DealBook: SkyBridge's Scaramucci Plays Host in Las Vegas

LAS VEGAS — Just outside the grand ballroom at the Bellagio hotel early Wednesday morning, Anthony Scaramucci, the backslapping host of the country's largest hedge fund conference, spotted Gregory J. Fleming, president of Morgan Stanley Investment Management and one of Mr. Scaramucci's most important business relationships.

"Is your kid still in town? Does he want to meet Train?" Mr. Scaramucci asked, referring to the adult-contemporary rock band performing at the event. "It's great to have you here; it really means a lot to me."

The hedge fund faithful, more than 1,800 strong, have come here for the SkyBridge Alternatives Conference, or SALT. Held over four days, SALT is a Wall Street schmooze-fest. This year's lineup of speakers features the investors Daniel S. Loeb and John Paulson, the politicians Nicolas Sarkozy and Leon Panetta, and the entertainers Oliver Stone and Al Pacino.

It is also a matchmaking service, with funds peddling their services to the world's richest investors, and the world's richest investors seeking out the next superstar manager. And this being Sin City, it is, perhaps above all else, a good time.

The ringmaster of this spectacle is Mr. Scaramucci, a Goldman Sachs alumnus with a Harvard Law degree whom many simply call "the Mooch." In an industry known for reclusive traders and math geeks, the boyish Mr. Scaramucci, 49, is Wall Street's first hedge fund impresario, a P. T. Barnum in a Ferragamo tie. In a gilded industry that has preferred to stay below the radar, Mr. Scaramucci embraces the white-hot center of it all.

A relentless self-promoter, Mr. Scaramucci is ubiquitous, especially to the stock traders and market aficionados who stare all day at Bloomberg terminals and have their flat screens fixed to business television.

He appears regularly on CNBC, jawboning about stocks. He wedged his way into a cameo in Mr. Stone's 2010 sequel to the movie "Wall Street." He has written two books: the first, "Goodbye Gordon Gekko," is part memoir, part self-help manual about "how to find your fortune without losing your soul"; the second, "The Little Book of Hedge Funds," is a primer on the investment vehicles that have made him rich.

"Mutual funds are the propeller plane," writes Mr. Scaramucci in his primer, "while hedge funds are the fighter jets."

That analogy has not worked well lately. The ascent of SALT, and Mr. Scaramucci, comes in a challenging time for hedge funds, which are expensive investment vehicles that promise outsize returns in up and down markets. The explosive growth experienced by the industry a decade ago has plateaued. For four consecutive years, the average hedge fund has failed to beat the Standard & Poor's 500-stock index.

Despite the weak performance, hedge funds, which have a total of about $2.5 trillion in assets, are still attracting money, taking in $15.2 billion in the first quarter of this year, according to Hedge Fund Research.

The SALT crowd can thank the Federal Reserve's persistent near-zero interest rate policy for their continued good fortune. Managers are also seeing money flood into debt-trading strategies as the world's largest banks have retrenched from those risky investments under greater regulation.

Tepid industry performance cannot stop Mr. Scaramucci, whose irrepressible salesmanship seeks to elevate the SkyBridge Capital brand. A manager of a portfolio of hedge funds — a "fund of funds," in Wall Street lingo — the New York-based firm has about $4.6 billion under management. It also oversees another roughly $3 billion in a business that advises pensions and other large institutions on hedge-fund-manager selection.

Mr. Scaramucci has built SkyBridge on the belief that hedge funds are not just the domain of giant pension funds and the Forbes 400 list of the wealthiest Americans.

SkyBridge's flagship product is structured for "the mass affluent," requiring a net worth of $1 million and a minimum investment of $25,000. Sold through brokers at big banks like Morgan Stanley and Merrill Lynch, SkyBridge has more than 24,000 clients. A typical customer is a dentist with a million or two in the bank and a desire to spice up his or her portfolio with a dollop of hedge fund exposure.

"I'm a middle-class kid from Long Island, and neither of my parents went to college," said Mr. Scaramucci, a father of three who grew up in Port Washington, N.Y., and now lives just a couple of miles away in Manhasset. "Why shouldn't more people have access to this industry?"

The access doesn't come cheap. On top of the usual 2 percent management fee and a 20 percent cut of the profits charged annually by the hedge funds in SkyBridge's portfolio, the firm adds a 1.5 percent yearly fee, along with a one-time placement charge paid to the broker that runs as high as 3 percent.

Not everyone buys what Mr. Scaramucci is selling. Critics decry the hefty fees that they say eat into the performance of funds of funds.

"Hedge funds tend to be a losing game for most investors," said Mebane T. Faber, co-founder of Cambria Investment Management. "With fund of funds, it is even more of a losing game because of the layers upon layers of fees."

Yet Skybridge's main fund, which profited from a concentrated bet on managers investing in beaten-down mortgages, returned 20.2 percent last year net of fees, handily outperforming the S.& P. But over a 10-year stretch, the fund has slightly underperformed the index.

"Reversion to the mean is a very powerful force," said Jack Bogle, founder of Vanguard and evangelist for low-cost funds that track the indexes. "These hedge fund products might work in the short term, but I can absolutely guarantee that they won't work forever."

SkyBridge almost didn't work right out of the gate. Mr. Scaramucci started the firm in 2005 after spending seven years at Goldman and then co-founding a money-management firm that he sold to Neuberger Berman. He originally formed SkyBridge to seed and incubate start-up hedge fund managers. But after the financial crisis crushed SkyBridge's portfolio of nascent funds, Mr. Scaramucci sought to reinvent the business.

He soon sniffed out an opportunity. When a sickly Citigroup sought to jettison its hedge fund unit, he negotiated a deal in June 2010 for SkyBridge to pay for the business with a small upfront payment and a revenue-sharing agreement with the bank that expires next month.

With the Citigroup acquisition, Mr. Scaramucci not only added several billion dollars in assets, but also acquired Citigroup's Raymond C. Nolte, a veteran hedge fund executive who now oversees SkyBridge's investments. Mr. Nolte also brought with him a respectable track record that Mr. Scaramucci could promote.

The SALT conference, too, grew out of the financial crisis. After President Obama warned Wall Street banks in early 2009 against throwing junkets on the taxpayers' dime, several banks canceled their Las Vegas conferences. Mr. Scaramucci decided to fill the void, holding the first SALT conference at the Wynn, with 400 people in attendance.

SALT has become the main engine of the SkyBridge marketing machine, though Mr. Scaramucci is quick to point out that it is not a SkyBridge event but an industrywide conclave. The conference is profitable, he says, but not as profitable as it would be if its organizers did not pour so much money back into it, paying top dollar for prominent speakers among other expenses.

Appearing at this year's event are Ehud Barak, the former Israeli prime minister; Mike Krzyzewski, the Duke University men's basketball coach; and Barney Frank, the former Massachusetts congressman.

Most of the talks take place in the main ballroom, but much of the real action happens behind the scenes at V.I.P. events. On Wednesday night, Mr. Scaramucci was holding a dinner for about 20, with Mr. Panetta, Mr. Pacino and others, where they were to eat a meal catered by Jean-Georges Vongerichten's ABC Kitchen, featuring organic chicken and collard greens paired with a polished Peay Vineyards syrah.

On Thursday, SkyBridge's top 20 clients will have breakfast with Matt Bissonnette, who under the pseudonym Mark Owen wrote "No Easy Day," the first-person account of the raid that killed Osama bin Laden.

SALT has become so larded with famous names that Mr. Scaramucci acknowledges the problem of having to live up to the agendas of previous conferences. He has set a high bar with past keynote speeches by former presidents Bill Clinton and George W. Bush, as well as Mitt Romney. (Mr. Scaramucci supported Mr. Obama in 2008, but served as Mr. Romney's national finance co-chairman in the last election.)

That challenge is evident with this year's entertainment. On Thursday evening, Train will perform, arguably a downgrade from last year's concert by the pop superstars Maroon 5. Mr. Scaramucci staunchly defended this year's musical act.

"I'll tell you a little secret" Mr. Scaramucci said. "Middle-aged white men? They love Train."

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Official Offers Account From Libya of Benghazi Attack

Drew Angerer for The New York Times

Gregory Hicks, center, a State Department official, presented on Wednesday the first public testimony from an American official who was in Libya during the seige of the diplomatic compound in Benghazi last Sept. 11.

WASHINGTON — A veteran diplomat gave a riveting minute-by-minute account on Wednesday of the lethal terrorist attack in Benghazi, Libya, last Sept. 11 and described its contentious aftermath at a charged Congressional hearing that reflected the weighty political stakes perceived by both parties.

During a chaotic night at the American Embassy in Tripoli, hundreds of miles away, the diplomat, Gregory Hicks, got what he called "the saddest phone call I've ever had in my life" informing him that Ambassador J. Christopher Stevens was dead and that he was now the highest-ranking American in Libya. For his leadership that night when four Americans were killed, Mr. Hicks said in nearly six hours of testimony, he subsequently received calls from both Secretary of State Hillary Rodham Clinton and President Obama.

But within days, Mr. Hicks said, after raising questions about the account of what had happened in Benghazi offered in television interviews by Susan E. Rice, the United Nations ambassador, he felt a distinct chill from State Department superiors. "The sense I got was that I needed to stop the line of questioning," said Mr. Hicks, who has been a Foreign Service officer for 22 years.

