India Ink: In Kashmir, Clashes and Dwindling Supplies As Curfew Continues

The Kashmir Valley is on the fourth day of a government-imposed shutdown begun immediately after the hanging of the militant Muhammad Afzal, also known as Afzal Guru, who comes from the town of Sopore in Baramulla district.

Many residents are running out of food and milk in Srinagar, Kashmir’s summer capital. Meanwhile, dozens have been injured and at least one killed in protests against Mr. Afzal’s hanging, which happened secretly in Delhi on Saturday and was announced afterward.

Mr. Afzal, from the Jaish-e-Muhammad militant group, was convicted of conspiracy and sentenced to death by a special court in 2002 for his role in planning an attack on India’s Parliament in December 2001.

Schools, colleges and most shops in Kashmir are closed by government order, and people have been asked to stay inside their homes. Rows of shops and restaurants were shuttered.

Vehicles have been banned from the streets, cable news channels have gone dark, Internet service on cellphones has been blocked and newspapers were not being delivered. Hospitals, pharmacies and emergency services remain open.

In Srinagar, the only people in the deserted streets were security forces.

Officials in the area said they were taking preventive measures. During the past decade, many Kashmiris have opposed the death sentence for Mr. Afzal, saying he was being unfairly accused of the crime. His wife had requested a pardon from the Indian government, but her plea was denied.

Many Kashmiris were also outraged that the government letter carrying the news of execution reached Mr. Afzal’s widow in Sopore only after he died. The central government said Tuesday that Mr. Afzal’s family could visit his grave at Tihar Jail in Delhi, but a date has yet to be decided, according to the Press Trust of India.

The ban on the movement of people and vehicles was imposed under Section 144 of India’s criminal procedure code, the same section invoked after protests over the recent Delhi gang rape, which prohibits the assembly of more than four people.

It was invoked by the administration to prevent “a law and order problem,” Suresh Kumar, principal secretary in Jammu and Kashmir’s Department of Home Affairs, said in a telephone interview Tuesday. 

Mr. Afzal’s death was mourned across the valley through organized street protests that involved stone pelting, in defiance of the ban.

Three civilians have died and many have been injured over the last four days, officials said. Some news reports attributed all three deaths to protest-related activities, but Mr. Kumar said only one man died of injuries caused by the police. The other two drowned when their boat capsized, an incident unrelated to the violence, he said.

Obair Mushtaq, from the Baramulla district, died after he was shot, his relatives said. Farooq Ahmed, his uncle, said Obair was 13.

Mr. Ahmed said that on Sunday evening, a handful of children, including his nephew, were throwing stones at a passing military convoy. “It was not aggressive. We were laughing at them,” he said, crying over the phone. “We can’t understand why there is so much fighting. Why are our children dying?”

A Kashmir police official told India Ink that 60 people have been injured since Saturday in clashes between police and civilians. Forty of those were security officials and 20 were civilians, he said. He spoke on the condition of anonymity, saying that he feared for his life.

Additionally, there were about 60 incidents of stone pelting across the valley. “Most of the violence erupted in Sopore and Baramulla,” he said.

“People are not allowed to step out of their homes,” he added. Many residents described the past four days as the longest curfew since 2010, when the valley was shaken by mass pro-independence demonstrations. 

Manzoor Ahmed, who drives an auto-rickshaw, said that he hasn’t earned any money since the curfew was imposed on Saturday. “I haven’t stepped out of the house so I cannot even make the little money I do,” he said during a telephone interview. “The children cannot go to school.”

Mr. Ahmed said that his family was surviving on dal, a stew made of lentils, because there are no fresh vegetables available. “We have a backup supply of dal because we know things like this can happen,” he said.

In some areas, for a few hours in the evening, residents said they were allowed out of their homes to shop. Vegetables and milk are generally shipped into Srinagar, which is nestled in the mountains, from villages and other states during the winter months.

Mr. Mohammed, a hotel manager near the Dal Lake, who requested his first name not be used to avoid any retaliatory action, said that his hotel was running out of vegetables like peas and cauliflower, and guests were only being served beans and potatoes from storage. “The situation is quite bad,” he said.

