Britain kow tows to China as athletes are forced to sign no criticism contracts

British Olympic chiefs are to force athletes to sign a contract promising not to speak out about China's appalling human rights record – or face being banned from travelling to Beijing.

The move – which raises the spectre of the order given to the England football team to give a Nazi salute in Berlin in 1938 – immediately provoked a storm of protest.

Gagged: Marathon runner Paula Radcliffe is likely to be one of those affected by the ban

The controversial clause has been inserted into athletes' contracts for the first time and forbids them from making any political comment about countries staging the Olympic Games.

It is contained in a 32-page document that will be presented to all those who reach the qualifying standard and are chosen for the team.

From the moment they sign up, the competitors – likely to include the Queen's granddaughter Zara Phillips and world record holder Paula Radcliffe – will be effectively gagged from commenting on China's politics, human rights abuses or illegal occupation of Tibet.

Prince Charles has already let it be known that he will not be going to China, even if he is invited by Games organisers.

His views on the Communist dictatorship are well known, after this newspaper revealed how he described China's leaders as “appalling old waxworks” in a journal written after he attended the handover of Hong Kong. The Prince is also a long-time supporter of the Dalai Lama, the Tibetan leader.

Yesterday the British Olympic Association (BOA) confirmed to The Mail on Sunday that any athlete who refuses to sign the agreements will not be allowed to travel to Beijing.

Read more...

• Shameful picture of England squad giving Nazi salute still haunts British sport. Why, 70 years later, do we still suck up to dictators?

Should a competitor agree to the clause but then speak their mind about China, they will be put on the next plane home.

The clause, in section 4 of the contract, simply states: “[Athletes] are not to comment on any politically sensitive issues.”

It then refers competitors to Section 51 of the International Olympic Committee charter, which “provides for no kind of demonstration, or political, religious or racial propaganda in the Olympic sites, venues or other areas”.

Contention: the Queen's granddaughter Zara Phillips stands to be among the athletes who will be forced to sign the gagging order

The BOA took the decision even though other countries – including the United States, Canada, Finland, and Australia – have pledged that their athletes would be free to speak about any issue concerning China.

To date, only New Zealand and Belgium have banned their athletes from giving political opinions while competing at the Games.

Simon Clegg, the BOA's chief executive, said: “There are all sorts of organisations who would like athletes to use the Olympic Games as a vehicle to publicise their causes.

“I don't believe that is in the interest of the team performance.

“As a team we are ambassadors of the country and we have to conform to an appropriate code of conduct.”

However, human rights campaigner Lord David Alton condemned the move as “making a mockery” of the right to free speech.

The controversial decision to award the Olympics to Beijing means this year's Games have the potential to be the most politically charged since 1936.

Adolf Hitler used the Munich Games that year to glorify his Nazi regime, although his claims of Aryan superiority were undermined by black American athlete Jesse Owens winning four gold medals.

More recently, there was a mass boycott of the 1980 Games in Moscow in protest at the Soviet invasion of Afghanistan.

But Colin Moynihan – now BOA chairman Lord Moynihan – defied Margaret Thatcher's calls for British athletes to stay at home and won a silver medal as cox of the men's eight rowing team.

Former Olympic rowing champion Matthew Pinsent has already criticised the Chinese authorities over the training methods used on children, which he regarded as tantamount to abuse.

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Past shame: The England team give Nazi salutes at the 1938 Berlin Olympics, a memory which critics do not want to see recalled in China

Young gymnasts told him they were repeatedly beaten during training sessions.

Mr Clegg confirmed that such criticisms would be banned under the team's code of conduct, which will be in force from when athletes are selected in July, until the end of the Games on August 24.

Mr Clegg said: “During the period of the contract, that sort of action would be in dispute with the team-member agreement.

“There are all sorts of sanctions that I can apply. I had to send a team member home in Sydney because they breached our sponsorship agreement and that is the first time it happened.

“I have to act in the interest of the whole British team, not one individual. No athlete is above being part of the team.

“There is a requirement on team members to sign the agreement. If athletes step out of line, action will have to be taken.”

Darren Campbell, Olympic relay gold winner at the 2004 Games in Athens, said the BOA's move would “heap extra pressure on athletes”. But he added: “We are there to represent our country in sporting terms, just as our Army do when they go off to war. It is not supposed to be about politics.”

The BOA is taking a far more stringent stance than authorities in other countries. Australian Olympic Committee president John Coates said: “What we will be saying to the athletes is that it's best to concentrate on your competitions.

“But they're entitled to have their opinions and express them. They're free to speak.”

Jouko Purontakanen, secretary general of the Finnish Olympic Committee, said: “We will not be issuing instructions on the matter. The freedom of expression is a basic right that cannot be limited.

“But the starting point is that we will go to Beijing to compete, not to talk politics.”

Political gestures have been made at previous Olympics, most famously in Mexico City in 1968 when black American 200m champion Tommie Smith and bronze medallist John Carlos raised their fists in a black power salute.

Both were suspended from the US Olympic team and barred from the Olympic village.

Forty years on, British athletes face similar sanctions if they highlight the abuse of human rights in China.

Last night Edward McMillan-Scott, Conservative MEP and the European Parliament vice-president, predicted a public outcry over the BOA's move.

He said: “Foreign Secretary David Miliband is off to China soon. But before he gets on the plane, he and the rest of the Government should tell the BOA to take this clause out of the agreement.”

Potentially the contract means that a British athlete who witnesses someone being mistreated on the way to a stadium is forbidden from even speaking to their colleagues about it.

Competitors emailing home or writing blogs will also have to exercise self-censorship – or face having their Olympic dreams ruined.

Lord Alton said: “It is extraordinary to bar athletes from expressing an opinion about China's human-rights record. About the only justification for participating in the Beijing Games is that it offers an opportunity to encourage more awareness about human rights.

“Imposing compulsory vows of silence is an affront to our athletes, and in China it will be viewed as acquiescence.

“Each year 8,000 executions take place in China, political and religious opinion is repressed, journalists are jailed and the internet and overseas broadcasts are heavily censored.

“For our athletes to be told that they may not make any comment makes a mockery of our own country's belief in free speech.”

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Fed Interest-Rate Cuts Fail to Lower Borrowing Costs (Update3)

By Scott Lanman

Feb. 13 (Bloomberg) -- The Federal Reserve's interest-rate cuts last month have failed to lower borrowing costs for many companies and households, increasing the chance of further reductions from the central bank.

Companies are paying more to borrow now than before the Fed reduced its benchmark rate by 1.25 percentage point over nine days in January, based on data compiled by Merrill Lynch & Co. Rates on so-called jumbo mortgages, those above $417,000, have increased in the past month, making it tougher to sell properties and risking further price declines.

``It's the clogging up of the credit markets that worries me most,'' Harvard University economist Martin Feldstein said in an interview in New York. ``The Fed has done a lot of cutting, the question is whether it's going to get the traction that it did in the past.''