He was soon given a scathing review of his management style, he said, and was later "effectively demoted" to desk officer at headquarters, in what he believes was retaliation for speaking up.

House Republican leaders made the hearing the day's top priority, postponing floor votes so that the Committee on Oversight and Government Reform could continue without interruption. The Obama administration appeared focused on the testimony, with senior officials at the White House, the State Department and the Pentagon responding throug the day to Republican accusations of incompetence and cover-up in campaign war room style.

In the balance, in the view of both Democrats and Republicans, is not just the reputation of Mr. Obama but also potentially the prospects for the 2016 presidential election as well, since Mrs. Clinton, who stepped down in February, is the Democratic Party's leading prospect. If the testimony did not fundamentally challenge the facts and timeline of the Benghazi attack and the administration's response to it, it vividly illustrated the anxiety of top State Department officials about how the events would be publicly portrayed.

Mr. Hicks offered an unbecoming view of political supervision and intimidation inside the Obama administration. When Representative Jason Chaffetz, Republican of Utah, visited Libya after the attack, Mr. Hicks said his bosses told him not to talk to the congressman. When he did anyway, and a State Department lawyer was excluded from one meeting because he lacked the necessary security clearance, Mr. Hicks said he received an angry phone call from Mrs. Clinton's chief of staff, Cheryl Mills.

"So this goes right to the person next to Secretary of State Clinton. Is that accurate?" asked Representative Jim Jordan, Republican of Ohio. Mr. Hicks responded, "Yes, sir."

A State Department official said Mr. Hicks had been free to talk to Mr. Chaffetz, but that department policy required a department lawyer to be present during interviews for any Congressional investigation.

In a statement late Wednesday, a State Department spokesman, Patrick H. Ventrell, said the department had not and would not retaliate against Mr. Hicks. Mr. Ventrell noted that Mr. Hicks "testified that he decided to shorten his assignment in Libya following the attacks, due to understandable family reasons." He said that Mr. Hicks's current job was "a suitable temporary assignment" at the same salary, and that he had submitted his preferences for his next job.

The accounts from Mr. Hicks and two other officials, Mark I. Thompson, the former deputy coordinator for operations in the State Department's Counterterrorism Bureau, and Eric Nordstrom, an official in the State Department's Bureau of Diplomatic Security who had testified previously, added some detail to accounts of the night of Sept. 11 in Benghazi. Armed Islamic militants penetrated the diplomatic compound, starting the fire that killed Mr. Stevens and an aide, and later killed two security officers in a mortar attack; in Tripoli, where frantic diplomats fearing a similar invasion used an ax to destroy classified hard drives; and in Washington, where officials struggled to keep up with events.

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Fwd.Us Raises Uproar With Advocacy Tactics

"Move fast and break things" has been the motto at Mark Zuckerberg's Facebook, embodying the Silicon Valley ethos of unapologetically finding new ways to solve old problems. His latest foray into politics in Washington, however, might be characterized as "Move fast, play hardball and be prepared for blowback."

Fwd.Us, the new nonprofit advocacy group created by Mr. Zuckerberg and several technology executives and investors to push for an overhaul of immigration law, has bankrolled television ads endorsing the conservative stands taken by three lawmakers, prompting an outcry from liberal groups and a call to withhold advertisements from Facebook.

The uproar, some say, will be a lesson for Silicon Valley companies as they try to influence emotional political issues like immigration. But the group's supporters brashly say they were ready for the reaction.

"Our advertising decisions are being made by a very smart team of political operatives who know that passing major reform will require some different and innovative tactics," Jim Breyer, a venture capitalist with Accel Partners and a contributor to the cause, said in an e-mailed statement. "I'm proud to support Fwd.Us as they work to pass comprehensive immigration reform."

The group has faced the most vocal criticism for television advertisements sponsored by its two subsidiaries, which are known as Americans for Conservative Action and Council for American Job Growth. One of those spots takes swipes at President Obama's health policies. Another lauds the Keystone XL pipeline, fiercely opposed by many environmental groups.

Those TV spots, which ran in several states for a week, prompted strong reaction from a coalition of liberal organizations that includes the Sierra Club, the League of Conservation Voters and MoveOn.org. They announced earlier this week that they would suspend buying advertisements on Facebook, which they acknowledged was meant to send a message and would have little economic impact on the company.

Cathy Duvall, director of strategic partnerships at the Sierra Club, said her group was especially disappointed to see the technology industry adopt a strategy that was more typical of old-fashioned, brass-knuckled Washington lobbying.

"When the ads came out they were politics as usual and divisive and pitting one issue against another," Ms. Duvall said. "We were really surprised that Silicon Valley would be moving into the political space by doing the worst of business-as-usual politics."

Fwd.Us, like other industry-backed interest groups, has said very little about how much money it has raised and from whom, except to name contributors on its Web site. It would say only that it spent in the "seven figures" on the television spots.

The ads are particularly surprising considering some of the other backers. John Doerr, a venture capitalist, is known for his investments in clean technology companies, and his wife, Ann, has been a major donor to environmental causes.

Reid Hoffman has described himself as "progressive" in an essay posted recently on LinkedIn, a company that he founded.

Bill Gates, co-founder of Microsoft, in 2010 backed an effort not to roll back California's global warming law. None of them returned calls and e-mails requesting comment for this article, referring instead to Fwd.Us operatives in Washington.

"We recognize that not everyone will always agree with or be pleased by our strategy," said Kate Hansen, a spokeswoman for Fwd.Us. "Fwd.Us remains totally committed to support a bipartisan policy agenda that will boot the knowledge economy, including comprehensive immigration reform."

For his part, Mr. Zuckerberg has covered his political bases. He recently held a fund-raiser for Chris Christie, the Republican governor of New Jersey, at his home in Palo Alto, Calif., and Facebook has hired several former White House and Congressional aides to work in its Washington office.

Mr. Zuckerberg has declined requests to be interviewed about Fwd.Us.

Jim Manley, a former chief spokesman for Senate majority leader Harry Reid, Democrat of Nevada, said that the ads may have achieved their goal, but that Mr. Zuckerberg should learn from the negative reaction.

"He is finding out it can be very, very problematic to get your company involved in hot-button social issues," said Mr. Manley, who now directs the communications practice at the Washington lobbying and public relations firm Quinn Gillespie. "There is going to be blowback. You are going to pay a price for it."

Fwd.Us has been openly criticized by others in Silicon Valley. Josh Miller, founder of a start-up called Branch, denounced what he called the group's "questionable lobbying practices" and said he was disappointed that the group had not been transparent about its intentions.

"More discouragingly, the leaders of the technology industry (and of FWD.us) have built their careers on bringing meaningful change to the world," he wrote in a BuzzFeed opinion piece. "They should be doing the same in Washington."

Vinod Khosla, a venture capitalist who finances clean energy companies and who was once a major partner at Mr. Doerr's investment firm, said on Twitter over the weekend: "Will Fwd.us prostitute climate destruction & other values to get a few engineers hired & get immigration reform?"

One advocacy group called CredoAction, based in San Francisco, tried to use Facebook ads to draw attention to the Keystone XL pipeline TV spot sponsored by Fwd.Us. The ads were prohibited by Facebook officials, because the company's terms of service prohibit using Mr. Zuckerberg's image in another organization's ad. A coalition of organizations has also created a Facebook group to agitate against Fwd.Us.

Still, others say the ads signal a calculated pragmatism. Fwd.Us is led by experienced political operatives, including Joe Lockhart, a former Clinton Administration official, and Rob Jesmer, a former Republican Senate political adviser. One executive involved in the effort said the advertisements were vetted with executives backing it — and that the executives realized before they were shown that they might alienate certain liberal audiences. But the group made a decision to back both Democrats and Republicans who support the immigration bill in order to get it passed.

"We did not just fall off the turnip truck," the executive said. "There are a lot of people involved in these organizations that have been involved in politics for a really long time."

The group e-mailed statements from prominent backers, including a former Facebook executive, Chamath Palihapitiya, who argued that Fwd.Us needs to be "disruptive" in politics, as in commerce.

"In order to push Washington to do something different and pass major legislation like comprehensive immigration reform, groups like Fwd.Us can't just do the same thing and expect different results," he said. "As part of our work, we're using a wide variety of tactics, some of which may ruffle some feathers, but we believe the passage of the bill will be worth it."

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Boston Bombing Inquiry Looks Closely at Russia Trip

MAKHACHKALA, Russia — During a six-month visit to his Russian homeland last year, the parents of  the Boston bombing suspect Tamerlan Tsarnaev said, he spent his time reading novels and reconnecting with family, not venturing into the shadowy world of the region's militants.

But now, investigators are looking into a range of suspected contacts Mr. Tsarnaev might have made in Dagestan, from days he might have spent in a fundamentalist Salafi mosque in Makhachkala, the capital, to time spent outside the city with a relative who is a prominent Islamist leader recently taken into custody by Russian authorities.

The emerging details of his time here have not fundamentally altered a prevailing view among American and Russian investigators that he was radicalized before his visit. However, there have been reports that he sought out contact with Islamist extremists, and was flagged as a potential recruit for the region's Islamic insurgency.

It remains unclear to what degree his months in Russia, which were punctuated by volleys of punishing attacks between the police and insurgents, might have changed his plans. But an official here, who said he did not have enough information to confirm or deny reports of Mr. Tsarnaev's contacts, said he had concluded that Mr. Tsarnae intended to link up with militant Islamists — but left frustrated, having failed.

