New Pakistan outreach could aid Afghan peace deal

ISLAMABAD (AP) — Pakistan has increased efforts to reach out to some of its biggest enemies in Afghanistan, a significant policy shift that could prove crucial to U.S.-backed efforts to strike a peace deal in the neighboring country.

The target of the diplomatic push has mainly been non-Pashtun political leaders who have been at odds with Pakistan for years because of the country's historical support for the Afghan Taliban, a Pashtun movement.

Many of the leaders fought against the Taliban when the fundamentalist Islamic group seized control of Afghanistan in the 1990s with Pakistan's help, and have accused Islamabad of maintaining support for the insurgents following the U.S.-led invasion in 2001 — allegations denied by the government.

Many experts agree that Pakistan continues to see the Taliban as an ally, albeit a shaky one, in countering the influence of archenemy India in Afghanistan. But they also say Islamabad no longer believes the insurgents can take over the country or wants them to, a common misperception in the West.

"A Taliban victory on the other side of the border would give a huge boost to domestic militants fighting the Pakistani state," said Zahid Hussain, a journalist who has written extensively about Islamabad's war against the Pakistani Taliban.

Pakistan is also worried that unrest in Afghanistan following the withdrawal of most foreign troops in 2014 could provide the Pakistani Taliban with greater space to establish sanctuaries across the border.

The Afghan and Pakistani Taliban are allies but have focused on different enemies. The Afghan Taliban have battled local and foreign forces in Afghanistan, while the Pakistani Taliban have mainly waged war against Islamabad.

Pakistan's concerns have led it to conclude that a peace agreement that includes all Afghan groups is in its best interests, and contact with its traditional foes among the non-Pashtuns is necessary to achieve that goal, said Moeed Yusuf, South Asia adviser for the United States Institute of Peace.

"I think the fundamental point here is that there is a serious realization among some people who matter in Pakistan that they can't continue to put all their eggs in the Taliban basket because it is too shaky," said Yusuf. "This is a major shift, and a shift that I think everybody should welcome."

The outreach comes as Pakistan, Afghanistan and the U.S. have stepped up efforts to breathe new life into the Taliban peace process, which has been hamstrung by distrust among all the parties involved.

The U.S. and Pakistan recently set up working groups to identify which Taliban leaders would be open to reconciliation and to ensure those holed up on Pakistani territory would be able to travel to the site of talks. Pakistan and Afghanistan have been in discussions to revive a joint commission set up to discuss the peace process.

Pakistan is seen as key to a peace deal because of its ties with the Taliban, and there is hope that Islamabad's increased engagement with non-Pashtuns in Afghanistan will facilitate the process.

"I think one of Pakistan's realizations is that if you want to play a bigger role to reconcile all these groups, you need to reach out to every group," said Rahimullah Yousufzai, a Pakistani journalist and expert on the Taliban. "They will be pushing the Taliban to share power with all these people, but it won't be easy because the Taliban aren't known to share power and the U.S. doesn't want to give them a major share."

Islamabad's historical support for the Taliban and other Pashtuns in Afghanistan, who make up about 40 percent of the population of 30 million, is partly rooted in the sizable number of Pashtuns who live in Pakistan. The ethnic group has always been seen as the best bet for furthering Pakistan's interests in the country.

Pakistan first advertised its overtures to non-Pashtuns in Afghanistan in February when Foreign Minister Hina Rabbani Khar met with a range of ethnic Tajik, Uzbek and Hazara leaders during a visit to Kabul. Prime Minister Raja Pervaiz Ashraf followed suit in July when he traveled to Afghanistan and invited the group to the opening of the new Pakistani Embassy in Kabul.

There have also been less publicized contacts by Pakistan's ambassador to Kabul, Mohammad Sadiq, and the country's army and intelligence service, according to Pakistani and Afghan officials.

Khar said the policy shift had been in the works for a while but was like a steering a large ship in a new direction.

"You're not able to do it immediately," said the foreign minister.

Pakistan's powerful army is the true arbiter of the country's Afghan policy, but experts expressed doubt that the Foreign Ministry would have pushed ahead without the support of the generals, who have historically had the closest relationship to the Taliban.

One key Afghan leader who has met with the Pakistanis, Abdullah Abdullah, said he appreciated the country's recent attempt to reach out because it was done publicly. The influential politician, who was runner-up to Afghan President Hamid Karzai in the 2009 election, said Pakistani intelligence officials contacted him in previous years, but he refused to speak with them because he did not believe communication should be carried out in secret.