Lenders and investors are demanding greater compensation for offering credit as losses mount on subprime-mortgage securities and concerns grow that ratings of bond insurers will be cut. Elevated borrowing costs mean Fed Chairman Ben S. Bernanke will have to reduce rates further to revive the economy, Fed watchers said.

Banks have been forced to abandon loan sales or offer discounts of as much as 5 percent for companies including Harrah's Entertainment Inc., First Data Corp. and Alltel Corp. in the past six months because of investor reluctance to buy debt perceived to be too risky.

Delphi Financing

General Motors Corp., the world's largest automaker, said yesterday it may have to help its former auto-parts unit, Delphi Corp., obtain $6.1 billion in financing to emerge from two years of bankruptcy because of ``difficulty'' in finding investors for the loans Delphi needs.

``The problem is that every piece of news we're getting continues to be bad,'' said Stephen Cecchetti, a former New York Fed bank research director, and now a professor at Brandeis University in Waltham, Massachusetts. ``They will have to ease more. It's the only thing they can do.''

Feldstein, who heads the National Bureau of Economic Research, the group that sets the dates for U.S. economic cycles, said the chance of a recession is ``close to 50-50.''

Traders now see a 100 percent chance of at least a half- point reduction at or before the Federal Open Market Committee's March 18 meeting, up from 68 percent on Jan. 31, when the Fed cited tighter credit conditions as a reason for lowering rates. Futures show 20 percent odds of a three-quarter point move.

Retail Sales

Futures rallied even after a government report today showed retail sales rose 0.3 percent in January from December, against the median forecast in a Bloomberg News survey for a decline. Economists said the gain, led by car and gasoline purchases, wasn't enough to indicate Fed rate cuts are affecting spending.

Bernanke may give an update of his outlook tomorrow when he testifies before the Senate Banking Committee at a hearing on the economy and financial markets. Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox are also scheduled to appear.

The extra yield investors demand to buy investment-grade U.S. corporate bonds rose to 2.37 percentage point Feb. 12 from 2.24 percentage point on Jan. 21, Merrill data show. For high- risk, high-yield securities, premiums over Treasury securities have risen a quarter-point, Merrill data show.

Yellen Frustration

``The increase in credit spreads has sort of worked against our policy,'' San Francisco Fed President Janet Yellen told reporters at her bank yesterday. ``The fact that the spreads went up so dramatically really resulted in an effective tightening of financial conditions that our cuts were partly meant to address.''

Those cuts were the fastest since the federal funds rate became the principal policy tool around 1990. The Fed lowered the rate by 75 basis points on Jan. 22 in an emergency move, then by an additional 50 basis points at the regular meeting on Jan. 30. A basis point is 0.01 percentage point.

Beyond March, traders expect quarter-point rate reductions at the following FOMC meetings in April and June, based on futures prices on the Chicago Board of Trade.

In the market where banks lend to each other, borrowing costs have receded since the Fed began special auctions of funds in December. The three-month dollar London Interbank Offered Rate fell to 12 basis points over the Fed's target rate today, from more than 1 percentage point above it two months ago.

`Not Functioning'

Yellen acknowledged in a Feb. 7 speech, repeated yesterday, that borrowers with greater default risk are paying more for loans. The markets for securities backed by mortgages ``are not functioning efficiently, or may not be functioning much at all,'' she said.

``As long as the credit strains remain and might even still be intensifying, it certainly supports the case for continuing to ease aggressively,'' said Brian Sack, a former Fed research manager who is now senior economist at Macroeconomic Advisers LLC in Washington. ``We don't need spreads to come down. We do need them to stop widening.''

The lack of improvement may make a fiscal-stimulus plan passed by Congress last week more critical. The $168 billion package, to be approved by President George W. Bush today, would send tax rebate checks to more than 111 million households, probably beginning in May.

``It's a necessary thing given the uncertainties about both the economy and the power of monetary policy at this point,'' said Harvard's Feldstein. It will probably add 1 percentage point to economic growth, he said.

Fannie, Freddie

The bill will allow Fannie Mae and Freddie Mac to raise the limit on purchasing ``jumbo'' loans to $729,750 from $417,000. The idea is to help struggling homeowners finance larger mortgages at lower interest rates, especially in expensive metropolitan areas such as New York, Washington and Southern California, where median home prices now exceed the $417,000 limit.

Yesterday, at a closed-door luncheon with Republican senators in Washington, Bernanke was ``very upbeat'' that the economy would avoid a recession, Iowa Senator Charles Grassley said in an interview.

Kentucky Senator Jim Bunning said in an interview that while Bernanke didn't comment on interest rates, the Fed chief said that ``they have their eye on inflation and price stability, and if the credit crunch didn't ease, obviously they are going to have to do something about it.''

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net

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This is a collection of all the unknown big dollar bills that America has had in the past.

1. The $500 Dollar Bill

   

   
   
   Yes, it may be hard to believe but the U.S. government did print $500 dollar bills for the general public at one point in history. This specific $500 dollar bill was printed in 1928 and features a portrait of the twenty- fifth President William McKinley. Today, there are very few of these $500 bills left. Nowadays they are collectors' items and sell for thousands. The funny thing is that they still could be used in stores today, because by law they are still U.S. currency. If you are interested in buying $500 bills you can find them for sale online.
   

2. The $1,000 Dollar Bill

   

   
   
   
   The United States government also printed $1,000 dollar bills which circulated in the American general public. This specific $1,000 dollar bill was printed in 1928 and has the portrait of the twenty-fourth president Grover Cleveland printed on. The $1,000 dollar bills are also collectors' items and can be found for sale online. The 1,000 dollar bill and all bills over $100 were printed until 1946 before they were discontinued. They then were then allowed to circulate in the general public until 1969 were they were recalled. The only remaining $1,000 dollar bills are the ones that were not turned in on the recall. There are very few bills left and are all worth thousands of dollars.
   

3. The $5,000 Dollar Bill

   

   
   
   The United States government also printed a $5,000 dollar bill which circulated in the American general public until 1969 when it was recalled. This specific $5,000 dollar bill was printed in 1934 and contains the portrait of the fourth president of the United States James Madison printed on it. There are less then five hundred $5,000 bills remaining in the world and if you are looking to buy one, check online. This site has very many old dollar bills that are for sale and is a dream website for any modern day collector.
   

4. The 10,000 Dollar Bill

   

   
   
   The $10,000 dollar bill was the largest of all dollar bills that was printed and circulated in the American general public. This specific dollar bill was printed in 1934 and contains the portrait of U.S. Treasury Secretary Chase printed on it. These bills were also recalled in 1969 and very few are still around today. The $10,000 dollar bill is also a collectible and can be bought online. But don't expect one of these babies to come cheap, be ready to leave a dent in your wallet and fork out over 10 grand. If I were I wouldn't spend one of these in a store. These bills would only be for the hardcore collectors.
   