"My presumed theory is that he evidently came here, he was looking for contacts, but he did not find serious contacts, and if he did, they didn't trust him," said Habib Magomedov, a member of Dagestan's antiterrorism commission.

Mr. Tsarnaev, 26, died after a shootout with the police four days after the Boston Marathon bombings on April 15. His brother, Dzhokhar, 19, also suspected in the bombings, remains in a prison medical facility in Massachusetts.

Investigators in Russia are also looking into Tamerlan Tsarnaev's interactions online, and exploring whether he and a Canadian-born militant, William Plotnikov, might have been part of a larger group of diaspora Russian speakers who mobilized online, under the auspices of an organization based in Europe, a law enforcement official said.

Unearthing what investigators have learned became more difficult two weeks ago when President Vladimir V. Putin told reporters that, "to our great regret," Russian security services did not have operative information on the Tsarnaev brothers that they could have shared with American officials. The police in Dagestan have said Tamerlan Tsarnaev was not under surveillance.

Since then an official from the Anti-Extremism Center, a federal agency under Russia's Interior Ministry, confirmed for The Associated Press that operatives had filmed Mr. Tsarnaev during visits to the Makhachkala mosque, whose worshipers adhere to a more radical strain of Islam, and scrambled to locate him when he disappeared from sight after Mr. Plotnikov was killed in a counterterrorism raid. An official from the same unit told the newspaper Novaya Gazeta that Mr. Tsarnaev had been spotted repeatedly with a suspected militant, Mahmoud Mansur Nidal, who was killed shortly thereafter in a counterterrorism raid.

What is certain, however, is that investigators are looking into the time Mr. Tsarnaev spent with a distant cousin, Magomed Kartashov, founder of a group called Union of the Just, a religious organization that promoted civic action, not violence. Mr. Kartashov, whose relationship with Mr. Tsarnaev was first reported in Time magazine, was detained 12 days ago by the police after taking part in a wedding procession that flew Islamic flags.

(At a checkpoint, police officers stopped the procession and demanded that the flags be removed; Mr. Kartashov protested, and is now facing charges of resisting the police.)

Agents from Russia's Federal Security Service visited Mr. Kartashov last Sunday in a detention center to question him about his relationship with Mr. Tsarnaev, focusing on whether the two had shared "extremist" beliefs, said Mr. Kartashov's lawyer, Patimat Abdullayeva.

Ms. Abdullayeva said that her client had discussed religious matters with Mr. Tsarnaev, but had been a moderating influence. "Magomed is a preacher, he has nothing to do with extremism," she said.

As head of the Union of the Just, Mr. Kartashov has led demonstrations protesting police counterterrorism tactics, which are often brutal here, and calling for the establishment of Islamic law, or Shariah, in the region. At a rally in February, he aligned himself with antigovernment forces in Syria, saying, "We do not want secularism, we do not want democracy, we want the law of Allah," according to the newspaper Nezavisimaya Gazeta.

Andrew Roth contributed reporting.

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U.S. Fears Russia May Sell Air Defenses to Syria

WASHINGTON — The United States, which is trying to bring Syrian rebels and the Syrian government to the negotiating table, is now increasingly worried that Russia plans to sell a sophisticated air defense system to Syria, American officials said Wednesday.

SANA, via European Pressphoto Agency

President Bashar al-Assad of Syria has benefited from the support of Iran and Russia.

Russia has a long history of selling arms to the Syrians and has a naval base in the country. But the delivery of the Russian S-300 missile batteries would represent a major qualitative advancement in Syria's air defenses. The system is regarded as highly effective and would limit the ability of the United States and other nations to operate over Syrian airspace or impose a no-fly zone.

It is also able to track and fire missiles at multiple targets, including aircraft and some missiles.

"There are concerns that this might happen," said a senior United States official who spoke on the condition of anonymity, referring to the possible delivery of the S-300. A Western intelligence service has also warned that the Russians may soon send S-300 air defense batteries to Syria, said another American official who asked not to be identified because he was discussing intelligence reports.

News of the possible Russian sale, which was first reported online by The Wall Street Journal on Wednesday evening, came less than a day after Secretary of State John Kerry sought to enlist Russia's help in facilitating a political transition that would supplant President Bashar al-Assad of Syria.

Russia and Iran have supported Mr. Assad politically and have provided military support — support that American officials say has fortified Mr. Assad's determination to hang on to power.

American officials had been concerned that Russia might sell S-300 air defense batteries to Iran. But after the United States and Israel raised alarms, the weapons were not provided to the Iranians. 

While Syria's air defenses are formidable, Israel has successfully carried out three airstrikes to stop the suspected transfer of advanced weapons from Syria to Hezbollah. In carrying out its attacks, Israeli warplanes flew over neighboring Lebanon and fired air-to-ground weapons at their targets, American officials said.

The possible S-300 sale comes as the United States and its allies are struggling to find a way to end the fighting in Syria, which has killed more than 70,000.

The White House announced Wednesday that Prime Minister David Cameron of Britain planned to meet with President Obama next Monday in Washington. One subject they will take up will be Syria, the White House noted in a statement.

British and French officials have said that they hope to modify or do away with the European Union ban on arms sales to Syria, which has precluded Western European nations from providing weapons to the Syrian opposition. That embargo is scheduled to expire at the end of May. The Obama administration is also weighing expanding the modest level of nonlethal aid it is giving to the armed Syrian rebels.

Still, while the United States and its allies are seeking to bolster the Syrian opposition, American officials have said that only a negotiated political transition holds the promise of building an inclusive and stable Syria if Mr. Assad is deposed.

To that end, the Americans have sought Russia's cooperation. Before his meeting with Mr. Putin on Tuesday, Mr. Kerry said that he hoped the two sides would find "common ground" on Syria. He made no mention of Russia's arms sales to Syria.

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South Carolina Returns Mark Sanford to Office

MOUNT PLEASANT, S.C. — As political rehabilitations go, few can match what happened to Mark Sanford on Tuesday night.

Mr. Sanford, the former South Carolina governor once so tarnished by a spectacular lie about an affair that few expected him to recover, is now headed to Congress.

About 55 percent of voters in South Carolina's First Congressional District forgave the man who turned "hiking the Appalachian Trail" into a euphemism for infidelity, giving him a nearly 10-percentage-point win over his Democratic opponent, Elizabeth Colbert Busch.

In his victory speech, Mr. Sanford promised to be a "messenger to Washington, D.C." Then, after introducing one of his sons and his fiancée, Mariá Belén Chapur, who had just flown in from Argentina, he spoke of the redemption he had found on the campaign trail.

"I am an imperfect man saved by God's grace," he said.

For voters, his hawkish views on federal spending, his experience and his promise to fight President Obama outweighed any personal transgressions.

"He took a couple of years to reflect, and now he just wants to get back to work," said Tom Lewis, 47, a Sanford voter who considers himself a libertarian. "They've just got to reel it in in Washington."

Still, even until the last moments of voting, it appeared that Ms. Colbert Busch, a political neophyte, stood a solid chance of becoming the first Democrat this conservative coastal district would send to the House in more than 30 years.

Not only did she have nearly $1 million in financing from the national Democratic Party and fund-raisers hosted by her famous brother, the comedian Stephen Colbert, but she also had the support of women who might have otherwise voted Republican.

"I'm still not sure I know exactly what she believes in, but integrity matters more than anything to me," said Suzanne McCord, 53, a conservative who had never before voted for a Democrat but found Mr. Sanford's behavior too distasteful to forgive with her vote.

In the end, however, government spending beat out a messy personal life.

"I've got a lot of problems with Sanford, believe me," said Jennifer Kavanagh, 42, a real estate agent. "I'd have preferred to have another Republican, but I just don't agree with the way Democrats are spending."

The race, soaked in personal drama that many have found similar to — and even more engaging than — reality television, received enormous media attention.

In 2009, Mr. Sanford had appeared to commit professional suicide by covering up a trip to Argentina to pursue the woman he would later call his soul mate with a story about hiking the Appalachian Trail.

His wife, Jenny Sanford, divorced him, and he faced impeachment before limping through the end of his term in 2011.

Mr. Sanford's political comeback could have been crafted only by a veteran, as Mr. Sanford is. He has never lost an election, and from 1995 to 2001, he held the House seat he just won, back then riding a wave of Republican power led by Newt Gingrich and articulated by the party's Contract With America.

The seat opened up in December when Gov. Nikki R. Haley appointed Representative Tim Scott, a favorite of the Tea Party, to replace Jim DeMint in the Senate. Mr. DeMint had stepped down to run the Heritage Foundation.

Mr. Sanford, who will have to run again in 2014 to keep the seat, easily won in a crowded primary field in March. Still, it was never clear that he could overcome his transgressions, even though the district is populated with country club Republicans and more conservative Tea Party voters.

And then there was his opponent, a sympathetic women roughly the age of Jenny Sanford with a famous brother, a compelling personal story as a single mother and a long track record as an executive in the maritime industry.

She was popular among the more centrist residents of Charleston County, which had supported President Obama twice but handed the victory to Mr. Sanford by less than two percentage points.

"We gave it a heck of a fight," she said in her concession speech.

Throughout the campaign, she tried to invoke the word "trust" with regularity, but remained vague on issues and scant on public appearances that were not heavily orchestrated.