For around two hours in the evening, a few stores selling basic groceries were open. But these shops have limited resources because the supply chain had been disrupted due to the ban on vehicles.

One businessman, who requested not be named to avoid possible retaliatory action by the police, said he hasn’t opened his crockery shop in downtown Srinagar in the past four days. “What choice do I have? They won’t let us step out,” he said. He estimated he has lost 60,000 rupees ($1,000) since Saturday.

The hanging of Mr. Afzal came as Kashmiris were planning protests to mark the death of Maqbool Bhatt, a pro-Kashmir independence leader who was hanged on Feb. 11, 1984. His death is considered the spark for two decades of unrest. Both men are buried at Tihar Jail in Delhi.

“Maqbool Bhatt inspired the insurgency while Afzal Guru was the product of it,” said Sheikh Showkat Hussain, a law professor at Kashmir University. 

He warned that Mr. Afazal’s hanging and the subsequent curfew would make the Kashmiri people’s “alienation with the government more deep rooted.”

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Julianne Hough: Ryan Seacrest Makes Valentine's Day Super Romantic









02/12/2013 at 01:40 PM EST







Ryan Seacrest and Julianne Hough


Michael Buckner/WireImage


Who knew Ryan Seacrest was such a romantic? His girlfriend, Julianne Hough, tells PEOPLE he likes to go all out for Valentine's Day.

"[He likes] surprising me and ending up at a restaurant and having the place cleared out and rose petals and stuff like that," the actress, 24, said at Monday's Self magazine New York screening of her new movie Safe Haven. The gestures, she added, make her feel "so cute and special."

"Every year is really wonderful. The first two years were super romantic and like, over the top, because it was new," she said.

So, how will the Idol host, 38, who spent a romantic getaway with Hough in St. Barts earlier this year, make this Valentine's Day even more special?

"This year I think it will be more understated, like [celebrating] real joy of what we truly have. I have no idea, but I know there are plans. He likes to do Valentine's Day," she said.

Finally, asked if there will be a ring anytime soon, she responded, "Not yet."

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Pope shows lifetime jobs aren't always for life


The world seems surprised that an 85-year-old globe-trotting pope who just started tweeting wants to resign, but should it be? Maybe what should be surprising is that more leaders his age do not, considering the toll aging takes on bodies and minds amid a culture of constant communication and change.


There may be more behind the story of why Pope Benedict XVI decided to leave a job normally held for life. But the pontiff made it about age. He said the job called for "both strength of mind and body" and said his was deteriorating. He spoke of "today's world, subject to so many rapid changes," implying a difficulty keeping up despite his recent debut on Twitter.


"This seemed to me a very brave, courageous decision," especially because older people often don't recognize their own decline, said Dr. Seth Landefeld, an expert on aging and chairman of medicine at the University of Alabama at Birmingham.


Age has driven many leaders from jobs that used to be for life — Supreme Court justices, monarchs and other heads of state. As lifetimes expand, the woes of old age are catching up with more in seats of power. Some are choosing to step down rather than suffer long declines and disabilities as the pope's last predecessor did.


Since 1955, only one U.S. Supreme Court justice — Chief Justice William Rehnquist — has died in office. Twenty-one others chose to retire, the most recent being John Paul Stevens, who stepped down in 2010 at age 90.


When Thurgood Marshall stepped down in 1991 at the age of 82, citing health reasons, the Supreme Court justice's answer was blunt: "What's wrong with me? I'm old. I'm getting old and falling apart."


One in 5 U.S. senators is 70 or older, and some have retired rather than seek new terms, such as Hawaii's Daniel Akaka, who left office in January at age 88.


The Netherlands' Queen Beatrix, who just turned 75, recently said she will pass the crown to a son and put the country "in the hands of a new generation."


In Germany, where the pope was born, Chancellor Angela Merkel, who is 58, said the pope's decision that he was no longer fit for the job "earns my very highest respect."


"In our time of ever-lengthening life, many people will be able to understand how the pope as well has to deal with the burdens of aging," she told reporters in Berlin.


Experts on aging agreed.


