Lobbying, a Windfall and a Leader’s Family

Gilles Sabrie for The New York Times

Ping An, one of China’s largest financial services companies, is building a 115-story office tower in Shenzhen. The company is a $50 billion powerhouse now worth more than A.I.G., MetLife or Prudential.

SHENZHEN, China — The head of a financially troubled insurer was pushing Chinese officials to relax rules that required breaking up the company in the aftermath of the Asian financial crisis.

The survival of Ping An Insurance was at stake, officials were told in the fall of 1999. Direct appeals were made to the vice premier at the time, Wen Jiabao, as well as the then-head of China’s central bank — two powerful officials with oversight of the industry.

“I humbly request that the vice premier lead and coordinate the matter from a higher level,” Ma Mingzhe, chairman of Ping An, implored in a letter to Mr. Wen that was reviewed by The New York Times.

Ping An was not broken up.

The successful outcome of the lobbying effort would prove monumental.

Ping An went on to become one of China’s largest financial services companies, a $50 billion powerhouse now worth more than A.I.G., MetLife or Prudential. And behind the scenes, shares in Ping An that would be worth billions of dollars once the company rebounded were acquired by relatives of Mr. Wen.

The Times reported last month that the relatives of Mr. Wen, who became prime minister in 2003, had grown extraordinarily wealthy during his leadership, acquiring stakes in tourist resorts, banks, jewelers, telecommunications companies and other business ventures.

The greatest source of wealth, by far, The Times investigation has found, came from the shares in Ping An bought about eight months after the insurer was granted a waiver to the requirement that big financial companies be broken up.

Long before most investors could buy Ping An stock, Taihong, a company that would soon be controlled by Mr. Wen’s relatives, acquired a large stake in Ping An from state-owned entities that held shares in the insurer, regulatory and corporate records show. And by all appearances, Taihong got a sweet deal. The shares were bought in December 2002 for one-quarter of the price that another big investor — the British bank HSBC Holdings — paid for its shares just two months earlier, according to interviews and public filings.

By June 2004, the shares held by the Wen relatives had already quadrupled in value, even before the company was listed on the Hong Kong Stock Exchange. And by 2007, the initial $65 million investment made by Taihong would be worth $3.7 billion.

Corporate records show that the relatives’ stake of that investment most likely peaked at $2.2 billion in late 2007, the last year in which Taihong’s shareholder records were publicly available. Because the company is no longer listed in Ping An’s public filings, it is unclear if the relatives continue to hold shares.

It is also not known whether Mr. Wen or the central bank chief at the time, Dai Xianglong, personally intervened on behalf of Ping An’s request for a waiver, or if Mr. Wen was even aware of the stakes held by his relatives.

But internal Ping An documents, government filings and interviews with bankers and former senior executives at Ping An indicate that both the vice premier’s office and the central bank were among the regulators involved in the Ping An waiver meetings and who had the authority to sign off on the waiver.

Only two large state-run financial institutions were granted similar waivers, filings show, while three of China’s big state-run insurance companies were forced to break up. Many of the country’s big banks complied with the breakup requirement — enforced after the financial crisis because of concerns about the stability of the financial system — by selling their assets in other institutions.

Ping An issued a statement to The Times saying the company strictly complies with rules and regulations, but does not know the backgrounds of all entities behind shareholders. The company also said “it is the legitimate right of shareholders to buy and sell shares between themselves.”

In Beijing, China’s foreign ministry did not return calls seeking comment for this article. Earlier, a Foreign Ministry spokesman sharply criticized the investigation by The Times into the finances of Mr. Wen’s relatives, saying it “smears China and has ulterior motives.”

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Protests Erupt After Egypt’s Leader Seizes New Power

Tara Todras-Whitehill for The New York Times

Egyptians in central Cairo ran from tear gas during clashes with the police on Friday. Protesters took to the streets in several cities. More Photos »

CAIRO — Protests erupted across Egypt on Friday, as opponents of President Mohamed Morsi clashed with his supporters over a presidential edict that gave him unchecked authority and polarized an already divided nation while raising a specter, the president’s critics charged, of a return to autocracy.  

In an echo of the uprising 22 months ago, thousands of protesters chanted for the downfall of Mr. Morsi’s government in Cairo, while others ransacked the offices of the president’s former party in Suez, Alexandria and other cities.

Mr. Morsi spoke to his supporters in front of the presidential palace here, imploring the public to trust his intentions as he cast himself as a protector of the revolution and a fledgling democracy.

In a speech that was by turns defensive and conciliatory, he ultimately gave no ground to the critics who now were describing him as a pharaoh, in another echo of the insult once reserved for the deposed president, Hosni Mubarak.

“God’s will and elections made me the captain of this ship,” Mr. Morsi said.

The battles that raged on Friday — over power, legitimacy and the mantle of the revolution — posed a sharp challenge not only to Mr. Morsi but also to his opponents, members of secular, leftist and liberal groups whose crippling divisions have stifled their agenda and left them unable to confront the more popular Islamist movement led by the Muslim Brotherhood.

The crisis over his power grab came just days after the Islamist leader won international praise for his pragmatism, including from the United States, for brokering a cease-fire between Hamas and Israel.