In April, leaked court documents revealed that Mr. Sanford's ex-wife claimed that he had been in her house watching the Super Bowl with one of their sons in violation of the divorce agreement. (The two will head back to court on Thursday to resolve the issue.)

The National Republican Congressional Committee pulled its support of Mr. Sanford while national Democratic organizations poured money into Ms. Colbert Busch's campaign.

On Sunday, Ms. Colbert Busch received a key endorsement from The Post and Courier of Charleston, the largest newspaper in the area. Several Republican women stepped firmly into her camp, including members of Congress.

But Mr. Sanford turned the race into a battle against Washington Democratic power brokers, especially the former House speaker Nancy Pelosi.

Tuesday's vote proved that his approach worked.

Mr. Sanford received support from local Republicans, including Governor Haley, although some of it was tepid. Senator Lindsey Graham, a fellow Republican, had been more vocal, portraying the race as a statement against President Obama.

Mr. Sanford received, but declined, an endorsement and the offer of financial support from Larry Flynt, the pornography advocate, who called Mr. Sanford "America's great sex pioneer."

But in the end, people here cared less about sex and more about government spending.

"We are not trying to elect the 'how is your conscience' candidate," said Charm Altman, president of the South Carolina Federation of Republican Women. "We are trying to elect someone who can govern."

Brad Mallett, 45, a local coffee roaster who was at Mr. Sanford's packed victory party, put it more simply: "Everyone deserves a second chance."

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Game 2: Knicks 105, Pacers 79: Knicks Roar to Victory, Rattling Rims and Pacers

The imagery, the timing and the guest list were enough to unnerve any Knicks fan with a long memory and an appreciation of history.

Reggie Miller roaming Madison Square Garden.

The Indiana Pacers on the court.

And the calendar uncomfortably highlighting the 18th anniversary of one of the greatest heartbreaks in Knicks playoff annals: Miller's infamous 8-points-in-9-seconds for the Pacers in 1995.

The symbolism was strong Tuesday night, but the Knicks were stronger — unbowed by a Game 1 defeat, unmoved by the Pacers' size advantage and ultimately unrelenting. They held firm for three quarters, then crushed the Pacers with a stunning 23-0 run and rolled to a stress-free 105-79 victory, tying this second-round series at 1-1.

After grinding through 17 days of low-wattage struggles in this postseason, the Knicks at last reclaimed their identity as a free-flowing, finely tuned offensive machine, and played a little defense for good measure. They exploded for 33 points in the final quarter and outscored the Pacers by 43-15 over the final 15 minutes 28 seconds.

"Like old times again," Coach Mike Woodson said. "It was kind of nice to see."

The Knicks broke the 100-point barrier for the first time since April 12 and shot 49.4 percent from the field. Carmelo Anthony put together his best performance of the postseason, filled with dunks and timely 3-pointers.

Anthony had 32 points and 9 rebounds and was crisp from the field, making 13 of 26 shots. He was brutally efficient in the second half, going 9 for 15.

"Melo just caught fire," said the Pacers' Paul George, adding: "I felt like we made it as difficult as we could. That's why he's an elite player — he has an ability to make contested shots."

The Pacers had largely bottled up Anthony in Game 1, forcing him into difficult shots and keeping him away from the rim. He broke through Tuesday, freeing himself from George and flying past David West and Roy Hibbert.

"I can't stop attacking," Anthony said. "I can't stop being aggressive out there on the basketball court. I think I did a good job of making some adjustments out there, just being patient. I thought that first game I was a little bit too impatient coming off the pick-and-rolls."

Four other Knicks finished in double figures, including Iman Shumpert (15 points), who lit up the arena with a first-half dunk, and Raymond Felton (14 points).

The series moves to Indiana for the next two games, after an extended three-day break that will give Anthony time to heal his achy left shoulder and Amar'e Stoudemire time to regain his conditioning. Game 3 is Saturday night.

The game was tense through three quarters, and the Knicks and the Pacers appeared headed for a close finish, the sort that Miller — the Hall of Fame sharpshooter who was at the Garden as a TNT analyst — would relish.

George had 20 points for the Pacers, whose size advantage seemed suddenly less important than it had in their Game 1 victory. The Knicks battled harder, won the rebounding battle (37-35), outscored the Pacers in the paint (52-40) and earned more second-chance points (29-8), reversing every troubling figure from Sunday's opener.

The only concern was Felton, who limped to the bench late in the third quarter and did not return. Felton said he tweaked his left ankle but indicated that he could have played if needed.

The Knicks treated their Game 1 loss as a minor hitch, not a warning bell — "There shouldn't be no panic mode on anybody's faces around here," Woodson said earlier — but the 1-0 deficit and the loss of home-court advantage was unsettling, and the prospect of falling behind by 2-0 was unthinkable. That made Tuesday's game the first must-win of this postseason, and by definition, the biggest game the Knicks have played in years.

Indiana took its final lead, 64-62, on Hill's 3-pointer with 3:28 left in the third quarter. Anthony answered emphatically, with two straight drives to the basket, including a two-handed dunk over Jeff Pendergraph that thrilled the crowd and elicited the first "M-V-P" chants of the night.

After Hill's 3-pointer, the Pacers went 12 minutes and 19 seconds without a field goal, scoring only 4 points on free throws, while the Knicks pushed their lead as high as 30 points. Indiana's drought finally ended with an Orlando Johnson 3-pointer.

Pacers Coach Frank Vogel was grim in his summation: "We turned the ball over, we didn't make free throws, we gave up second shots and we didn't guard the paint or the rim. And we didn't score."

Pablo Prigioni sparked the Knicks' fourth-quarter charge, opening the period with a 3-pointer and a short jumper. Anthony followed with two straight baskets — including a 3-pointer in front of Spike Lee, Miller's foil in playoffs past.

And the fun times kept coming. A putback dunk from Tyson Chandler. Another 3-pointer from Anthony. Another dunk from Chandler to make it 92-66, and soon the fans were taunting Miller with a lewd chant informing him that he stunk.

"We finally fell into a bit of a rhythm," Chandler said. "Our whole thing is to just kind of wear 'em down, wear 'em down, wear 'em down. Eventually we'll start to get the open shots."

Anthony again wore a protective wrap on his injured left shoulder, which continued to bother him on contact and any time he overextended himself. He briefly hung on the rim with his left hand after a third-quarter dunk and winced as he landed. "I keep forgetting it's sore," he said.

Anthony showed some patience with the ball and some faith in his teammates, hitting Felton and J. R. Smith for 3-pointers in the first quarter, doubling his assist total from Game 1. But it was Shumpert who delivered the early jolt, a thunderous putback dunk that sent tremors through the building. The murmurs did not subside for the next two minutes.

Shumpert credited the perfectly timed bounce from Chris Copeland's miss.

"It was beautiful for me," Shumpert said. "I just wanted to win this game real bad."

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China Trade Figures Rise Slightly, but Weaknesses Persist

HONG KONG — Trade figures for April released by the Chinese government on Wednesday morning were slightly better than economists expected, but still indicated that demand was fairly weak in foreign markets and in China itself.

Exports and imports both increased last month compared with a year earlier, but the figures were harder than usual to interpret because April of last year was so weak. Imports and exports all but stopped growing in April of last year as a wide range of industries, perceiving a short, sharp domestic economic slowdown that would last until early autumn, stopped buying industrial commodities, even as foreign buyers cut orders as well.

Compared with that weak base, China's trade figures for last month looked somewhat better. Exports rose 14.7 percent from a year ago, while imports increased 16.8 percent.

But the trade figures were far from strong enough to suggest that foreign demand could pull China out of what seems to be a deepening economic malaise. Although official figures still show the economy steaming along at a growth rate of nearly 8 percent, a range of purchasing manager surveys last month showed growing worry among business executives across China.

"China is in a very difficult position now," as American and European consumers seem wary of further increases in the coming months in their purchases of Chinese goods, said Diana Choyleva, an economist in the Hong Kong office of Lombard Street Research, an economic analysis firm.

The discouraging shift in sentiment, after a fairly weak economic performance in March as well, comes despite enormous lending through the autumn, winter and early spring. China's leaders were able to turn the sharp economic slowdown a year around by flooding the economy with bank and trust loans, and other credit.

But the heavy lending has brought about considerably less economic growth than earlier rounds of monetary easing, raising worries that China's investment-dominated economy is running out of economically viable projects to pursue and may not be able to shift quickly enough to consumer-led growth.

China has scheduled the release of April inflation data on Thursday, and a wide range of April economic statistics next Monday, including including industrial production, fixed asset investment and retail sales.

Another uncertainty about Wednesday's trade data lies in whether the export figures are even accurate, or whether they have been artificially inflated. A gradual rise in the value of the renminbi against the dollar over the last year, together with expectations that this rise will continue, has created an incentive for exporters to overstate the value of the goods they ship out of the country, as a way to bypass China's currency controls and bring more dollars into the country to convert into renminbi.

The Chinese government has opened an investigation into whether exporters are overinvoicing clients, after export data in the first quarter showed unusual patterns, including a surge in reported Chinese exports to Hong Kong that did not match Hong Kong data.

Louis Kuijs, an economist in the Hong Kong office of the Royal Bank of Scotland, estimated that overinvoicing of exports accounted for more than half of the year-on-year growth in China's exports last month. By adjusting for this, he said that the true growth in China's exports last month appeared to be more like 5.7 percent than 14.7 percent.

