the wall street journal weekly quiz · web viewplaintiffs' attorneys counter that the argument...

The Wall Street Journal Education Program Weekly Review & QuizCovering front-page articles from Aug 26 – Sept 1, 2006Professor Guide with Summaries Fall 2006Developed by: Scott R. Homan Ph.D., Purdue University

Questions 1 – 12 from The First Section, Section A

Class Inaction Plaintiffs' Lawsuits Against Companies Sharply DeclineBy PAUL DAVIESAugust 26, 2006; Page A1http://online.wsj.com/article/SB115655512774246275.html

Companies involved in many of the largest and most controversial legal clashes of recent decades are seeing a sharp decline in the number of lawsuits filed against them.In recent months, judges have dismissed or challenged tens of thousands of individual cases, in matters ranging from claims of lung damage from asbestos and silica dust to allegations that the diet drug fen-phen caused heart problems. Moreover, fewer new claims like these are being launched, as state and federal courts and legislators attack the methods used by some attorneys to round up plaintiffs for large-scale litigation.There is no comprehensive count of claims, but a look at several key areas -- particularly asbestos and silica claims -- shows large-scale litigation against single products, known as "mass torts" and "class actions," is on the wane."The future of mass torts and class actions is very much in question," said Geoffrey Miller, a New York University School of Law professor who teaches a course on issues in large-scale litigation.This year, new securities-fraud class-action lawsuits are down 45%, to 61 through June from 111 in the first half of 2005, according to a new study.Among the factors behind that drop: the federal indictment in May of the leading securities class-action law firm, Milberg Weiss Bershad & Schulman LLP, which is accused of paying individuals to file suits. The firm filed just 17 lawsuits in the first six months of 2006, down from 55 in 2005's first half -- and hasn't filed a class-action case since its indictment.Another contributor is a federal judge's finding last year that nearly 10,000 claims of lung damage from silica dust "were manufactured for money." The case involved 200 companies that manufactured or used silica, which causes an incurable disease of the lungs known as silicosis caused by overexposure to silica dust, which is found in sand and rock and most commonly affects construction workers.Silicosis claims have soared this decade; for instance, one top manufacturer, U.S. Silica Co., had seen claims against it spike to almost 20,000 in 2003 from just a few hundred in previous years. But after defense attorneys raised questions, U.S. District Judge Janis Jack, appointed to the bench by President Clinton, found plaintiffs were being recruited even though they likely had suffered no harm. She sent all but one case back to state courts, where many have since been dropped.

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The decision has had a major chilling effect on litigation involving both silicosis and asbestos, which features many of the same plaintiffs' lawyers, doctors and even plaintiffs. About 60% of the plaintiffs in the silica case had previously been plaintiffs in asbestos suits, even though it is extremely rare to get both silicosis and asbestos. One doctor has made roughly 88,000 asbestos diagnoses over the years and diagnosed about 70% of the 10,000 silicosis cases that Judge Jack found fraudulent. Her ruling also prompted congressional hearings and state and federal criminal investigations.The recent shift comes after decades in which trial lawyers followed a tried-and-true strategy: Recruit lots of plaintiffs, then pressure companies to agree to a cash settlement in order to avoid a long, costly court battle. Law firms typically pocketed up to a third of any resulting settlement.Litigation against manufacturers of asbestos has been a particularly crowded arena. More than 700,000 claims have been filed against more than 8,000 companies in recent decades, leading to more than $70 billion in payouts and legal bills. Those expenses have forced dozens of companies into bankruptcy.Many claims are legitimate. Asbestos is a fire-retardant mineral that was widely used as insulation and in auto parts until the 1970s, but was banned after the inhalation of asbestos fibers was linked to cancer and other diseases. About 4,000 people a year die from mesothelioma, cancer of the membrane around the lungs, caused by asbestos, according to the World Health Organization.But critics say the mass-litigation system gives law firms an incentive to aggressively recruit plaintiffs with dubious claims, cutting into funds left for people who were truly harmed."The game for plaintiffs' attorneys is: Seek out doctors willing to diagnose a problem where the vast majority of doctors would not," says Richard Nagareda, a professor at Vanderbilt University Law School. Judge Jack's silicosis opinion "really lifted the curtain," he says.Plaintiffs' attorneys counter that the argument is a smokescreen designed to make it harder for individuals to hold companies accountable for bad behavior. While many plaintiffs may not currently be impaired from their exposure to asbestos, they point out, cancers and other diseases can take years to develop.Mark Lanier, a plaintiffs' attorney not involved in the asbestos and silicosis litigation, says the actions of a few aggressive lawyers has fueled the perception that all plaintiffs' attorneys are "ambulance chasers."A spokeswoman for the primary professional group for trial lawyers says pro-business groups are using isolated incidents to "distract attention" from efforts by businesses to "evade responsibility" for harming individuals. "If there are doctors or lawyers misusing the civil-justice system, they should be held accountable," says the spokeswoman, Chris Mather. "I would say the biggest problem is the negligence of big corporations."Her group, the Association of Trial Lawyers of America, voted last month to change its name to the American Association for Justice because of the negative image of the term "trial lawyers."

1. Large-scale litigation against single products, known as "_______" are on the wane.a. total tortsb. Lemon Laws


c. Keyersd. mass torts Correct

2. Companies involved in many of the largest and most controversial legal clashes of recent decades are seeing _______ in the number of lawsuits filed against them.a. a sharp decline Correct b. a sharp increasec. a small declined. a small increase

Sticky Business Technology Boosts Outdoor Ads As Competition Becomes FiercerBy AARON O. PATRICKAugust 28, 2006; Page A1http://online.wsj.com/article/SB115672572723646939.html

LONDON -- The last time billboard companies bid for the world's biggest outdoor advertising contract -- to hang up posters throughout the London subway system -- they offered to do just that: hang up posters. That was in 1994.This year, when the contract came up again, it sparked a bidding war among the top providers of outdoor advertising space. The winner, CBS Corp., promised to install hundreds of television screens and projectors to beam advertisements on the walls. It spent years developing a way to stick up posters without glue. Chief executive Leslie Moonves flew to London for a demonstration of the new adhesive. The company's proposal was 1,250 pages.Outdoor advertising, one of the oldest forms of advertising, is reinventing itself. The $23 billion industry is introducing digital technology to change ads faster, new ways of measuring viewers, and billboards that beam information to cellphones. As a result, outdoor advertising companies -- which provide billboards, posters and video screens in public places -- are now seeing bigger gains than many competitors.Because outdoor advertising is much less expensive than TV spots, it still accounts for a smaller part of overall ad spending. But it has become the second-fastest growing form of advertising, behind the Internet, according to market-research and media-buying firms.At the same time, customers are upping the ante. In London, subway officials figured advertising companies needed to provide sleeker and more innovative billboards so they could charge more to advertise in its tunnels and its stations, says Richard Squire, a senior business manager for the London Underground, the unit of government agency Transport for London.The increased expectations of clients have created an arms race to win accounts, with outdoor-ad companies one-upping each other with new features. Paris-based JCDecaux SA is supplying thousands of bicycles for public use to the cities of Lyon, Brussels and Vienna, as part of its successful bids to control all the ads that appear on bus shelters and other street fixtures in the cities. Clear Channel Holdings Inc., based in San Antonio, is erecting digital billboards across London, built with tiny reflective cells that change color when an electric current runs through them."Outdoor has got its act together," says Charlie Hiscocks, head of global brands marketing for London-based SABMiller PLC, the beer giant. The company says it has



increased spending on billboard ads 50% in the past five years. "Rather than a scruffy old piece of plasterboard that you throw some paste onto on the edge of a motorway, you now have high-quality sites."Around the world, spending on outdoor advertising last year was $23.2 billion, up 6.1% from the year earlier, according to ZenithOptimedia, a media buyer owned by Publicis Groupe SA. Spending on television ads was $146.8 billion, up 3.8%, the group says. Global spending on Internet advertising was slightly less than on outdoor, at $18.1 billion, but up 28.77% from the year before.In the U.S., outdoor advertising rose 11% in the first quarter, ended March 31, compared with a 5% rise in spending on all advertising, according to TNS Media Intelligence. Outdoor advertising in the U.K. rose 29% from 2000 to 2005, says the Advertising Association, a U.K. trade group. Television advertising rose 4% over the same period.The awarding of the London subway contract shows the new technology and intense competition at play in the industry. Transport for London, the government agency which oversees the subway, put the ad job up for bid, forcing incumbent CBS to compete with other outdoor advertising groups. (CBS, formerly part of Viacom Inc., inherited the subway account though its Infinity Broadcasting Corp. unit, which acquired outdoor advertising company TDI Worldwide Inc. in 1996.) In the U.K., CBS's outdoor advertising company is still called Viacom Outdoor.The London Underground contract is valued at an estimated $3 billion over eight-and-half-years. With big outdoor-advertising contracts, a city or government agency shares revenue generated from selling ads with the company that manages the billboards. CBS Outdoor wouldn't disclose how much it will receive and how much will go to the London Underground.CBS began preparing its pitch two years ago. It set up a team of 18 people and converted the basement in its London offices into a workshop to build and test the new equipment. Andrew Oldham, joint managing director of CBS Outdoor's U.K. operation, recalls that he decided "the knock-out punch" would be glueless posters.For years, advertisers including CBS have been looking for a new way to stick up posters. Using glue is expensive and time consuming. The glue is spread on both sides of a poster to help smooth it flat. But trains stir up dust, which sticks to the glue. Some advertisers won't buy ads which are likely to be covered in grime.When "they get rid of the glue, it will make a dramatic improvement," says Mr. Squire of the London Underground.The Tube, as the London subway is called, is a tricky place to hang ads. The walls are curved. Temperatures and humidity levels vary greatly. About 150 CBS employees, called "fixers," paste up several thousand posters, from 2 a.m. to 6 a.m. every day, carrying 50-pound buckets of glue. To remove a poster, it takes three workers about an hour of scraping. Glueless posters could be peeled off in minutes.In 2002, CBS had approached 3M Co., of St. Paul, Minn., to help it develop a glueless poster, also known in the industry as a dry poster. It figured the maker of Post-it sticky notes and tape knew about adhesives. The companies had been unsuccessful in their quest, but with the prospect of the London subway contract, their work took on new urgency.


CBS envisioned an ad with adhesive on one side, like a giant Post-it note. 3M said that was too expensive. Posters in the Tube are printed by several companies, using different types of paper, and it would be costly to get them all to adopt a common standard.At 3M's laboratory in Berkshire, west of London, technical service manager Mike Killner had an alternative plan. It was inspired by a bulletin board he had in his office, a 3M Wall Pad which is sticky on both sides, so one attaches to the wall and the other holds notes.Mr. Killner imagined covering the subway walls with giant adhesive strips that were sticky on both sides like the Wall Pad. One side would attach to the wall. Posters could be pressed on the other side. Mr. Killner figured the adhesive strips would lose their stickiness and need to be replaced every six months.For two years, Mr. Killner tested chemical combinations for adhesives. In early 2004, Mr. Killner took a prototype to CBS's offices in London. A group of CBS executives gathered in the basement workshop. Mr. Killner showed them an advertising poster stuck to one of his adhesive strips. He grabbed the edge of the poster and pulled. Instead of coming off easily, it ripped. The adhesive was too strong.CBS assigned six people to work with Mr. Killner. 3M put another five people on the project. The team tried different combinations of polypropylene and polyester films. After about a dozen versions and laboratory tests using different papers and in various temperatures and humidity levels, in early 2005, the team found what it deemed the perfectly balanced adhesive. It was strong enough so that passing trains wouldn't send the posters flying, but gentle enough to pull down the posters easily."I've never worked on a project which has taken so long," Mr. Killner says.Meanwhile, the rest of the CBS bid team was looking to add more advertising to the Tube. To go alongside its glueless posters on the train platforms, CBS decided to try mounting projectors on the ceiling which could beam ads directly onto the walls. These projectors could show TV ads or cycle through still images. CBS technicians would control them remotely from their offices and send in new ads easily. CBS found a supplier to make the projectors but they were expensive, at about $95,000 each.Also, the projectors' lightbulbs were too hot and presented a possible problem for the Tube's fire code. CBS hired an engineering firm to design metal boxes to enclose the projectors, ensuring flames couldn't spread if they should catch fire. CBS added the projectors to its pitch.For the escalators into the deep subway tunnels, CBS's Mr. Oldham wondered if CBS could install flat-panel-television screens to show ads.In a test at one station last year, CBS mounted 66 screens above the escalators, linked to a central computer. Commuters seemed to like them, often standing still to stare, CBS observed. CBS research indicated that the Tube's three million daily riders spend an average of two minutes each day riding the escalators. In one ad for a Sony television set, CBS made a series of rubber balls bounce from one screen to another, following commuters as they rode down the escalator.Concerned the screens could be vulnerable to vandalism, CBS staffers smashed the screens with sledgehammers. It took five hits to shatter the glass. CBS's Mr. Oldham deemed them tough enough.The only remaining blank space: the corridors between the train platforms and station entrances. There, CBS decided to install thousands of light boxes. Light boxes have lightbulbs mounted behind transparent posters. The light is intended to make the ads


