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VOL. CCLXII NO. 17 * * * * * * *

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WEEKEND

RISE OF THEWARRIOR COP

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n The SEC moved to barSteven A. Cohen from over-seeing investor funds, alleg-ing he ignored insider-trad-ing “red flags” at SAC. A1n China will scrap controlson lending interest rates andlet financial institutionsprice loans themselves. A6n Apple and Samsung haveheld private negotiationson their patent disputes. B1n The SEC rejected a pro-posed settlement with PhilipFalcone and Harbinger. B1n GE and Honeywell sawbright spots in strugglingbig economies as theyposted improved profits. B3n Boeing and the FAA in-structed airlines to inspectemergency-locator transmit-ters on 787 Dreamliners. B3n Two J.P. Morgan direc-tors will step down, the lat-est ripple from the “LondonWhale” trading losses. B2n The G-20 is set to back anoverhaul of internationaltaxation designed to elimi-nate corporate loopholes. A9n The Dow industrials eased4.80 points to 15543.74, butthe S&P 500 inched up to arecord high of 1692.09. B5n Low-rated U.S. corporatebonds are recovering fromtheir swoon in the spring. B5n The SEC charged Miamiand its former budget direc-tor with securities fraud. B2

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InsideNOONAN A15

A BombshellIn the

IRS Scandal

n Israel and the Palestin-ians agreed to peace talks.Officials from both sides willmeet in Washington within aweek to establish a timeframe before a more formalrelaunch of the peace pro-cess. After Palestinian lead-ers rebuffed Kerry’s planThursday, the secretary ofstate returned to Ramallahwith fresh pledges securedfrom Netanyahu on Friday, asenior Abbas aide said. A6Kerry announced the talksat the end of his sixth tripto the Mideast since hetook his post in February.n Obama responded to theTrayvon Martin verdict, say-ing the teen “could havebeen me 35 years ago.” A1n Detroit’s bankruptcy fil-ing will be a test case forhow far a major U.S. city cango in dealing with its unsus-tainable pension costs. A1nMore doctors now requirepatients to give urine sam-ples to show they are takingpain drugs as directed. A3n Russian activist AlexeiNavalny was freed pendingappeal a day after his em-bezzlement conviction. A7n The U.S.-led coalition’scommander in Afghanistancautioned against withdraw-ing all troops next year. A8n Parents tried to breakinto the home of the head-mistress of a school in Indiawhere a lunch killed 23. A9

Detroit’s historic bankruptcyfiling will be a test case for howfar a major U.S. city can go indealing with a chronic problemfacing many local and state gov-ernments: unsustainable pensioncosts.

Emergency manager KevynOrr has said all city workers,both current and retired, couldsee pensions cut to help resizeDetroit’s finances.

It is a scary prospect not onlyfor Detroit workers who havebeen counting on these guaran-teed benefits, but for workers incities across the U.S. who haveassumed that their pensionswere untouchable, even in bank-ruptcy.

Almost every state in the U.S.has made cuts to its public-em-ployee pensions, seeking to digout from the economic down-turn. But many of these changesapply only to newly hired work-ers, not to retirees.

States aren’t allowed to filefor bankruptcy protection. But ina few cities—including Central

in getting Mr. Cohen banned forlife from the industry.

The civil action sets up ashowdown between a federalagency operating under a newchairman pledging to get toughon financial misconduct and oneof its longest-running targets.SAC manages roughly $14 billion,of which about $8 billion belongsto Mr. Cohen and his employees.

A spokesman for SAC said Fri-day the SEC’s action had “nomerit.”

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Mr. Cohen still faces a crimi-nal insider-trading probe that iscontinuing. However, The WallStreet Journal previously re-ported that prosecutors had con-cluded they don’t have enoughevidence to file criminal insider-trading charges this monthagainst Mr. Cohen personally.