5. The 100,000 Dollar Bill

   

   
   
   The $100,000 dollar bill is actually not a dollar bill at all, it's a gold certificate. What's a gold certificate? Well a gold certificate is money that the government prints that only they can own and use. It is intended for only the use in Fiscal Channels. They were never issued or used for general circulation. This specific gold certificate was printed in 1934 and has the 28th president, Woodrow Wilson's portrait on it. There were only 42,000 $100,000 dollar certificates printed and the only ones around today are not for sale and are used for educational purposes only. The few remaining undestroyed $100,000 certificates are institutionalized today and may be seen only in some museums.

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Graph: How Americans Spend Their Money

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Woman files $54m lawsuit against Best Buy for losing laptop

We've definitely heard some horror stories about Best Buy, but it looks like a DC woman named Raelyn Campbell has had enough: she's opening up a big can of America Sauce on the retailer in the form of a $54m lawsuit after it lost her laptop during warranty service. Campbell says she bought a laptop and $300 extended warranty from Best Buy in 2006, and took the machine in for service when the power switch broke last May. Told repairs would take two to six weeks, she set off on a business trip, only to find that her laptop had gone missing when she returned in August. Fast forward through several more weeks of run-around and delays, and the best the Buy would offer for losing a $1,100 machine with all her data on it was a $900 gift card. After being informed of the potential for identity theft, Campbell filed the multimillion-dollar suit, which prompted Best Buy to up its offer to a whopping $2,100 plus a $500 gift card. Campbell says she's not dropping the case until she finds out what happened to her machine -- and she wants ol' Blue to train its employees on privacy issues and revamp its warranty policy. Honestly? We'd say she has a better chance of getting the $54 million.

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Victim: $54 million Best Buy lawsuit stupid, but necessary

$54 million is what Raelyn Campbell wants out of Best Buy for her missing laptop, personal data, and her time. The Washington, DC, resident filed a lawsuit against the company after Best Buy allegedly lied to her for months at a time about the status of her machine, then offered her an insultingly low compensation once it acknowledged the loss. Campbell even says that she knows $54 million is outrageous, but it's apparently the only way to get media attention and put enough pressure on Best Buy to do the right thing.

"It shouldn't take a $54 million lawsuit to motivate Best Buy to address these issues," Campbell told MSNBC. In fact, she doesn't even expect to win that much—all she wants is appropriate compensation, an explanation of what happened, and a promise that employees will receive training on preventing the loss or theft of items from secure areas of the store.

The story of how the lawsuit came about is convoluted. Campbell bought the laptop from Best Buy in 2006 and was "talked into" paying an extra $300 for the extended warranty. A year later, in May of 2007, the power switch on the computer broke, so she took it in for repairs and was told it would take between two and six weeks. Two months later, she began making phone calls to Best Buy to find out the status of her repairs, but continually got the runaround.

"On July 11, I contacted the (store's) helpline and was instructed by 'Agent David Goodfellow' that it would be 'ready within days,'" Campbell wrote in her complaint letter to the company in late August. She called again on July 19, when someone told her that the machine was in Louisville for repairs. On July 25, she was told that a part had been ordered and it would be leaving Louisville "soon."

On August 9, Campbell managed to get an answer out of another Best Buy employee, who told her that the computer never actually went anywhere. In fact, he told her several days later that the computer was missing, and that Campbell would be compensated. That compensation amounted to a $900 gift card several weeks and a number of phone calls later—an amount that Campbell found to be ridiculously low. She says that her laptop and warranty alone cost over $1,100, not counting her purchased software, time, and all of her lost data. Campbell demanded $2,100 in cash, but was met with silence.

After Campbell contacted the Washington, DC, attorney general's office in November, Best Buy offered her a $1,100 refund to her credit card and a $500 gift card. Finally, when Campbell filed her $54 million attention-getting lawsuit later that month, the company upped its offer: $2,500 in cash, plus all of the above. But Campbell withdrew her original demand for $2,100 because of the added costs of filing police reports, consulting lawyers, and taking measures to deal with identity theft.

That's right: Campbell's tax returns were on her laptop, and Best Buy apparently violated Washington, DC's security breach notification laws by not telling her about the potential data loss. And the potential for data theft as a result of missing equipment is no laughing matter: the state of Ohio, TSA, IRS, US Department of Transportation, and the Veterans Administration have all lost equipment (often laptops) that have forced them to alert millions of citizens to watch out for identity theft. Campbell says that she still hasn't heard from Best Buy on that particular issue, and has been forced to incur extra costs to monitor all of her accounts for suspicious activity.

Best Buy did not respond to our requests for comment by publication time.

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The innovative news aggregator site has the big boys queueing up. Dominic White reports

There aren't many places in cyberspace where you can find stories about Super Tuesday, CIA interrogations and high-speed photography next to a video of man having a tennis ball fired at his testicles. But Digg.com is one, if the mid-week running order on its homepage was anything to go by.

Digg's eclectic cocktail of serious politics, tech news, celebrity gossip, conspiracy-theorising bloggers and puerile video has got millions hooked. It is the runaway leader in a wave of web-only news sites that have replaced news editors and sub-editors with the readers themselves, who vote to move stories or clips to the front page of the site, or to bury them.

Digg attracts 24m unique users a month from a demographic dominated by 18-40-year-old tech-savvy males with money to spend. Advertisers are salivating, traditional news companies are looking over their shoulders and Silicon Valley bankers are tipping Digg as one of the big takeover targets of this year.

Last year, Microsoft struck a deal to sell banner adverts on Digg in a three-year agreement which upset some of Digg's many left-leaning, anti-establishment users.

Some think Digg could be next on Bill Gates' shopping list after Yahoo! but Digg chief executive Jay Adelson steadfastly refuses to be drawn when probed with questions about potential M&A. "We are growing and we are very happy with the relationship we have established with Microsoft," says the 37-year-old Californian, whose last job was taking $2.5bn data-centre giant Equinix to market. "We have a fully funded business plan. We don't require capital in our opinion to reach profitability."

Digg's growth story is remarkable even by Web 2.0 standards. It began life in September 2004, the brainchild of web pioneer and cable TV presenter Kevin Rose. Rose, now 30, developed an algorithm that would allow web users to control and promote news and other content on a single site, without external editorial control. Within weeks he realised that, combined with a social-networking element, the site had serious commercial potential He hired a clutch of net veterans, led by Adelson, to help turn Digg into a business.

"Kevin was inspired by small enthusiast news-aggregation sites [for technology types] such as SlashDot and MacRumors," says Adelson. "But he wanted to take it to the masses." From the largest online news destinations such as The Wall Street Journal and CNN to the most obscure blog, Digg users can recommend - or "Digg" - their favourite content and provide links to those sites. To stop users rigging Digg, the closely guarded algorithm is constantly updated.