On Friday, the State Department expressed muted concern over Mr. Morsi’s decision. “One of the aspirations of the revolution was to ensure that power would not be overly concentrated in the hands of any one person or institution,” said the State Department spokeswoman, Victoria Nuland.

She said, “The current constitutional vacuum in Egypt can only be resolved by the adoption of a constitution that includes checks and balances, and respects fundamental freedoms, individual rights and the rule of law consistent with Egypt’s international commitments.”

But the White House was notably silent after it had earlier this week extolled the emerging relationship between President Obama and Mr. Morsi and credited a series of telephone calls between the two men with helping to mediate the cease-fire in Gaza.

For Mr. Morsi, who seemed to be saying to the nation that it needed to surrender the last checks on his power in order to save democracy from Mubarak-era judges, the challenge was to convince Egyptians that the ends justified his means.

But even as he tried, thousands of protesters marched to condemn his decision. Clashes broke out between the president’s supporters and his critics, and near Tahrir Square, the riot police fired tear gas and bird shot as protesters hurled stones and set fires.

Since Thursday, when Mr. Morsi issued the decree, the president and his supporters have argued that he acted precisely to gain the power to address the complaints of his critics, including the families of protesters killed during the uprising and its aftermath.

By placing his decisions above judicial review, the decree enabled him to replace a public prosecutor who had failed to win convictions against senior officers implicated in the killings of protesters.

The president and his supporters also argued that the decree insulated the Constituent Assembly, which is drafting the constitution, from meddling by Mubarak-era judges.

Since Mr. Mubarak’s ouster, courts have dissolved Parliament, kept a Mubarak loyalist as top prosecutor and disbanded the first Assembly.

But by ending legal appeals, the decree also removed a safety valve for critics who say the Islamist majority is dominating the drafting of the constitution.

Mayy El Sheikh contributed reporting from Cairo, and Helene Cooper from Washington.

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NFL to examine replay rule from Lions-Texans game

NEW YORK (AP) — The rule that negated using video replay to confirm a Houston Texans touchdown "may be too harsh" and will be re-examined immediately, NFL director of football operations Ray Anderson said Friday.

Anderson, also co-chairman of the competition committee that suggests rules changes to the owners, said a change could come this year. The NFL traditionally resists changing rules during a season.

"We will certainly discuss the rule with the competition committee members, as we do all situations involving unique and unusual circumstances, and determine if we feel a change should be recommended to ownership," Anderson said in a statement.

"Not being able to review a play in this situation may be too harsh, and an unintended consequence of trying to prevent coaches from throwing their challenge flag for strategic purposes in situations that are not subject to a coaches' challenge."

Anderson added the NFL is not bound by past events when a rule is proved to have loopholes, and that a 15-yard penalty for throwing the challenge flag on a play that is automatically reviewed might be enough. For now, throwing the challenge flag also eliminates the use of replay. All scoring plays otherwise are reviewed.

Justin Forsett's third-quarter 81-yard run in the Texans' 34-31 overtime victory at Detroit on Thursday initially was ruled a touchdown, although replays clearly showed his knee and elbow touched the turf when he was hit by Lions defenders. Detroit coach Jim Schwartz challenged, resulting in a 15-yard unsportsmanlike conduct penalty and the negated use of video replay.

"I overreacted," Schwartz acknowledged. "And I cost us."

In 2011, instant replay rules were changed to have the replay official initiate a review of all scoring plays. The rule stated that a team is prevented from challenging a play if that team commits a foul that prevents the next snap, or if a challenge flag is thrown when an automatic review would take place. A 15-yard unsportsmanlike conduct penalty is assessed as well as the elimination of the replay review for the play.

But, as Anderson noted, getting the calls right is paramount and that the league may have overlooked the scenario that occurred in Detroit.

Anderson also said the play in which Lions defensive tackle Ndamukong Suh kicked Texans quarterback Matt Schaub in the groin will be reviewed. He called the play "out of the ordinary."

Suh could face a suspension if he is found to have intentionally kicked Schaub. A year ago on Thanksgiving, Suh was ejected for stomping on the right arm of Green Bay offensive lineman Evan Dietrich-Smith and subsequently was suspended for two games.

Suh has been fined in previous seasons for roughing up quarterbacks Andy Dalton, Jay Cutler and Jake Delhomme.

Similar incidents to the replay flap, but not involving scores happened last season in San Francisco's win, coincidentally at Detroit, and last week when the Falcons beat Arizona.

The rule was adopted in part because of a situation in a Redskins-Giants game in December 2010.

Officials on the field ruled a fumble recovered by the Giants, and the ball was made ready for play. But Washington veteran linebacker London Fletcher kicked the ball and was called for delay of game. While the penalty was being enforced, Washington challenged the ruling of a fumble.

The competition committee felt that a team could benefit from committing a penalty in that situation, giving it more time to challenge a play. It was decided that the new rule would also apply when a team throws the challenge flag on a play that can't be challenged — including scoring plays, turnovers, when the team is out of challenges or timeouts, and inside the final two minutes of a half or game, or in overtime.

___

Online: http://pro32.ap.org/poll and http://twitter.com/AP_NFL

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Scientists See Advances in Deep Learning, a Part of Artificial Intelligence

Hao Zhang/The New York Times

A voice recognition program translated a speech given by Richard F. Rashid, Microsoft’s top scientist, into Mandarin Chinese.

