, a team of graduate students studying with the University of Toronto computer scientist Geoffrey E. Hinton won the top prize in a contest sponsored by Merck to design software to help find molecules that might lead to new drugs.

From a data set describing the chemical structure of 15 different molecules, they used deep-learning software to determine which molecule was most likely to be an effective drug agent.

The achievement was particularly impressive because the team decided to enter the contest at the last minute and designed its software with no specific knowledge about how the molecules bind to their targets. The students were also working with a relatively small set of data; neural nets typically perform well only with very large ones.

“This is a really breathtaking result because it is the first time that deep learning won, and more significantly it won on a data set that it wouldn’t have been expected to win at,” said Anthony Goldbloom, chief executive and founder of Kaggle, a company that organizes data science competitions, including the Merck contest.

Advances in pattern recognition hold implications not just for drug development but for an array of applications, including marketing and law enforcement. With greater accuracy, for example, marketers can comb large databases of consumer behavior to get more precise information on buying habits. And improvements in facial recognition are likely to make surveillance technology cheaper and more commonplace.

Artificial neural networks, an idea going back to the 1950s, seek to mimic the way the brain absorbs information and learns from it. In recent decades, Dr. Hinton, 64 (a great-great-grandson of the 19th-century mathematician George Boole, whose work in logic is the foundation for modern digital computers), has pioneered powerful new techniques for helping the artificial networks recognize patterns.

Modern artificial neural networks are composed of an array of software components, divided into inputs, hidden layers and outputs. The arrays can be “trained” by repeated exposures to recognize patterns like images or sounds.

These techniques, aided by the growing speed and power of modern computers, have led to rapid improvements in speech recognition, drug discovery and computer vision.

Deep-learning systems have recently outperformed humans in certain limited recognition tests.

Last year, for example, a program created by scientists at the Swiss A. I. Lab at the University of Lugano won a pattern recognition contest by outperforming both competing software systems and a human expert in identifying images in a database of German traffic signs.

The winning program accurately identified 99.46 percent of the images in a set of 50,000; the top score in a group of 32 human participants was 99.22 percent, and the average for the humans was 98.84 percent.

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Scientists See Advances in Deep Learning, a Part of Artificial Intelligence

Hao Zhang/The New York Times

A voice recognition program translated a speech given by Richard F. Rashid, Microsoft’s top scientist, into Mandarin Chinese.

Using an artificial intelligence technique inspired by theories about how the brain recognizes patterns, technology companies are reporting startling gains in fields as diverse as computer vision, speech recognition and the identification of promising new molecules for designing drugs.

The advances have led to widespread enthusiasm among researchers who design software to perform human activities like seeing, listening and thinking. They offer the promise of machines that converse with humans and perform tasks like driving cars and working in factories, raising the specter of automated robots that could replace human workers.

The technology, called deep learning, has already been put to use in services like Apple’s Siri virtual personal assistant, which is based on Nuance Communications’ speech recognition service, and in Google’s Street View, which uses machine vision to identify specific addresses.

But what is new in recent months is the growing speed and accuracy of deep-learning programs, often called artificial neural networks or just “neural nets” for their resemblance to the neural connections in the brain.

“There has been a number of stunning new results with deep-learning methods,” said Yann LeCun, a computer scientist at New York University who did pioneering research in handwriting recognition at Bell Laboratories. “The kind of jump we are seeing in the accuracy of these systems is very rare indeed.”

Artificial intelligence researchers are acutely aware of the dangers of being overly optimistic. Their field has long been plagued by outbursts of misplaced enthusiasm followed by equally striking declines.

In the 1960s, some computer scientists believed that a workable artificial intelligence system was just 10 years away. In the 1980s, a wave of commercial start-ups collapsed, leading to what some people called the “A.I. winter.”

But recent achievements have impressed a wide spectrum of computer experts. In October, for example, a team of graduate students studying with the University of Toronto computer scientist Geoffrey E. Hinton won the top prize in a contest sponsored by Merck to design software to help find molecules that might lead to new drugs.

From a data set describing the chemical structure of 15 different molecules, they used deep-learning software to determine which molecule was most likely to be an effective drug agent.

The achievement was particularly impressive because the team decided to enter the contest at the last minute and designed its software with no specific knowledge about how the molecules bind to their targets. The students were also working with a relatively small set of data; neural nets typically perform well only with very large ones.