"I see a lot of good in reaching out, in engagement, in dialogue," said Abdullah, who is half Pashtun but draws much of his support from the Tajik community.

The outreach has rattled the Taliban, who have warned Pakistani officials that they can't trust the non-Pashtuns, Yousufzai said.

Pakistan will have to overcome significant distrust among the non-Pashtuns. The government has old ties to some of the leaders, who worked with Pakistan in the 1980s to push the Soviets out of Afghanistan, but Islamabad's subsequent support for the Taliban created a huge amount of bad blood.

Despite that, the Pakistanis are hopeful.

"The Pakistani side's view of Afghan negotiations is that you kill on one day and kiss on the next, so while this will be very tough, they think that it's not entirely out of the realm of possibility that they may actually get somewhere," said Yusuf, the South Asia analyst.

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Vogt reported from Kabul, Afghanistan.

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Star Silicon Valley analyst felled by Facebook IPO fallout

SAN FRANCISCO (Reuters) - The firing of Citigroup stock analyst Mark Mahaney on Friday in the regulatory fallout from Facebook Inc's initial public offering was greeted with shock and dismay in Silicon Valley, where Mahaney was a well-known and well-liked figure.

"Pretty shocked," was the reaction of Jacob Funds Chief Executive Ryan Jacob, who described Mahaney as one of the most respected financial analysts covering the Internet industry.

"I'd put him at the top. If not at the top, then near the top," said Jacob. "He really knew what to look for."

In addition to firing Mahaney, Citigroup paid a $2 million fine to Massachusetts regulators to settle charges that the bank improperly disclosed research on Facebook ahead of its $16 billion IPO in May.

The settlement agreement said Mahaney failed to supervise a junior analyst who improperly shared Facebook research with the TechCrunch news website. (Settlement agreement: http://r.reuters.com/pyj63t)

The settlement agreement also outlined an incident in which Mahaney failed to get approval before responding to a journalist's questions about Google Inc -- and told a Citigroup compliance staffer that the conversation had not occurred -- even after being warned about unauthorized conversations with the media.

Mahaney declined to comment.

Mahaney got his start in the late 1990s, during the first dot-com boom where he worked at Morgan Stanley for Mary Meeker, one of the star analysts of the time. He went on to work at hedge fund Galleon Group before moving to Citigroup in 2005. Unlike most of his New York-based peers in the analyst world, Mahaney worked in San Francisco's financial district, close to the companies and personalities at the heart of the tech industry.

Earlier this month, Mahaney was named the top Internet analyst for the fifth straight year by Institutional Investor. The review cited fans of Mahaney who praised a "systematic" investment approach that allows him to avoid the "waffling" often evidenced by other analysts.

Mahaney's Buy rating on IAC/InteractiveCorp in April 2011, when the stock traded at $33.32, allowed investors to lock in a 51 percent gain before he downgraded the stock to a Hold at $50.31 a few months later, according to Institutional Investor.

But it wasn't only his stock picks that put him in good stead. He earned kudos for simply being a nice guy.

"He's a kind and thoughtful person and that's evident in the way he deals with people," said Jason Jones of Internet investment firm HighStep Capital. "He's very well liked on Wall Street because of that."

A CAUTIOUS VIEW ON FACEBOOK

Mahaney was only indirectly involved in the incident involving the Facebook research, according to the settlement agreement by Massachusetts regulators released on Friday. But the actions of the junior analyst who worked for him provide an unusual glimpse into the type of behind-the-scenes information trading that regulators are attempting to rein in.

While the Massachusetts regulators did not identify any of the individuals by name, Reuters has learned that the incident involved TechCrunch reporters Josh Constine and Kim-Mai Cutler as well as Citi junior analyst Eric Jacobs.

Jacobs, Constine and Cutler all did not respond to requests for comments.

In early May, shortly before Facebook's IPO, Jacobs sent an email to Cutler and Constine. Constine attended Stanford University at the same time as Jacobs.

Constine, who studied social networks such as Facebook and Twitter for his 2009 Master's degree in cybersociology at Stanford, had a close friendship with Jacobs, according to the settlement agreement.

"I am ramping up coverage on FB and thought you guys might like to see how the street is thinking about it (and our estimates)," Jacobs wrote in the email. The email included an "outline" that Jacobs said would eventually become the firm's 30-40 page initiation report on Facebook.