 There has been little sign of manipulation of import figures, which appear to show that domestic demand is holding up a little better than overseas demand.

 

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Hospital Billing Varies Wildly, U.S. Data Shows

A hospital in Livingston, N.J., charged $70,712 on average to implant a pacemaker, while a hospital in nearby Rahway, N.J., charged $101,945.

In Saint Augustine, Fla., one hospital typically billed nearly $40,000 to remove a gallbladder using minimally invasive surgery, while one in Orange Park, Fla., charged $91,000.

In one hospital in Dallas, the average bill for treating simple pneumonia was $14,610, while another there charged over $38,000.

Data being released for the first time by the government on Wednesday shows that hospitals charge Medicare wildly differing amounts — sometimes 10 to 20 times what Medicare typically reimburses — for the same procedure, raising questions about how hospitals determine prices and why they differ so widely.

The data for 3,300 hospitals, released by the federal Center for Medicare and Medicaid Services, shows wide variations not only regionally but among hospitals in the same area or city.

Government officials said that some of the variation might reflect the fact that some patients were sicker or required longer hospitalization.

Nonetheless, the data is likely to intensify a long debate over the methods that hospitals use to determine their charges.

Medicare does not actually pay the amount a hospital charges but instead uses a system of standardized payments to reimburse hospitals for treating specific conditions. Private insurers do not pay the full charge either, but negotiate payments with hospitals for specific treatments. Since many patients are covered by Medicare or have private insurance, they are not directly affected by what hospitals charge.

Experts say it is likely that the people who can afford it least — those with little or no insurance — are getting hit with extremely high hospitals bills that may bear little connection to the cost of treatment.

"If you're uninsured, they're going to ask you to pay," said Gerard Anderson, the director of the Johns Hopkins Center for Hospital Finance and Management.

The debate over medical costs is growing louder, spurred partly by President Obama's overhaul of the health insurance system.

Hospitals, in particular, have come under scrutiny for charges that are widely viewed as difficult to comprehend, even for experts. "Our goal is to make this information more transparent," Jonathan Blum, the director of the agency's Center for Medicare, said in an interview.

The data covers bills submitted from virtually every hospital in the country in 2011 for the 100 most common treatments and procedures performed in hospitals, like hip replacements, heart operations and gallbladder removal.

The hospitals were not given the data before its release by Medicare officials.

Some hospitals contacted Tuesday said that the higher bills they sent to Medicare reflected the fact that they were either teaching hospitals or they had treated sicker patients.

For example, billing records showed that Keck Hospital of the University of Southern California charged, on average, $123,885, for a major artificial joint replacement, six times the average amount that Medicare reimbursed for the procedure and a rate significantly higher than the average for other Los Angeles area hospitals.

"Academic medical centers have a higher cost structure, and higher acuity patients who suffer from many health complications," the hospital said.

The hospital added that it wrote off any difference between what it charged and what Medicare paid, rather than seeking to collect it from patients. Centinela Hospital Medical Center, also in Los Angeles and owned by Prime Healthcare Services, charged $220,881 for the same procedure.

A spokesman said the hospital served a sicker and older patient base.

The data showing the range of hospital bills does not explain why one hospital charges significantly more for a procedure than another one. And Medicare does pay slightly higher treatment rates to certain hospitals — like teaching facilities or hospitals in areas with high labor costs.

Mr. Blum, the Medicare official, said he would have anticipated variations of two- to threefold at the most in the difference between what hospitals charge.

However, hospitals submitted bills to Medicare that were, on average, about three to five times what the agency typically pays to treat a condition, an analysis of the data by The New York Times indicates. And variations between what hospitals charge may be even greater.

Mr. Blum said he could not explain the reasons for that large difference.

An official at the American Hospital Association, a trade group, said there was a cat-and-mouse game between hospitals and insurers that affects what hospitals charge.

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Patients Say Gastric-Band Procedure Won’t Guarantee Weight Loss

There will probably be no more bubbly Champagne or hefty steaks at political events. No more gobbling slices of pizza while on the campaign trail.

For Mr. Christie, the rewards of successful stomach-band surgery could be great, like reducing his risk of a premature death or having the chance to run for president as a slimmer person. But the consequences of not sticking to a post-surgery diet could be dire, like being forced to run to the bathroom after eating the wrong food or suffering the abject humiliation of being a public figure who still fails to lose weight publicly.

 "You really have to change your mind-set; it's a new way of eating," said David Ackerman, a Lap-Band patient.

An estimated 200,000 people a year have weight-loss surgery in the United States, and banding — placing a silicone band around the upper part of the stomach to restrict intake — is the least invasive and least risky type.

"We like to say that about a third of people do really well, a third so-so and a third not so well," said Dr. Hans Schmidt, chief of bariatric surgery at Hackensack University Medical Center.

Looking at Mr. Christie's photograph, Dr. Jaime Ponce, president of the American Society for Metabolic and Bariatric Surgery, estimated that his weight could range from 350 to 450 pounds.

If Mr. Christie did well, he could lose about 150 pounds by 2016, Dr. Ponce said. "That would put him in a 250 range," he said. "He's still going to be looking like a big guy, but not overweight like he is now."

With the band in place, food has to be cut into small pieces and chewed well, and the band's very purpose can be circumvented with high-calorie shakes or soft foods.

Mr. Ackerman said he could no longer tolerate soda, because carbonated beverages irritate his stomach. So the governor "cannot go to a function and drink a ton of Champagne or beer," Mr. Ackerman, 59, a retired assistant principal in Brooklyn, said.

Pizza can get stuck. "Either it sits there and you feel like the lady in the commercial, with an elephant on your chest, or you're going to have to excuse yourself, it will come up," he said.

After lunch on Tuesday, Mr. Ackerman said he felt full on four ounces of fish. "In the past I would have eaten four or five times that," he said.

For him, the rewards have been worth the sacrifice. Since his operation at Maimonides Medical Center in Brooklyn in 2009, he has removed nearly 100 pounds from his 6-foot-4-inch frame, slimming a 42-inch waist to a 36. "The only thing that hasn't changed is my shoes," he said.

Others have been less successful. Another Maimonides patient, who asked not to be named because she did not want to embarrass her doctor, said her operation had been extremely frustrating. "It's definitely not as simple as people make it out to be," the woman said. JoAnn Savino, a customer service worker in Patchogue, on Long Island, went from Size 18 to Size 6 jeans after having the operation just over three years ago at North Shore-LIJ Health System.

But her diet is not well-suited to the political life, said Ms. Savino, 66. She cannot eat just any roadhouse steak. "I eat filet mignon," she said. "It's soft."

Still, she is sure that losing weight will make Mr. Christie a better father, husband and politician. "If you can't feel good about yourself, you can't help other people," Ms. Savino said.

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DealBook: After Years of Battling, Bank of America and MBIA Settle Mortgage Dispute

8:29 p.m. | Updated

Bank of America and MBIA, the troubled bond insurer, have reached a $1.7 billion agreement to settle a long-running legal dispute over mortgage-backed securities that became troubled when the financial crisis blossomed.

The deal, which was announced on Monday, provides a lifeline to MBIA, which stood in danger of being unable to meet its obligations in a few weeks' time. And the agreement will turn Bank of America from bitter foe to equity investor in, and major lender to, the insurer.

The battle between the two financial giants had its beginnings in transactions before the financial crisis between MBIA and two companies — Merrill Lynch and Countrywide Financial — that Bank of America acquired during the crisis.

Merrill Lynch was in a position to collect billions from the insurer — if it had enough cash to meet its obligations.

But it seemed unlikely that MBIA could come up with the cash unless Countrywide agreed to pay billions to settle claims that it had misled the insurer regarding the quality of mortgages in securitizations insured by MBIA, and had failed to honor its obligations to repurchase those mortgages.

Now the multibillion-dollar claims the institutions had against each other will be canceled out. Under the agreement, Bank of America will pay $1.6 billion in cash to MBIA, and will lend the firm another $500 million. It also acquired warrants that, if exercised, would give the bank a 4.9 percent stake in the insurer. In addition, the bank will surrender to MBIA about $130 million in MBIA bonds.

Bank of America said the agreement would reduce its previously announced first quarter after-tax profits by $1.1 billion, or 10 cents a share, but would improve its capital position. MBIA indicated that the settlement would have little impact on its profits, but said its first-quarter results, scheduled to be released on Thursday, would be delayed.

The agreement also appears to remove any practical chance that MBIA's split into two companies will be reversed. One company, National, is taking over the municipal bond insurance policies. The other, known as MBIA Corporation, backs the insurance the company issued on securitized products and on credit-default swaps. Both remain subsidiaries of the parent, MBIA Inc.

Jay Brown, MBIA's chief executive, said the agreement "sets the stage for National to reclaim its leadership in the U.S. public finance insurance market."

Shares of MBIA soared on word of the settlement, rising $4.46, or 45 percent, to $14.29. Bank of America shares surged 64 cents, or 5 percent, to $12.88.

Before the settlement, it appeared that within weeks the insurer would owe as much as $3 billion to Merrill Lynch stemming from credit-default swaps issued by MBIA concerning commercial real estate transactions.

MBIA Corporation had met earlier obligations by borrowing money from National, the municipal bond part of the company.