"People's mental capacities in their 80s and 90s aren't what they were in their 40s and 50s. Their short-term memory is often not as good, their ability to think quickly on their feet, to execute decisions is often not as good," Landefeld said. Change is tougher to handle with age, and leaders like popes and presidents face "extraordinary demands that would tax anybody's physical and mental stamina."


Dr. Barbara Messinger-Rapport, geriatrics chief at the Cleveland Clinic, noted that half of people 85 and older in developed countries have some dementia, usually Alzheimer's. Even without such a disease, "it takes longer to make decisions, it takes longer to learn new things," she said.


But that's far from universal, said Dr. Thomas Perls, an expert on aging at Boston University and director of the New England Centenarians Study.


"Usually a man who is entirely healthy in his early 80s has demonstrated his survival prowess" and can live much longer, he said. People of privilege have better odds because they have access to good food and health care, and tend to lead clean lives.


"Even in the 1500s and 1600s there were popes in their 80s. It's remarkable. That would be today's centenarians," Perls said.


Arizona Sen. John McCain turned 71 while running for president in 2007. Had he won, he would have been the oldest person elected to a first term as president. Ronald Reagan was days away from turning 70 when he started his first term as president in 1981; he won re-election in 1984. Vice President Joe Biden just turned 70.


In the U.S. Senate, where seniority is rewarded and revered, South Carolina's Strom Thurmond didn't retire until age 100 in 2002. Sen. Robert Byrd of West Virginia was the longest-serving senator when he died in office at 92 in 2010.


Now the oldest U.S. senator is 89-year-old Frank Lautenberg of New Jersey. The oldest congressman is Ralph Hall of Texas who turns 90 in May.


The legendary Alan Greenspan was about to turn 80 when he retired as chairman of the Federal Reserve in 2006; he still works as a consultant.


Elsewhere around the world, Cuba's Fidel Castro — one of the world's longest serving heads of state — stepped down in 2006 at age 79 due to an intestinal illness that nearly killed him, handing power to his younger brother Raul. But the island is an example of aged leaders pushing on well into their dotage. Raul Castro now is 81 and his two top lieutenants are also octogenarians. Later this month, he is expected to be named to a new, five-year term as president.


Other leaders who are still working:


—England's Queen Elizabeth, 86.


—Abdullah bin Abd al-Aziz al-Saud, king of Saudi Arabia, 88.


—Sabah al-Ahmad al-Jaber al-Sabah, emir of Kuwait, 83.


—Ruth Bader Ginsburg, U.S. Supreme Court associate justice, 79.


__


Associated Press writers Paul Haven in Havana, Cuba; David Rising in Berlin; Seth Borenstein, Mark Sherman and Matt Yancey in Washington, and researcher Judy Ausuebel in New York contributed to this report.


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Marilynn Marchione can be followed at http://twitter.com/MMarchioneAP


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Wall Street edges up ahead of Obama speech as housing gains

NEW YORK (Reuters) - Stocks edged higher on Tuesday, with the S&P 500 holding near multi-year highs ahead of President Barack Obama's State of the Union address, as housing stocks advanced.


The economy will be a major topic of Obama's speech before a joint session of Congress set for 9 p.m. (0200 GMT Wednesday). Investors will listen for any clues on a deal with Republicans to avert automatic spending cuts due to take effect March 1, including the tone of the speech.


The S&P 500 has risen in the past six weeks and is up 6.7 percent so far this year. But gains have been harder to come by since the benchmark S&P index hit a five-year high on February 1. The market has had to consolidate strong gains at the year's start while investors search for reasons to drive stocks higher.


"It is a drift higher here, it certainly seemed like we were stalled out for awhile," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.


"There are a lot of people looking for some type of pullback, some type of profit-taking, and often when everybody is looking it simply doesn't happen."


Housing shares helped lift equities in the latter portion of trading, led by a 14.4 percent jump in Masco Corp to $20.35 after the home improvement product maker posted fourth-quarter earnings and said it expects new home construction to show strong growth in 2013. The PHLX housing sector index <.hgx> rose 4.3 percent.


The White House has signaled Obama, in his speech, will urge U.S. investment in infrastructure, manufacturing, clean energy and education. He is also expected to call for comprehensive trade talks with the European Union.