He also included a "Facebook One Pager" document, which contained confidential, non-public information that Citigroup obtained in order to help begin covering Facebook after the IPO.

Asked by Constine if the information could be published and attributed to an anonymous source, Jacobs responded that "my boss would eat me alive," the agreement said.

A spokeswoman for AOL Inc, which owns TechCrunch, declined to answer questions on the matter, saying only that "We are looking into the matter and have no comment at this time."

Ironically, Mahaney was one of a small group of analysts at the many banks underwriting Facebook's IPO who had cautious views of the richly valued offering. Mahaney initiated coverage of the company with a neutral rating.

Analysts at the top three underwriters on Facebook's IPO - Morgan Stanley, Goldman Sachs and J.P. Morgan - started the stock with overweight or buy recommendations.

Earlier this year, Reuters reported that Facebook had pre-briefed analysts for its underwriters ahead of its IPO, advising them to reduce their profit and revenue forecasts.

Facebook, whose stock was priced at $38 a share in the IPO, closed Friday's regular session at $21.94 and has traded as low as $17.55.

"There were tens of billions of dollars in losses based on hyping the name, a lack of skeptical information and misunderstanding the company," said Max Wolff, chief economist and senior analyst at research firm GreenCrest Capital.

"It's highly unfortunate and darkly ironic that one of the signature regulatory actions from this IPO so far involves punishing analysts for disseminating cautious information about Facebook," he added.

(Editing by Jonathan Weber, Mary Milliken and Lisa Shumaker)

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FDA: Pharmacy tied to outbreak knew of bacteria

WASHINGTON (AP) — Staffers at a pharmacy linked to the deadly meningitis outbreak documented dozens of cases of mold and bacteria growing in rooms that were supposed to be sterile, according to federal health inspectors.

In a preliminary report on conditions at the pharmacy, the Food and Drug Administration said Friday that even when the contamination at New England Compounding Center exceeded the company's own safety levels, there is no evidence that staffers investigated or corrected the problem. The FDA uncovered some four dozen reports of potential contamination in company records, stretching back to January this year.

The report comes from an FDA inspection of the Framingham, Mass.-based company earlier this month after steroid injections made by the company were tied to an outbreak of fungal meningitis. FDA officials confirmed last week that the black fungus found in the company's vials was the same fungus that has sickened 338 people across the U.S., causing 25 deaths.

The New England Compounding Center's lawyer said Friday the pharmacy "will review this report and will continue our cooperation with the FDA."

Compounding pharmacies like NECC traditionally fill special orders placed by doctors for individual patients, turning out a small number of customized formulas each week. They have traditionally been overseen by state pharmacy boards, though the FDA occasionally steps in when major problems arise. Some pharmacies have grown into much larger businesses in the last 20 years, supplying bulk orders of medicines to hospitals that need a steady supply of drugs on hand.

The FDA report provides new details about NECC's conditions, which were first reported by state officials earlier this week. The drug at the center of the investigation is made without preservative, so it's very important that it be made under highly sterile conditions. Compounding pharmacies prepare their medications in clean rooms, which are supposed to be temperature-controlled and air-filtered to maintain sterility.

But FDA inspectors noted that workers at the pharmacy turned off the clean room's air conditioning every night. FDA regulators said that could interfere with the conditions needed to prevent bacterial growth.

Inspectors also say they found a host of potential contaminants in or around the pharmacy's clean rooms, including green and yellow residues, water droplets and standing water from a leaking boiler.

Additionally, inspectors found "greenish yellow discoloration" inside an autoclave, a piece of equipment used to sterilize vials and stoppers. In another supposedly sterile room inspectors found a "dark, hair-like discoloration" along the wall. Elsewhere FDA staff said that dust from a nearby recycling facility appeared to be drifting into the pharmacy's rooftop air-conditioning system.

The FDA on Friday declined to characterize the severity of the problems at NECC, or to speculate on how they may have led to contamination of the products made by the pharmacy. FDA emphasized that the report is based on "initial observations" and that the agency's investigation is ongoing.

The agency also provided new details about the pharmacy's handling of the steroids it recalled last month. The company recalled three lots of steroids made since May that totaled 17,676 single-dose vials of medicine — roughly equivalent to 20 gallons. The shots are mainly used to treat back pain.