But Benjamin Lawsky, the New York State financial services superintendent, refused to allow further loans, and it was expected that MBIA Corporation might be put into receivership before it had to pay Merrill Lynch.

In an interview, Mr. Lawsky said negotiations had been going on for more than a year, but accelerated in the last couple of weeks. "There was a way to get to yes because everyone had claims on everyone else," he said. The agreement, he said "resolves significant exposure and expensive litigation for Bank of America, while also giving MBIA a path forward."

MBIA originally insured municipal bonds, a profitable business because few such bonds ever defaulted and municipalities buying the insurance would get AAA ratings on their bonds, saving them more in interest payments than the insurance cost because many muni bond investors were very risk-averse.

It later expanded into insuring securitizations and writing credit-default swaps, businesses in which the purchasers were more sophisticated. When the financial crisis struck, it became clear that the company had taken some very bad risks.

In 2009, the New York State Insurance Department, which later was folded into the Department of Financial Services, approved a decision by MBIA to split into the two companies. Banks and hedge funds that owned securities insured by MBIA went to court to try to reverse the split. In March, MBIA prevailed in one of those suits, as Justice Barbara R. Kapnick of the New York State Supreme Court ruled that the insurance department had wide latitude to approve the split with or without much investigation.

She cited a deposition by Michael Moriarty, the then-deputy superintendent of the department, who said "the department did not, nor do they usually, verify the financial condition of a company." Since that was the policy, the judge concluded she had no authority to question it, even if some information provided by the company was false.

Bank of America had vowed to appeal that decision, raising the possibility that an appellate court would order a trial that could be embarrassing to the state regulator. Under the settlement, the bank will drop that appeal.

Some MBIA legal disputes remain. Société Générale, the French bank, remains a plaintiff in the suit over the split, and that dispute seems likely to cost MBIA perhaps $200 million to settle. MBIA is also pursuing complaints against ResCap, a mortgage company previously owned by General Motors' finance arm, and against Credit Suisse, the Swiss bank. Settlement of those disputes potentially could bring in more than $500 million to MBIA.

Another suit against the MBIA split was filed by hedge funds that feared their insurance claims would not be honored. That suit is still pending, but the agreement would make it harder to pursue since all the information the bank obtained in disclosure from MBIA would be returned to the insurer.

Bank of America had bought the bonds in an effort to frustrate MBIA's effort to change their terms. By turning over the bonds to the insurer, it now seems likely MBIA can change the terms. The expectation is that MBIA will eventually resell the bonds to investors, providing cash for the company.

The money provided by Bank of America will largely be used to repay the loans National made to MBIA Corporation, solidifying National's finances.

Under the warrants, Bank of America will have the right for the next five years to purchase 9.94 million shares of MBIA for $9.59 a share. If the warrant is exercised, that would provide the insurer with another $95 million.

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3 Long-Missing Women Are Found in Cleveland, and Man Is Arrested

CLEVELAND (AP) — Three women who went missing separately about a decade ago, when they were in their teens or early 20s, had been tied up and held in a home just south of downtown before being found Monday, and three brothers were arrested, police said.

One of the women frantically told a 911 dispatcher the person who had taken her was gone, and she pleaded for police officers to come and get her, saying, "I'm free now."

Cheering crowds gathered Monday night on the street near the home where police said Amanda Berry, Gina DeJesus and Michelle Knight had been held since they went missing and were found earlier in the day.

Police didn't immediately provide any details of how the women were found but said they appeared to be in good health and had been taken to a hospital to be reunited with relatives and to be evaluated. They said a 6-year-old also was found in the home.

On a recorded 911 call Monday, Berry declared, "I'm Amanda Berry. I've been on the news for the last 10 years."

She said she had been taken by someone and begged for police officers to arrive at the home on Cleveland's west side before he returned.

"I've been kidnapped, and I've been missing for 10 years," she told the dispatcher. "And I'm here. I'm free now."

Berry disappeared at age 16 on April 21, 2003, when she called her sister to say she was getting a ride home from her job at a Burger King. DeJesus went missing at age 14 on her way home from school about a year later. They were found just a few miles from where they had gone missing.

Police said Knight went missing in 2002 and is 32 now. They didn't provide current ages for the other two women.

Police said one of the brothers, a 52-year-old, lived at the home. They released no names and gave no details about the others arrested or what charges they might face.

Dozens of police officers and sheriff's deputies remained at the scene late Monday awaiting a warrant to search the building where the women and the child were found.

Loved ones said they hadn't given up hope of seeing the women again. Among them was Kayla Rogers, a childhood friend of DeJesus.

"I've been praying, never forgot about her, ever," Rogers told The Plain Dealer newspaper. "This is amazing. This is a celebration. I'm so happy. I just want to see her walk out of those doors so I can hug her."

Berry's cousin Tasheena Mitchell told the newspaper she couldn't wait to have Berry in her arms.

"I'm going to hold her, and I'm going to squeeze her and I probably won't let her go," she said.

Berry's mother, Louwana Miller, who had been hospitalized for months with pancreatitis and other ailments, died in March 2006. She had spent the previous three years looking for her daughter, whose disappearance took a toll as her health steadily deteriorated, family and friends said.

Mayor Frank Jackson expressed gratitude that the three women were found alive.

"We have many unanswered questions regarding this case, and the investigation will be ongoing," he said in a statement.

At Metro Health Medical Center, Dr. Gerald Maloney declined to go into details about the women's conditions.

"We're assessing their needs, and the appropriate specialists are evaluating them as well," he said at a news conference, which concluded with a round of applause from a large gathering of area residents.

In January, a prison inmate was sentenced to 4 1/2 years after admitting he provided a false burial tip in the disappearance of Berry, who had last been seen the day before her 17th birthday. A judge in Cleveland sentenced Robert Wolford on his guilty plea to obstruction of justice, making a false report and making a false alarm.

Last summer, Wolford tipped authorities to look for Berry's remains in a Cleveland lot. He was taken to the location, which was dug up with backhoes.

Two men arrested for questioning in the disappearance of DeJesus in 2004 were released from the city jail in 2006 after officers did not find her body during a search of the men's house.

One of the men was transferred to the Cuyahoga County Jail on unrelated charges, while the other was allowed to go free, police said.

In September 2006, police acting on a tip tore up the concrete floor of the garage and used a cadaver dog to search unsuccessfully for DeJesus' body. Investigators confiscated 19 pieces of evidence during their search but declined to comment on the significance of the items then.

No Amber Alert was issued the day DeJesus failed to return home from school in April 2004 because no one witnessed her abduction. The lack of an Amber Alert angered her father, Felix DeJesus, who said in 2006 he believed the public will listen even if the alerts become routine.

"The Amber Alert should work for any missing child," Felix DeJesus said then. "It doesn't have to be an abduction. Whether it's an abduction or a runaway, a child needs to be found. We need to change this law."

Cleveland police said then that the alerts must be reserved for cases in which danger is imminent and the public can be of help in locating the suspect and child.

___

Associated Press writer Kantele Franko in Columbus contributed to this report.

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U.S. Accuses China’s Military in Cyberattacks

WASHINGTON — The Obama administration on Monday explicitly accused China's military of mounting attacks on American government computer systems and defense contractors, saying one motive could be to map "military capabilities that could be exploited during a crisis."

While some recent estimates have more than 90 percent of cyberespionage in the United States originating in China, the accusations relayed in the Pentagon's annual report to Congress on Chinese military capabilities were remarkable in their directness. Until now the administration avoided directly accusing both the Chinese government and the People's Liberation Army of using cyberweapons against the United States in a deliberate, government-developed strategy to steal intellectual property and gain strategic advantage.

"In 2012, numerous computer systems around the world, including those owned by the U.S. government, continued to be targeted for intrusions, some of which appear to be attributable directly to the Chinese government and military," the nearly 100-page report said.

The report, released Monday, described China's primary goal as stealing industrial technology, but said many intrusions also seemed aimed at obtaining insights into American policy makers' thinking. It warned that the same information-gathering could easily be used for "building a picture of U.S. network defense networks, logistics, and related military capabilities that could be exploited during a crisis."

It was unclear why the administration chose the Pentagon report to make assertions that it has long declined to make at the White House. A White House official declined to say at what level the report was cleared. A senior defense official said "this was a thoroughly coordinated report," but did not elaborate.

Missing from the Pentagon report was any acknowledgment of the similar abilities being developed in the United States, where billions of dollars are spent each year on cyberdefense and constructing increasingly sophisticated cyberweapons. Recently the director of the National Security Agency, Gen. Keith Alexander, who is also commander of the military's fast-growing Cyber Command, told Congress that he was creating more than a dozen offensive cyberunits, designed to mount attacks, when necessary, at foreign computer networks.

When the United States mounted its cyberattacks on Iran's nuclear facilities early in President Obama's first term, Mr. Obama expressed concern to aides that China and other states might use the American operations to justify their own intrusions.

But the Pentagon report describes something far more sophisticated: A China that has now leapt into the first ranks of offensive cybertechnologies. It is investing in electronic warfare capabilities in an effort to blind American satellites and other space assets, and hopes to use electronic and traditional weapons systems to gradually push the United States military presence into the mid-Pacific nearly 2,000 miles from China's coast.