Using an artificial intelligence technique inspired by theories about how the brain recognizes patterns, technology companies are reporting startling gains in fields as diverse as computer vision, speech recognition and the identification of promising new molecules for designing drugs.

The advances have led to widespread enthusiasm among researchers who design software to perform human activities like seeing, listening and thinking. They offer the promise of machines that converse with humans and perform tasks like driving cars and working in factories, raising the specter of automated robots that could replace human workers.

The technology, called deep learning, has already been put to use in services like Apple’s Siri virtual personal assistant, which is based on Nuance Communications’ speech recognition service, and in Google’s Street View, which uses machine vision to identify specific addresses.

But what is new in recent months is the growing speed and accuracy of deep-learning programs, often called artificial neural networks or just “neural nets” for their resemblance to the neural connections in the brain.

“There has been a number of stunning new results with deep-learning methods,” said Yann LeCun, a computer scientist at New York University who did pioneering research in handwriting recognition at Bell Laboratories. “The kind of jump we are seeing in the accuracy of these systems is very rare indeed.”

Artificial intelligence researchers are acutely aware of the dangers of being overly optimistic. Their field has long been plagued by outbursts of misplaced enthusiasm followed by equally striking declines.

In the 1960s, some computer scientists believed that a workable artificial intelligence system was just 10 years away. In the 1980s, a wave of commercial start-ups collapsed, leading to what some people called the “A.I. winter.”

But recent achievements have impressed a wide spectrum of computer experts. In October, for example, a team of graduate students studying with the University of Toronto computer scientist Geoffrey E. Hinton won the top prize in a contest sponsored by Merck to design software to help find molecules that might lead to new drugs.

From a data set describing the chemical structure of 15 different molecules, they used deep-learning software to determine which molecule was most likely to be an effective drug agent.

The achievement was particularly impressive because the team decided to enter the contest at the last minute and designed its software with no specific knowledge about how the molecules bind to their targets. The students were also working with a relatively small set of data; neural nets typically perform well only with very large ones.

“This is a really breathtaking result because it is the first time that deep learning won, and more significantly it won on a data set that it wouldn’t have been expected to win at,” said Anthony Goldbloom, chief executive and founder of Kaggle, a company that organizes data science competitions, including the Merck contest.

Advances in pattern recognition hold implications not just for drug development but for an array of applications, including marketing and law enforcement. With greater accuracy, for example, marketers can comb large databases of consumer behavior to get more precise information on buying habits. And improvements in facial recognition are likely to make surveillance technology cheaper and more commonplace.

Artificial neural networks, an idea going back to the 1950s, seek to mimic the way the brain absorbs information and learns from it. In recent decades, Dr. Hinton, 64 (a great-great-grandson of the 19th-century mathematician George Boole, whose work in logic is the foundation for modern digital computers), has pioneered powerful new techniques for helping the artificial networks recognize patterns.

Modern artificial neural networks are composed of an array of software components, divided into inputs, hidden layers and outputs. The arrays can be “trained” by repeated exposures to recognize patterns like images or sounds.

These techniques, aided by the growing speed and power of modern computers, have led to rapid improvements in speech recognition, drug discovery and computer vision.

Deep-learning systems have recently outperformed humans in certain limited recognition tests.

Last year, for example, a program created by scientists at the Swiss A. I. Lab at the University of Lugano won a pattern recognition contest by outperforming both competing software systems and a human expert in identifying images in a database of German traffic signs.

The winning program accurately identified 99.46 percent of the images in a set of 50,000; the top score in a group of 32 human participants was 99.22 percent, and the average for the humans was 98.84 percent.

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Military Analysis: For Israel, Gaza Conflict Is Test for an Iran Confrontation

Menahem Kahana/Agence France-Presse — Getty Images

An Israeli missile is launched from a battery. Officials said their antimissile system shot down 88 percent of all assigned targets.

WASHINGTON — The conflict that ended, for now, in a cease-fire between Hamas and Israel seemed like the latest episode in a periodic showdown. But there was a second, strategic agenda unfolding, according to American and Israeli officials: The exchange was something of a practice run for any future armed confrontation with Iran, featuring improved rockets that can reach Jerusalem and new antimissile systems to counter them.

It is Iran, of course, that most preoccupies Prime Minister Benjamin Netanyahu and President Obama. While disagreeing on tactics, both have made it clear that time is short, probably measured in months, to resolve the standoff over Iran’s nuclear program.

And one key to their war-gaming has been cutting off Iran’s ability to slip next-generation missiles into the Gaza Strip or Lebanon, where they could be launched by Iran’s surrogates, Hamas, Hezbollah and Islamic Jihad, during any crisis over sanctions or an Israeli strike on Iran’s nuclear facilities.

Michael B. Oren, the Israeli ambassador to the United States and a military historian, likened the insertion of Iranian missiles into Gaza to the Cuban missile crisis.

“In the Cuban missile crisis, the U.S. was not confronting Cuba, but rather the Soviet Union,” Mr. Oren said Wednesday, as the cease-fire was declared. “In Operation Pillar of Defense,” the name the Israel Defense Force gave the Gaza operation, “Israel was not confronting Gaza, but Iran.”