According to the agency's report, the pharmacy began shipping vials from the August lot to customers on Aug. 17. That was nearly two weeks before the pharmacy received test results from an outside laboratory confirming the sterility of the drug. When FDA scientists went back and tested the same lot this month, they found contamination in 50 vials.

Outside experts said the report paints a picture of a dysfunctional operation.

"The entire pharmacy was an incubator of bacteria and fungus," said Sarah Sellers, a former FDA officer who left the agency in 2008 after unsuccessfully pushing it to increase regulation of compounding pharmacies. She now consults for drug manufacturers. "The pharmacy knew this through monitoring results, and chose to do nothing."

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Threat of superstorm launches mass evacuations in coastal areas

SHIP BOTTOM, N.J. (AP) — Forget distinctions like tropical storm or hurricane. Don't get fixated on a particular track. Wherever it hits, the rare behemoth storm inexorably gathering in the eastern U.S. will afflict a third of the country with sheets of rain, high winds and heavy snow, say officials who warned millions in coastal areas to get out of the way.

"We're looking at impact of greater than 50 to 60 million people," said Louis Uccellini, head of environmental prediction for the National Oceanic and Atmospheric Administration.

As Hurricane Sandy barreled north from the Caribbean — where it left nearly five dozen dead — to meet two other powerful winter storms, experts said it didn't matter how strong the storm was when it hit land: The rare hybrid storm that follows will cause havoc over 800 miles from the East Coast to the Great Lakes.

"This is not a coastal threat alone," said Craig Fugate, director of the Federal Emergency Management Agency. "This is a very large area."

President Barack Obama was monitoring the storm and working with state and locals governments to make sure they get the resources needed to prepare, administration officials said.

New Jersey Gov. Chris Christie declared a state of emergency Saturday as hundreds of coastal residents started moving inland and the state was set to close its casinos. New York's governor was considering shutting down the subways to avoid flooding and half a dozen states warned residents to prepare for several days of lost power.

Sandy weakened briefly to a tropical storm early Saturday but was soon back up to Category 1 strength, packing 75 mph winds about 355 miles southeast of Charleston, S.C., as of 8 p.m. Experts said the storm was most likely to hit the southern New Jersey coastline by late Monday or early Tuesday.

Governors from North Carolina, where heavy rain was expected Sunday, to Connecticut declared states of emergency. Delaware ordered mandatory evacuations for coastal communities by 8 p.m. Sunday.

Christie, who was widely criticized for not interrupting a family vacation in Florida while a snowstorm pummeled the state in 2010, broke off campaigning for Republican presidential nominee Mitt Romney in North Carolina on Friday to return home.

"I can be as cynical as anyone," the pugnacious chief executive said in a bit of understatement Saturday. "But when the storm comes, if it's as bad as they're predicting, you're going to wish you weren't as cynical as you otherwise might have been."

The storm forced the presidential campaign to juggle schedules. Romney scrapped plans to campaign Sunday in the swing state of Virginia and switched his schedule for the day to Ohio. First lady Michelle Obama canceled an appearance in New Hampshire for Tuesday, and Obama moved a planned Monday departure for Florida to Sunday night to beat the storm. He canceled appearances in Northern Virginia on Monday and Colorado on Tuesday.

In Ship Bottom, just north of Atlantic City, Alice and Giovanni Stockton-Rossini spent Saturday packing clothing in the backyard of their home, a few hundred yards from the ocean on Long Beach Island. Their neighborhood was under a voluntary evacuation order, but they didn't need to be forced.

"It's really frightening," Alice Stockton-Rossi said. "But you know how many times they tell you, 'This is it, it's really coming and it's really the big one' and then it turns out not to be? I'm afraid people will tune it out because of all the false alarms before ... (but) this one might be the one."

A few blocks away, Russ Linke was taking no chances. He and his wife secured the patio furniture, packed the bicycles into the pickup truck, and headed off the island.

What makes the storm so dangerous and unusual is that it is coming at the tail end of hurricane season and the beginning of winter storm season, "so it's kind of taking something from both," said Jeff Masters, director of the private service Weather Underground.

Masters said the storm could be bigger than the worst East Coast storm on record — the 1938 New England hurricane known as the Long Island Express, which killed nearly 800 people. "Part hurricane, part nor'easter — all trouble," he said. Experts said to expect high winds over 800 miles and up to 2 feet of snow as far inland as West Virginia.