“This is a really breathtaking result because it is the first time that deep learning won, and more significantly it won on a data set that it wouldn’t have been expected to win at,” said Anthony Goldbloom, chief executive and founder of Kaggle, a company that organizes data science competitions, including the Merck contest.

Advances in pattern recognition hold implications not just for drug development but for an array of applications, including marketing and law enforcement. With greater accuracy, for example, marketers can comb large databases of consumer behavior to get more precise information on buying habits. And improvements in facial recognition are likely to make surveillance technology cheaper and more commonplace.

Artificial neural networks, an idea going back to the 1950s, seek to mimic the way the brain absorbs information and learns from it. In recent decades, Dr. Hinton, 64 (a great-great-grandson of the 19th-century mathematician George Boole, whose work in logic is the foundation for modern digital computers), has pioneered powerful new techniques for helping the artificial networks recognize patterns.

Modern artificial neural networks are composed of an array of software components, divided into inputs, hidden layers and outputs. The arrays can be “trained” by repeated exposures to recognize patterns like images or sounds.

These techniques, aided by the growing speed and power of modern computers, have led to rapid improvements in speech recognition, drug discovery and computer vision.

Deep-learning systems have recently outperformed humans in certain limited recognition tests.

Last year, for example, a program created by scientists at the Swiss A. I. Lab at the University of Lugano won a pattern recognition contest by outperforming both competing software systems and a human expert in identifying images in a database of German traffic signs.

The winning program accurately identified 99.46 percent of the images in a set of 50,000; the top score in a group of 32 human participants was 99.22 percent, and the average for the humans was 98.84 percent.

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G.E. Looks to Industry for the Next Digital Disruption

SAN RAMON, Calif. — When Sharoda Paul finished a postdoctoral fellowship last year at the Palo Alto Research Center, she did what most of her peers do — considered a job at a big Silicon Valley company, in her case, Google. But instead, Ms. Paul, a 31-year-old expert in social computing, went to work for General Electric.

Ms. Paul is one of more than 250 engineers recruited in the last year and a half to G.E.’s new software center here, in the East Bay of San Francisco. The company plans to increase that work force of computer scientists and software developers to 400, and to invest $1 billion in the center by 2015. The buildup is part of G.E’s big bet on what it calls the “industrial Internet,” bringing digital intelligence to the physical world of industry as never before.

The concept of Internet-connected machines that collect data and communicate, often called the “Internet of Things,” has been around for years. Information technology companies, too, are pursuing this emerging field. I.B.M. has its “Smarter Planet” projects, while Cisco champions the “Internet of Everything.”

But G.E.’s effort, analysts say, shows that Internet-era technology is ready to sweep through the industrial economy much as the consumer Internet has transformed media, communications and advertising over the last decade.

In recent months, Ms. Paul has donned a hard hat and safety boots to study power plants. She has ridden on a rail locomotive and toured hospital wards. “Here, you get to work with things that touch people in so many ways,” she said. “That was a big draw.”

G.E. is the nation’s largest industrial company, a producer of aircraft engines, power plant turbines, rail locomotives and medical imaging equipment. It makes the heavy-duty machinery that transports people, heats homes and powers factories, and lets doctors diagnose life-threatening diseases.

G.E. resides in a different world from the consumer Internet. But the major technologies that animate Google and Facebook are also vital ingredients in the industrial Internet — tools from artificial intelligence, like machine-learning software, and vast streams of new data. In industry, the data flood comes mainly from smaller, more powerful and cheaper sensors on the equipment.

Smarter machines, for example, can alert their human handlers when they will need maintenance, before a breakdown. It is the equivalent of preventive and personalized care for equipment, with less downtime and more output.

“These technologies are really there now, in a way that is practical and economic,” said Mark M. Little, G.E.’s senior vice president for global research.

G.E.’s embrace of the industrial Internet is a long-term strategy. But if its optimism proves justified, the impact could be felt across the economy.

The outlook for technology-led economic growth is a subject of considerable debate. In a recent research paper, Robert J. Gordon, a prominent economist at Northwestern University, argues that the gains from computing and the Internet have petered out in the last eight years.

Since 2000, Mr. Gordon asserts, invention has focused mainly on consumer and communications technologies, including smartphones and tablet computers. Such devices, he writes, are “smaller, smarter and more capable, but do not fundamentally change labor productivity or the standard of living” in the way that electric lighting or the automobile did.