Rose, who started the business with $1,000 of his own money, remains the largest individual shareholder, but he has been backed by a Who's Who of Silicon Valley investors, including eBay founder Pierre Omidyar; Facebook backer David Sze at Greylock Partners; social-networking pioneer Reid Hoffman and Netscape co-founder Marc Andreessen.

Even with all that financial muscle, Digg remains a low-cost operation, employing just 40 staff. It is spared the massive infrastructure costs of operations such as video-sharing site YouTube, now owned by Google, because Digg merely provides links to other sites.

Ian Maude of industry-watcher Enders Analysis says Digg's cross between news and social networking sits in a sweet spot on the web. "News is a very good subject to pick because it has a very high appeal," he says. "Our research shows that 70 per cent of internet users in the UK regularly visit news websites."

Despite its US base, Adelson says London is Digg's number one city in terms of "user density", adding that 7 per cent of all of Digg's traffic last month came from the UK.

Not surprisingly, Digg's growing power has caused concern among established news organisations - until recently unused to competing for readers' attention with content from random individual bloggers.

But Adelson insists Digg has a symbiotic relationship with traditional publications. "It took a good six to 12 months for people to understand, but once they got it they realised we actually drive a tremendous amount of new users to their online publications, so we are helping expand their reach.

"Digg is levelling the playing field but quality still matters: so while we believe it's important for Digg to allow any author to be exposed, our users recognise that when reporters get paid and have training, it shows."

Most major news sites - from The Washington Post to CBS to The Daily Telegraph - now feature a Digg button, which readers can click to recommend articles to Digg's community. These generate more than 1bn page impressions every month, says Adelson.

But Digg's "wisdom of the masses" approach has backfired before, exposing the tightrope its business model walks between freedom of information and litigation. Last year, under pressure from the owners of the technology behind next-generation DVDs, Digg threatened to take down stories featuring a way to crack their copy protection.

The users staged a rebellion by voting en masse for the stories to stay up. Rose and Adelson reversed their decision, and Rose wrote on Digg's company blog to explain why. " You've made it clear. You'd rather see Digg go down fighting than bow down to a bigger company. We hear you, will deal with whatever the consequences might be. If we lose, then what the hell... we died trying."

Digg didn't die, and now Adelson and Rose are looking forward to putting a host of new personalisation features on the site. But perhaps the biggest challenge, as Digg gets bigger, is to maintain the backing of the site's so-far loyal - but sometimes volatile - user community.

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Best Buy's pushing Blu-ray to the front

he HD DVD camp, still reeling after losing support from Netflix this morning, may feel flattened as Best Buy has announced it will officially promote Blu-ray as the HD format of the future. Starting in early March the store will showcase Blu hardware and software on its shelves and website, and switch from its current neutral stance, to recommending Blu-ray to any customers that ask. While "an assortment of HD DVD products" will remain, a vote of confidence from major retailers, following the majority of studio support, will make it impossible for red to recover.

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Netflix picks Blu-ray, good luck renting an HD DVD soon

In what can only be classified as yet another crushing blow to the embattled HD DVD camp, rent-by-mail giant Netflix has just announced its intention to only stock Blu-ray titles in the future. Netflix justified its decision by pointing out the fact that most Hollywood studios seem to be converging solely around the Sony-backed format -- a fact that's all too familiar to Toshiba and friends. With both Blockbuster and now the 'Flix having eschewed HD DVD for BD, it's gonna get harder and harder to even find a place to rent those former discs in the first place, let alone one that has a decent selection.

Update: It looks like all hope is not lost for HD DVD renters. Not only does Blockbuster Online still carry titles in the endangered format, but Netflix should continue offering a limited selection of discs until current stock is phased out around the end of the year.

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Are you a workplace pyro?

The manager who makes every little problem a three-alarm fire can burn your business. Is it you?

(FSB Magazine) -- Even now, she winces when she thinks of the way she used to manage her staff. The only woman partner at a small biotech research firm with a roster of blue-chip clients, she found the pressure to perform intense. Her direct reports were young, bright, ambitious, eager to please. But she never trusted them to execute on their own. Every project became a crisis, every meeting a fire drill. She would make assignments at night and on weekends. When she was out visiting clients, she kept the team jumping via e-mails - each one marked URGENT, including the one about the typo in the footnote of a routine report. "I drove everyone crazy, and I didn't even realize it half the time," she says.

Cruella - not her real name - is finally getting help. For six months she has been in family therapy to deal with her overbearing behavior at home and at work. "This is something I am going to work on - seriously," she says.

But it's too late to prevent damage to her small company: In the space of just months, six of her nine staffers quit to escape her reign of terror.

Cruella is what Michael Watkins, founder of management consultancy Genesis Advisers (genesisadvisers.com), calls a "pyromaniac." Pyros are bosses who compulsively light one fire after another in their organizations. These constant emergencies are highly destructive. They waste time and resources while diverting attention from the important issues facing the business. Employees become too busy to do their regular work, and while the pyromaniac boss focuses on the minutiae, the business may miss the chance to head off more dangerous long-term threats.

Does any of this seem familiar? "Entrepreneurs are among the worst pyros," Watkins says. "They're head-strong and impulsive. These qualities may serve them well creating companies but not necessarily running them." Most successful entrepreneurs obsess about details, pursue specific goals, and remain vigilant to competitive threats. But they also think of themselves as visionaries without whom the business wouldn't exist. Those traits feed the pyro habit.

There are legions of pyros out there, says Watkins, whose Newton, Mass., firm teaches leadership, with a special emphasis on business owners. Watkins first put the name "pyromaniac" to this management style in an essay posted on Harvard Business Online in March. The entry quickly generated more than 10,000 responses.

Technology enables modern-day Neros

While the pyromaniac tag may describe an age-old management style (think Nero), it arrives in the lexicon at a time when technology is making pyromania easier and possibly more common. "Technology reduces the barriers that would curb this kind of behavior," says Watkins. "Years ago, a pyro's impulses might have been dampened a bit by the effort to write a memo or pick up the phone. In contrast, think how simple it is to blast off an e-mail to five people, ten people, or even more. E-mail is a one-to-many medium that has the potential to cause a kind of reactive hysteria." Watkins calls e-mail, instant messaging, and Black-Berrys "incendiary devices."

Management gurus say that pyromania is the antithesis of true leadership. "Pyromania is a knee-jerk reaction and, ultimately, a powerfully destructive force," says John Seiffer of Milford, Conn., an executive coach who has counseled more than a few pyros. "Leadership is hard work because it requires thought and discipline and time and patience."

Seiffer had a client, a restaurant owner, who was a classic pyro. He loved being out on the floor chatting with customers and micromanaging the service. But he hated sitting at a desk in the back crunching numbers. As a result, he did not plan correctly for the seasonality of his business and, in a panic, fired employees leaving him short-staffed when the busy season came around again. To wean him off his seat-of-the-pants management style, Seiffer had the owner develop checklists that forced him to focus on long-term business issues. "Pyros fritter away their time on issues that seem urgent but are not important," says Seiffer. "CEOs address issues that are important but may not seem urgent."