And the storm was so big, and the convergence of the three storms so rare, that "we just can't pinpoint who is going to get the worst of it," said Rick Knabb, director of the National Hurricane Center in Miami.

Officials are particularly worried about the possibility of subway flooding in New York City, said Uccellini.

New York Gov. Andrew Cuomo told the Metropolitan Transportation Authority to prepare to shut the city's subways, buses and suburban trains by Sunday, but delayed making a final decision. The city shut the subways down before last year's Hurricane Irene, and a Columbia University study predicted that an Irene surge just 1 foot higher would have paralyzed lower Manhattan.

Up and down the Eastern Seaboard and far inland, officials urged residents and businesses to prepare in big ways and little.

On Saturday evening, Amtrak began canceling train service to parts of the East Coast, including between Washington, D.C., and New York.

The Virginia National Guard was authorized to call up to 500 troops to active duty for debris removal and road-clearing, while homeowners stacked sandbags at their front doors in coastal towns. At a Home Depot in Virginia Beach, employee Dave Jusino said the store was swamped with customers.

"We have organized chaos, is what I call it," Jusino said. "We organize a group of 10 associates, give them certain responsibilities and we just separate the lines, organize four customers at a time, load up their cars and get them out the door and then take the next customers."

Utility officials warned rains could saturate the ground, causing trees to topple into power lines, and told residents to prepare for several days at home without power. "We're facing a very real possibility of widespread, prolonged power outages," said Ruth Miller, spokeswoman for the Pennsylvania Emergency Management Agency.

Warren Ellis, who was on an annual fishing pilgrimage on North Carolina's Outer Banks, didn't act fast enough to get home. Ellis' 73-year-old father managed to get off uninhabited Portsmouth Island near Cape Hatteras by ferry Friday. But the son and his camper got stranded when high winds and surf forced the ferry service to suspend operations Saturday.

"We might not get off here until Tuesday or Wednesday, which doesn't hurt my feelings that much," said Ellis, 44, of Amissville, Va. "Because the fishing's going to be really good after this storm."

Last year, Hurricane Irene poked a new inlet through the island, cutting the only road off Hatteras Island for about 4,000.

In Connecticut, the Naval Submarine Base in Groton prepared to install flood gates and pile up sandbags to protect against flooding while its five submarines remain in port through the storm.

Lobsterman Greg Griffen in Maine wasn't taking any chances; he moved 100 of his traps to deep water, where they are less vulnerable to shifting and damage in a storm.

"Some of my competitors have been pulling their traps and taking them right home," said Griffen. The dire forecast "sort of encouraged them to pull the plug on the season."

In Muncy Valley in northern Pennsylvania, Rich Fry learned his lesson from last year, when Tropical Storm Lee inundated his Katie's Country Store.

In between helping customers picking up necessities Saturday, Fry was moving materials above the flood line. Fry said he was still trying to recover from the losses of last year's storm, when he estimates he lost $35,000 in merchandise.

"It will take a lot of years to cover that," he said.

Christie's emergency declaration will force the shutdown of Atlantic City's 12 casinos for only the fourth time in the 34-year history of legalized gambling here. The approach of Hurricane Irene shut down the casinos for three days last August.

Atlantic City officials said they would begin evacuating the gambling hub's 30,000 residents at noon Sunday, busing them to mainland shelters and schools.

Tom Foley, Atlantic City's emergency management director, recalled the March 1962 storm when the ocean and the bay met in the center of the city.

"This is predicted to get that bad," he said.

Eighty-five-year-old former sailor Ray Leonard said if he had loved ones living in the projected landfall area, he would tell them to leave. Leonard knows to heed the warnings.

He and two crewmates in his 32-foot sailboat, Satori, rode out 1991's infamous "perfect storm," made famous by the Sebastian Junger bestseller of the same name, before being plucked from the Atlantic off Martha's Vineyard, Mass., by a Coast Guard helicopter.

"Don't be rash," Leonard said in a telephone interview Saturday from his home in Fort Myers, Fla. "Because if this does hit, you're going to lose all those little things you've spent the last 20 years feeling good about."

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Breed reported from Raleigh, N.C. Contributing to this report were AP Science Writer Seth Borenstein in Washington; Emery Dalesio in Kill Devil Hills, N.C.; Karen Matthews in New York; Glenn Adams in Augusta, Maine; Randall Chase in Lewes, Del.; Rodrique Ngowi in Boston; Ron Todt in Philadelphia and Nancy Benac in Washington.

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