But others say such pessimism misses the next wave of technology. “The reason I think Bob Gordon is wrong is precisely because of the kind of thing G.E. is doing,” said Andrew McAfee, principal research scientist at M.I.T.’s Center for Digital Business.

Today, G.E. is putting sensors on everything, be it a gas turbine or a hospital bed. The mission of the engineers in San Ramon is to design the software for gathering data, and the clever algorithms for sifting through it for cost savings and productivity gains. Across the industries it covers, G.E. estimates such efficiency opportunities at as much as $150 billion.

Some industrial Internet projects are already under way. First Wind, an owner and operator of 16 wind farms in America, is a G.E. customer for wind turbines. It has been experimenting with upgrades that add more sensors, controls and optimization software.

The new sensors measure temperature, wind speeds, location and pitch of the blades. They collect three to five times as much data as the sensors on turbines of a few years ago, said Paul Gaynor, chief executive of First Wind. The data is collected and analyzed by G.E. software, and the operation of each turbine can be tweaked for efficiency. For example, in very high winds, turbines across an entire farm are routinely shut down to prevent damage from rotating too fast. But more refined measurement of wind speeds might mean only a portion of the turbines need to be shut down. In wintry conditions, turbines can detect when they are icing up, and speed up or change pitch to knock off the ice.

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Protests Erupt After Egypt’s Leader Seizes New Power

Tara Todras-Whitehill for The New York Times

Egyptians in central Cairo ran from tear gas during clashes with the police on Friday. Protesters took to the streets in several cities. More Photos »

CAIRO — Protests erupted across Egypt on Friday, as opponents of President Mohamed Morsi clashed with his supporters over a presidential edict that gave him unchecked authority and polarized an already divided nation while raising a specter, the president’s critics charged, of a return to autocracy.  

In an echo of the uprising 22 months ago, thousands of protesters chanted for the downfall of Mr. Morsi’s government in Cairo, while others ransacked the offices of the president’s former party in Suez, Alexandria and other cities.

Mr. Morsi spoke to his supporters in front of the presidential palace here, imploring the public to trust his intentions as he cast himself as a protector of the revolution and a fledgling democracy.

In a speech that was by turns defensive and conciliatory, he ultimately gave no ground to the critics who now were describing him as a pharaoh, in another echo of the insult once reserved for the deposed president, Hosni Mubarak.

“God’s will and elections made me the captain of this ship,” Mr. Morsi said.

The battles that raged on Friday — over power, legitimacy and the mantle of the revolution — posed a sharp challenge not only to Mr. Morsi but also to his opponents, members of secular, leftist and liberal groups whose crippling divisions have stifled their agenda and left them unable to confront the more popular Islamist movement led by the Muslim Brotherhood.

The crisis over his power grab came just days after the Islamist leader won international praise for his pragmatism, including from the United States, for brokering a cease-fire between Hamas and Israel.

On Friday, the State Department expressed muted concern over Mr. Morsi’s decision. “One of the aspirations of the revolution was to ensure that power would not be overly concentrated in the hands of any one person or institution,” said the State Department spokeswoman, Victoria Nuland.

She said, “The current constitutional vacuum in Egypt can only be resolved by the adoption of a constitution that includes checks and balances, and respects fundamental freedoms, individual rights and the rule of law consistent with Egypt’s international commitments.”

But the White House was notably silent after it had earlier this week extolled the emerging relationship between President Obama and Mr. Morsi and credited a series of telephone calls between the two men with helping to mediate the cease-fire in Gaza.

For Mr. Morsi, who seemed to be saying to the nation that it needed to surrender the last checks on his power in order to save democracy from Mubarak-era judges, the challenge was to convince Egyptians that the ends justified his means.

But even as he tried, thousands of protesters marched to condemn his decision. Clashes broke out between the president’s supporters and his critics, and near Tahrir Square, the riot police fired tear gas and bird shot as protesters hurled stones and set fires.

Since Thursday, when Mr. Morsi issued the decree, the president and his supporters have argued that he acted precisely to gain the power to address the complaints of his critics, including the families of protesters killed during the uprising and its aftermath.

By placing his decisions above judicial review, the decree enabled him to replace a public prosecutor who had failed to win convictions against senior officers implicated in the killings of protesters.

The president and his supporters also argued that the decree insulated the Constituent Assembly, which is drafting the constitution, from meddling by Mubarak-era judges.