The root causes of office arson

What sparks pyromania? For some, it satisfies a deep need to feel powerful and important. Others find that injecting anxiety in subordinates lessens their own. Some pyros are just suspicious that everyone is slacking off behind their backs. Creating a frenzy can be very satisfying for those who don't trust employees to put in an honest day's work.

Some cultures foster pyromania. The biotech executive says she modeled her fire-starting style on that of her first boss. They worked at a major consulting company where every summer brought a new crop of fresh MBAs to break in. "Whipping them into a frenzy of work was our way of hazing," she says. "We were just trying to weed out the ones who couldn't hold up under pressure."

While pyromaniac management may be a dandy way to find the weakest link, it is a terrible way to motivate. It demoralizes and demeans workers. The work routine becomes unpredictable and unsatisfying. Over time, the environment turns toxic. Talented workers depart, leaving a colony of sycophants who enjoy the false urgency of the daily fire drills. "Some companies have a revolving door for COOs, CFOs, and CEOs," Watkins says. "That's often a tip-off that the founder or the president is a pyromaniac."

Break the addiction to creating emergencies

Is there a cure? Watkins says the key is impulse control. Lock up the cell-phone and the other mobile devices after hours. Set a daily limit on e-mails. If that seems too unrealistic, go ahead and write the e-mails, but don't send them immediately. Instead, save them as drafts. Force yourself to wait a couple of hours - not just minutes - then reread and ask yourself if the matter is as urgent as it seemed when you first thought of it. Practice some restraint in your messages. Don't call it urgent unless there's blood. Remember that exclamation points are banned for everyone but prepubescent girls. And don't use BOLDFACE CAPITALS unless there's a bomb in the building.

Kicking the pyro habit is not easy. Recently, when Cruella was out of town for a speech, she decided at the last minute that she really needed new data and called her assistant back at the office. "I had him jumping for 16 hours," she says. "But that doesn't really count as pyromania. I needed more data. Cutting-edge data. After all, we're a data company. He should have known that before I got on the plane."

Have you ever been an office pyromaniac? How did you break the habit? Share the approach that worked for you on the FSB Features Forum. To give feedback, please write to fsb_mail@timeinc.com.

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Will Disney Keep Us Amused?

The Walt Disney Company is building a robotic Mr. Potato Head to greet visitors at a theme park that is being digitally refitted to entice the video generation.

ANAHEIM, Calif. — VISIT Disney’s California Adventure — a 55-acre theme park next door to the fabled progenitor of the modern amusement Mecca, Disneyland — and you will find a noisy reminder of what happens when a company loses its focus and cuts corners.

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Kevin Rafferty, left, a developer, and Roger Gould, standing, creative director at Pixar, worked with Don Rickles on the script for Mr. Potato Head.

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The Walt Disney Company built the park on the cheap in 2001, and many rides are copies of familiar carnival workhorses like the Ferris wheel. A lack of landscaping can leave guests sweltering. Outdoor shows were borrowed from other Disney properties. And the theme, built around tributes to California, is modest except for an occasionally unintentional ghost-town atmosphere: The park draws about 6 million visitors a year, a trickle compared with the 15 million who swarm Disneyland.

Now, Disney is embarking on a $1.1 billion, five-year effort to get California Adventure on track. The blueprints call for ripping out ho-hum rides and adding elaborate new ones, rebuilding the park’s entrance — a hodgepodge of turnstiles, a miniature Golden Gate Bridge and pastel tile murals — to shift the focus to Disney iconography.

In June, Disney will unveil a glimpse of the shoot-for-the-moon bet it is making on California Adventure’s makeover, with the introduction of a ride called Toy Story Mania. More than three years in the making, and estimated to cost about $80 million, the attraction essentially puts guests inside a video game.

Riders, wearing 3-D glasses, board vehicles that career through an old-fashioned carnival midway, operated by characters from the popular “Toy Story” film franchise. Vehicles stop at game booths — 56 giant screens programmed with 3-D animation from Pixar — and riders play virtual-reality versions of classic carnival games.

But much more is riding on the attraction than a complex turnaround of just one theme park. Toy Story Mania, which Disney is also installing in Florida, reflects the larger pressures and challenges facing the company’s $10.6 billion parks and resorts business. To stay relevant to younger, digitally savvy visitors while also delivering growth to investors, Disney, the company that invented the modern theme park, knows that it has to devise a new era of spectacular attractions rooted in technology.

One-upmanship increasingly drives this intensely competitive business, and Disney’s rivals are also trying harder to gain market share. Universal Studios, part of NBC Universal, has more than quadrupled its spending on new rides, introducing attractions in California and Florida that are based on “The Simpsons.” Universal is teaming up with Warner Brothers to bring a small Harry Potter-theme park to Florida in late 2009. Niche players like SeaWorld and Legoland are also muscling in on Disney’s territory.

At its core, however, Toy Story Mania represents an effort to solve a puzzle that poses a much larger threat to Disney and the broader amusement park business. The quickening pace of daily living, advances in personal technology and the rapidly changing media landscape are combining to reshape what consumers expect out of a theme park, Disney executives say.

Toy Story Mania, which carries a modest price tag compared with some other Disney efforts, demonstrates one way that the company is fighting back, said Jay Rasulo, the chairman of Walt Disney Parks and Resorts.

“Bigger and more expensive is not necessarily the answer,” Mr. Rasulo said. “You want people leaving thinking, ‘Wow, only Disney could do that.’ ”

Consumers’ fixation on instant gratification and personalization has been reshaping the entertainment industry for some time, but it has finally caught up to the theme park business in visible ways. For instance, Disney has spent much more effort — and money — developing ways to entertain people as they stand in line for Toy Story Mania.

An animatronic figure with an estimated $1 million price tag will sing songs and interact with guests as they wait. Employees dressed as “Toy Story” characters will stroll among the crowds.

“There’s an erosion of patience,” said Bruce Vaughn, the chief creative executive for Walt Disney Imagineering, the company’s development group. “People’s tolerance for lines is decreasing at a rapid rate.”

Mr. Rasulo said that younger visitors, in particular, expect customized entertainment. So Toy Story Mania’s computers will accommodate riders of various skill levels.

“Guests are pretty much no longer interested in being passive viewers,” Mr. Rasulo said.

To address shifting tastes, the broader amusement park industry will have to rewrite its operating rules, said Jerry Aldrich, the founder of Amusement Industry Consulting. “Disney is already there, but a lot of parks are just waking up to this,” he said.

The health of the parks and resorts unit is crucial to Disney’s overall performance. Its lucrative sports unit, ESPN, makes more money, and its movie studio basks in Hollywood glamour. But the parks, where people interact with Mickey and his pals, are the reason that the Disney brand is so powerful, analysts say. As the theme parks go, so goes Disney.