The Dow Jones industrial average <.dji> rose 47.77 points, or 0.34 percent, to 14,019.01. The Standard & Poor's 500 Index <.spx> gained 3.95 points, or 0.26 percent, to 1,520.96. The Nasdaq Composite Index <.ixic> added 0.88 points, or 0.03 percent, to 3,192.88.


Coca-Cola Co shares fell 2.9 percent to $37.51 and were the biggest drag on the Dow after the world's largest soft drink maker reported quarterly revenue slightly below analysts' estimates, hurt by a weaker-than-expected performance in Europe.


With earnings season starting to wind down, Thomson Reuters data through Tuesday morning shows of the 353 companies in the S&P 500 that have reported earnings, 70.3 percent have exceeded analysts' expectations, above a 62 percent average since 1994 and 65 percent over the past four quarters.


Fourth-quarter earnings for S&P 500 companies are estimated to have risen 5.3 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.


Avon Products shares surged 18.6 percent to $20.49 after the beauty products company reported a better-than-expected quarterly profit.


Goodyear Tire & Rubber shares slipped 0.4 percent to $13.86 after it posted a stronger-than-expected quarterly profit but cut its 2013 forecast due to weakness in the European automotive market.


Michael Kors Holdings shares jumped 10.8 percent to $63.18 after the fashion company handily beat Wall Street's estimates and raised its full-year outlook.


(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry and Nick Zieminski)



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The Lede: Latest Updates on the Pope’s Resignation

The Lede is providing updates on Pope Benedict XVI’s announcement on Monday that he intends to resign on Feb. 28, less than eight years after he took office, the first pope to do so in six centuries. (Turn off auto-refresh to watch videos.)
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Tia Mowry-Hardrict: Cree 'Gets a Little Jealous' of Aden

Tia Mowry-Hardrict Puffs Dress for Success
Bret Hartman/AP


Tia Mowry-Hardrict and her twin sister Tamera Mowry-Housley couldn’t be closer, but the siblings have to work a bit harder to get their little boys on that same level.


“I will be honest, Cree [20 months] gets a little jealous [of his 3-month-old cousin],” Mowry-Hardrict, 34, tells PEOPLE Tuesday at Blushington in West Hollywood.


“When I was trying to feed Aden, Cree started crying. I have to just slowly introduce Aden into our world. It’s kind of hard on Cree, but he loves Aden. We really, really enjoy having him around.”


Luckily, the mommies give their kids plenty of opportunity to get acquainted.

“My sister and I try to see each other once a week,” Mowry-Hardrict, who teamed up with Puffs and Dress for Success’s Virtual Kiss program, says. “We actually just had a play date. We went to the Grove and hung out.”


Being a mom is tiring for the actress, who is working on a new sitcom, Instant Mom, but there are a few things that manage to keep her energized.


“I just look at my son,” she says. “When I’m away from him, I really feel it. I’m exhausted, I feel like a zombie. I’m like, ‘What am I going to do?’ But when I see him and I see the smile on his face, it just gives me this instant burst of energy.”


Adds Mowry-Hardrict, “I’m very into holistic living and very healthy eating, so I don’t run to coffee or caffeine. I think it drops you rather quickly. Instead I juice with my husband [Cory Hardrict] every single morning. I have kale, celery, ginger, a little bit of garlic, parsley and cucumber. I drink half in the morning and half in the afternoon. And that’s my energy drink.”


Luckily, her new hairdo also saves her from wasting any additional energy.


“I think it’s very practical for me because I am a mom,” she says. “Now I can just get in the shower and put some conditioner in my hair. I have curly hair, so this makes it easy to just go. But I also have a great stylist who can just [style] my hair in so many different ways. It does take a while when you want to do a straight look. But when I want to go au naturel, I just get out of the shower, and boom — I’m done.”


Clearly, motherhood is working for Mowry-Hardrict, because she’s already planning for more little ones.


“Cree’s almost two, and I really, really want him to be close with his sibling,” she says. “So I would say I’m having more kids sooner rather than later.”


– Dahvi Shira


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Stock rally stalls as investors seek catalysts

NEW YORK (Reuters) - Stocks slipped on Monday on lack of catalysts to move the market higher after a six-weeks-long advance that has taken the S&P 500 index near record highs.