Since Mr. Mubarak’s ouster, courts have dissolved Parliament, kept a Mubarak loyalist as top prosecutor and disbanded the first Assembly.

But by ending legal appeals, the decree also removed a safety valve for critics who say the Islamist majority is dominating the drafting of the constitution.

Mayy El Sheikh contributed reporting from Cairo, and Helene Cooper from Washington.

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News Analysis: Case Casts a Shadow on a Hedge Fund Mogul

In 2010, the billionaire hedge fund manager Steven A. Cohen gave a rare interview to Vanity Fair. He said that he wanted to combat persistent rumors that his firm, SAC Capital Advisors, routinely violated securities laws by trading on confidential information.

“In some respects I feel like Don Quixote fighting windmills,” Mr. Cohen said at the time. “There’s a perception, and I’m trying to fight that perception.”

Federal prosecutors only heightened that perception on Tuesday, bringing a criminal case against a former SAC employee in what Preet Bharara, the United States attorney in Manhattan, who brought the charges in Federal District Court in Manhattan, called the most lucrative insider trading scheme ever charged.

And for the first time, the evidence suggests that Mr. Cohen participated in trades that the government says illegally used insider information — though prosecutors have not said that Mr. Cohen himself knew the information was confidential, and he has not been charged.

Any prosecution of Mr. Cohen would most likely hinge on the cooperation of Mathew Martoma, the former SAC employee charged in the case. Mr. Bharara said in the charges that Mr. Martoma obtained secret data from a doctor about clinical trials for an Alzheimer’s drug being developed by the companies Elan and Wyeth. The information enabled SAC to avoid losses of almost $194 million on the stocks, which it sold and then bet against, reaping $83 million in profit — a total benefit to the firm of more than $276 million. SAC executed the trades shortly after Mr. Martoma e-mailed Mr. Cohen and said he needed to discuss something important.

As to Mr. Cohen’s potential culpability in the case, the crucial issue is what Mr. Martoma told Mr. Cohen that led SAC to quickly dump $700 million worth of stock. Did he provide his boss details on why he had turned sour on Wyeth and Elan? Specifically, did he share the leak about the drug trial’s negative results and identify the source of the secret information? Through a spokesman, he said he was confident he had acted appropriately.

It appears, for now, that Mr. Martoma will fight the charges. But the crucial question, as it relates to Mr. Cohen, is whether at some point Mr. Martoma will reverse course, admit to insider trading and agree to help the government build a case against his former boss. Without Mr. Martoma’s cooperation, it is unlikely that the prosecutors have enough evidence to charge Mr. Cohen.

“This has all the markings of a case where the government goes after the smaller fish and then pressures them to flip so they can get the whale,” said Bradley D. Simon, a criminal defense lawyer and former federal prosecutor in New York.

The government has several weapons for its effort to persuade Mr. Martoma to agree to a plea, including the stiff sentences for insider trading. Under the federal sentencing guidelines, Mr. Martoma could receive more than 15 years in prison, a term that could be reduced — or avoided altogether — if he agreed to testify against Mr. Cohen.

F.B.I. agents arrested Mr. Martoma, 38, early Tuesday morning at his home in Boca Raton, Fla., a nearly 8,000-square-foot Mediterranean-style mansion on the grounds of the elite Royal Palm Yacht and Country Club. He lives there with his wife, a pediatrician, and three children. A graduate of Duke University and Stanford University’s business school, Mr. Martoma is expected to make an appearance in Federal District Court in Manhattan Monday morning.

Described by a former colleague as low-key and cerebral, Mr. Martoma is one of scores of traders who have earned millions of dollars working under Mr. Cohen and feeding him their best investment ideas. He joined SAC in 2006. In 2008, the year he participated in the alleged illegal trade, the firm paid Mr. Martoma a $9.3 million bonus. But SAC fired him in 2010 after two years of subpar performance.

Charles A. Stillman, a lawyer for Mr. Martoma, said on the day of his arrest, “What happened today is only the beginning of a process that we are confident will lead to Mr. Martoma’s full exoneration.”

It is no secret that the government has been circling Mr. Cohen since the middle of last decade, when it began its crackdown on insider trading, an investigation that has resulted in more than 70 criminal charges. Prosecutors have already linked five former SAC employees to insider trading while at the fund — securing three convictions — though none of those cases connected Mr. Cohen to any illicit activity. But the complaint filed on Tuesday puts Mr. Cohen at the center of the supposed improper conduct.