more attractive than paper posters, so advertisers will pay more for them. CBS considered its original boxes too big for many corridors because they might slow down pedestrians. So, CBS designed a light box with about half the depth, at 2.2 inches. It proposed to install 4,500.In June 2005, Mr. Moonves, CBS's chief executive, flew to London to inspect preparations for the bid. With local CBS Outdoor executives, he traveled by car to a train station to look at the existing ads. Back in the CBS basement workshop, he was given a demonstration of the glueless posters, video screens and projectors. Everything worked."I was extremely impressed with the advertising technology because this is one area that's going to change dramatically over the next three to four years," Mr. Moonves said in a recent interview. In London, "they were further ahead of what we are doing in the U.S." Last year, CBS Outdoor's revenue rose 4% and operating profit rose 13%, the largest increases in those categories of all of CBS's divisions.Mr. Moonves discussed negotiating tactics with his local executives. He spent about 48 hours in London, then flew back to New York and approved their plan. CBS would offer to spend about $136 million on new advertising equipment in the Tube, including 8,300 glueless poster sites, 150 projectors, about 2,000 video screens and 4,500 light boxes.In July 2005, CBS and five other companies submitted bids to Transport for London. CBS's offer was seven volumes and 1,250 pages. A JCDecaux spokeswoman said its own bid was as long as the novel "War and Peace."A few weeks later, however, when a CBS engineer tried to remove the adhesive strips from a metal frame in the office basement, they ripped. That would be a huge problem in the Tube. CBS had overlooked the back of the strips which attached to galvanized steel frames on the Tube walls. 3M suggested using coated aluminum frames, a smoother surface, instead. The strips came off easily. CBS didn't need to change its bid.Last October, Transport for London announced the shortlist. Clear Channel didn't make the cut. The world's largest outdoor advertising company by revenue hadn't developed a glueless poster. A spokesman for Clear Channel declined to discuss its bid. Transport for London declined to discuss the losing bids.Two bidders went to the final round: CBS and JCDecaux, the second-largest outdoor advertising group. JCDecaux and CBS included additional details such as how they would handle safety, security and recycling, but not new features, and submitted their proposals in March. JCDecaux chairman Jean-Francois Decaux says his company also developed a glueless poster but he declined to discuss the pitch in detail.On May 23, Transport for London said it had awarded the contract to CBS. It felt the CBS proposal would make the Tube look more modern, says the London Underground's Mr. Squire, who helped select the winner. Transport for London also thought the projectors, light boxes, digital screens and glueless posters would generate more advertising revenue, he says.The new posters are likely to attract marketers who have shied away from the Tube, says Glen Wilson, deputy managing director at Posterscope, a London-based firm that buys outdoor advertising and is owned by Aegis Group PLC. "You don't want to advertise food on posters that become covered in dust," he says.The contract started Aug. 15. The first glueless posters have gone up. Ad executives say London is the first place they have been used.


3. _______ is the second-fastest growing form of advertising.a. “Pop-up” advertisingb. Indoor advertisingc. Outdoor advertising Correctd. Wordless

4. A new advertising plan for the Underground in London includesa. glueless postersb. light boxes and flat-panel-television screensc. projectors on the ceiling which could beam ads directly onto the wallsd. All of the above Correct

Fuel Lines Giant New Oil Refinery in India Shows Forces Roiling IndustryBy STEVE LEVINE and PATRICK BARTAAugust 29, 2006; Page A1http://online.wsj.com/article/SB115681680204648030.html

AMNAGAR, India -- For one billionaire and 150,000 manual workers here on the Indian seacoast, America's gasoline-thirsty motorists mean opportunity.The drivers want more gasoline. U.S. companies that refine it from crude oil are minting money. But they have turned away from building new refineries in the U.S. because the numbers work better abroad, where costs and red tape are reduced and where expected demand growth is even higher than the U.S.Into that economic mix sailed Mukesh Ambani, the chairman of India's largest private-sector company, Reliance Industries Ltd., a man whose animated personality and estimated $7 billion fortune regularly land him on the front pages of Indian newspapers. On India's northwest coast near Pakistan, Mr. Ambani is building the world's largest refinery complex. When it's finished, he plans to load 40% of the fuel it turns out onto huge tankers for a 9,000-mile trip to America.The potential for oil refineries abroad that can serve the U.S. is so strong that Chevron Corp., though based in the car-happy state of California, is investing in Mr. Ambani's project rather than try to build a new refinery at home.Behind this is a shift in the economics of the refinery business. Distilling crude oil into gasoline, diesel, home-heating oil and jet fuel used to be a lower-margin business. These days it's a fat profit center. Steady growth in demand for fuel in developed countries, plus explosive growth in developing ones like China, have strained the globe's refining capacity. The limited capacity amid growing demand drives up prices of what the refineries turn out.The U.S. market is especially lucrative, sometimes earning its refiners $20 or more on every barrel of crude oil they refine. Exxon Mobil Corp. earned $1.3 billion in its refining arm in the second quarter, up 11% from a year before. Independent refiner Valero Corp. earned $1.9 billion in the quarter, up about 124%, a jump partly due to its acquisition of another refiner.While in the past, thinner profit margins required that refineries be close to consumers to save on shipping, today's margins are wide enough that it pays to haul gasoline and other refined products long distances. Locating refineries in a region such as Asia is an easy



decision, given its less-onerous construction costs, environmental limits and red tape, plus its own rapidly growing fuel demand.The hefty profits have spurred many new projects. Scottish oil consultancy Wood MacKenzie counts 500 plans to expand or build refineries world-wide, and figures that maybe half will actually get done. Few are in the U.S. Despite considerable expansion and upgrading of existing American refineries, oil companies haven't built a new refinery from scratch in the U.S. in 30 years.The result is a growing dependence on foreign-produced fuel. Politicians of all stripes say the U.S. should rely less on foreign energy sources. Instead, it has twin addictions -- not only to imported crude to feed its refineries, but to imported gasoline to meet demand beyond what those refineries can make.The U.S. is importing about 13% of its gasoline needs this year, up from around 11% in 2005 and less than 8% in 2000, according to the U.S. Energy Information Administration. In all, American drivers use almost half of the gasoline burned in the world each day.For U.S. consumers, the prospect of getting more fuel from new refineries being built abroad isn't necessarily a negative. The new plants will make more fuel available during crunches, especially since they'll be able to handle heavy, higher-sulfur varieties of crude that some older refineries can't. After Hurricane Katrina, for example, Saudi Arabia said a lack of refineries able to handle such crude prevented it from being able to relieve the U.S. gasoline-supply pinch.Saudi Arabia's national oil company, Saudi Aramco, currently envisions two giant new 400,000-barrel-a-day refineries. ConocoPhillips is in talks to build one, and France's Total SA the other. In addition, Saudi Aramco and Exxon Mobil are talking about being partners in a refinery expansion and petrochemical complex in China's Fujian province, near Taiwan.Mr. Ambani's project in India is among the most ambitious. At $6 billion, it is in keeping with a tradition at Reliance Industries of proposing massive projects and getting them built.While calling himself "media-shy," the 49-year-old Mr. Ambani isn't entirely modest in his claims for his business. He says just two companies in the world are comparable in building vast projects from scratch -- "only Microsoft and Reliance."Mr. Ambani's father, Dhirubhai Ambani, founded Reliance in the 1970s as a textile producer. In the 1990s, the company plunged into oil refining after the younger Mr. Ambani noticed that India was importing millions of tons of oil products each year. Reliance soon built one of the world's largest refineries at the Jamnagar site, one that can process 660,000 barrels a day of crude oil.The plant is also one of the most sophisticated, able to process heavy crude, an advantage not only because light, sweet crude is getting harder to come by but also because heavy crude is cheaper.

5. On India's northwest coast near Pakistan, Mr. Ambani is building the world's largest refinery complex. When it's finished, he plans to load 40% of the fuel it turns out onto huge tankers for a 9,000-mile trip to________.a. Chinab. America Correctc. Saudi Arabia


d. Mexico

6. The potential for oil refineries abroad is so strong that ______, is investing in Mr. Ambani's project rather than try to build a new refinery at home.a. Exxonb. BPc. Chevron Correct d. Amaco

Desk Job Consumer Demand and Growth In Laptops Leave Dell BehindBy CHRISTOPHER LAWTONAugust 30, 2006; Page A1http://online.wsj.com/article/SB115689887806349051.html

To understand why the world's largest personal-computer maker is facing its worst crisis in years, consider how Chris Conroy recently bought his new laptop computer.Mr. Conroy, who works at a publisher of scientific journals in Washington, D.C., first logged onto Dell Inc.'s Web site to browse personal-computer offerings online. But because his old laptop was dying quickly, the 31-year-old figured buying a PC on the Internet and getting it shipped home would take too long.So in late June, Mr. Conroy went to a Circuit City Stores Inc. store, which doesn't stock any Dell computers. There, he checked out several laptops before snapping up a $1,200 Hewlett-Packard Co. model. "Most importantly, I could get my hands on it right then, without having to worry about it being shipped," he says.Mr. Conroy's experience signals a fundamental problem facing Dell. For years, Dell -- famous for selling products directly over the phone and the Internet -- was a dynamo thanks to bulk sales to corporations, mostly of desktop computers. Its direct-sales business model made the Round Rock, Texas, company a widely admired paragon of efficiency as it underpriced rivals such as H-P and Gateway Inc.But in the past few years, buying behavior in the PC world has changed. Much of the growth has come from consumer demand rather than the business market on which Dell focused. What's more, people looking for a new home computer are increasingly turning to laptops. There Dell is particularly weak: Its models lack the pizzazz and features of rivals. For laptops especially, consumers prefer to hold and test models in a store, but Dells aren't sold there. According to NPD Group, 56% of laptops sold to consumers in the first quarter of this year were bought in a store, up from 50% two years ago.Dell has largely ignored the consumer boom although it says it still considers consumers an important market. For a while it had part-time workers with an annual turnover rate of 300% taking calls from customers who wanted to buy a PC. The company has poured money into corporate products such as printers, storage systems and computer servers. It nixed some overtures from retailers to sell its wares in stores. At a conference in 2004, Dell Chief Executive Kevin Rollins declared, "We have never focused on the consumer as a company."At the same time, rivals such as H-P, Gateway and Apple Computer Inc., have charged ahead in the consumer PC market. In particular, H-P cut costs to become competitive with Dell, began working more closely with retailers and redoubled its marketing efforts.



As Dell cut prices, H-P invested in consumer-friendly features in its notebooks. H-P computers, using a laser, can write a label on a specially coated music CD with artist and title so users don't have to use a marker. And people can watch movies on H-P laptops without booting up the computer, a feature that Dell now offers too.Dell has missed sales or earnings projections three times in the past five quarters, most recently posting a 51% drop in quarterly profit. The company took another hit two weeks ago when it announced the recall of 4.1 million laptop batteries because they can overheat and catch fire. Earlier this year, Dell expanded more slowly than the overall U.S. PC market for the first time in more than a decade. In the most recent fiscal year, while consumers made up about 30% of H-P's $86.7 billion in annual sales, according to Sanford C. Bernstein & Co., Dell's consumer business constituted just 15% of its $55.9 billion in revenue.Dell's stock is down more than 60% from its peak closing price of $58.13 on March 22, 2000. By comparison, H-P is up about 30% over the same period. The weak performance is a huge comedown for Dell, whose stock was the No. 1 performer in the S&P 500 index in the 1990s.