It is an imprecise analogy. What the Soviet Union was slipping into Cuba 50 years ago was a nuclear arsenal. In Gaza, the rockets and parts that came from Iran were conventional, and, as the Israelis learned, still have significant accuracy problems. But from one point of view, Israel was using the Gaza battle to learn the capabilities of Hamas and Islamic Jihad — the group that has the closest ties to Iran — as well as to disrupt those links.

Indeed, the first strike in the eight-day conflict between Hamas and Israel arguably took place nearly a month before the fighting began — in Khartoum, the capital of Sudan, as another mysterious explosion in the shadow war with Iran.

A factory said to be producing light arms blew up in spectacular fashion on Oct. 22, and within two days the Sudanese charged that it had been hit by four Israeli warplanes that easily penetrated the country’s airspace. Israelis will not talk about it. But Israeli and American officials maintain that Sudan has long been a prime transit point for smuggling Iranian Fajr rockets, the kind that Hamas launched against Tel Aviv and Jerusalem over recent days.

The missile defense campaign that ensued over Israeli territory is being described as the most intense yet in real combat anywhere — and as having the potential to change warfare in the same way that novel applications of air power in the Spanish Civil War shaped combat in the skies ever since.

Of course, a conflict with Iran, if a last-ditch effort to restart negotiations fails, would look different than what has just occurred. Just weeks before the outbreak in Gaza, the United States and European and Persian Gulf Arab allies were practicing at sea, working on clearing mines that might be dropped in shipping lanes in the Strait of Hormuz.

But in the Israeli and American contingency planning, Israel would face three tiers of threat in a conflict with Iran: the short-range missiles that have been lobbed in this campaign, medium-range rockets fielded by Hezbollah in Lebanon and long-range missiles from Iran.

The last of those three could include the Shahab-3, the missile Israeli and American intelligence believe could someday be fitted with a nuclear weapon if Iran ever succeeded in developing one and — the harder task — shrinking it to fit a warhead.

A United States Army air defense officer said that the American and Israeli militaries were “absolutely learning a lot” from this campaign that may contribute to a more effective “integration of all those tiered systems into a layered approach.”

The goal, and the challenge, is to link short-, medium- and long-range missile defense radar systems and interceptors against the different types of threats that may emerge in the next conflict.

Even so, a historic battle of missile versus missile defense has played out in the skies over Israel, with Israeli officials saying their Iron Dome system shot down 350 incoming rockets — 88 percent of all targets assigned to the missile defense interceptors. Israeli officials declined to specify the number of interceptors on hand to reload their missile-defense batteries.

Before the conflict began, Hamas was estimated to have amassed an arsenal of 10,000 to 12,000 rockets. Israeli officials say their pre-emptive strikes on Hamas rocket depots severely reduced the arsenal of missiles, both those provided by Iran and some built in Gaza on a Syrian design.

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Texans top Lions 34-31 in OT after coach's mistake

DETROIT (AP) — Justin Forsett scooted up the middle and lunged forward while a couple of Detroit defenders closed in to stop him. His knee hit the ground, but the Houston running back hopped up quickly and took off toward the end zone.

"I know now that I was down, but I didn't think I was during the play," Forsett said. "I didn't think my knee hit, and there was no whistle, so I kept going."

Forsett had nothing to lose by getting up and running — and unbelievably, the 81-yard scoring play stood. The officials missed the call, giving the Texans a touchdown, and Detroit coach Jim Schwartz inadvertently wiped out any chance of a replay review by throwing his challenge flag when he wasn't allowed to.

That was all Houston needed to start a second-half comeback, and the Texans went on to beat the Lions 34-31 in overtime Thursday.

"Sometimes it's better to be lucky than good," running back Arian Foster said.

AFC South-leading Houston (10-1) has won five straight — two in a row in OT — and if a handful of teams lose, the Texans could be in the playoffs by the end of this weekend.

The Lions led 24-14 in the third quarter when Forsett scored on his long run. Replays clearly showed Forsett's knee touching the ground around his own 25 — Detroit players even slowed up, assuming the play was over.

Forsett got up and ran all the way to the end zone.

Scoring plays are reviewed automatically — but if a coach throws a challenge flag like Schwartz did, the review is negated and an unsportsmanlike conduct penalty is assessed. So the touchdown stood despite obvious evidence it shouldn't have.

Detroit (4-7) still led 24-21 after Forsett's touchdown, and the Lions went up 31-24 on Joique Bell's 23-yard TD run with 13:31 left in the fourth.

Houston rallied, tying it at 31 on Foster's 1-yard run with 1:55 to play. That touchdown capped a 15-play, 97-yard drive that included a conversion on fourth-and-7.

"Had our opportunities to win it multiple times. Both teams did," Lions quarterback Matthew Stafford said. "It was a great football game. Didn't catch many breaks and couldn't capitalize on a couple we needed to."

Texans kicker Shayne Graham missed from 51 yards in overtime, and Detroit's Jason Hanson hit the right upright from 47. Graham finally connected from 32 to win it.

Detroit extended its losing streak in its annual Thanksgiving showcase to nine.