Mr. Cohen, 56, is a legend on Wall Street, having amassed a multibillion-dollar fortune by posting phenomenal investment returns averaging about 30 percent over the last two decades. Starting with a $25 million grubstake, SAC now manages about $13 billion and has 900 employees across the globe. Mr. Cohen has also emerged as a major force in the art world, owning an eclectic collection that includes works by Picasso, Warhol and Cézanne.

Prosecutors have constructed their case against Mr. Martoma, and increased the pressure on him, by securing the cooperation of Dr. Sidney Gilman, the doctor who supposedly leaked to him the Alzheimer’s drug’s trial data. The case against Mr. Martoma will depend largely on Dr. Gilman’s credibility as a witness.

Dr. Gilman, 80, a neurologist at the University of Michigan medical school, was hired by Elan and Wyeth to monitor the trial’s safety, which gave him access to secret information about the results. SAC retained Dr. Gilman as a consultant and paid him about $108,000.

At first, Dr. Gilman’s reports on the trial’s progress were positive, and SAC built a position in the two drug makers worth approximately $700 million, according to prosecutors. But then, on July 17, 2008, Dr. Gilman told Mr. Martoma that there were problems with the drug, the government said.

A few days later, Mr. Martoma e-mailed Mr. Cohen that he needed to discuss something “important,” and the two then spoke for 20 minutes, according to court filings. Over the next four days, at Mr. Cohen’s direction, SAC Capital jettisoned its entire position in the two stocks and then placed a big negative bet on the drug makers, the government said.

On July 30, after disclosure of the poor trial results, shares of Elan and Wyeth sank. According to the prosecutors’ calculations, SAC would have lost about $194 million had it kept the stock; taking a short position instead generated profits of about $83 million.

Dr. Gilman and the Justice Department have entered into a nonprosecution agreement under which he will cooperate in exchange for not being criminally charged.

Thus far, any potential evidence against Mr. Cohen is entirely circumstantial. The government’s complaint includes e-mails about secretly selling the Elan and Wyeth shares through esoteric methods like algorithms and dark pools. But that is common practice among large, sophisticated funds that do not want to alert competitors or move the stock too much. Moreover, while SAC dumped its large positions in the two stocks quickly — raising the question of what prompted it to do so — Mr. Cohen is known for a rapid-fire trading style. He frequently moves aggressively in and out of stocks while processing gobs of information fed to him by his underlings.

It would be difficult for a jury to infer anything incriminating just from the way these trades were executed.

The government in this case also lacks the powerful wiretap evidence that it has used to convict dozens others, including Raj Rajaratnam, the head of the Galleon Group. Federal agents did wiretap Mr. Cohen’s home telephone for a short period in 2008, according to a person with direct knowledge of the investigation who spoke only on the condition of anonymity. But it is unclear whether the eavesdropping, which was first reported by The Wall Street Journal, yielded any fruit.

Even without incriminating wiretap evidence, the government has brought cases that rely almost entirely on witnesses testifying against their bosses.

One of those cases is now under way in federal court in Manhattan. Prosecutors are currently trying the former hedge fund portfolio managers Anthony Chiasson of Level Global Investors and Todd Newman of Diamondback Capital Management. Prosecutors say that the two were part of a conspiracy that made about $68 million illegally trading technology stocks.

The outcome of that trial is expected to depend largely on whether the jury believes the testimony of two cooperating witnesses who admitted to the conspiracy — Spyridon Adondakis and Jesse Tortora, former junior analysts at Level Global and Diamondback. The two say they shared secret information with the defendants. Defense lawyers have attacked the witnesses’ credibility, accusing them of lying to avoid prison.

That case, too, has strong ties to SAC. Mr. Chiasson and his co-founder were star traders under Mr. Cohen before starting the now-defunct Level Global. And the owners of Diamondback are both former SAC employees; one is Mr. Cohen’s brother-in-law, Richard Schimel. Diamondback, which continues to operate, has not been accused of wrongdoing.

“SAC’s extraordinary profits have always been something of a market mystery,” said Sebastian Mallaby, the author of “More Money Than God,” a book on the history of hedge funds. “As more and more lawsuits implicate former SAC traders, we may at last understand where SAC’s profits came from.”

A version of this article appeared in print on 11/23/2012, on page B1 of the NewYork edition with the headline: New Trading Case Casts a Deeper Shadow on a Hedge Fund Mogul.