7. According to NPD Group, 56% of laptops sold to consumers in the first quarter of this year were bought in a store, up from ____ two years ago.a.10% b. 25%c. 50% Correctd. 75%

8. People looking for a new home computer are increasingly turning to _____PC’s.a. expensive desktop gamingb. Tivo likec. cheap desktopd. laptop Correct

Wake-Up Call Entrepreneur Finds Millions Are Left On Breakfast TableBy ROGER THUROWAugust 31, 2006; Page A1http://online.wsj.com/article/SB115698922657150212.html

Twenty-nine million children, most from low-income families, eat federally funded lunch in school. But only nine million eat school breakfast. To federal and state officials, that gap is a big reason for the persistence of childhood hunger in America.To entrepreneur Gary Davis, it's also a business opportunity. Those 20 million unserved breakfasts translate into nearly $2 billion in federal money that could be claimed from school-feeding programs, but has been left on the table each year. In the summer of 2004 Mr. Davis wondered: What if he could get all the children who eat lunch in school to eat breakfast, too?His answer: a grab-and-go meal of cereal, crackers and fruit juice, in small boxes that could be distributed on buses, in the cafeteria or in the first-period classroom. He



launched his product at the beginning of last school year, and by the end, he says he was selling three million of them a month.Long-neglected, school breakfast is becoming a sought-after market for business. At the same time, that business is driving participation in an underused government social program. Earlier this month, Kellogg Co. began selling its own breakfast-in-a-box to schools, which includes cereal, a Pop-Tart or graham crackers, and juice. Tyson Foods Inc. is adapting its popular lunchtime chicken nuggets and patties into smaller sizes for breakfast. Scores of other companies also are pitching breakfast items to schools.As companies try to cash in on the before-the-bell market, they are fueling a debate about how to best serve hungry children. Nutritionists, trying to combat childhood obesity, say ideally, breakfast offerings should contain fresh fruit and more whole grains. But they also acknowledge that many children come to school hungry, without having eaten any breakfast at all.For decades, schools focused on lunch -- often believing children were eating breakfast at home -- and so did many food companies. Now the school market "is pretty saturated as far as lunch goes," says Min Jung Tavella, Kellogg's associate director for customer marketing, prompting "a refocus on breakfast." She says that more schools are asking for breakfast products, believing that better-fed students learn more.The push by food companies to make breakfast as much of a school-time institution as lunch comes at a time when hunger in the U.S., especially among children, is an acute issue. The U.S. Department of Agriculture reports that in 2004, 13.9 million children lived in households that didn't have enough resources to purchase an adequate, balanced diet throughout the year, compared with 12.7 million in 2001. Food banks and soup kitchens say many of those families show up on their doorsteps.When he started zeroing in on breakfast in 2004, Mr. Davis's company, East Side Entrees of Long Island, N.Y., was already a player in the school-lunch program, supplying products like SpongeBob SquarePants milk and Batman cheese pizza. But, as he learned, many schools didn't offer breakfast, often because it was deemed too much hassle in the hectic moments before school begins.Mr. Davis conjured up his idea of a pre-packaged meal, calling it Breakfast Breaks. He then assembled a coalition of lobbyists, charities and Washington insiders -- including former Senators Robert Dole and George McGovern -- to persuade more schools to take advantage of the federal money by starting breakfast programs.By the end of last school year, East Side says schools in more than 40 states were serving its Breakfast Breaks -- which cost schools 80 cents each. As schools reopen for the new year, Mr. Davis expects to be providing four million Breakfast Breaks per month to about 650,000 children.Federal support for school meals dates back to the Depression, when surplus farm commodities were funneled to schools for lunch. Congress formally established the lunch program in 1946 as a matter of national security after the military complained too many World War II draftees were being sent home suffering the effects of poor childhood nutrition.The School Breakfast Program began in 1966, driven by worries that rural children traveling long distances to school and children in poor families weren't getting full breakfasts. Congress made the program permanent in 1975.


Lunch has been embraced by most public schools, but even after three decades, breakfast hasn't nearly caught up. That's partly because many schools say they have trouble with the logistics. There's little time as students scramble before the bell, and not much flexibility in bus schedules to get children to school earlier. Many schools lack enough early morning staffing or food-storage space.In the 2004-05 school year, 17 million children ate free or reduced-price lunches, while another 12 million paid full price. Only 7.5 million children ate free or reduced-price breakfast, with 1.7 million paying full price.Both school lunch and breakfast are federal entitlement programs with mandatory funding -- meaning the government will reimburse school districts for every meal that meets USDA nutritional guidelines. During the 2004-05 school year, total federal school breakfast reimbursements were about $1.9 billion, compared to $7 billion for lunch.Last school year, in most cases, the government reimbursed schools $1.27 for each free breakfast served; 97 cents for each reduced-price meal, and 23 cents for each fully paid one. The reimbursements are to cover the cost of food, and help with the cost of cafeteria staff and equipment. Schools make their own food purchases from various vendors.In states with the highest percentage of low-income students participating in both school food programs, such as Oregon, West Virginia and Kentucky, 55% of children who ate school lunch also ate breakfast at school, according to the Food Research and Action Center, an anti-hunger group. If all students who ate school lunch also ate breakfast, federal breakfast reimbursement would have soared to $3.84 billion, the group says -- meaning nearly $2 billion went unused.These numbers jump off the page to entrepreneurs like East Side's Mr. Davis and Ben Tabatchnick, of Tabatchnick Fine Foods Inc., of Somerset, N.J. For both companies, success depends on coming up with ideas that will appeal to schools as well as children, so they can tap the federal money."Our customers are four feet tall and 60 pounds," says Mr. Tabatchnick. His company has developed products for schools ranging from strawberry- and vanilla-flavored milk to raspberry smoothies to energy bars with apples and oranges. "We want children to pick up an energy bar instead of a candy bar," he says.Mr. Davis, a 64-year-old former food broker, founded East Side Entrees in 1998 specifically to serve school food programs. He expects sales of Breakfast Breaks to reach an annualized level of more than $100 million this school year, and says they will represent about 75% of his company's growth "this year and going forth." The privately held company makes "a modest profit margin" on the product, he says, but wouldn't be specific.Kellogg says its breakfast box, called Morning Jump-Starts, sells for about 85 cents each. It is similar, containing a small bowl of a reduced-sugar version of some of its cereals, such as Froot Loops; a single package of Pop-Tarts or graham crackers, and a carton of fruit juice. On the packaging, Kellogg characters Tony the Tiger and Toucan Sam provide math, science, nutrition and fitness tips. Kellogg wouldn't provide sales projections for the product.

9. Long-neglected, ________ is becoming a sought-after market for business.a. school breakfast Correct b. after school dinners


c. after school snackingd. formal school day teatime

10. The U.S. Department of Agriculture reports that in 2004, ______ children lived in households that didn't have enough resources to purchase an adequate, balanced diet throughout the year.a. 1.1 millionb. 1.9 millionc. 10.0 milliond. 13.9 million Correct

Republican Advantage on Issue Of National Security ErodesBy JACKIE CALMESSeptember 1, 2006; Page A1http://online.wsj.com/article/SB115704547231650711.html

In both national elections since the Sept. 11, 2001, terrorist attacks, President Bush and congressional Republicans successfully played the national-security card to win big victories against the odds. Now, with their party's control of Congress at stake, Republicans are betting on the issue again. But it may not be the trump card it used to be.The public's patience has frayed as the Iraq war grows bloodier in its fourth year, eroding confidence in Mr. Bush's stewardship of national security. Mismanagement of the response to Hurricane Katrina contributed. Democrats, having ceded the security issue to Republicans in the past, now are on the offensive. They're attacking the administration's competence at home and abroad and fielding candidates with military experience. Democrats are also pressing an argument opposite to the president's: that Iraq isn't central to the broader war on terror but distracts from it, and breeds more terrorists. How voters ultimately decide on that issue is "one of the most important dynamics of this election," says Republican pollster David Winston.A Wall Street Journal/NBC News poll in June, buttressed by other polls since, suggested Democrats have gained significant ground. It gave them a three-point advantage on the question of which party can best deal with Iraq, erasing Republicans' 30-point edge of October 2002. Democrats had a nine-point edge on handling foreign policy, a swing from Republicans' 18-point advantage in June 2002. Republicans did retain a 24-point advantage on "ensuring a strong national defense" -- though that was down from a high of 41 points just before 9/11.The intensifying debate was on full display in Salt Lake City yesterday, where Mr. Bush set the theme for what will be a sustained pre-election push to make the Republicans' case on national security. He told the American Legion's national convention that leaving Iraq now would be "absolutely disastrous," providing a base of operations for global terrorists who are "successors to fascists, to Nazis, to communists and other totalitarians" the veterans helped battle. Back in Washington, the Republican National Committee struck a new political note, with a widely distributed email against Democrats titled "The Defeatocrat Playbook."



A laboratory for how that fight plays out is suburban Philadelphia. Ten-term Republican Rep. Curt Weldon, a senior member of the House Armed Services Committee, is running his toughest re-election campaign yet, with full-throated support for the Iraq war. "We either fight them there," Mr. Weldon recently said of terrorists, "or we fight them in the supermarkets and streets here." He still insists there are weapons of mass destruction in Iraq.Stuart Rothenberg, a veteran nonpartisan handicapper of congressional races, recently rated Mr. Weldon's a tossup. The Democratic challenger is Joe Sestak, a former vice admiral who served in Afghanistan. Two weeks ago, Democratic leaders tapped him to deliver the party's weekly response to Mr. Bush's Saturday radio address. Mr. Sestak charged that the administration, by its attention to Iraq, had ignored Iran "as it developed a nuclear capability," as well as North Korea, "now launching missiles." Recalling his own stint in Afghanistan, he said that country now "is in danger of once again falling prey to terrorists." And the alleged terrorist plot in London, Mr. Sestak added, "forces us to ask: Are we doing everything possible to make America safe?"Against this backdrop, Labor Day kicks off the candidates' traditional sprint to Election Day, Nov. 7, with Republicans increasingly fretful at the prospect of losing their House, and possibly Senate, majorities. Polls since last year have shown the public's approval ratings for Mr. Bush and the Republican-led Congress at historic lows. Voters by low double-digit margins continue to say they'd prefer Democrats to run Congress.Even most Republicans see little ahead that could change the picture for the better. As usual, they have more money to make their case, but Democrats have narrowed the gap. Republicans are spending millions to defend seats they thought would be safe, leaving them strapped for helping their challengers running against Democratic incumbents.By all accounts, Republicans will suffer net losses. Both Mr. Rothenberg and Charlie Cook, another respected political analyst, now predict that Democrats will gain at least the 15 seats they need to control the House, based on current trends. That likely would mean defeats for some of the few remaining Republican moderates from New England across the Middle West. They are vulnerable this year, by association with an unpopular president and congressional leadership, among less-conservative voters who feel neither safer nor economically secure. Most analysts expect Democrats to fall short of the six-seat gain they need for a Senate majority, given that Republicans have fewer seats than Democrats to defend this year.Many factors have combined to turn the tables against the party in power: worsening chaos and casualties in Iraq, economic insecurity and high gasoline prices, congressional corruption, conservatives mutinous about Republicans' spending record, and an anti-incumbent mood this year that gives the majority more to lose.Republicans are left with one remaining strong suit -- voters' sense, going back a half-century to the Cold War against communism, that they are better able than Democrats to keep the nation secure."It's still an enormously potent issue" for Republicans, says party strategist and former Rep. Vin Weber. His party's historical advantage on national security is the wild card, he argues, that makes these midterm elections less predictable than in years past -- such as 1994, when Republicans broke Democrats' 40-year domination of Congress amid voters' disgust with Democrats' unkept promises on domestic issues, or 1974, when Democrats swept scores of Republicans from office in the wake of the Watergate scandal.