The SEC didn’t file civil-fraudcharges against him, eventhough it faces a lower burden ofproof than required for criminalconvictions. Still, the agencycould claim victory if it succeeds

Friday. It marked the first timehe was personally accused ofwrongdoing in a long-running in-sider-trading probe.

But the weapon used againstMr. Cohen by the SEC is one ofthe weakest in its enforcementarsenal, falling short of a lawsuitthat would be decided by a juryin federal court. The charge offailing to supervise employeesleveled at Mr. Cohen isn’t an ac-cusation of insider-trading orany other form of securitiesfraud.

U.S. securities regulators ac-cused Steven A. Cohen of ignor-ing “red flags” that should havealerted him to insider trading athis hedge-fund firm and movedto ban the billionaire for lifefrom the industry where hemade his fortune.

After circling Mr. Cohen foryears, the Securities and Ex-change Commission filed an ad-ministrative action against him

BY JEAN EAGLESHAMAND JENNY STRASBURG

SEC Seeking to Ban CohenRegulator Says Founder of Hedge Fund SAC Ignored Signs of Illegal Trading

PORT TALBOT, Wales—When the tell-tale rash appeared behind Aleshia Jen-kins’s ears, her grandmother knew ex-actly what caused it: a decision she’dmade 15 years earlier.

Ms. Jenkins was an infant in 1998,when this region of southwest Wales wasa hotbed of resistance to a vaccine formeasles, mumps and rubella. Many hererefused the vaccine for their children af-ter a British doctor, Andrew Wakefield,suggested it might cause autism and a lo-cal newspaper heavily covered the fears.Resistance continued even after the au-

tism link was disproved.The bill has now come due.A measles outbreak infected 1,219 peo-

ple in southwest Wales between Novem-ber 2012 and early July, compared with105 cases in all of Wales in 2011.

One of the infected was Ms. Jenkins,whose grandmother, her guardian, hadn’tvaccinated her as a young child. “I wasafraid of the autism,” says the grand-mother, Margaret Mugford, 63 years old.“It was in all the papers and on TV.”

The outbreak presents a cautionarytale about the limits of disease control.Wales is a modern society with access tomodern medical care and scientific

thought. Yet legions spurned a long-proven vaccine, putting a generation atrisk even after scientists debunked Dr.Wakefield’s autism research.

The outbreak matters to the rest ofthe world because measles can quicklycross oceans, setting back progress else-where in stopping it. By 2000, the U.S.had effectively eliminated new home-grown cases of measles, though smalloutbreaks persist as travelers bring thevirus into the country. New York Cityhealth officials this spring traced aBrooklyn outbreak to someone they be-lieve was infected in London.

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Fifteen Years After Autism Panic,A Plague of Measles Erupts

BY JEANNE WHALEN AND BETSY MCKAY

Red Alert: In Japan, CommunistsInclude Some Colorful Characters

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With Election Coming, Party Brings OutDigital Mascots; Moon-Faced Chief

Japan’s newest Com-munists are a motleybunch.

There is Ikuko Koso-date, a mother of 10 withfierce-looking eyebrowsand a baby strapped toher back. She is “planningto have one more childand then start a familysoccer team in the fu-ture,’’ according to theCommunist party web-site. There is Master Po-ken, a strict disciplinar-ian. And then there isYoko, a “mysterious” 25-year-oldjob hopper who “always wearssunglasses and a trench coat,and is rumored to hide a whipinside her coat.’’

They are all members of theProliferation Bureau, a group ofeight cartoonmascots who are the

centerpiece of the 91-year-old Japanese CommunistParty’s digital attempt torebrand itself for a tech-savvy new audience.

Other parties are ex-perimenting online too,ahead of July 21 upper-house elections, afterrules banning politickingon the Internet werelifted in April. Offeringsinclude a cellphone gamefeaturing a leaping figureof Japanese Prime Minis-ter Shinzo Abe.