The report argues that China's first aircraft carrier, the Liaoning, commissioned last September, is the first of several carriers the country plans to deploy over the next 15 years. It said the carrier would not reach "operational effectiveness" for three or four years, but is already set to operate in the East and South China Seas, the site of China's territorial disputes with several neighbors, including Japan, Indonesia, the Philippines and Vietnam. The report notes a new carrier base under construction in Yuchi.

The report also detailed China's progress in developing its stealth aircraft, first tested in January 2011.

Three months ago the Obama administration would not officially confirm reports in The New York Times, based in large part on a detailed study by the computer security firm Mandiant, that identified P.L.A. Unit 61398 near Shanghai as the likely source of many of the biggest thefts of data from American companies and some government institutions.

Until Monday, the strongest critique of China came from Thomas E. Donilon, the president's national security adviser, who said in a speech at the Asia Society in March  that American companies were increasingly concerned about "cyberintrusions emanating from China on an unprecedented scale," and that "the international community cannot tolerate such activity from any country." He stopped short of blaming the Chinese government for the espionage.

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Three Women, Gone for Years, Found in Ohio

Three young women from Cleveland who disappeared about a decade ago, and who friends and relatives feared were gone forever, were found on Monday and appeared to be physically unharmed, the authorities said.

The police did not offer any immediate information about how the women were found, but they said in a statement that three men in their 50s had been arrested.

The police identified the women as Amanda Berry, Gina DeJesus, who were in their teens when they disappeared, and Michelle Knight who was 20 when she vanished. All were found in a home in a residential neighborhood not far from where they reportedly disappeared.

A neighbor, Charles Ramsey, told local television reporters that a woman's screams drew him to a house on his block.

"This girl is kicking the door and screaming," he said. "I said, 'Can I help? What's going on?' And she said, 'I've been kidnapped, and I've been in this house a long time. And I want to leave right now.' "

Mr. Ramsey said he and his neighbors broke through the door and Ms. Berry came out with a young child. It was not immediately clear if it was her child. He said the police then went in and brought out the other two.

Ms. Berry, now 27, was last seen in April 2003. Almost exactly a year later, Ms. Dejesus, now 23, disappeared. The police said Ms. Knight vanished around 2000, but was assumed to have run away.

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Bulls 93, Heat 86: N.B.A. Playoffs — Heat Have M.V.P.; Bulls Have Series Lead

Rhona Wise/European Pressphoto Agency

The Bulls' Marquis Teague, left, and Jimmy Butler defending the Heat's LeBron James on Monday.

MIAMI — When Nate Robinson chased after a loose ball in the second quarter of Monday's second-round playoff game, he quickly discovered that he had company in the form of the 6-foot-8, 250-pound LeBron James. At 5-8, Robinson paid the price. He retreated to the locker room to receive 10 stitches on his upper lip, and the Bulls pressed on without him.

Robinson soon returned, and so did his team's determined attitude. During this most surprising postseason run, little has been able to slow the undermanned, injury-ravaged Bulls. No Luol Deng? No Derrick Rose? No problem. The Bulls opened their series against the defending champion Heat with a 93-86 victory that left a once-festive crowd at American Airlines Arena in near disbelief.

"Nobody had us winning any games," said Robinson, who finished with 27 points and 9 assists. "I heard we were going to get swept."

Not quite, not after Robinson broke open a tie game by scoring the final 7 points. It was a one-man surge that featured a step-back, 19-foot jumper and a finger-roll layup over a cluster of Miami defenders. He stifled the crowd as well as James, who had done his best to keep the Heat involved late.

"He's as confident as they come," Bulls Coach Tom Thibodeau said of Robinson, adding: "He always thinks he's hot. He's never afraid."

The Bulls limited the Heat to 39.7 percent shooting, held a 46-32 rebounding advantage and seized early control of the series.

"We're not going to make excuses," Chris Bosh said. "We have to do a better job of getting into rhythm. We never found it."

Coming off a seven-game series against the Nets, the Bulls have refused to buckle without the considerable services of Deng, who experienced complications after having a spinal tap to test for viral meningitis; Kirk Hinrich, who has a bruised left calf; and Rose, a former most valuable player who has not dressed at all this season after tearing the anterior cruciate ligament in his left knee in the playoffs a year ago.

"They have a no-excuse mentality," James said before the game. "No matter who's in the lineup, they play the same style of basketball: hard-nosed, together and with a sense of urgency each and every possession. That's why they continue to win games."

The Heat, meantime, were fully rested and raring to go since sweeping the Milwaukee Bucks more than a week ago. The latest homage to James took shape in the hours before the game. The front facade of the arena suddenly featured a huge black-and-white mural of his profile, along with the headline "2013 MVP." In a pregame ceremony, Commissioner David Stern presented James with his fourth M.V.P. trophy.

The Bulls took all this in and promptly made James's life as miserable as possible. He went 1 of 6 from the field in the first half, and much of the credit belonged to Jimmy Butler, who was dealt the challenge of defending James in Deng's absence. Butler, who played a full 48 minutes for the third straight game and finished with 21 points and 14 rebounds, said he conferred with Deng by telephone before the game.

"I just tried to make everything difficult for him," Butler said of guarding James. "It's all about containment."

James finished with 24 points, and his 3-point play put the Heat ahead, 76-69, late in the fourth quarter. But the Bulls responded with a 9-1 run, which set the stage for Robinson's dramatics — stitches and all.

"I've played on some tough teams, but this is a little different," said Robinson, an eight-year veteran. "There's something special about this group."

During the Heat's extended layoff since dispatching the Bucks, Coach Erik Spoelstra tried to keep his players sharp at practice by creating what he described as a "training camp" vibe. Despite his best efforts, he was unable to replicate the toughness of the Bulls, who are surviving and thriving against all odds.

REBOUNDS

Bulls guard Marco Belinelli was fined $15,000 by the N.B.A. for making an obscene gesture in the fourth quarter of Chicago's 99-93 victory at Brooklyn in Game 7 of their first-round playoff series. Belinelli made the gesture as he made his way back down the court after connecting on a 3-pointer that gave Chicago a 91-81 lead. (AP)

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Kennedy Library Gives Giffords a Courage Award

Evan McGlinn for The New York Times

Gabrielle Giffords, center, who has worked for gun control, accepted her honor from Caroline Kennedy, behind her, in Boston on Sunday.

BOSTON — Caroline Kennedy was not even 6 years old when her father was assassinated 50 years ago. And on Sunday, she said the hurt never heals.

"Our family is still suffering the heartbreak caused by gun violence," Ms. Kennedy said here at the John F. Kennedy Presidential Library and Museum.

She was here to honor another target of an assassin, one who lived. Gabrielle Giffords, the former Arizona congresswoman who was shot in 2011 at point-blank range and was nearly killed by a lone gunman, has devoted herself to pressing for measures to prevent gun violence since she has recovered.

For that, Ms. Kennedy bestowed on Ms. Giffords the Profile in Courage Award in a small ceremony on Sunday afternoon at the library. The award is given annually to someone who demonstrates the kind of courage that President Kennedy highlighted in his book "Profiles in Courage," which praised eight senators who risked their careers by taking principled stands on unpopular positions.

"No one should have to lose a husband, a wife, a father, a child to senseless murder," Ms. Kennedy said in presenting the award to Ms. Giffords. "But as our honoree has shown, out of that pain and tragedy, we must find the strength to carry on, to give meaning to our lives, and to build a more just and peaceful world."

They were perhaps the most personal words Ms. Kennedy has ever spoken publicly about the gunfire that took the life of her father, in 1963, and that of an uncle, Senator Robert F. Kennedy, in 1968. Nov. 22 will be the 50th anniversary of her father's death.

"Gabrielle Giffords has turned a personal nightmare into a movement for political change," Ms. Kennedy said. "Her work is saving lives and sparing countless families from the pain and loss caused by gun violence."

Ms. Giffords, wearing a sleeveless, floor-length red gown, gingerly climbed the few steps to the podium with the aid of her husband, Mark Kelly, the former astronaut, who wore a tuxedo. A formal 500-person fund-raising gala for the library followed the more intimate award ceremony, attended by about 50 people.

Ms. Giffords and Ms. Kennedy, who wore a slim royal blue dress, embraced as Ms. Kennedy handed her the award, a sterling silver lantern, which symbolizes a beacon of hope. The lantern was designed by Edwin Schlossberg, Ms. Kennedy's husband, and made by Tiffany & Company.

The audience included many of the members of the committee that selected Ms. Giffords as this year's recipient, including Representative Nancy Pelosi of California, the House minority leader; former Senator Christopher Dodd of Connecticut; and Kenneth R. Feinberg, the chairman of the board of directors of the John F. Kennedy Library Foundation.

"We're so sorry for the violence and terror you all have endured," Mr. Kelly said from the podium, referring to the Boston Marathon bombings. "We know what that is like," he said. "We know how violence changes lives."

His wife, he added, has chosen to try to inspire and motivate "a nation that is fed up with violence and fed up with Congressional inaction."

Just recently the Senate failed to pass expanded background checks for those buying guns.

Ms. Giffords spoke for a few seconds. "I believe we all have courage inside," she said haltingly, then veered from her prepared remarks to add: "I wish there was more courage in Congress."

She said these two years since she was shot have been hard. "But I want to make the world a better place," she said. "More than ever."