But he adds that Republicans "have to portray the Democratic Party in fairly stark terms as not being fit … to do what's necessary to protect America," because of its traditional ambivalence about use of force, civil-libertarian views against aggressive surveillance, and deference to international opinion.How stark? "If you vote for my opponent, America will suffer," Republican challenger Max Burns said Monday of incumbent Democratic Rep. John Barrow at their debate in Georgia. The following day, Defense Secretary Donald Rumsfeld led off the administration's pitch to the American Legion convention with a speech that linked critics of the Iraq war to Europeans who gave ground to Nazi Germany in the 1930s, saying "many have still not learned history's lessons" and "believe that somehow vicious extremists can be appeased."With Republicans' hand on the security issue weakened by Iraq, Katrina and a furor over illegal immigration, party leaders have begun emphasizing security angles where their positions remain popular -- and where they believe Democrats are vulnerable. Those include Republicans' support for the post-9/11 Patriot Act increasing federal surveillance and prosecutory powers; the administration's detainment of suspected terrorists; and its program of warrantless electronic eavesdropping.The tactic was evident Wednesday when Senate Majority Leader Bill Frist defended Mr. Rumsfeld against Democrats' counterattacks. Mr. Frist, a Tennessee Republican, said in a statement that if Democrats support a war on terror, why do they "object to a terrorist surveillance program and other policies that are necessary to bring our adversaries to justice and to make sure that we take the fight to our enemies rather than waiting for them to attack innocent civilians?"Republican leaders will be looking for legislative opportunities to score political points against Democrats before Congress adjourns, perhaps in late September, and both sides hit the campaign trail full time. They'll seek votes on Mr. Bush's wiretap program and treatment of alleged terrorists at Guantanamo Bay, Cuba, among others, as the Senate turns to the annual defense-spending bill.Democrats, cautiously confident, nonetheless harbor fears of an unexpected event that up-ends the campaign landscape -- a terrorist attack, for example -- and revives the president's standing with voters. Britain's foiling of the alleged terror plot last month gave him a slight bump up. Or it could be something like the threatening videotape Osama bin Laden released just days before the 2004 presidential election, boosting Mr. Bush's narrow lead over Democratic rival John Kerry by four points in one pre-election poll.Back then, the president came from behind to win re-election. He and his supporters promoted his post-9/11 leadership image to offset growing unease about the Iraq war, while portraying Mr. Kerry as indecisive and questioning his decorated Vietnam combat record -- with help from the anti-Kerry "Swift Boat Veterans for Truth."In the 2002 midterm congressional campaigns, after Sept. 11 and before the Iraq invasion, Mr. Bush used Senate Democrats' opposition to legislation creating the Homeland Security Department to question his foes' credentials on national security. They actually were first to call for a department, but opposed Mr. Bush's proposals limiting civil-service protections for federal employees who would staff it. Several Democratic senators were defeated, including Vietnam veteran and triple amputee Max Cleland of Georgia. Republicans defied the traditional pattern of midterm losses for the president's party, restoring their Senate majority to an enlarged 55-45 margin.


This year looks to be different. Recent polls and maneuverings in close congressional contests suggest some reasons the security issue may not help Republicans as much this year.Most simply put, time has worn the public's patience on Iraq -- and with it the Republicans' edge on security issues. With Democrats noting that the war soon will exceed the length of U.S. involvement in World War II, and with Iraq on the verge of sectarian civil war, the unpopularity of the war has become the year's central issue. Not since March 2004 has a Journal/NBC poll shown that a majority believed the Iraq invasion was worth the cost and casualties. Now polls consistently show a majority thinking the war was a mistake. Majorities favor troop reductions, though not immediate withdrawal. Two-thirds of Americans disapprove of Mr. Bush's handling of foreign policy, and of Iraq specifically.Rep. Ike Skelton, a conservative Missouri Democrat who likely would become chairman of the House Armed Services Committee if Democrats became a majority, doesn't have a tough re-election race. Yet he spent much of August campaigning at small-town coffees, Rotary clubs, youth groups and the Missouri State Fair to argue that the nation's military readiness in troops and materiel is dangerously strained, while foreign threats are multiplying.In his Republican-leaning district, "I'm hearing great concern from everybody" about Iraq, Mr. Skelton says. "They're saying, 'How do we get out of it?'" He favors beginning redeployments this year, at the military's discretion, saying: "The Iraqis are going to have to sort this out for themselves."In another break with recent campaign years, some conservatives have joined the chorus of war critics, providing cover for Democrats against the administration's stepped-up assaults. Mr. Skelton's comments would qualify him as a "cut-and-run Democrat" in the rhetoric that Republicans, led by the White House, took to using months ago. But lately, the phrase could apply as well to conservative pundits and Republican lawmakers seeking distance from the White House.Moderate Republican Rep. Chris Shays of Connecticut, hammered for months by Democrat Diane Farrell for backing the war, last week returned from his 14th trip to Iraq and called for a timetable for U.S. withdrawal. "The Iraqis lack the political will to be on a time frame to get this done," he said. Minnesota's Republican Rep. Gil Gutknecht did likewise, calling the president's course in Iraq "politically unsustainable." His Democratic foe, former Army National Guard commander Tim Walz, has made Mr. Gutknecht's formerly unquestioning support for the war a major part of his challenge.Sen. John McCain is perhaps the president's strongest Senate supporter on the war, and the Republicans' early presidential front-runner. Last week, he cited past rosy comments of the president and Vice President Cheney for misleading Americans into thinking the Iraq war would be "some kind of day at the beach." Columnist George Will recently wondered in print whether "the spectacle of America" confronting the limits of its power "has emboldened many enemies." Conservative icon William F. Buckley Jr. has declared a U.S. failure in Iraq. The Sept. 11 issue of the magazine he founded, National Review, is devoted to conservatives' musings on the headline question "Last Chance for Iraq?"Another factor this year: The public is skeptical of Mr. Bush's linkage of Iraq and the war on terror.


Linkage has political benefits for the president. Polls show Americans still rate his handling of the broader war on terror higher than his handling of anything else -- Iraq, the economy, foreign policy and his job in general. Even so, Republicans' edge on the question of dealing with terrorism has been slipping for four years, according to Journal/NBC polls -- from a 36-point advantage over Democrats in October 2002, to 18 points in December 2004, to six points in June.Back in April 2003, in a New York Times/CBS News poll after the overthrow of Iraqi leader Saddam Hussein, Americans agreed by two-to-one that the Iraq war was part of the overall war on terror. This week, a New York Times/CBS poll had Americans by 51% to 44% rejecting that idea. Nearly half said the focus on Iraq in fact is distracting attention from problems elsewhere -- a central contention of Democrats this year.By Election Day, perhaps most decisive will be whether Democrats indeed take the offensive on the issue of defense.In both 2002 and 2004, Democrats, in league with top party consultants, made a strategic decision -- "a terrible mistake" -- not to engage Mr. Bush on national security, says former Clinton White House Chief of Staff John Podesta. "You just cannot concede the question; he is vulnerable on it," Mr. Podesta says. "Our D.C. leaders get it now, and the candidates in the states aren't shrinking from it."In New Mexico, for example, Democratic Attorney General Patsy Madrid has aired TV ads in her campaign to unseat Rep. Heather Wilson, lambasting the Republican for claiming to be independent but failing to question Mr. Bush on the war and its costs even though she sits on the House Intelligence Committee.On Capitol Hill, House and Senate Democrats have their own plans to try to score points on national security, starting next week and running through the fifth anniversary commemorations of 9/11. They will step up the past months' calls for Mr. Rumsfeld's ouster, while highlighting Republicans' failure to implement many of the recommendations of the bipartisan 9/11 Commission.As House Democratic Leader Nancy Pelosi of California likes to say, referring to Republicans' successful campaign against Mr. Kerry, "We're not going to let them Swift Boat us again." Evidence of that was Wednesday's orchestrated condemnation of Mr. Rumsfeld by an array of Democratic leaders, with statements, media conference calls and TV bookings.So was the recent reaction in Ohio when embattled Republican Sen. Michael DeWine aired a TV ad assailing his Democratic challenger, Rep. Sherrod Brown, for voting against intelligence programs and antiterrorism laws. The ad opened with an image of the World Trade Center, one tower smoking from the terrorists' strike, and ended with the kicker "Sherrod Brown -- Weakening America's Security/Out of Touch with Ohio Values." Over the weekend, the Ohio Democratic Party in Columbus and the Democratic Senatorial Campaign Committee in Washington quickly coordinated to buy air-time and produce a counterattack ad: "It's sad," the ad opened. "Mike DeWine exploiting images of 9/11 to smear Sherrod Brown." The ad defended Mr. Brown's record while jabbing Mr. DeWine for failing to oversee the administration from the Senate intelligence committee.

11. A Wall Street Journal/NBC News poll in June, buttressed by other polls since, suggested Democrats have gained significant ground. It gave them a three-point advantage on the question of which party can best deal with _______.


a. Iraq Correct b. Iranc. North Koread. China

12. Two-thirds of Americans disapprove of Mr. Bush's handling of _______ policy.a. energyb. foreign Correct c. agriculturald. technology

Questions 13 – 17 from Marketplace

'Abstain From Evil' Was Once a Lesson In Pupils' TextbooksBy CYNTHIA CROSSEN August 28, 2006; Page B1http://online.wsj.com/article/SB115671602784846741.html

In early American public schools, there was no separation between church and state. Tenets of Christianity were embedded in almost every lesson and book, including spelling, reading, history, grammar, arithmetic and science.A was for Adam, B was for the Bible and C was for Christ. In arithmetic, "How many days is it since the birth of Our Savior?" In geography, "Christianity is the prevailing religion of the leading nations of the world." In science, "All parts of the solar system are framed and adjusted to answer exactly the purpose intended by the Creator." In nature, "The more we examine the insect world, the more sensible do we become of the mighty power and goodness of God."The schoolbooks used by early Americans were supposed to teach literacy and knowledge, but they also had a broader purpose: to create a national character, instilling children with a belief in God and a moral code appropriate to the pious citizens of a new republic. While learning to read, students also had to absorb messages about religion, patriotism and other virtues, such as thrift, diligence and honesty."A sense of God permeates all [early school books] as surely as a sense of nationalism," wrote Ruth Miller Elson in "Guardians of Tradition" (1964). "The books devote the greater part of their space to the subject of God's relationship to the universe, to man and to the child himself."As late as 1880, Noah Webster's popular spelling book included practice sentences such as, "God created heaven and earth in six days" and "The devil is the great adversary of man."The first textbooks in American schools -- primers and spellers -- came from England. They usually included lessons in several subjects in a single volume, guiding the poorly trained teachers as much as their students. But American educators wanted a homegrown curriculum, emphasizing what they saw as uniquely American values. "Unlike aristocratic and monarchical Europe, America was free, young and vigorous," wrote Michael V. Belok in "Forming the American Minds," his 1973 book. "And Americans were convinced that the hand of God played an active part in their affairs."