Hanson's miss came on third down after the Lions had lost 3 yards on a second-down run. The Lions sent the veteran kicker onto the field instead of trying to move the ball a bit closer.

"We didn't want to give up a negative play, and they'd been trying really hard to strip the ball, so we didn't want to risk a turnover," Schwartz said.

The Lions were hoping a three-game homestand would help revive their playoff hopes, but they lost against Green Bay last weekend and couldn't hold on against the Texans.

If the Lions didn't have enough problems, defensive tackle Ndamukong Suh could be in trouble with the league again after his left cleat connected with Houston quarterback Matt Schaub's groin area in the first quarter.

"I really don't have anything to say about that play or that person," Schaub said.

Suh was on his chest, taken down by an offensive lineman, when he extended his left foot below Schaub's belt.

It wasn't clear on replays whether the kick was intentional. Suh didn't stick around talk to reporters after the game.

Last year on Thanksgiving, Suh was ejected for stomping on the right arm of Green Bay offensive lineman Evan Dietrich-Smith and was suspended for two games. He has been fined in previous seasons for roughing up quarterbacks: Cincinnati's Andy Dalton, Chicago's Jay Cutler and Cleveland's Jake Delhomme.

Schaub stayed in the game, and was 29 of 48 for 315 yards with a 9-yard TD to Owen Daniels that tied it at 14 late in the first half. He also threw an interception.

Houston's Andre Johnson had nine receptions for 188 yards.

Stafford was 31 of 61 for 441 yards with two TDs — tiebreaking scores to Calvin Johnson and Mike Thomas in the second quarter. It wasn't enough.

"We got what we deserved," Stafford said. "We didn't capitalize on our chances."

NOTES: Lions OT Jeff Backus (right hamstring) was inactive, ending his 186-game starting streak. ... Houston LB Brooks Reed (left groin) and OT Derek Newton (knee) were injured during the game.

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Recipes for Health: Pear Clafoutis — Recipes for Health

Andrew Scrivani for The New York Times NYTCREDIT:

If you don’t want to make a crust but want something tartlike for your Thanksgiving dessert, a clafoutis, which is something like a cross between a flan and a pancake, is a great choice. It’s a very easy dessert, yet it’s always impressive.

2 tablespoons pear eau-de-vie or liqueur (optional)

2 tablespoons mild-flavored honey, like clover

2 pounds ripe but firm pears, like Bartlett or Comice

3 large eggs

1 vanilla bean, scraped

1/3 cup sugar

2/3 cup sifted unbleached white flour

1/2 cup plain yogurt

1/2 cup milk

pinch of salt

1. Combine the pear eau-de-vie and the honey in a bowl. Peel, core and slice the pears and toss with the mixture. Let sit for 30 minutes.

2. Preheat the oven to 375 degrees. Butter a 10-inch ceramic tart pan or baking dish.

3. In the bowl of an electric mixer or with a whisk, beat together the eggs, the seeds from the vanilla bean and the sugar. Pour off the marinade from the pears and add to the egg mixture. Gradually beat in the flour, then beat in the yogurt, milk and salt.

4. Arrange the pears in the baking dish. Pour on the batter. Place in the oven and bake 40 to 50 minutes, until the top is beginning to brown. Serve hot or warm.

Yield: 8 servings.

Advance preparation: Although this is best served warm, you can allow it to cool completely and serve it at room temperature. It will hold for several hours out of the refrigerator. Leftovers make a nice breakfast treat.

Nutritional information per serving: 195 calories; 2 grams fat; 1 gram saturated fat; 0 grams polyunsaturated fat; 1 gram monounsaturated fat; 71 milligrams cholesterol; 40 grams carbohydrates; 4 grams dietary fiber; 47 milligrams sodium; 5 grams protein

Martha Rose Shulman is the author of “The Very Best of Recipes for Health.”

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News Analysis: Case Casts a Shadow on a Hedge Fund Mogul

In 2010, the billionaire hedge fund manager Steven A. Cohen gave a rare interview to Vanity Fair. He said that he wanted to combat persistent rumors that his firm, SAC Capital Advisors, routinely violated securities laws by trading on confidential information.

“In some respects I feel like Don Quixote fighting windmills,” Mr. Cohen said at the time. “There’s a perception, and I’m trying to fight that perception.”

Federal prosecutors only heightened that perception on Tuesday, bringing a criminal case against a former SAC employee in what Preet Bharara, the United States attorney in Manhattan, who brought the charges in Federal District Court in Manhattan, called the most lucrative insider trading scheme ever charged.

And for the first time, the evidence suggests that Mr. Cohen participated in trades that the government says illegally used insider information — though prosecutors have not said that Mr. Cohen himself knew the information was confidential, and he has not been charged.

Any prosecution of Mr. Cohen would most likely hinge on the cooperation of Mathew Martoma, the former SAC employee charged in the case. Mr. Bharara said in the charges that Mr. Martoma obtained secret data from a doctor about clinical trials for an Alzheimer’s drug being developed by the companies Elan and Wyeth. The information enabled SAC to avoid losses of almost $194 million on the stocks, which it sold and then bet against, reaping $83 million in profit — a total benefit to the firm of more than $276 million. SAC executed the trades shortly after Mr. Martoma e-mailed Mr. Cohen and said he needed to discuss something important.