But no other party hasgone as all-out as theCommunists, who have

featured their mascots on T-shirts, cardboard megaphonesand ads shown on Tokyo’s bigoutdoor screens. The Prolifera-tion Bureau members have theirown Twitter accounts fromwhich they tweet bits from the

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BY ELEANOR WARNOCKAND ALEXANDER MARTIN

Yoko

Diplomatic Intervention: Israelis and Palestinians Agree to Meet

HEATED: A Palestinian yelled at Israeli soldiers Friday in the West Bank, even as U.S. Secretary of State Kerry said peace talks would resume. A6

BY MICHAEL CORKERYAND MATTHEW DOLAN

Detroit’s BankruptcySparks Pension Brawl

Falls, R.I., and Prichard, Ala.,that like Detroit have filed underChapter 9 of U.S. BankruptcyCode—bankruptcy has led to bigcuts to retired city workers.

“These cases are exposing thefact that many municipal work-ers are unprotected and suffer-ing big losses of income thatthey thought were pretty muchguaranteed,’’ said Robert Flan-ders, a judge, who was appointedby Rhode Island to help overseeand guide Central Falls throughbankruptcy.

Retirees in Central Fallsagreed to 50% cuts in pensionbenefits, in many cases, after thesmall city filed for bankruptcy in2011. By contrast, the city’sbondholders were paid in full.

Bankruptcy lawyers and pen-sion experts say these cases—and Detroit’s filing Thursday—prove it can be less painful forpublic-sector unions and city of-ficials to agree on how to curbhigh pension costs before reach-ing bankruptcy court.

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Bankruptcy reverberates inMichigan, bond markets........... A4

Six days after a Florida juryacquitted a Hispanic man in theshooting death of an African-American teen, President BarackObama made his first extensivecomments on the case, speakingin personal terms about his ownexperience of being black inAmerica.

“Trayvon Martin could havebeen me 35 years ago,” the presi-dent said in the remarks, madeFriday during a surprise appear-ance in the White House pressroom. Mr. Martin, a 17-year-oldAfrican-American, was shot andkilled in Florida last year in a casethat riveted millions of Americansand sparked debate over the stateof race relations in the country.

Saying he would leave argu-ments about the verdict to legalanalysts, Mr. Obama didn’t cri-tique last Saturday’s acquittal ofGeorge Zimmerman, the neigh-borhood watchman who facedvarious charges related to thekilling.

But he tried to explain thelens through which black Ameri-cans may see the case, sayingthat their own experiences andthe country’s history with raceinform how many view whathappened to Mr. Martin.

“There are very few African-American men who haven’t hadthe experience of walking acrossthe street and hearing the locksclick on the doors of cars,” Mr.Obama said. “That happens tome—at least before I was a sena-tor.”

The remarks, delivered with-out a teleprompter, were a strik-ing example of America’s firstblack president seeking to guidethe country’s thinking on racewithout inflaming racial tensionsor undermining the judicial sys-tem. They also amounted to Mr.Obama’s most pointed commentsabout race since his 2008 presi-dential campaign.

Mr. Obama issued a briefstatement the day after the Mar-tin verdict was handed down. Heurged calm and compassion, not-ing that “a jury has spoken.”Missing, though, was any per-sonal reflection from a presidentwith a unique perspective on thematter.

As the week wore on, thedrumbeat from civil-rightsgroups asking Mr. Obama tospeak out and take action con-tinued.

In recent days, the presidenthad conversations with a num-ber of people about this issuebefore offering a detailed reac-tion, White House spokesmanJay Carney said. Privately, thepresident had outlined ahead oftime the gist of his remarks.

“He knows what he thinks,and he knows what he feels, andhe has not just in the past week,but for a good portion of his life,given a lot of thought to theseissues,” Mr. Carney said. Thepresident spoke just before a se-ries of planned weekend protestsover the verdict.

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BY COLLEEN MCCAIN NELSON

ObamaSpeaksFranklyOn Race

President Obama on Friday

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ssociatedPress

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‘Trayvon Martincould have beenme 35 years ago.’

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