By the end of the 18th century, a thriving textbook industry had taken root in the U.S. No credentials were required to write a schoolbook, and ministers, lawyers, teachers and publishers all tried their hands at it. Almost all the books were printed and distributed locally, so children in different areas might be studying different texts. But because there were few copyright laws, schoolbook authors often borrowed or plagiarized similar material from earlier volumes.The books were subject to little editing or expert review, and they reflected the prejudices of their authors. In his 1784 textbook, "Geography Made Easy," Jedidiah Morse (whose son Samuel would later invent the telegraph) described the characteristics of people living in different U.S. states: Virginians were "indolent, easy and good-natured," he wrote; Westerners "produce a strange sort of lawless profligacy."Morse especially liked the people of Connecticut. In the 1812 edition of "American Universal Geography," he wrote, "Only two duels were ever fought in the state; the first between two West Indians, the second between two citizens of New York who crossed the line."The purpose of education, which for many children stopped after elementary school, was to prepare them for life as devout farmers in a frontier democracy. Only useful knowledge was important, and reading material was supposed to be informative or morally edifying.Arithmetic books often included a section on surveying, with problems involving how to measure tobacco, rum or wheat. National heroes loomed large: Noah Webster's 1787 "Lessons in Reading and Speaking" started, "Begin with the infant in his cradle: Let the first word lisped be 'Washington.' " Benjamin Franklin was the "consummate type and flowering of human nature under the skies of colonial America."Schools trained the heart as much as the head: An 1882 reader admonished, "Little children, you must seek rather to be good than wise."In her 1846 American-history textbook, Emma Willard wrote that her goal, more than training memory or intellect, was "to sow the seeds of virtue, by showing the good in such amiable lights that the youthful heart shall kindle into desires of imitation."As the country grew and diversified during the 19th century, and waves of immigrants brought their own faiths and opinions to the U.S., overtly religious references were dropped from most school texts. Lessons about virtue and goodness, however, continued. From late 19th-century spellers: "Abstain from evil." "Obey the law." "Be on your guard against evil associates."Although early schoolbooks portrayed the world as a moral place, where virtue is rewarded and vice punished, they also didn't shrink from the cruel realities of life on the frontier ("Xerxes did die/And so must you and I," said one speller)."Schoolbooks made the 19th-century child thoroughly aware that life is hard and full of natural and manmade pitfalls," wrote Ms. Elson. "It is his duty to strive for success, but he will struggle hard on the way."

13. The first textbooks in American schools -- primers and spellers -- came from____.a. teacher unionsb. Greecec. the churchd. England Correct


Global Experience Doesn't Have to Mean Going to Live OverseasBy JOANN S. LUBLINAugust 29, 2006; Page B1http://online.wsj.com/article/SB115681437438547986.html

Arte Nathan earned his international stripes without moving to a foreign land.Mr. Nathan, the top human-resources officer at Wynn Resorts in Las Vegas, did so by visiting China a dozen times since 2003. He was helping to plan the recruitment and hiring of 5,000 staffers for the company's Macau casino-resort, set to open next week. The project exposed him to innovative hiring ideas that he hopes to import.His Macau performance "has been terrific," says Chief Executive Officer Steve Wynn.Bilingual managers who have lived in exotic locales abroad write their own advancement ticket, search firms say. But foreign stints hold less appeal for Americans today, thanks in part to a new U.S. tax law that raises costs for many expatriates.Fear not. You can burnish your credentials even if you oversee an overseas operation from the U.S. -- as do many executives like Mr. Nathan."It's not your ability to endure miles in the air that makes the difference," observes Patricia Woertz, CEO of Archer-Daniels-Midland in Decatur, Ill. "It's how quickly you can adapt to different business models, management styles and local practices."The grain-processing giant picked Ms. Woertz as its leader last spring in part because she had been a country-hopping commander of a global enterprise. She formerly ran Chevron's refining and marketing operations, supervising 30,000 employees in 180 countries from San Ramon, Calif. She once took just nine days to visit Chevron employees, investors and business partners in eight nations on four continents.Mr. Nathan knew little about China before his initial visit. He and his Las Vegas colleagues spent a year learning to do business there from well-established foreign players. They assisted local managers chosen to run the Macau complex. In staffing the 600-room resort, he recalls, Wynn Resorts had to adapt a lot of things to fit the Chinese culture.It was the kind of experience that makes managing a foreign operation so valuable. For example, about 93% of the Macau applications came online. Yet few Chinese jobseekers wanted to follow up by email. They preferred to arrange interviews via cellphone text messages."It didn't dawn on me" before, that many young American adults communicate the same way, Mr. Nathan admits. "It was like slapping yourself on the forehead." He's now experimenting with text messaging for U.S. recruiting.The Macau project also made Mr. Nathan recognize the importance of earning applicants' respect through a series of personal interactions and job interviews, taking time to build a strong rapport. "This is a good thing for all cultures" that may improve retention broadly, he says.The upshot? As it did in China, Wynn Resorts will soon audition prospective U.S. dealers -- forging a firmer bond by testing their skills in a work-like environment.



Hiring Macau hourly employees consumed a year, longer than Mr. Nathan preferred but faster than expected. He posted milestones on a corporate Web site to keep senior management abreast of the project's progress.When your foreign responsibilities require extensive trips, it's important to find a loyal internal advocate who can wage your battles back at headquarters. The president of a major consumer-products maker played this role at a crucial moment for a lieutenant leading its Asia business from the U.S.The president persuaded the CEO to embrace that associate's proposed repair of a troubled Asian joint venture while the executive was traveling abroad. Some insiders had favored disbanding it. The venture survived."You want to make sure you don't catch [your manager] totally off guard," cautions Janice M. Tomlinson, an executive vice president of Chubb, a property and casualty insurer. She manages international field operations in 28 countries from its Warren, N.J., headquarters.Ms. Tomlinson heeds her own advice. Every January, she arranges nearly her entire work calendar for the year. She includes overseas trips that consume half her time, plus monthly face-to-face meetings with her boss. "We talk informally all the time," she says.Outside the workplace, you can showcase your U.S. oversight of international operations by spelling out the frequency of your foreign trips in your resume, giving speeches and promoting your acumen in the press.I learned about Ms. Tomlinson, for instance, from a public-relations firm that touted her tips on conducting business overseas. The Chubb executive impressed another journalist after she cited a Chinese law change that could crimp foreign carriers' ability to sell auto insurance there. "You sell your global expertise by understanding what's happening in a local market," Ms. Tomlinson explains.Recruiters offer additional suggestions for ambitious executives such as Mr. Nathan, who has never lived abroad, and Ms. Tomlinson, whose sole expatriate assignment occurred in Toronto. They should use concrete details to describe their U.S. management of a foreign operation, recommends Nick Young, a Spencer Stuart recruiter in New York. "If they have a global mindset and are looking to be creative with what they've learned abroad, that's a positive, too."

14. Chinese jobseekers often prefer to arrange interviews via __________.a. cellphone text messages Correct b. emailc. WWW calendar programsd. face to face meetings with a recruiters secretary

Hong Kong Discovers Merits of Open SpacesBy WENDY LEEAugust 30, 2006; Page B1http://online.wsj.com/article/SB115690116125949104.html

HONG KONG -- In this jam-packed city where real estate is expensive to exorbitant, the development of an old airport on prime waterfront property has been caught up in a fundamental debate: How much space do people need?



Hong Kong is dense. Its Kwun Tong district houses about 129,000 people per square mile -- roughly twice the density of Manhattan. The smallest housing-project apartments in Kwun Tong are just 88 square feet.It isn't that this former British colony lacks land. Vast swaths remain undeveloped, but city planning here usually takes a back seat to maximizing profits from government property, the revenue from which makes up 12% of the city's budget. Eager developers end up building skyscraper apartments on tiny patches of land and giant malls with office towers on top.That thinking, however, is changing dramatically, as evidenced by a redevelopment project at the city's storied Kai Tak airport, which closed in 1998. When it's finished, the new Kai Tak adjacent to Kwun Tong will look like nothing else this city has seen before. More than one-third of the land will be dedicated to open green space, mostly divided into four public parks and a waterfront promenade. The largest area will be Metro Park, the city's biggest urban park, about the size of Boston Common."Not everybody has access to a country club," says Liu Yuyang, an assistant professor of architecture at the Chinese University of Hong Kong. "Everybody needs some breathing room so people don't go crazy."That said, the new Kai Tak will be no Central Park: The site will also feature a stadium, 6,800 hotel rooms, a cruise-ship terminal and 30,500 apartments.Current plans for the airport came after others were ruled out. In 2003 flight instructor Francis Chin founded the Save Kai Tak Campaign, fighting to preserve the airport's heritage with a museum and a short runway. Kai Tak was legendary for its white-knuckle landings, with descending aircraft making a 47-degree turn, bringing the plane so close to Hong Kong's apartment buildings that nervous passengers could see the flicker of television screens through bedroom windows.The government rejected Mr. Chin's plans for a runway, but injected some of his ideas in a runway park which will feature airport memorabilia such as the former air traffic control tower.At first, after Kai Tak shut down, the site was slated to be a "city within a city" housing 320,000 and filling in more than 700 acres of harbor waterfront. At that time, the government projected Hong Kong's population would swell and planned to build at least 85,000 apartments in the city each year. But the plans drew flak from environmentalists and residents like attorney Winston K.S. Chu.Quitting his job, Mr. Chu spent six years battling plans to fill one part of the harbor. In 2004 Hong Kong's Court of Final Appeal ruled the government couldn't fill in any part of the harbor -- including Kai Tak -- without "overriding public need.""We are telling the government town planning should not be for money, it should be for the people," says Mr. Chu, who split $2 million in legal costs with his environmentally minded 91-year-old mother. "I think slowly the message is getting through."Mr. Chu's lawsuit, along with an unexpected damping in population growth, brought about a considerable shift in the government's approach to urban planning. In 2004 the city scrapped its earlier designs and began a massive public consultation. The government invited people to the Kai Tak site, posted videos of the plan online and even displayed a miniature model of the Kai Tak site in the subway. More than 700 citizens have participated in each step of the process.


"The community called for improvement in the quality of living," says Kelvin Chan, a government planning officer. "Greening contributes to the quality of living environment and makes it more environmentally friendly and pedestrian friendly."Hong Kong's change of heart was also influenced by the 2003 outbreak of severe acute respiratory syndrome. In one 33-story apartment tower, more than 300 people were infected by the disease. One theory holds that the worn-down plumbing in the complex caused an infected patient's virus-tainted waste to spread to other residents' apartments. "With the advent of SARS, the government began to realize they have reached the critical limit with this density game," says Essy Baniassad, chairman of the Department of Architecture at Chinese University.In the city that introduced feng shui design to the world, Hong Kong planners have paid far more attention to the angles of buildings than to the people who inhabit them. Public housing in Hong Kong is designed following a density formula that leaves little room for outdoor spaces, says Mr. Baniassad. The law stipulates that each person living in public housing be given a minimum of about 59 square feet -- and some complexes go no further.In Kwun Tong, residents say they have trouble breathing because of the towering apartments and concrete walkways that block air from circulating. "These buildings are a concrete jungle, trapping the pollutants," says 72-year-old Leung Kanluen, who has lived in the neighborhood for 15 years. Mr. Leung says he rides an hour on the bus to visit a theme park with gardens but would much rather walk to a nearby park.The latest Kai Tak plan embraces open space and living and entertainment concepts common in many cosmopolitan cities but entirely foreign here. Plans for housing are still fluid, but there is talk of limiting some buildings to a mere three stories and crisscrossing the residential areas with footpaths to encourage people to greet their neighbors. Drawings depicting the new Kai Tak even show people sipping coffee at open-air restaurants, which the government currently restricts in most parts of the city."We are trying to create a comprehensive neighborhood environment," says Mr. Chan, the government planning officer.