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The New Old Age Blog: Home Health Care Help by the Hour

Here is a bright idea that ought to spread: You call your home care agency and say you will need your mother’s aide for the normal two hours on Monday and Wednesday, but for just half an hour (to drive her to a doctor’s office) on Tuesday, then 90 minutes on Thursday. And the agency says, “Sure.”

It sounds logical to hire someone to help — with bathing, dressing, errands, meal preparation, medication reminders – for only as many hours as an older adult needs assistance. But it is actually unusual for companies to offer such flexibility.

The majority of agencies require a four-hour minimum. Having to spend $80  — the national average cost for home care is $21 an hour — if you only need $40 worth of help is a big barrier for families trying to keep their elderly relatives living at home longer. A few agencies allow you to hire for fewer than four hours, but at higher rates.

But Mission Healthcare in San Diego, Calif., a three-year-old agency that began with Medicare-certified skilled home nursing and hospice care, expanded to general home care this summer and decided that clients should be able to specify how much help they want – in 15-minute increments — and will pay for.

“We’ll come for as long as they need us to,” said Mark Kimsey, one of Mission’s four directors. “In one hour, a well-trained caregiver can get the client bathed and dressed, prepare three meals and have them organized for the day.” (I have to think that is a speedy caregiver with a not-too-frail client, but still … )

Can Mission, which charges $19 to $20 an hour, actually make money this way? Though overall the agency serves 1,100 clients, its fledgling home care business is still small: 30 aides caring for just 60 clients. The aides can get benefits if they work enough hours, a bonus for them and for consumers (better employees, lower turnover), but an additional cost for the company.

The directors say they are profitable already, and that the approach will succeed because more people will like the flexibility and potential savings, and sign up. It is also true, let’s acknowledge, that a person who can get by with an hour or two a day for now may well need more help eventually, a boost for Mission’s bottom line.

Competitors are no doubt watching to see if this works. I’m curious, too, to see if the policy catches on. “Consumers can change the marketplace if they want to,” Mr. Kimsey said. It would be nice to think that is true.

Would you use this kind of hourly service, if it were available?

Paula Span is the author of “When the Time Comes: Families With Aging Parents Share Their Struggles and Solutions.”

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The New Old Age Blog: Home Health Care Help by the Hour

Here is a bright idea that ought to spread: You call your home care agency and say you will need your mother’s aide for the normal two hours on Monday and Wednesday, but for just half an hour (to drive her to a doctor’s office) on Tuesday, then 90 minutes on Thursday. And the agency says, “Sure.”

It sounds logical to hire someone to help — with bathing, dressing, errands, meal preparation, medication reminders – for only as many hours as an older adult needs assistance. But it is actually unusual for companies to offer such flexibility.

The majority of agencies require a four-hour minimum. Having to spend $80  — the national average cost for home care is $21 an hour — if you only need $40 worth of help is a big barrier for families trying to keep their elderly relatives living at home longer. A few agencies allow you to hire for fewer than four hours, but at higher rates.

But Mission Healthcare in San Diego, Calif., a three-year-old agency that began with Medicare-certified skilled home nursing and hospice care, expanded to general home care this summer and decided that clients should be able to specify how much help they want – in 15-minute increments — and will pay for.

“We’ll come for as long as they need us to,” said Mark Kimsey, one of Mission’s four directors. “In one hour, a well-trained caregiver can get the client bathed and dressed, prepare three meals and have them organized for the day.” (I have to think that is a speedy caregiver with a not-too-frail client, but still … )

Can Mission, which charges $19 to $20 an hour, actually make money this way? Though overall the agency serves 1,100 clients, its fledgling home care business is still small: 30 aides caring for just 60 clients. The aides can get benefits if they work enough hours, a bonus for them and for consumers (better employees, lower turnover), but an additional cost for the company.

The directors say they are profitable already, and that the approach will succeed because more people will like the flexibility and potential savings, and sign up. It is also true, let’s acknowledge, that a person who can get by with an hour or two a day for now may well need more help eventually, a boost for Mission’s bottom line.

Competitors are no doubt watching to see if this works. I’m curious, too, to see if the policy catches on. “Consumers can change the marketplace if they want to,” Mr. Kimsey said. It would be nice to think that is true.

Would you use this kind of hourly service, if it were available?

Paula Span is the author of “When the Time Comes: Families With Aging Parents Share Their Struggles and Solutions.”

Read More..