As to Mr. Cohen’s potential culpability in the case, the crucial issue is what Mr. Martoma told Mr. Cohen that led SAC to quickly dump $700 million worth of stock. Did he provide his boss details on why he had turned sour on Wyeth and Elan? Specifically, did he share the leak about the drug trial’s negative results and identify the source of the secret information? Through a spokesman, he said he was confident he had acted appropriately.

It appears, for now, that Mr. Martoma will fight the charges. But the crucial question, as it relates to Mr. Cohen, is whether at some point Mr. Martoma will reverse course, admit to insider trading and agree to help the government build a case against his former boss. Without Mr. Martoma’s cooperation, it is unlikely that the prosecutors have enough evidence to charge Mr. Cohen.

“This has all the markings of a case where the government goes after the smaller fish and then pressures them to flip so they can get the whale,” said Bradley D. Simon, a criminal defense lawyer and former federal prosecutor in New York.

The government has several weapons for its effort to persuade Mr. Martoma to agree to a plea, including the stiff sentences for insider trading. Under the federal sentencing guidelines, Mr. Martoma could receive more than 15 years in prison, a term that could be reduced — or avoided altogether — if he agreed to testify against Mr. Cohen.

F.B.I. agents arrested Mr. Martoma, 38, early Tuesday morning at his home in Boca Raton, Fla., a nearly 8,000-square-foot Mediterranean-style mansion on the grounds of the elite Royal Palm Yacht and Country Club. He lives there with his wife, a pediatrician, and three children. A graduate of Duke University and Stanford University’s business school, Mr. Martoma is expected to make an appearance in Federal District Court in Manhattan Monday morning.

Described by a former colleague as low-key and cerebral, Mr. Martoma is one of scores of traders who have earned millions of dollars working under Mr. Cohen and feeding him their best investment ideas. He joined SAC in 2006. In 2008, the year he participated in the alleged illegal trade, the firm paid Mr. Martoma a $9.3 million bonus. But SAC fired him in 2010 after two years of subpar performance.

Charles A. Stillman, a lawyer for Mr. Martoma, said on the day of his arrest, “What happened today is only the beginning of a process that we are confident will lead to Mr. Martoma’s full exoneration.”

It is no secret that the government has been circling Mr. Cohen since the middle of last decade, when it began its crackdown on insider trading, an investigation that has resulted in more than 70 criminal charges. Prosecutors have already linked five former SAC employees to insider trading while at the fund — securing three convictions — though none of those cases connected Mr. Cohen to any illicit activity. But the complaint filed on Tuesday puts Mr. Cohen at the center of the supposed improper conduct.

Mr. Cohen, 56, is a legend on Wall Street, having amassed a multibillion-dollar fortune by posting phenomenal investment returns averaging about 30 percent over the last two decades. Starting with a $25 million grubstake, SAC now manages about $13 billion and has 900 employees across the globe. Mr. Cohen has also emerged as a major force in the art world, owning an eclectic collection that includes works by Picasso, Warhol and Cézanne.

Prosecutors have constructed their case against Mr. Martoma, and increased the pressure on him, by securing the cooperation of Dr. Sidney Gilman, the doctor who supposedly leaked to him the Alzheimer’s drug’s trial data. The case against Mr. Martoma will depend largely on Dr. Gilman’s credibility as a witness.

Dr. Gilman, 80, a neurologist at the University of Michigan medical school, was hired by Elan and Wyeth to monitor the trial’s safety, which gave him access to secret information about the results. SAC retained Dr. Gilman as a consultant and paid him about $108,000.

At first, Dr. Gilman’s reports on the trial’s progress were positive, and SAC built a position in the two drug makers worth approximately $700 million, according to prosecutors. But then, on July 17, 2008, Dr. Gilman told Mr. Martoma that there were problems with the drug, the government said.

A few days later, Mr. Martoma e-mailed Mr. Cohen that he needed to discuss something “important,” and the two then spoke for 20 minutes, according to court filings. Over the next four days, at Mr. Cohen’s direction, SAC Capital jettisoned its entire position in the two stocks and then placed a big negative bet on the drug makers, the government said.

On July 30, after disclosure of the poor trial results, shares of Elan and Wyeth sank. According to the prosecutors’ calculations, SAC would have lost about $194 million had it kept the stock; taking a short position instead generated profits of about $83 million.

Dr. Gilman and the Justice Department have entered into a nonprosecution agreement under which he will cooperate in exchange for not being criminally charged.

Thus far, any potential evidence against Mr. Cohen is entirely circumstantial. The government’s complaint includes e-mails about secretly selling the Elan and Wyeth shares through esoteric methods like algorithms and dark pools. But that is common practice among large, sophisticated funds that do not want to alert competitors or move the stock too much. Moreover, while SAC dumped its large positions in the two stocks quickly — raising the question of what prompted it to do so — Mr. Cohen is known for a rapid-fire trading style. He frequently moves aggressively in and out of stocks while processing gobs of information fed to him by his underlings.

It would be difficult for a jury to infer anything incriminating just from the way these trades were executed.