15. A redevelopment project at the city's storied Kai Tak airport will feature a. apartments as small as 88 square feetb. a concrete jungle that traps pollutantsc. four public parks and a waterfront promenade Correctd. airplanes making turns so close the passengers can watch TV in the apartments below

With Sexy Story Lines, Low Budgets, News Corp. Will Launch MyNetworkTVBy BROOKS BARNESAugust 31, 2006; Page B1http://online.wsj.com/article/SB115698811194650185.html

Every time News Corp. launches a new television business, it turns to programming that entrenched players decry as schlocky and culturally debasing. Then, in many cases, the company starts printing money.On Tuesday, Roger Ailes, chairman of News Corp.'s Fox Television Stations, will flip the switch on MyNetworkTV, a new broadcast network that will feature a novel format for



mainstream U.S. television: Super-sexy -- and super-cheap -- prime-time soap operas that air six nights a week for limited runs.It's an over-the-top format borrowed from Spanish-language broadcasters. While story lines on American soaps can drag on for years, Spanish soaps, or telenovelas, deliver immediate gratification. They wrap everything up after 13 weeks, offer a cliffhanger in each episode and culminate with shocking finales that can rack up Super Bowl-size ratings -- just the formula that MyNetwork hopes to duplicate.U.S. viewers may be jolted by the style and content of the two shows MyNetwork is rolling out next week -- "Desire" and "Fashion House." But "Fox has a way of turning unsophisticated, simplistic programming into a success," says Laura Caraccioli-Davis, an executive vice president at ad-buying firm Starcom Entertainment. She adds: "And this is definitely unsophisticated."The hour-long episodes on MyNetwork are taped on a shoestring budget of $200,000 to $500,000 each, and it shows. While far from bare-bones, the sets aren't as lavishly decorated as those seen in traditional network dramas, which cost $2 million to $3 million an episode. Details can slip through the cracks: A character might start a scene in one outfit and finish it in another.MyNetwork has largely hired actors with limited experience. And in another bid to save money, it is buying telenovela scripts from Mexico, Cuba and other Spanish-speaking countries and translating them into English. It employs a staff of writers to smooth out the story lines and winnow the shows down to 65 episodes from 120, and taping is done on union soundstages well outside the Hollywood infrastructure in San Diego.The plot points are rapid-fire. "Desire" is the tale of two brothers who are on the run from the Mafia and happen to be in love with the same woman; one brother sleeps with two different women, dodges a spray of bullets and escapes from an exploding building -- and that's just in the opening 10 minutes of the first episode."Fashion House" stars Bo Derek and Morgan Fairchild as executives who run rival clothing labels. The show is replete with fang baring, scenery chewing and face slapping: In one scene, Ms. Fairchild, known for saucy roles on 1980s soaps such as "Falcon Crest," tries to stab Ms. Derek with a syringe in a hospital room. "I'm sure they'll put us in the mud next," Ms. Fairchild says.MyNetwork executives offer no apologies: At a time when production costs at the traditional networks are spiraling out of control due to an increase in everything from license fees to cast sizes, they think their way represents the future.Jack Abernethy, chief executive of Fox Television Stations, says it no longer makes financial sense for fledgling networks to put together patchwork schedules of sitcoms and dramas. "It costs too much to market dozens of different time periods and shows," he says.16. MyNetworkTV, a new broadcast network that will feature a novel format for mainstream U.S. television is different because a. it has prime-time soap operas that air six nights a week for limited runs.b. it is highly sophisticated c. it is buying telenovela scripts from Mexico, Cuba and other Spanish-speaking countries and translating them into Englishd. Both a and c Correct


Chasing Generation YBy STEPHANIE KANGSeptember 1, 2006; Page A11http://online.wsj.com/article/SB115707429918551385.html

Nearly two decades ago, toddlers wore Baby Gap's signature bodysuit. As teens, they sported ubiquitous T-shirts with Abercrombie & Fitch's name stitched across the front. Now that the oldest members of Generation Y are in their 20s and completing college or starting their first jobs, who is going to dress them?The answer: Many of the same retailers who have catered to this group since they were children, growing up with them along the way. Apparel companies are getting ready for the glut of people in their 20s by opening new stores with merchandise that appeals to young adults. According to Philadelphia-based marketing consultancy Twentysomething Inc., there are 38 million young people between the ages of 11 and 19 in the U.S.Orv Madden, chief executive officer of privately owned Metropark, a fashion chain that first opened in 2004 in Glendale, Calif., says he started thinking about new ways to sell apparel five years ago, after watching young consumers and asking himself, "where are all these folks going to go when they get tired of shopping in teenage land?"He wasn't the only one asking that question and coming up with ideas. Abercrombie & Fitch Co. in 2004 started a new store, Ruehl No. 925, that is aimed at 20-to-35-year-olds. It now has 10 stores in cities like Tampa, Fla.; Columbus, Ohio; and San Diego. At the Manhattan store on Bleecker Street -- close to bars, cafes and smaller retail shops -- pricey leather handbags and paper-thin T-shirts are sold in a space with dark wood and assorted mirrors that feels like a cross between a New York brownstone and a swanky boutique hotel.Jimmy'Z, owned by Aeropostale Inc., stocks studded denim and blazers with graphics on the back for 18-to-25-year-olds at prices that are significantly higher than at its flagship chain for teens. In designing its 14 stores -- in places like Riverside, Calif., Houston and St. Louis -- executives were inspired by the look of a contemporary California beach house, with lots of open space and light.Teen-retail giant Pacific Sunwear of California Inc. says it is seeing success with its high-end footwear store for young adults, called One Thousand Steps. And American Eagle Outfitters will launch a new concept this fall called Martin + Osa, whose target customer ranges in age from 25 to 40 years old.It remains to be seen whether these targeted customers will flock to the new chains. The niche is crowded, with retailers like Banana Republic, a division of Gap Inc., Urban Outfitters Inc. and Bebe Stores Inc., already successfully catering to young adults. And chasing the twentysomething market may not last because there's a smaller generation behind it: there are about 27.6 million 6-to-12-year-olds in the U.S., according to marketing consultancy Twentysomething.Teen-oriented retailers are trying to figure out the clothing tastes of young adults who juggle a mix of casual and work clothes -- and how to get them to pay higher prices than they are used to. That can take some tinkering. Ruehl initially carried slightly dressier apparel at prices 30% higher than at Abercrombie. Ruehl now has shifted to more casual wear, aping more of the successful Abercrombie model and lowering prices to 12% higher than the flagship brand. (Although Ruehl's merchandise is made with more



expensive fabrics like cashmere.) The company has said it spent $20 million to develop the new chain and expects to break even in 2007.Sales at teen specialty shops more than tripled since 2000 to $11 billion last year, pushed by strong sales and rapid expansion by retail companies, according to Piper Jaffray analyst Jeff Klinefelter.

17. Sales at teen specialty shops _____ since 2000 to $11 billion last year, pushed by strong sales and rapid expansion by retail companies, according to Piper Jaffray analyst Jeff Klinefelter.a. doubledb. tripled Correct c. quardrupledd. rebounded

Questions 18 – 23 from Money & Investing

Housing Boom's Dark SideBy M.P. MCQUEENAugust 26, 2006; Page B1http://online.wsj.com/article/SB115653949046445851.html

It's the downside of the housing boom: Many homeowners are now significantly underinsured.Americans have been pouring money into their homes in recent years, adding everything from marble bathrooms to fancy backyard barbecues: Last year alone, spending on improvements like these hit an estimated $155 billion, up 27% from two years earlier. At the same time, the global boom in commodities prices -- lumber, copper piping and other necessities -- as well as rising labor costs has pushed up replacement costs by 7% a year since 2001.As a result, people who haven't updated their insurance policies in a few years may now be underestimating what it would cost to rebuild their homes, particularly in high-priced markets.According to a survey to be released soon by Marshall & Swift/Boeckh LLC, a firm that supplies building-cost data to insurers, 58% of houses are undervalued for insurance purposes. Of those, the average homeowner has enough insurance to rebuild only about 80% of his or her house, according to the survey.Meantime, many insurers have been quietly cutting back what their policies cover. Allstate Corp. recently stopped covering earthquake damage in most states. Several insurers, including State Farm Insurance Cos. and Farmers Insurance Group, a unit of Zurich Financial Services, have stopped covering wind damage in some coastal areas that have been threatened by hurricanes.One of the biggest shifts by insurers in recent years has been the virtual disappearance of "guaranteed replacement cost" coverage, which promised to rebuild a home exactly the way it was, no matter the cost. Now, most standard policies provide only "extended



replacement cost," which offers up to 20% or so more than the face value of the policy if extraordinary events push up rebuilding costs.Insurance experts say many homeowners haven't grasped this shift, and may be woefully underinsured as a result.Home insurance exists to help owners repair or rebuild a home, and replace furniture, clothing and other personal property, in the wake of a fire, burglary or other calamity covered by the policy. Some risks, such as flooding or acts of war, are routinely excluded. (Policies also include liability coverage to protect against lawsuits resulting from incidents around a home, such as your dog biting the cable guy).For insurance purposes, the value of a house is based mostly on the rebuilding costs in a particular area, not on its market value. The policy isn't meant to include the value of the land underneath, which is why some homes, especially in desirable neighborhoods where land is pricey, need less insurance than the amount they would fetch in a resale.Homeowners need to pay close attention to what's in their policies, because insurers are regularly fiddling with the coverage. Insurers notify policyholders about coverage changes in the annual policy-renewal statement, but many homeowners don't bother to read it, focusing only on the premium."Take the new policy, and the old one, and put them side by side -- and if you have questions, contact the company," says Don Griffin of the Property and Casualty Insurers Association of America. It's also a good idea to have a face-to-face meeting at least once a year with your insurance agent or broker, at renewal time.Some consumer advocates have blamed insurers themselves for homeowners being underinsured, saying their agents lowballed replacement costs in order to keep premiums competitive. Over the past few years, spurred in part by lawsuits, insurers have taken steps to improve their estimates, industry officials say.That is what Ross Quigley of Mount Lemmon, Ariz., says happened to him. In 2003 a mountain cabin he owns in this vacation community near Tucson was destroyed by wildfire, along with hundreds of other homes. The retired real-estate broker had a $160,000 policy, but he learned that rebuilding the 1912 structure was going to cost $500,000 because of its unusual features and remote location. Mr. Quigley says his insurer had "told me not to worry, because I had 'replacement value,' " a provision in the policy that stipulates he would receive the value of his home without subtracting for depreciation. "But that was so misleading," he says.He sued the insurer, alleging the company had acted in bad faith by seriously underestimating the amount of insurance he needed. The matter was settled out of court late last year.Homeowners with unique, historical or custom-built houses might not be able to find adequate coverage from mass-market insurers, which typically pay to rebuild using only standard materials and construction techniques. These owners might have to turn to a specialty insurer, such as Chubb Corp., American International Group Inc. and Allianz AG's Fireman's Fund Insurance Co.

18. One of the biggest shifts by insurers in recent years has been the virtual disappearance of ____________ coverage, which promised to rebuild a home exactly the way it was, no matter the cost. a. liability


b. "extended replacement cost"c. "guaranteed replacement cost" Correctd. “replacement value”

B.J. and the BearsBy JUSTIN LAHARTAugust 28, 2006; Page C1http://online.wsj.com/article/SB115671831138546794.html

Trucking companies have been running at full throttle in recent years. But now they seem to be hitting a speed bump.There aren't many better places to get a good read on the economy than the interstate truck stop. Since they haul everything from Barbie dolls to power generators, truckers are among the first to feel it when the economy shifts.Oscar Sloterbeck, who runs the survey group at research firm ISI Group, says the trucking companies he polls on a weekly basis are seeing disappointing freight volume for this time of year. One factor is housing. The housing downturn means they're hauling less gypsum board and lumber than when construction was booming. Retail shipments more broadly also show signs of slowing.None of this has been lost on investors, whose once optimistic view on trucking company shares has deteriorated sharply in the past few weeks. Since the end of June, the Dow Jones index of U.S. trucking shares has fallen 16%.Production cuts in the auto industry will hurt truckers even more in the months to come. Two weeks ago, Ford announced plans to cut its fourth-quarter auto production by 21% from year-earlier levels. Last week DaimlerChrysler's Chrysler unit said it planned to cut fourth-quarter production as well. Rounding out the Big Three, auto analysts expect General Motors to announce fourth-quarter production cuts as early as this week. That is likely to add up to less work for truckers.Jim Meil, chief economist with Eaton Corp., which supplies many truck manufacturers, estimates autos and auto parts account for 8% to 9% of total U.S. trucking freight.A back-of-the-envelope calculation by Goldman Sachs economist Andrew Tilton suggests that Ford's cuts alone, if they were felt wholly in the fourth quarter and if there were no offsets (unlikely on both counts), would reduce the economy's growth rate -- as measured by gross domestic product -- by about two-thirds of a percentage point in the fourth quarter.Mr. Meil says he sees signs of a slowdown in trucking, though it hasn't been alarming, as it was back in 2000 when a trucking slowdown preceded a recession. "My reading now is that trucking is OK," he says.If businesses pull back sharply in response to the combination of automobile-production cuts, the drop in housing and a consumer slowdown, that assessment could change. That's why Mr. Meil says there's also good reason to be a little nervous right now.