Lately, Wall Street has been sounding alarm bells about the unit — and not just about California Adventure. While Disneyland and the cluster of Florida parks that make up Disney World have been churning out record profits on strong increases in attendance, some investors worry that the troubled domestic economy will tear a hole in the business. In late January, a Citigroup analyst downgraded Disney’s stock to a sell, citing concern about lower demand for hotel rooms at the resorts.

DISNEY strongly rejects the skepticism, and some other analysts agree. Disney’s chief financial officer, Thomas O. Staggs, said the company saw no indication that consumers were cutting back. “We are pleased with the current pace of business at our parks, particularly given the record attendance we achieved last year,” he told analysts on Tuesday during a conference call, held as the company released fiscal first-quarter earnings.

Vacationers from Europe and Asia, benefiting from a weak dollar, could pick up some of the slack in the event of an economic downturn, but that could lead to cannibalization — Disney needs those same visitors to patronize theme parks in Paris, Hong Kong and Tokyo.

Although its performance has drastically improved from its early days, Disneyland Resort Paris is still struggling after 10 years of changes and heavy capital investment. The park in Japan is cruising right along, but attendance at nearby Hong Kong Disneyland, the company’s newest park, has fallen more than 25 percent since its 2005 opening. Disney told analysts on Tuesday that attendance in Hong Kong has recently “improved significantly” because of new promotions.

To make certain that Toy Story Mania is a hit — part of a strategic effort to keep mining revenue from the 13-year-old “Toy Story” franchise — Disney is pulling every lever in its vast arsenal.

Pixar, the Disney-owned studio working on “Toy Story 3” for a 2010 release, contributed animation and general creative advice. Disney VR Studios, the company’s video game unit, customized software, while the parks and resorts unit handled the heavy lifting of design and construction. The media networks division, which includes ABC, will help publicize the ride once it opens — along with hundreds of other promotional partners.

“We have an incredible number of engines at this company, and every one is firing around this franchise,” Mr. Rasulo said.

WORK on Toy Story Mania got under way on a stiflingly hot September day in 2005, when a team of Disney creative developers went to the Los Angeles County Fair. The goal was to research how carnival games operate.

Two developers, Kevin Rafferty and Robert Coltrin, had devised an idea for a new California Adventure ride that would juxtapose the old-fashioned romance of a carnival midway with high-tech video game elements. They had a hunch that “Toy Story” and “Toy Story 2,” the Pixar films about toys coming to life, would provide a good theme. But they didn’t know much about carnival games.

“We looked at each other and said, ‘Are the games we remember from our childhoods even relevant anymore?’ ” Mr. Coltrin said.

At the fair, the two were thrilled as they walked through rows of game booths — wooden structures that carnival operators call “stick joints” — to find crowds enjoying classic games like the ring toss and water guns. “We were like, ‘Score!’ and gave each other a high-five,” Mr. Coltrin recalled.

Using digital cameras, members of the development team documented details, from the colors of the canvas covering each booth — red and yellow — to how far apart the games were spaced. They quickly ruled out some games as options for the ride. “Toss a coin in a cup didn’t really do it for us,” said Chrissie Allen, a senior show producer.

But other games, like one in which customers threw darts at balloons, piqued their interest. “We thought, ‘This just might work,’ ” Ms. Allen said.

Reassembling at Disney’s offices in Glendale, Calif., the team worked on the concept that would become Toy Story Mania. Because carnivals sell commotion, there would be lots of flashing lights, barkers trying to capture riders’ attention, buzzers and bells.

Mr. Rafferty and Mr. Coltrin dreamed up a fanciful story: The classic toys in “Toy Story” had come to life and staged a carnival under their owner’s bed while he was away at dinner. Little Bo Peep would operate the balloon darts; Ham, the talking piggy bank, would cheer riders as they tossed virtual eggs at barn animals. The culmination would be “Woody’s Rootin’ Tootin’ Gallery,” a twist on old-fashioned shooting galleries.

They would use full-scale 3-D animation, a first for a Disney ride. That, Mr. Vaughn said, would make riders feel as if they were inside a video game or a virtual world. “We look at it as gaming meets immersive storytelling,” he said.

While Mr. Vaughn and his colleagues were cogitating in the fall of 2005, Disney had its hands full. Robert A. Iger had just taken over the company after the exit of Michael D. Eisner and was working to extend Disney’s partnership with Pixar, an effort that would result in a $7.4 billion acquisition.

When Mr. Rasulo and his team presented Mr. Iger with plans for Toy Story Mania, Mr. Iger was interested but cautious. Would that dovetail with much larger efforts to overhaul the entire park? The ride could handle up to 1,500 riders an hour. Was that enough? An improved relationship with Pixar looked promising, but what if a deal couldn’t be reached? Would that hinder plans to build a lavish ride around Pixar’s core creative property?

But Mr. Iger liked a couple of the important parts of the proposal. Imagineers (Disney’s term for creative developers) suggested building versions of the ride at the same time in California and Florida — a Disney first — to leverage the development costs. Another component involved the ease with which the ride could be rethemed every season.

“The chance to take simple games that people have loved playing for generations and pairing them with cutting-edge technology just sounded exhilarating to everybody,” Ms. Allen said.

BUILDING elaborate models is among the first formal steps in creating a Disney attraction. Engineers, paying attention to scale and sight lines, want to find out how a planned addition would affect the existing park.

Models are built on large tables equipped with wheels. The company keeps room-size models of entire parks, and engineers will eventually wheel the new model into that area to see how it looks.

To give birth to Toy Story Mania, Mr. Rafferty and Mr. Coltrin went to work turning drawings of the ride into foam models, toiling in the same 1950s-era building in suburban Los Angeles where Walt Disney himself once tinkered.

Tweaks started to happen. The team added turrets to the top of the ride for a more dramatic flair. They shifted the direction of the facade by a few degrees to make it more visible from the park entrance. “And we knew at this stage that we wanted a little piece of magic out in front as a tease to people as they waited in line,” Mr. Coltrin said.

Upstairs, designers entered blueprints for the ride into a computer program. This would allow them to start building and refining the entire project, which is made up of 150 computers, with 90 of them moving around on the ride vehicles and communicating with one another via a secured wireless network. With a click of a mouse, developers could jump to any spot inside in the vehicles for a virtual dip into how the experience might look to someone on the ride.

“We don’t want anybody to be able to see multiple versions of Woody at the same time, and seconds make a difference,” said Mark Mine, the technical concept designer. “Every part of the ride has to be magical.

“It is much easier and less expensive to do this before the concrete has been poured,” he added. “As rides become more complicated, your ability to tweak in the field gets harder and much more expensive.”

Across the street, in a cold, unmarked garage, Ms. Allen helped to conduct “play tests” on rudimentary versions of the ride. More than 400 people of all ages — all had signed strict nondisclosure agreements — sat on a plywood vehicle set up in front of a projection screen and played various versions of the games. Disney workers studied their reactions and interviewed them afterward.