The government in this case also lacks the powerful wiretap evidence that it has used to convict dozens others, including Raj Rajaratnam, the head of the Galleon Group. Federal agents did wiretap Mr. Cohen’s home telephone for a short period in 2008, according to a person with direct knowledge of the investigation who spoke only on the condition of anonymity. But it is unclear whether the eavesdropping, which was first reported by The Wall Street Journal, yielded any fruit.

Even without incriminating wiretap evidence, the government has brought cases that rely almost entirely on witnesses testifying against their bosses.

One of those cases is now under way in federal court in Manhattan. Prosecutors are currently trying the former hedge fund portfolio managers Anthony Chiasson of Level Global Investors and Todd Newman of Diamondback Capital Management. Prosecutors say that the two were part of a conspiracy that made about $68 million illegally trading technology stocks.

The outcome of that trial is expected to depend largely on whether the jury believes the testimony of two cooperating witnesses who admitted to the conspiracy — Spyridon Adondakis and Jesse Tortora, former junior analysts at Level Global and Diamondback. The two say they shared secret information with the defendants. Defense lawyers have attacked the witnesses’ credibility, accusing them of lying to avoid prison.

That case, too, has strong ties to SAC. Mr. Chiasson and his co-founder were star traders under Mr. Cohen before starting the now-defunct Level Global. And the owners of Diamondback are both former SAC employees; one is Mr. Cohen’s brother-in-law, Richard Schimel. Diamondback, which continues to operate, has not been accused of wrongdoing.

“SAC’s extraordinary profits have always been something of a market mystery,” said Sebastian Mallaby, the author of “More Money Than God,” a book on the history of hedge funds. “As more and more lawsuits implicate former SAC traders, we may at last understand where SAC’s profits came from.”

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Egypt Leader and Obama Forge Link in Gaza Deal

Lefteris Pitarakis/Associated Press

Israelis in the town of Sderot watched a Palestinian missile on Wednesday, before a cease-fire.

WASHINGTON — President Obama skipped dessert at a long summit meeting dinner in Cambodia on Monday to rush back to his hotel suite. It was after 11:30 p.m., and his mind was on rockets in Gaza rather than Asian diplomacy. He picked up the telephone to call the Egyptian leader who is the new wild card in his Middle East calculations.

Over the course of the next 25 minutes, he and President Mohamed Morsi of Egypt hashed through ways to end the latest eruption of violence, a conversation that would lead Mr. Obama to send Secretary of State Hillary Rodham Clinton to the region. As he and Mr. Morsi talked, Mr. Obama felt they were making a connection. Three hours later, at 2:30 in the morning, they talked again.

The cease-fire brokered between Israel and Hamas on Wednesday was the official unveiling of this unlikely new geopolitical partnership, one with bracing potential if not a fair measure of risk for both men. After a rocky start to their relationship, Mr. Obama has decided to invest heavily in the leader whose election caused concern because of his ties to the Muslim Brotherhood, seeing in him an intermediary who might help make progress in the Middle East beyond the current crisis in Gaza.

The White House phone log tells part of the tale. Mr. Obama talked with Mr. Morsi three times within 24 hours and six times over the course of several days, an unusual amount of one-on-one time for a president. Mr. Obama told aides he was impressed with the Egyptian leader’s pragmatic confidence. He sensed an engineer’s precision with surprisingly little ideology. Most important, Mr. Obama told aides that he considered Mr. Morsi a straight shooter who delivered on what he promised and did not promise what he could not deliver.

“The thing that appealed to the president was how practical the conversations were — here’s the state of play, here are the issues we’re concerned about,” said a senior administration official who spoke on the condition of anonymity to discuss private conversations. “This was somebody focused on solving problems.”

The Egyptian side was also positive about the collaboration. Essam el-Haddad, the foreign policy adviser to the Egyptian president, described a singular partnership developing between Mr. Morsi, who is the most important international ally for Hamas, and Mr. Obama, who plays essentially the same role for Israel.

“Yes, they were carrying the point of view of the Israeli side but they were understanding also the other side, the Palestinian side,” Mr. Haddad said in Cairo as the cease-fire was being finalized on Wednesday. “We felt there was a high level of sincerity in trying to find a solution. The sincerity and understanding was very helpful.”

The fledgling partnership forged in the fires of the past week may be ephemeral, a unique moment of cooperation born out of necessity and driven by national interests that happened to coincide rather than any deeper meeting of the minds. Some longtime students of the Middle East cautioned against overestimating its meaning, recalling that Mr. Morsi’s Muslim Brotherhood constitutes a philosophical brother of Hamas even if it has renounced violence itself and become the governing party in Cairo.

“I would caution the president from believing that President Morsi has in any way distanced himself from his ideological roots,” said Robert Satloff, executive director of the Washington Institute for Near East Policy. “But if the president takes away the lesson that we can affect Egypt’s behavior through the artful use of leverage, that’s a good lesson. You can shape his behavior. You can’t change his ideology.”

Other veterans of Middle East policy agreed with the skepticism yet saw the seeds of what might eventually lead to broader agreement.

“It really is something with the potential to establish a new basis for diplomacy in the region,” said Tamara Cofman Wittes, who was Mr. Obama’s deputy assistant secretary of state for the Middle East until earlier this year and now runs the Saban Center for Middle East Policy at the Brookings Institution. “It’s just potential, but it’s particularly impressive potential.”