The benchmark index is up more than 6 percent so far this year after a steep rally in January that has stalled as the S&P and Dow industrials near multiyear highs.


Google Inc shares fell 1 percent at $777.67 after the company said in a filing former chief executive Eric Schmidt is selling roughly 42 percent of his Google stake, a move that could potentially net him $2.51 billion.


But the decline was offset by gains in Apple , up 1.4 percent at $481.73 after a New York Times report that the iPhone maker is experimenting with the design of a device similar to a wristwatch.


"It's really the valuation and indications that the economy is improving that have pushed the market higher. We would have to see a probable correction before heading higher and that could come from weak economic data in the future," said Tim Ghriskey, chief investment officer at Solaris Asset Management.


The Federal Reserve's Vice Chair Janet Yellen, seen as a potential successor to Fed Chairman Ben Bernanke next year, said the Fed is still aggressively stimulating an anemic U.S. economic recovery that has failed to bring rapid progress on employment.


On Tuesday, President Barack Obama will describe his plan for spurring the economy in his State of the Union address. He is expected to offer proposals for investment in infrastructure, manufacturing, clean energy and education.


The Dow Jones industrial average <.dji> was down 24.96 points, or 0.18 percent, at 13,968.01. The Standard & Poor's 500 Index <.spx> was down 1.56 points, or 0.10 percent, at 1,516.37. The Nasdaq Composite Index <.ixic> was down 5.00 points, or 0.16 percent, at 3,188.93.


Upbeat U.S. and Chinese data last week helped the S&P 500 extend its weekly winning streak to six.


Opposition has grown to the $24.4 billion buyout of Dell Inc , the No. 3 personal computer maker, as three of the largest investors joined Southeastern Asset Management on Friday in raising objections. Dell said in a regulatory filing it had considered many strategic options before opting to go private in a buyout led by Chief Executive Michael Dell.


Dell shares hovered near $13.65, the buyout offer price.


Regeneron Pharmaceuticals Inc shares rose 1.6 percent at $168.72 after it said longtime drug development partner Sanofi plans to boost its stake in Regeneron by open market purchases of its stock.


(Reporting By Angela Moon; Editing by Kenneth Barry and Nick Zieminski)



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India Ink: More Than Two Dozen Killed in Kumbh Mela Stampede

ALLAHABAD, Uttar Pradesh — As many as 30 people were killed Sunday in a stampede at a train station here as millions gathered for a Hindu religious festival.

The stampede erupted on a platform of the main railway station in Allahabad as religious pilgrims passed through it on their way to the festival, Kumbh Mela on the banks of the Ganges River.

Sunday was one of the busiest days of the 55-day festival; 30 million people were expected to take a dip in the Ganges River to cleanse themselves of sin.

About 30 bodies, covered in blue sheets and pieces of cloth, were visible on the train platform on Sunday evening. Several appeared to be children.

The stampede was set off by railway delays, shoddy infrastructure and overcrowding, several witnesses said.

Train services were severely delayed during the early evening, witnesses said, leaving growing numbers of passengers stranded in the small station.

The police initially said that panic spread after a railing broke on a footbridge over the tracks in the Allahabad station, sending a few people tumbling to their deaths. The tightly packed crowds rushed to get off the footbridge, and others were trampled. They later retracted this statement and attributed it to a rush on the steps leading to one of the platforms.

“People tripped over the steps leading to platform 6,” Lalji Shukla, deputy inspector general of Allahabad police, said in an interview.

“I can’t believe God punished us this way,” said one pilgrim, Santos Singh. “My 15-year-old son got injured. I wish the police were more responsive.”

At least an hour after the incident occurred, there were still no medical workers on the scene.

Prime Minister Manmohan Singh expressed shock at the episode and said in a public statement: “I am deeply shocked to learn of the unfortunate incident at the Allahabad Railway station today, in which precious lives have been lost and many pilgrims to Kumbh Mela among other people have been injured.”

Mr. Singh directed the Ministry of Railways to provide all “necessary assistance” to those who were involved and promised compensation for the families of the dead or injured.