“We were looking to see if some effects were too scary,” Ms. Allen said, “or if there wasn’t enough laughing happening during certain sequences.”

Among the discoveries: People wanted to be able to compare scores after they were finished playing, while some children had a hard time reaching the cannonlike firing controller, christened by Disney as a “spring action shooter.” Engineers added a computer screen to vehicles to display scores and installed the controls on movable lap bars.

“We were trying to find out things we didn’t even know to ask about,” said Sue Bryan, a senior show producer.

The ride’s psychological components started to take shape during this phase. Disney decided that riders were happier when they got a bigger visual payoff. (One of Little Bo Peep’s balloons now pops with greater force when hit with a virtual dart and a blast of air shoots into a rider’s face.) A game involving shooting at a paper target was dropped. (“It was hard to make paper interesting,” Ms. Bryan said.) And developers decided that the last game before the exit needed to be the easiest, so riders would feel that they were coming out as winners, even if they weren’t very good.

After Disney closed the Pixar deal, in January 2006, Toy Story Mania became more elaborate. Mr. Iger wanted Pixar — and particularly one of its co-founders, John Lasseter, who had worked as a skipper on the Jungle Cruise ride at Disneyland after college — to contribute to creative advances in the parks. Disney had incorporated Pixar movies into its theme parks before, but Pixar’s involvement in those efforts was modest, Mr. Vaughn said.

“The minute Pixar became 100 percent part of the family, it could go whole hog and dive in,” he said.

One of Mr. Lasseter’s major concerns about Toy Story Mania centered on the animation, various developers said. Disney had hired an outside contractor to handle it, but Mr. Lasseter insisted that Pixar staff members who were involved in creating the films should also work on the ride.

The Disney team had also decided to leave out Buzz Lightyear, the modern spaceman toy in the films, because he was already showcased in an older ride called Astro Blasters. But Pixar felt that the character was essential to the “Toy Story” franchise. Buzz will now be a host of a game, and he shares top billing on the ride’s marquee.

Creating what Mr. Coltrin had called “a little piece of magic” was another area of special attention for Mr. Lasseter and his lieutenants. To entertain people as they waited in line, the developers decided to place one of Disney’s signature animatronic figures outside. It would draw attention like a carnival barker, but also be sophisticated enough to interact one on one with guests, adding another element of customization.

Only one “Toy Story” figure was considered for the role: Mr. Potato Head.

WORK on Mr. Potato Head started last year in a heavily guarded Disney research plant a few miles from the company’s headquarters in Burbank, Calif. Developers had to make a five-foot-tall plastic potato sing, dance and seemingly hold conversations with people at random. The robot also had to be able to remove his ear and put it back on.

“It’s all in the math,” said Jimmy A. Thomas, the lead mechanical designer.

When Walt Disney introduced animatronics in the 1960s, coining the word in the process, his creations moved in simple ways through the use of pneumatic valves and hydraulic pumps. The children in the It’s a Small World attraction wowed patrons simply by blinking their eyes and bowing.

Modern visitors expect much more. Mr. Potato Head — with help from a dozen video cameras, several computers, an unseen ride operator and a $1 million budget — will be able to make his mouth form words, a first for Disney animatronics.

The comedian Don Rickles, whose gravelly voice brought the character to life in the films, was hired to record 750 words and four songs. The hidden ride operator, armed with a computer and cameras that scan the crowd, will then choose phrases based on the actions and appearance of people standing in front of it. (“Hey, you in the red baseball hat.”)

The goal was to make the character so perfect that it looked as if it had just stepped out of the movies. Pixar executives tightly monitored every detail and helped direct Mr. Rickles. At a recent taping, the Pixar team put him through his paces.

“Let’s put a little more chuckle in that line,” said Roger Gould, Pixar’s creative director, sitting in a recording studio as 10 other executives and engineers took notes and adjusted instruments.

Mr. Rickles complied, repeating a line that would play if the ride stopped unexpectedly. “Folks, we’re having a little delay here,” he said. “For your safety, please stay seated inside the game tram.”

Among Disneyphiles, at least, the wait for Toy Story Mania to open is unbearable. Blogs like Blue Sky Disney and Mice Age, which are not affiliated with the company, have been chronicling minute details of the construction. (“The first ride vehicles have just arrived in California from their production facility in Osaka, Japan!”)

Al Lutz, the publisher of Mice Age and a critic of what he calls California Adventure’s “cheap strip-mall stucco” aesthetic, says fans are keen to see the ride’s over-the-top details. Disney is, after all, a company that studied how the sun struck the earth differently in various locations to determine the color of paint to use on the fairy-tale castle at the center of each resort.

“Young people are going to be fighting to be first in line,” he said.

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Polaroid Closing Instant Film Factories

BOSTON (AP) -- Polaroid Corp. is dropping the technology it pioneered long before digital photography rendered instant film obsolete to all but a few nostalgia buffs.

Polaroid is closing factories in Massachusetts, Mexico and the Netherlands and cutting 450 jobs as the brand synonymous with instant images focuses on ventures such as a portable printer for images from cell phones and Polaroid-branded digital cameras, televisions and DVD players.

This year's closures will leave Polaroid with 150 employees at its Concord headquarters and a site in the nearby Boston suburb of Waltham, down from peak global employment of nearly 21,000 in 1978.

The company stopped making instant cameras over the past two years.

''We're trying to reinvent Polaroid so it lives on for the next 30 to 40 years,'' Tom Beaudoin, Polaroid's president, chief operating officer and chief financial officer, said in a phone interview Friday, after the company's plans were reported in The Boston Globe.

Polaroid failed to embrace the digital technology that has transformed photography, instead sticking to its belief that many photographers who didn't want to wait to get pictures developed would hold onto their old Polaroid cameras.

Global sales of traditional camera film have been dropping about 25 percent to 30 percent per year, ''and I've got to believe instant film has been falling as fast if not faster,'' said Ed Lee, a digital photography analyst at the research firm InfoTrends Inc.

''At some point in time, it had to reach the point where it was going to be uneconomical to keep producing instant film,'' Lee said.

Privately held Polaroid doesn't disclose financial details about its instant film business.

Polaroid instant film will be available in stores through next year, the company said -- after which, Lee said, Japan's Fujifilm will be the only major maker of instant film.

Polaroid got its start making polarized sunglasses in the 1930s, and introduced its first instant camera in 1948. Film packs contained the chemicals for developing images inside the camera, and photos emerged from the camera in less than a minute.

Polaroid's overall revenue from instant cameras, film and other products peaked in 1991 at nearly $3 billion. The company went into bankruptcy in 2001 and was bought four years later for $426 million by Minnetonka, Minn.-based consumer products company Petters Group Worldwide.

Polaroid's newly announced job cuts include 150 positions to be eliminated over the next couple months at Massachusetts operations in Norwood and Waltham, which make large-format films for technical and industrial photography. Later this year, Polaroid will close plants employing 300 workers in the Mexican state of Queretaro and in Enschede, Netherlands.