19. _______ are among the first to feel it when the economy shifts.a. taxi driversb. bus driversc. flight attendants



d. truckers Correct

How 'Ya Feeling?By JUSTIN LAHARTAugust 29, 2006; Page C1http://online.wsj.com/article/SB115680764847447834.html

With so much important data coming out later this week, investors might be complacent about today's report on consumer confidence.The connection between how people say they feel and how they spend can be tenuous, so many economists consider measures of consumer confidence third-tier data. This week's big trading day is Friday, when reports on employment, manufacturing activity and automobile sales all hit the tape within a couple of hours.But confidence can be an important clue about the economy's direction at turning points. In December 2000, for example, the University of Michigan's consumer-sentiment index broke lower, signaling the economy was heading for trouble.Economists polled by Dow Jones Newswires estimate the Conference Board's confidence index slipped to 102 in August from July's 106.5. While that would be the lowest level since last November, it would still be about where the index stood during the economic expansions in the mid-1980s and mid-1990s. Assessments of the job market are also pretty robust; fewer than 20% of those surveyed said jobs are now hard to get, about the way workers saw the world in 1997.Yet the Conference Board's confidence index looks vulnerable. Other confidence measures, such as the University of Michigan's sentiment index, have registered sharper declines that might portend a larger-than-expected drop in the Conference Board measure. Moreover, August was a disconcerting month for many households, with high gasoline prices, terrorism in the news and the housing slowdown all weighing on consumer moods."All of these concerns are going to put pressure on the confidence numbers," says Carlos Asilis, a portfolio manager with hedge fund Vega Plus Capital Partners.What's also notable about the Conference Board's numbers is the disparity between what people are experiencing today and what they expect for the future. The Conference Board's index of consumer attitudes about the present situation -- at 133 -- is much higher than its index of attitudes about the near future -- at 88.8.Maybe everyone will cheer up. But Susan Sterne, who runs Economic Analysis Associates, isn't so sure. She's a long-running bull who's become bearish on consumers. "When people worry more about the future," she says, "the risk for spending tends to be greater."

20. Assessments of the job market are pretty robust; fewer than _____ of those surveyed said jobs are now hard to get, about the way workers saw the world in 1997.a. 50%b. 10%c. 15%d. 20% Correct



Street Sleuth Probes of BP Point to Hurdles U.S. Cases FaceBy ANN DAVISAugust 30, 2006; Page C1http://online.wsj.com/article/SB115690578569049216.html

Government investigations into oil trading at BP PLC raise fresh questions about when a powerful energy company can legally trade on inside information about its own operations.The surprising answer: more often than you think.In contrast to the stock market, it generally is legal in the commodities markets to have an informational jump on others -- and to profit from that information -- as long as the behavior isn't considered price manipulation. And to prove manipulation, the government must establish that a company or trader intended to affect the price, had the ability to do so and successfully caused the price to move artificially.As a result, regulators probing BP's behavior have faced a high burden of proof in seeking to establish that the British petroleum giant used internal information to affect prices, rather than simply turned a profit from what it knew.If the government decides to bring civil or criminal charges, it will likely focus on manipulation itself, which commodities lawyers say is difficult to prove.As reported yesterday in The Wall Street Journal, regulators have been examining, among other things, whether BP used information about its own pipelines and storage tanks at a key oil-delivery point in Cushing, Okla., to influence crude-oil price benchmarks that are set each day and influence billions of dollars of transactions. Regulators are also looking at other players in the crude market as part of a continuing probe. In a separate criminal probe, investigators are examining whether BP manipulated gasoline prices on a single day's trading on the New York Mercantile Exchange in 2002, traders and lawyers contacted or briefed on their investigations said.Historically, the commodities markets have been a place where large companies go to manage risks that only they may be aware of. Because energy companies, refiners, pipeline and storage-terminal owners have legitimate commercial reasons to supply, buy or hold large quantities of fuel, they are allowed to make trades to fulfill obligations or simply make money from what they know. Companies can even do so if they will soon announce big news, such as a refinery outage, that could move prices, legal experts say.Commercial firms that have inside information "need to use that information to hedge their price risks, which is one of the primary purposes of the commodity markets," says Marcia Blase, counsel to Fred Hatfield, Democratic commissioner of the Commodity Futures Trading Commission, which regulates the futures markets.In the past, the U.S. government has brought civil and criminal cases when a company allegedly took an action, such as shutting a power plant or sending out false information about their operations, in order to manipulate prices. But the legal bright line, and what crosses an ethical line, may be different. Some of the activities at issue in a recently closed energy-trading probe into BP, which didn't result in charges, put a spotlight on the limited scope of behavior that commodities-market cops can police.BP's business activities can affect the world-wide price of crude oil, natural gas, gasoline, propane and other commodities. According to the lawyers and traders informed of the case, the CFTC and Justice Department want to know whether BP traders, who possess



powerful inside information, engaged in behavior intended to influence price benchmarks.The CFTC says it doesn't confirm or deny the existence of an investigation. The Justice Department has declined to comment on the probe. A BP spokesman has said, "We are aware of investigations being done by the authorities, and we are cooperating fully."By definition, a big energy company always has a jump-start on information that could interest the market. When BP announced earlier this month that a pipeline it operated in Alaska was corroded and that oil shipments from Alaska would be curtailed, it caused a big jump in oil prices.

21. It generally is _____ in the commodities markets to have an informational jump on others -- and to profit from that information.a. illegalb. legal Correct c. ruded. immoral

Can Anyone Police the Swaps?By KARA SCANNELL in Washington, SERENA NG in New York and ALISTAIR MACDONALD in LondonAugust 31, 2006; Page C1http://online.wsj.com/article/SB115698777269950171.html

Unusual trading in a relatively new corner of the bond market illustrates how the rise of increasingly sophisticated financial instruments is potentially outpacing the ability of regulators to police them.In recent months, there have been spikes in the prices of so-called credit-default swaps, which are a kind of default insurance on debt, popular among banks, hedge funds and other big investors. In some prominent cases recently -- including deals involving hospital operator HCA Inc. and energy company Anadarko Petroleum Corp. -- prices of the swaps climbed in the weeks before news of major acquisitions became public.That raises the possibility that some traders might have acted on inside information.There is no evidence at this point that improper inside information was leaked. Proving insider trading has always been a challenge for regulators, even in traditional securities. But the recent activities raise questions as to which regulator, if any, is policing the market, and how they will go about it as these exotic instruments spread.A credit-default swap is an insurance contract tied to, say, corporate bonds. A buyer will pay a sum annually for such a derivative. If a bond defaults, the losses will be covered by the seller of the contract. The cost of protection rises if investors feel the underlying debt is getting riskier.The credit-default swap market has ballooned to more than $17 trillion in recent years -- meaning such agreements have been written on trillions of dollars of debt -- and trading volumes in this market now exceed trading volumes in the debt itself. But it is a difficult market to track. Credit-default swaps trade away from exchanges in the "over-the-counter" market, and tend to be negotiated privately and over the phone. They are typically traded in lots of $5 million, making them the exclusive domain of large



investors that are active in the debt markets. Moreover, they aren't even clearly securities, because they are often likened to insurance contracts.These instruments are one example of a large and growing array of financial products that have cropped up in recent years that don't easily fit the definitions of securities with which regulators have traditionally dealt. These newfangled instruments were mostly created by banks and others to manage their risks, and many observers say they have helped to make the financial markets more resilient to shocks.But worries are growing. Last year regulators demanded that banks become more efficient at processing everyday trades in these fast-growing contracts. Another concern: Credit-default swaps have become popular with some investors, namely hedge funds, which are barely regulated themselves."All it's going to take is somebody from the bank talking to his friend who works at a hedge fund" for inside information to spread, said Michael Piazza, a former enforcement attorney with the Securities and Exchange Commission who is now a partner at Dorsey & Whitney LLP.Adding to the regulatory challenge, the growth in cross-border finance and deregulation means these transactions sometimes fall either under multiple jurisdictions, or no clear jurisdiction.Prices on credit-default swaps for HCA rose by a third in the weeks before reports appeared saying the company was in talks to be sold to a group of private investors.An investor who wanted to be sheltered from a default of $10 million in HCA bonds over five years had to pay around $130,000 annually for such coverage in June.That price climbed to around $170,000 in the days before news of a possible deal, and then soared to more than $400,000 after one was unveiled.A similar pattern occurred before Anadarko's $21 billion cash offer in June for two companies, Kerr-McGee Corp. and Western Gas Resources Inc. In both the HCA and Anadarko transactions, the deals increased the acquiring company's financial risk and thus made the swaps more valuable.HCA declined to comment. An Anadarko spokeswoman said: "The credit-default swap market operates independent of Anadarko and we cannot speculate on the nature or cause of fluctuations and spreads in that market."Other cases appear to have cropped up. A 2005 study by two London Business School researchers examined credit-default swap prices of around 80 U.S. companies from 2001 to 2004.The researchers, Viral Acharya and Timothy Johnson, said they found evidence "consistent with insider trading" in these instruments. In Europe, some investors complained last month that the credit-default swaps of Dutch media company VNU NV had become significantly more expensive ahead of an announcement that the company's bond issue was being restructured.

22. Unusual trading in a relatively new corner of the _____ market illustrates how the rise of increasingly sophisticated financial instruments is potentially outpacing the ability of regulators to police them.a. stolen credit cardsb. agricultural commoditiesc. NASDAQ


d. bond Correct

Housing Chill Begins to Pinch Nation's BanksBy ROBIN SIDELSeptember 1, 2006; Page C1http://online.wsj.com/article/SB115707467917751396.html

The cooling housing market is starting to pinch the nation's banks, which are more exposed to real estate than ever -- and it comes at a time when some of their other key businesses already are being squeezed.Although real-estate downturns typically trigger concerns about rising delinquencies and defaults on existing mortgages, the more pressing worry in the industry right now is that a slowdown in demand for new loans will cut into earnings that have been exceptionally strong.That is significant because financial institutions already are grappling with several issues. They include a difficult interest-rate environment, competition for traditional banking customers, a saturated credit-card market and expectations that strong consumer-credit quality will soon show signs of weakening."Any wiggle in the real-estate business has a significant impact on banking because that's where the growth has been coming from," says Richard Bove, an analyst at Punk, Ziegel & Co.The Commerce Department last week reported that sales of new single-family homes fell 4.3% in July to a seasonally adjusted annual rate of 1.1 million. The National Association of Realtors, meanwhile, said that existing-home sales fell in July to the lowest level since January 2004.Indeed, banks have begun to warn investors that the housing slowdown is starting to hurt their business. FirstFed Financial Corp., a Santa Monica, Calif., bank with a large mortgage business, said in a securities filing Monday that its mortgage originations were down 47% in July from year-earlier levels. The next day, First Horizon National Corp., a Memphis, Tenn., bank that sells home loans across the country, said it expects mortgage originations to fall by $1 billion in the third quarter due to a falloff in applications. And Punk Ziegel's Mr. Bove last week cut his rating on Salt Lake City-based Zions Bancorp to a "hold" from a "buy" due to views that the bank, which provides loans to home builders, will experience lower volumes as construction slows and land values decline.Banks have ridden the real-estate boom over the past five years by pitching traditional loans, newfangled mortgages and home-equity loans that can be used to pay off credit-card bills or fund a new plasma-screen television.While the banks reduce their exposure to these loans by selling some of them into secondary markets, real estate still amounts to a chunk of their assets.As a result, real estate, including mortgages, home-equity loans and commercial loans, represented a record 33.5% of the U.S. banking industry's $9.298 trillion in assets in July, according to the Federal Reserve. The numbers represent the highest level in the Fed's database going back to 1973.Although the nation's biggest banks have sprawling operations, their share of the mortgage market also has grown during the boom, whether through acquisitions or internal expansion. At J.P. Morgan Chase & Co., the nation's third-largest bank as



measured by assets and market value, real estate represents about 13% of the bank's assets. That is a slight increase from 2003, when real estate was less than 10% of Bank One Corp.'s assets and about 11% of J.P. Morgan's assets. J.P. Morgan acquired Bank One in 2004.At Bank of America Corp., the nation's second-largest bank, behind Citigroup Inc., home-equity loans represented 5% of assets as of June 30, up from 4% at the end of 2001."Five years ago, you would have said that mortgage risk was pretty [small] for the banking industry as a whole, and for the large banks in particular, but it is hard to say that today," says Frederick Cannon, an analyst at Keefe, Bruyette & Woods Inc., which specializes in the financial-services industry.So far, bank executives and Wall Street analysts are expressing little concern about the prospects for a big increase in mortgage delinquencies or defaults, particularly if unemployment stays low and the economy shows signs of strength despite high gasoline prices. They say that credit-scoring models are far more sophisticated today than they were in previous housing cycles. Delinquencies stood at 4.41% in the first three months of the year, up from 4.31% in the year-earlier period, according to data released by the Mortgage Bankers Association, a trade group, in June.Still, the mortgage market is filled with new types of loans that were far less prevalent -- or didn't exist at all -- in previous housing downturns. These products, such as interest-only loans or adjustable-rate mortgages in which the borrower can choose from multiple payment options, are viewed as more risky than traditional fixed-rate mortgages. The trade association says that fewer than 25% of all mortgages are adjustable-rate loans."The oldest saw in banking is that bad loans are made in good times," Keefe's Mr. Cannon says. "We have never really faced a weakening housing market with the structure of the mortgage market as it is today."