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Pacers 102, Knicks 95: Pacers’ Aggressive Defense Proves Too Much for Knicks

The challenge necessarily grows bigger as the N.B.A. playoffs progress, and the Knicks are a seasoned enough group to understand this basic truth. It was, however, not the size of the challenge but the actual size of the players standing in their path that put the first real crimp in the Knicks' postseason thrill ride.

The Indiana Pacers stood taller Sunday afternoon, quite literally, and they played bigger. They also played harder and smarter as they pushed their way to a 102-95 victory in the opener of this second-round series, leaving the Knicks stunned and Madison Square Garden silent.

After working all season to secure home-court advantage — and holding off the Pacers through the season's final weeks — the Knicks lost it in one frustrating, foul-filled afternoon.

Carmelo Anthony struggled through foul trouble and shoulder pain while banging with the Pacers' David West, an inch taller and at least 15 pounds beefier. Tyson Chandler fouled out against Roy Hibbert, who had a 1-inch and 40-pound advantage. The Pacers grabbed 44 rebounds to the Knicks' 30, outscored them inside by 46-32 and scored twice as many second-chance points (20-10).

"They just flat-out played harder than we did today," Anthony said. "That was the key in their victory. They outplayed us; they outworked us."

There was a lot of self-flagellation in the Knicks' locker room, with the players uniformly blaming their own failings for letting the Pacers steal the game. Game 2 is Tuesday, also at the Garden.

For the first time since the postseason began, and really for the first time since the Knicks revived themselves in late March, this team has reason for concern.

Anthony had 27 points and 11 rebounds, but he made just 10 of 28 shots, continuing a shooting slump that began in the first round against Boston. Over his last four games, Anthony is 35 for 110 (.318) from the field. He is now playing with a black wrap around his left shoulder, which was injured in Game 5 against the Celtics.

The Pacers led for the entire second half, by as many as 16 points and by double digits for most of the fourth quarter. The Knicks closed the gap to 6 points in the final minute, on two free throws from J. R. Smith, but the rally sputtered.

Aside from Raymond Felton, who scored 18 points and hit 8 of 12 shots, the Knicks' offense was a mess. Smith's postseason slump also continued as he made 4 of 15 attempts from the field, finishing with 17 points. The Knicks shot 43.2 percent from the field while allowing the Pacers to shoot 48.7 percent, mostly because Indiana was shooting closer to the basket.

"That's who we are," Pacers Coach Frank Vogel said of his team's size advantage and physical play. He added, "It'll be a contrast in styles most of the series."

Six Pacers scored in double figures, led by West's 20 points and Paul George's 19. D. J. Augustin pitched in 16 points off the bench.

The Knicks got to this point — winning 54 games in the regular season, securing the No. 2 seed in the Eastern Conference, pushing past Boston — by playing with a small lineup, deploying the 6-8 Anthony at power forward and exploiting his quickness against bigger defenders. That strategy might be in for a re-evaluation.

Kenyon Martin, a reserve big man for the Knicks, made a thinly veiled pitch to rework the lineup, presumably with him at power forward and Anthony at small forward. Coach Mike Woodson used that alignment sparingly Sunday.

"Melo has to wrestle and tussle with David West," Martin said. "I don't think he should have to do that from the beginning of the game. We got size over there we can use to our advantage."

Anthony tried to play down the issue, noting that the Knicks won twice and lost twice against the Pacers this season while playing with this lineup.

"I don't want to panic and overanalyze that situation," he said. But he acknowledged that his foul trouble "put a little dent in the game plan."

Anthony picked up his fourth foul early in the third quarter, after tagging George on the arm during a jump shot. With Anthony on the bench, the Pacers quickly expanded their lead from 6 points to 16 turning the momentum for good. Anthony got his fifth foul with 10 minutes 11 seconds left in the game, but he stayed on the floor to the finish, scoring 15 of the Knicks' 30 points in the final period.

"I was never going to take Melo out of the game," Woodson said. "He fouls out, he fouls out."

Chandler did foul out, with 2:36 to play, after picking up two fouls in 10 seconds against Hibbert. Chandler finished with 4 points and 3 rebounds and was badly outplayed by Hibbert, who had 14 points, 8 rebounds, 4 assists and 5 blocked shots.

"Hibbert, he played better tonight," Woodson said. "I got to get Tyson playing better than Hibbert."

REBOUNDS

LeBron James fell one vote short of becoming the N.B.A.'s first unanimous most valuable player. That first-place vote went to Carmelo Anthony, who greeted the news with a chuckle. "I'll take that vote," he said. Anthony, who was third in the balloting, said James deserved the award. "I came in this season with a total different mind-set than I have in the past, as far as me as an individual, as far as our team," Anthony said. "My goal was to win 50 games this year, 50-plus wins, to win our division, to get out of the first round and hopefully make it past the second round." The highest Anthony had finished was sixth, in 2009-10, and he had never received a first-place vote. He also had 16 second-place votes and 51 third-place votes, 27 fourth-place votes and 17 fifth-place votes, finishing with 475 points, behind James (1,207) and Kevin Durant (765).

Steve Novak was inactive for a second straight game because of back spasms.

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Syria Condemns Israel for Air Assault Near Damascus

SANA, via European Pressphoto Agency

Rubble was cleared in an area near Damascus. The Syrian government said the attack "opened the door to all possibilities."

BEIRUT, Lebanon — The Syrian government publicly condemned Israel for a powerful air assault on military targets near Damascus early Sunday, saying it "opened the door to all possibilities," as fear spread throughout the region that the country's civil war could expand beyond its borders.

The attack, which sent brightly lighted columns of smoke and ash high into the night sky above the Syrian capital, struck several critical military facilities in some of the country's most tightly secured and strategic areas, killing dozens of elite troops stationed near the presidential palace, a high-ranking Syrian military official said in an interview.

Israel refused to confirm the attacks, the second in three days, and Israeli analysts said it was unlikely that Israel was seeking to intervene in the Syrian conflict. They said the attacks in all likelihood expanded and continued Israel's campaign to prevent the Syrian government from transferring weapons to Hezbollah, the Shiite militia and political party in neighboring Lebanon that is one of Israel's most dangerous foes.

Rebels, opposition activists and residents said the strikes hit bases of the elite Republican Guard and storehouses of long-range missiles, in addition to a military research center that American officials have called the country's main chemical weapons facility.

An American official said a more limited strike early Friday at Damascus International Airport was also meant to destroy weapons being sent from Iran to Hezbollah.

Concerns flared about whether Hezbollah might attack Israel in retaliation, possibly drawing Lebanon into the conflict. Israel deployed two of its Iron Dome missile-defense batteries in its northern cities. Iran's IRNA news agency said Israel could expect a "crushing" retaliation from Syria or "the resistance," meaning Hezbollah.

Analysts said Syria, weakened by the conflict, and Hezbollah, overstretched as it commits more forces to support the Syrian government, were unlikely to act, but they cautioned that a miscalculation by either side that set off an escalation could not be ruled out. And President Bashar al-Assad could choose to mount covert attacks on Israeli targets abroad, rather than engage its military directly.

One senior Israeli official, who spoke on the condition of anonymity, said he did not think that Israel was entering a war with Syria and suggested that Syria was unlikely to respond. Mr. Assad "has his own problems," the official noted. "He doesn't need Israel in the mess."

In Washington, the reported Israeli attacks stoked debate about whether American-led airstrikes were the logical next step to cripple the ability of the Syrian president to counter the rebel forces or use chemical weapons. That was already being discussed in secret by the United States, Britain and France in the days leading to the Israeli strikes, according to American and foreign officials involved in the discussions, with a model being the opening days of the attacks on Libya that ultimately drove Col. Muammar el-Qaddafi from power.

Lawmakers from both parties urged President Obama to move toward arming the rebels. "The idea of getting weapons in — if we know the right people to get them — my guess is we will give them to them," Senator Patrick J. Leahy, Democrat of Vermont, said on NBC's "Meet the Press."

The White House declined to say whether it believed Israel was responsible for the Damascus explosions, though other American officials said there was no plausible alternative, given the size and precision of the strikes. Josh Earnest, the deputy press secretary, echoed statements by Mr. Obama last week, saying "the Israelis are justifiably concerned about the threat posed by Hezbollah obtaining these advanced weapon systems."

The Syrian deputy foreign minister, speaking on CNN, called the strikes "an act of war." But the decision to blame Israel so publicly presented Mr. Assad with a difficult choice. He could retaliate against Israel and risk conflict with the region's strongest military — an option analysts called unlikely. Or he could refrain, in which case he risks appearing further weakened and hypocritical to supporters and opponents alike, many of whom are united in their antipathy for Israel.

"Why does the regime attack the rebels with Scuds and warplanes while it takes no action on the Israeli raids?" Basil, 35, who lives near the military research center, in Jamraya, asked as he and his wife swept broken glass from their house on Monday.

Noureddin, 50, a lawyer, lives in the Doumar Project neighborhood, where the blasts knocked kitchen crockery from shelves and drove residents into basements for shelter. Noureddin said the attack would anger members of Mr. Assad's Alawite sect, who make up the bulk of the military elite and his strongest base of support, already frustrated with their mounting death toll.

Reporting was contributed by an employee of The New York Times from Damascus, Syria, Hala Droubi from Dubai, Thomas Erdbrink from Tehran, Ben Hubbard from Cairo, Michael Schwirtz from New York and Hania Mourtada and Hwaida Saad from Beirut.

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