Raksha Kumar reported from Allahabad, and Heather Timmons and Malavika Vyawahare from New Delhi

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Chris Brown Crashes Car During Paparazzi Chase















02/10/2013 at 12:40 PM EST



Grammy weekend got off on a bumpy start for Chris Brown.

The best urban contemporary album nominee walked away uninjured after crashing his black Porsche into a wall during a paparazzi chase, reports the Associated Press.

Beverly Hills police say the accident occurred Saturday around noon when Brown, 23, lost control of his vehicle while driving to an L.A. charity event.

After Brown was reportedly cut off by photographers, "the occupants jumped out, with cameras, and aggressively approached his vehicle," Brown's rep said in a statement, via Entertainment Weekly. "In an effort to remove himself from the situation, he began to back down an alley, at which point he was cut off by two additional vehicles."

According to his rep, his car was totaled because of the "aggressive pursuit by paparazzi" but "he is okay." The Porsche was towed away from the scene.

However, the photo agency responsible for the photographers on the scene are refuting Brown's story, saying that the paparazzi didn't arrive until after the accident. Chris Doherty, owner of INF, the photo agency, tells TMZ that his photographers "had nothing to do with the Chris Brown crashing" and that it's simply "convenient for him to blame us."

Lt. Lincoln Hoshino said authorities will investigate the incident, although he didn't know whether any of the involved parparazzi have been identified, according to the AP.

It's been just four years since Brown first caused a stir during Grammy weekend as a domestic violence drama began to unfold between him and on-again girlfriend Rihanna right before the 2009 awards ceremony. Now, fans will wait and see if the two attend this year's show together.

A call to Brown's lawyer by the AP was not immediately returned.

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Analysis: Accounting risk clouds big U.S. business bets in China


NEW YORK/HONG KONG (Reuters) - Tales of shady business practices abound in China - fake revenues, phony invoices, sham factories - but until recently, the problem seemed confined mostly to Chinese companies.


No longer.


Concern is growing about risks to U.S.-based multinationals in a country where American audit regulators are locked out by the Chinese government and bribery and fraud are routine.


Questions about transparency and integrity weigh heavily on China, the world's second-largest economy, as it assumes greater economic leadership and responsibility. These doubts test its ability to adhere to international standards.


Stories of business deception - confirmed by corporate sleuths, former business executives, court filings and experts on accounting in China - are commonplace.


There was the Chinese company that billed itself as a high-tech television screen manufacturer, but had a factory that turned out to be a man selling fireworks from a shack.


Or there was the Chinese biodiesel plant that sat idle for months, then sprang to life one day - when investors showed up for a tour - only to fall silent again.


Last month, there was the scandal at a Chinese unit of Caterpillar Inc , the world's largest construction equipment manufacturer, based in Peoria, Illinois.


On January 18, Caterpillar disclosed "deliberate, multi-year, coordinated accounting misconduct" at the Siwei unit of ERA Mining Machinery. Caterpillar said it would write off most of the $654 million it had paid to acquire ERA only months earlier.


Caterpillar's Siwei stumble was not the first for a U.S. multinational in China, but the scope of the problem stood out.


Caterpillar has provided few details, but it has disclosed inventory discrepancies, inflated profits and improperly recorded costs and revenue at Siwei.


Caterpillar declined further comment.


Part of Caterpillar's problem may have been inadequate due diligence work prior to the ERA acquisition. Companies often try to keep fees down for this type of work, but in China that may be asking for trouble, says Paul Gillis, an accounting professor at Peking University in Beijing.


Acquiring firms typically do some of their own due diligence while also relying on deal advisers, legal experts and auditors. Due to the risks in China, efforts should be beefed up to uncover fraud, Gillis said. "When you start cutting corners on audits ... you're enabling those who commit fraud."


GOING FOR GROWTH


Of course, it is not as if the United States has not had its own share of egregious accounting frauds over the years. In 2001-2002, a series of major scandals involving the likes of Enron, WorldCom and Tyco shook the U.S. economy.


Legislation followed that strengthened oversight of auditing and accountability of companies' top officers. That has not stopped U.S. accounting fraud, but it has made it easier to identify and deter some of the most egregious behavior.


In China, where large U.S. corporations are making some very big bets, a new frontier of accounting risk is opening up.