23. Although real-estate downturns typically trigger concerns about rising delinquencies and defaults on existing mortgages, the more pressing worry in the industry right now is that a slowdown in demand for new loans will _______.a. trim bank jobsb. displace real estate agentsc. lower interest ratesd. cut into earnings Correct

Questions 24 – 26 from Personal Journal, Section D

Guarding Your IdentityBy ELIZABETH BLACKWELLAugust 29, 2006; Page D1http://online.wsj.com/article/SB115681481094647996.html

The Problem: Giving out your Social Security number increases the risk of identity theft.The Solution: Offer to provide your passport or driver's license number instead.In many cases, you can suggest an alternative when you are asked to divulge your Social Security number for identification purposes from, say, a retailer, doctor's office, gym,



library or other institution. An exception: If you're applying for a store charge card, your Social Security number will be needed to check your credit history.If your state's Department of Motor Vehicles uses your Social Security number as a driver's license ID number, request a random number instead. The same goes for health-insurance identification cards.It's also a risk to use part of your Social Security number, experts say, so avoid using the last four digits as an ATM or online password.Due to government regulations, providing a Social Security number is sometimes mandatory: when you start a job, apply for credit or open a bank account.

24. To increase your personal security you should a. use your social security number as often as possible for identification purposes.b. suggest an alternative when you are asked to divulge your Social Security number for identification purposes Correct c. use the last four digits of your Social Security number as your online passwordd. not request an alternate number for your driver’s license ID number

Intimate Betrayal: When the Elderly Are Robbed by Their Family MembersBy JEFF D. OPDYKEAugust 30, 2006; Page D1http://online.wsj.com/article/SB115689331870748918.html

Note to retirees: Beware the family.Financial swindles are one of the fastest-growing forms of elder abuse. By some estimates, as many as five million senior citizens are victimized each year, says Sara Aravanis, director of the nonprofit National Center on Elder Abuse, which provides information to federal and state policy makers. Because of the problem's spread, "many states have laws authorizing financial institutions to report suspicions of elderly abuse," says Bruce Jay Baker, general counsel for the Illinois Bankers Association. Earlier this summer, the Securities and Exchange Commission hosted a Seniors Summit to highlight the issue, with SEC Chairman Christopher Cox noting that protecting seniors' pocketbooks "is one of the most important issues of our time."Yet it's not dodgy financial experts or crooked caregivers who are the biggest threat. It's family. Children, siblings, grandchildren, nieces and nephews, and even spouses are the people most likely to rob the elderly, according to elder-law advocates and attorneys. The data that exist -- albeit in a spotty manner -- suggest that financial crimes rank as the third-most prevalent abuse of the elderly.For victims and family members out to help, the way to combat the crime is to know what to look for and how to prevent it.• The abuses: Some of the offenses are straightforward: A grandson swipes checks and makes them out to "cash"; a daughter uses the power-of-attorney over Mom's bank account to apply for an ATM card and withdraws money without authority; a son taking care of Dad's finances uses his father's credit card for personal purchases. Other crimes are more intricate and generally depend on manipulating an elderly person's emotions. Over time, a niece hired to help an elderly aunt persuades her to redirect



certain assets to the niece in a will or to designate the niece as the beneficiary of investment accounts or insurance policies; a nephew coerces an uncle to put the nephew's name on the deed to the uncle's house. In some instances, a sibling caring for a brother or sister pays for substandard care and lets bills go unpaid in order to preserve assets the sibling stands to inherit.• How to detect it: If you're a retiree, you should be wary if a family member you've entrusted to help with your finances rationalizes ways to keep you from your accounts. The person might say the credit-card bill is paid and the checkbook already balanced, so there's no need for you to look at it. That could be a sign the person is trying to keep you from seeing big, unwarranted expenses or checks made out to cash. If a family member seems eager to take you to the lawyer to sign a power-of-attorney, or talks to you about changing a will, deed or beneficiary designation on financial accounts and insurance policies, be cautious. The same holds true if the person insists on sitting in on your meeting with an attorney to help you understand what's going on. Attorneys are capable of explaining legal arrangements simply -- just ask.For family members watching from the outside to see if an elderly person is being exploited, a lifestyle change for the elderly relative or the caregiver is a big hint. If Mom or Dad is suddenly cut off from the rest of the family, no longer pursues activities away from home -- such as church functions or a weekly card game -- or gets calls screened by another family member who always has an excuse for why the parent isn't available, "that's a big red flag," says Sally Hurme, an attorney with AARP Financial Security, an educational-outreach arm of AARP.A family member suddenly driving a new car or living a grander lifestyle than seems reasonable should sound warning bells as well.Approaching the victim can be tricky; retirees often balk at talking about abuse for fear they'll be seen as incapable of managing their lives. Still, communication is the first recourse. If you're convinced that abuse is occurring, contact an Adult Protective Services agency.• How to prevent it: Start with legal documents. Retirees often want a trusted family member to manage various aspects of their lives when they can't manage it themselves. A power-of-attorney allows that -- but it can also be a license to steal if misused. To build in safeguards, structure the document to limit what your agent can do and the accounts that are accessible. Stipulate that someone else -- a lawyer, an accountant or a different family member -- receive routine account updates, and ask your financial institution to send duplicate copies of trading records and account statements to this third party.Establish a relationship with a local elder-law attorney (you can find one through the National Elder Law Foundation, www.nelf.org1). These lawyers can help set up legal safeguards. More important: They can read between the lines if you show up with someone else in tow looking to change your will or power-of-attorney."When you've worked with so many families, you begin to be more aware of certain traits in people that can be signs of a problem," says Donna Beshaw, president of the National Academy of Elder Law Attorneys. Such attorneys are likely to request time to speak with you alone to gauge what might be happening behind the scenes.


http://www.nelf.org/

Finally, if you are a retiree, listen to outside observers. You might not want to believe a family member is exploiting you, but outsiders often have a clearer view. Hear what they're saying. Then, look for the signs yourself.

25. In cases of financial swindling of elderly relatives, some warning signs includea. a lifestyle change for the elderly relative or the caregiverb. the family member is cut off from others and phone calls are screenedc. eager discussions about changing a will, deed or beneficiary designation on financial accounts and insurance policiesd. All of the above Correct

This Email Will Self-DestructBy ANDREW LAVALLEEAugust 31, 2006; Page D1http://online.wsj.com/article/SB115698239989350052.html

People who want to open email from patent attorney Andrew Currier have to know the drill. First, they must answer a predetermined question, such as "Where did we first meet?" If they answer correctly, they will then be allowed to view the contents of the email -- but they can't alter it or forward it to anyone else.Concerned about privacy, the Toronto-based lawyer has begun using a new service that encrypts his emails and tries to keep unintended recipients from reading the contents. The tool, developed by Echoworx Corp., adds a "send secure" button to his Microsoft Outlook email program. Unlike other email-security systems Mr. Currier has tried, this one doesn't require recipients of his emails to download any software or use the same email program."I really need it to be easy for the client on the other end," says Mr. Currier, who says that leaked information could be disastrous for one of their patent applications. "People don't appreciate just how vulnerable email is."Amid heightened privacy concerns, a handful of technology companies are touting new services designed to make existing email programs, such as Microsoft Corp.'s Outlook, more secure, with features ranging from emails that can't be forwarded to self-destructing messages that can be viewed only for a limited time. While most email programs by themselves guard against inbound attacks such as viruses and spam, they give computer users little control over the messages that are sent. So these third-party developers, which aren't working directly with Microsoft or other email companies, aim to fill that hole.The new outbound-email services focus on safeguarding data and protecting the sender from legal liability, says Richi Jennings, an email-security analyst at Ferris Research in San Francisco. "The state of the art of the technology, though, for some time has just made it really difficult to deploy," he says. "That seems to be changing."Echoworx, a closely held Toronto company, launched its new Secure Mail service in January. The service is sold through Internet service providers, including AT&T Inc., Verizon Communications Inc. and BellSouth Corp., which charge consumers $5 to $8 a month. The service appeals to individual users, as well as companies that want to ensure confidentiality, says Chris Erickson, an executive vice president at Echoworx. He declined to say how many people are currently using the service.


"For consumers it's all about identity theft," says Mr. Erickson. And because Secure Mail makes it easier to prove that messages were received and that their contents were unchanged, businesses can more safely negotiate deals through email, he says.Another new service, Kablooey Mail, allows consumers to send "self-destructing" emails that can be viewed for only a limited time, which may appeal to people who don't want a record of their correspondence. The free service, which made its debut in July, lets individuals log on to Kablooey's site to compose a message and set an expiration time, which can range from 10 seconds to two weeks after the message is opened. (Senders can also elect to have the message not expire.) A copy of the message is saved in the sender's account, where it can be reviewed by the sender later, or deleted altogether for extra security.The email is sent from the Web site, but appears as though it is coming from the sender's personal email address, such as an Outlook account. It shows up in the recipient's inbox with a link to a Web site with the message's content as well as a timer that shows how long before the message expires. A recipient is instructed to use only the up/down arrow keys or scroll bar to read the message; any other keystroke causes the message to expire instantly, which removes the message from the screen and prevents the recipient from accessing it again.In addition to preventing alteration of email and letting the sender destroy messages, the service also allows senders to track when an email was opened, the recipient's Internet protocol address, and how long he or she viewed the message, says John Flanagan, chief technology officer of CDS Technologies LLC, the Delray Beach, Fla., company that designed Kablooey. The company will provide an affidavit with this tracking data if requested in a legal dispute. "It gives us a greater level of control" over email communications, Mr. Flanagan says.Email is increasingly called on as evidence in court, says Dana Henry, a consultant for RPost International Ltd., a Los Angeles-based provider of "registered email" services. It is relatively easy to change the contents of a message or say it was never delivered, says Ms. Henry, a former Los Angeles County Superior Court judge. "There is such incredible deniability on the part of the other party who is the recipient."The RPost service, which also works with Outlook, is designed to ensure the authenticity of messages so that they can be used in legal disputes, if necessary. The program adds a unique digital seal to each registered email. A few minutes after sending the message, the sender receives an email receipt that includes when the message was delivered and opened. RPost will also verify whether the original message's content was changed. The sender can choose whether or not the email tells the recipient that the message is registered.The RPost service, which charges senders 59 cents for each registered email, added a new feature in July that checks for "risky" content, such as Social Security numbers or key words that senders -- or the senders' employer -- have flagged, before delivering the message. Customers, especially lawyers and technology professionals, are interested in using the service to protect senders from email-related liability, says RPost CEO Zafar Khan. "That can often cost the company quite a bit more, especially in this country, in litigation and litigation-discovery costs," he says.The new products aren't without their hurdles. Echoworx customers must warn recipients they'll be prompted with a question before they can read their email, and not being able to


forward messages is sometimes a hindrance, says Darren Williams, an investment banker in Toronto. His employer, Solaris Capital Advisors, provides the Echoworx tool for all its employees.

26. People who want to open email from patent attorney Andrew Currier have to ______.a. answer a predetermined question Correct b. sign nondisclosure agreementsc. buy special hardwared. install virus software that he controls


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