Meanwhile, Polaroid is seeking a partner to acquire licensing rights for its instant film, in hopes that another firm will continue making the film to supply Polaroid enthusiasts.

As it seeks to gain a foothold in digital photography this year, Polaroid plans to sell an 8-ounce photo printer slightly bigger than a deck of cards that requires no ink and prints business card-sized pictures. It uses thermal printing technology from Zink Imaging Inc., founded by private investors who bought technologies from Polaroid as it was coming out of bankruptcy.

Polaroid also has its brand name on foreign-made TVs, DVD players, digital photo frames, cameras and MP3 music players. Those products generated nearly $1 billion in revenue last year for Polaroid's parent firm, Beaudoin said.

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Australian Real Estate Agents File Defamation Claim Against Google

Two real estate agents in Victoria, Australia have filed suit against Google. Mark Forytarz & Paul Castran claim defamation due to articles painting them in a negative light that can be found on the search engine. So…they’re filing suit for links. Here are Mark Forytarz’ search results.

The articles, found on Melbourne Indymedia, claim that Mark Forytarz bullied a mentally challenged man into selling his home in order to earn a $200k+ commission. The article further alleges that Paul Castran used fake bidders to inflate the prices of properties he sold.

Forytarz & Castran claim that the article paints them both in a negative light, and that they have suffered embarrassment & humiliation as a result. They asked Google to remove the links to the article a year ago, but Google did not comply.

So…this begs a few questions:

1) Why aren’t they suing Melbourne Indymedia? (Could it be a lack of Google-deep pockets?)
2) Why haven’t they launched a counter-PR campaign, explaining their side of the story?
3) How has this not been thrown out of court?

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Judges Press IRS on Church Tax Break

A Jewish couple's bid to take a tax deduction they say the Internal Revenue Service reserves only for members of the Church of Scientology is getting a friendly reception from a federal appeals court, increasing the possibility of a ruling that could create a tax break for taxpayers of many religions who pay tuition to religious schools.

During arguments on the case this week, three judges who ride the 9th Circuit Court of Appeals expressed deep skepticism of the IRS's position that the way the agency treats Scientologists is irrelevant to the deductions the Orthodox Jews, Michael and Marla Sklar, took for part of their children's day school tuition and for after-school classes in Jewish law.

"The view of the IRS is it can unconstitutionally violate the Constitution by establishing religion, by treating one religion more favorably than other religions in terms of what is allowed as deductions, and there can never be any judicial review of that?" Judge Kim Wardlaw asked at the court session Monday in Pasadena, Calif.

"That is not at all what I said," a Justice Department lawyer representing the IRS, Ellen Delsole, said.

"That's the bottom line," Judge Wardlaw and a colleague on the panel, Harry Pregerson, both replied. "This does intrude into the Establishment Clause," Judge Wardlaw added.

The case stems from an agreement the IRS reached with the Church of Scientology in 1993 to end more than a decade of lawsuits, audits, and other enforcement actions involving the tax agency, Scientology entities, and church leaders. The church paid $12.5 million, while the IRS agreed to drop arguments that Scientology, which was founded by L. Ron Hubbard, was not a bona fide religion.

At about the time of that deal, the IRS agreed to allow Scientologists to deduct at least 80% of the fees paid for "religious training and services."

The Sklars took similar deductions for religious education on their returns for the early 1990s, without challenge by the IRS. However, the IRS rejected their deductions for 1994 and beyond.

The 1993 pact between the IRS and the Scientologists was memorialized in a 72-page "closing agreement," which was published by the Wall Street Journal in 1997. However, the IRS has never acknowledged the accuracy of that document, and when the Sklars' attorney, Jeffrey Zuckerman, sought it from the agency, the IRS refused to turn the document over.

Mr. Zuckerman also subpoenaed the agreement and other records from the Church of Scientology and its president, Reverend Heber Jentzsch. The tax court judge who handled the case, John Colvin, quashed the subpoenas without explanation.

Ms. Delsole told the appeals court that the agreement with the Scientologists must be kept confidential for privacy reasons. "That's getting into the private taxpayer business of another taxpayer," she said.

The government lawyer asserted that the Sklars were not "similarly situated" to the Scientologists because the couple was seeking to deduct fees related to basic education for children and not the kind of training Scientologists undergo.

"How do we know that?" Judge Wardlaw asked, according to a recording of the hearing.

"You tell us you don't know anything either, but you read the Wall Street Journal," Judge Pregerson said to Ms. Delsole. She said that even if the benefit for Scientologists went too far, the solution was not to give it to "one taxpayer and one more religion."

"That's your best argument: two wrongs don't make a right," the third judge on the case, Ronald Leighton, said. He called the agency's refusal to explain its agreement with the Scientologists "a frustration that is hard to get beyond."

Ms. Delsole warned the court that the IRS would have difficulty resolving tax disputes if it could be forced to justify those deals in cases involving other taxpayers. "Every person who can find out about it from any other religious group is going to come in and want the same thing and that would really tie the IRS's hands," she said.

Members of racial minorities could also claim taxpayers of other races got better deals, the government lawyer said. "That's the sort of thing that would flow from the idea that the IRS can't settle and keep this confidential," she added.

Mr. Zuckerman rejected that idea. "If the IRS were saying white people were entitled to a certain deduction and black people were not, why would it be such a parade of horrors for the courts to come in and say the government may not act that way?" he asked.

The court made no immediate ruling, but an attorney who represents the Church of Scientology, Monique Yingling, said she was surprised by the judges' statements that data on the church's deal with the IRS was needed for the Sklars' case. "There's a lot of information already in the public record about this question," she said. "I don't know that there's any need for any additional information."

Ms. Yingling said the 1993 deal merely ensured parity for Scientologists under tax law. "They are not getting any kind of special treatment," she said.

Ms. Yingling said the training Scientologists can deduct is not the same as religious education. "The use of the word 'training' in Scientology is not analogous to education," she said. "It's just another way of advancing spiritually in Scientology."

Mr. Zuckerman said that alleged distinction is precisely what he wants to explore in the court case. "You need to get a factual record on that, then you can make your argument," he said.

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RIAA Wants Your Anti-Virus Software to Screen Your Downloads for Pirated Content

Content filter version one: A massive, network-wide dragnet. Not really feeling that Big Bro deal, even though RIAA chief Cary Sherman says it "doesn't give rise...to any privacy concerns because it can operate automatically and anonymously"? It's cool, there's a better approach: A locally installed filter on your computer.

As a bonus, a local filter would defeat encrypted torrents, since you've gotta decrypt 'em, at which point the filter would kick in. Sherman is a smart cookie though, and knows people aren't just gonna sign up to have their machine lojacked:

"Why would somebody put that on their machine? They wouldn't likely want to do that, they'd do that when it benefits them such as for viruses and so on and so forth...it could be enforced at the modem or put in by the ISP."

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