Lured by an economy growing much more quickly than the United States, U.S. companies have directly invested $54 billion in Chinese businesses, factories and property, most of it in the past decade, according to U.S. Department of Commerce data.


Despite a cooling off of China's growth last year, demand from its massive consumer class is still lifting revenues at companies that range from coffee seller Starbucks Corp to casino operator Wynn Resorts .


The Caterpillar experience and the growing catalog of smaller instances of deception and abuse have some experts wondering if U.S. companies' Chinese results can be trusted.


Though China is shifting to a market economy, much business is still done on a handshake, China experts say. State secret laws hinder investigations by outsiders. Audits done in China of U.S. corporate units there cannot be inspected by U.S. regulators because the Chinese government refuses to allow them.


A former executive at a large, U.S.-based multinational active in China recalled the firm's auditor being fired for trying to correct improper accounting at a joint venture in China. Managers there were trying to book sales early, sometimes for unassembled products, to avoid a coming tax increase, said the executive, who asked not to be named. He said he had the auditor reinstated and the accounting changed.


Dealings with a Chinese joint venture did not end well for California-based RAE Systems Inc, which makes chemical detection monitors. It had to pay nearly $3 million to the U.S. government to settle complaints in 2010 that it did too little to stop bribery at a Chinese joint venture.


'RED FERRARI' TEST


Despite well-known risks in China, auditors there often are not inquisitive enough or alert to possible fraud, some experts say.


Auditors in China may pore tirelessly over documents and yet "fail to spot the red Ferrari parked on the doorstep and fail to ask who it belongs to, how it was paid for," said Peter Humphrey, founder of ChinaWhys, a Shanghai-based anti-fraud consultancy that has investigated white-collar crime and fraud at scores of multinational firms in China.


China experts said it is difficult to do business there without encountering demands for gifts or kickbacks.


Transparency International, a corruption watchdog, surveyed business executives who said Chinese firms in 2011 were second only to Russian companies in being most likely to pay bribes abroad.


But six U.S. companies, including technology group IBM and drugmaker Pfizer Inc , were charged by the U.S. Securities and Exchange Commission over the past two years for improper payments or gifts in China.


Retailer Wal-Mart Stores has said it is investigating allegations of bribery in China, among other countries, and cosmetics group Avon Products Inc is dealing with probes of possible bribery in China.


There have been plenty of other red flags. For example, U.S. regulators have deregistered dozens of Chinese companies listed on U.S. exchanges after fraud probes, and some major U.S. investors have been caught flat-footed.


Billionaire hedge fund manager John Paulson suffered big losses after a disastrous bet on Chinese forestry company Sino Forest. Sino Forest was rocked by allegations in 2011 that it falsified its timber assets and later filed for bankruptcy.


Chinese software company Longtop Financial Technologies was accused of seizing audit documents when its auditor, Shanghai-based Deloitte Touche Tohmatsu, tried to double-check cash amounts at the company's bank. Longtop admitted cash had been faked. It was deregistered by the SEC.


The U.S. Public Company Accounting Oversight Board, which is responsible for regulating auditors of U.S.-listed companies, has been trying to get access to China to inspect audits there. But China has resisted because of sovereignty concerns.


Being unable to inspect in China "continues to create a gaping hole in investor protection," James Doty, chairman of the Washington, D.C.-based PCAOB, said in a statement.


The PCAOB recently reached deals with France and Finland to inspect in those countries, adding to its growing list of cooperation agreements with 16 nations.


The SEC has hit a wall trying to get documents out of China to investigate fraud. In December the commission began legal proceedings against the Chinese affiliates of five of the world's biggest audit firms - Deloitte , Ernst & Young , KPMG BDO and PricewaterhouseCoopers - over their refusal to turn over audit papers for fear of violating state secrets laws.


Meanwhile, investment in China continues. Over the past five years, U.S. companies and investment groups have announced or completed about $25 billion of whole or partial acquisitions in China, according to Thomson Reuters data.


(Additional reporting by Lisa Baertlein in Los Angeles, Ernest Scheyder in New York, Clare Baldwin in Hong Kong; Editing by Kevin Drawbaugh and Dan Grebler)



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