The relationship between the two leaders has come a long way in just 10 weeks. Mr. Morsi’s election in June as the first Islamist president of Egypt set nerves in Washington on edge and raised questions about the future of Egypt’s three-decade-old peace treaty with Israel. Matters worsened in September when Egyptian radicals protesting an anti-Islam video stormed the United States Embassy in Cairo.

Peter Baker reported from Washington, and David D. Kirkpatrick from Cairo.

This article has been revised to reflect the following correction:

Correction: November 21, 2012

An earlier version of this article misstated the given name of the director of the Saban Center for Middle East Policy at the Brookings Institution. She is Tamara Cofman Wittes, not Teresa.

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Thunder edge Clippers 117-111 in overtime

OKLAHOMA CITY (AP) — Kendrick Perkins challenged his Oklahoma City Thunder teammates before a showdown of division leaders with the Los Angeles Clippers on Wednesday night.

The Thunder had lost their first two games this season against other top teams in the Western Conference, and Perkins wanted that trend to stop immediately.

It wasn't easy, but Oklahoma City got the job done.

Kevin Durant scored 35 points, Russell Westbrook added 23 and Oklahoma City's All-Star tandem scored all of the Thunder's points in overtime in a 117-111 victory over the Clippers.

"It felt good to finally get one of those wins, and we can move on now," Durant said.

Westbrook connected on a 3-pointer from the left wing to open the scoring in overtime, and Durant rattled one in from about the same spot two possessions later for a 108-104 advantage.

Westbrook then answered DeAndre Jordan's three-point play with a baseline jumper, and Oklahoma City was able to close it out from the foul line.

"This is a good win for us, especially against a team like that, that had some success lately," said Thabo Sefolosha, who hounded Clippers All-Star Chris Paul much of the game.

Blake Griffin led Los Angeles with 23 points and Jamal Crawford scored 20 for the Clippers, who had a six-game winning streak snapped after entering the game tied for the best record in the West.

After trailing for the previous 44 minutes, the Clippers finally pulled even at 102 when Matt Barnes drove for a layup with 36 seconds left in regulation. Griffin denied Durant the ball on the Thunder's ensuing possession, and Westbrook came up empty on a drive to the basket.

Paul then dribbled out the rest of the clock before missing a turnaround jumper from the left elbow as the horn sounded.

"I think the frustrating part is we had an opportunity to win and, regardless of what anybody says, it's going to be hard for us to win a game when I play that bad," said Paul, who missed 12 of 14 shots and ended up with nine points and nine assists.

"It's tough because you work so hard but there's going to be nights like that."

Los Angeles had been tied with Memphis for the West's best record at the start of the day but dropped behind Oklahoma City and San Antonio with the loss. The Clippers were trying to win at least seven games in a row for only the sixth time in franchise history, and the first time since 1991.

"We fought the whole game and Chris got a great look. We're going to live and die on that shot," Jordan said. "We fought but we definitely made some mistakes tonight. They made more plays than we did down the stretch."

Matt Barnes scored 19 points while replacing starting forward Caron Butler in the Clippers' lineup. Butler missed the game with a strained right shoulder sustained Monday night in a win at San Antonio.

Kevin Martin scored 20 points and Serge Ibaka chipped in 15 points and 12 rebounds for Oklahoma City before fouling out in overtime. Hasheem Thabeet also matched his career high with 10 points off the bench.

The Clippers won three out of four against Oklahoma City in a sometimes testy series last season that included Griffin's memorable throwdown over Perkins in a Clippers win and Perkins' retaliation with a hard foul to Griffin's face as Oklahoma City won the rematch.

Barnes had a couple scuffles with Ibaka and Perkins but nothing quite as noteworthy.

The Clippers ended up with a 54-38 edge scoring in the paint and a 28-10 advantage in second-chance points. Oklahoma City made up for it by making 34 of 39 free throws, while L.A. was 24 for 33.

Durant was 19 for 21 at the line, with coach Vinny Del Negro telling official Kevin Fehr after one call: "He doesn't need any help scoring."

"Those guys are physical and (I was) just trying to fight through it. Just trying to get there, man," Durant said. "I think early on, me driving and me getting into the paint, I was a little hesitant in the second half because I was turning the ball over.

"But I just tried to keep going. My teammates told me to just keep being aggressive, and that's what I tried to do."

The Thunder pushed ahead with a string of eight straight made baskets in the first quarter, and the lead stretched to 26-16 after Westbrook's extra effort turned a potential turnover into a three-point play for Thabeet.

The Clippers finally got back within striking distance early in the fourth, with Thunder coach Scott Brooks yelling to Durant to get off the bench with Los Angeles back within 78-75.

With Durant back in, Oklahoma City responded with the next six points to stabilize momentarily before the Clippers' final charge.

Notes: Los Angeles has held eight straight opponents below 46 percent shooting. The Thunder were just shy at 45.6 percent. ... Crawford made all four of his free throws, stretching his streak of consecutive makes to 29. He made 37 in a row in April. ... Jordan, one of the NBA's worst foul shooters at 42 percent, got Oklahoma City to stop hacking him intentionally in the fourth quarter by making three of four.

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