A report showing the government will run a budget deficit of more than $1 trillion for the fourth consecutive year inflamed a debate over the federal shortfall that
LONDON—James Murdoch scaled the rungs of the global media empire that his father built. Now scandal taints the heir apparent, threatening to derail the expected succession and shaking the assumption that the Murdoch dynasty would preserve its tight grip over the multibillion-dollar business.
Founder Rupert Murdoch, 80, has long expressed a wish to hand his publicly traded News Corp. to his offspring, and he retains the voting power to make key decisions. But shareholders and board members are said to be troubled by revelations of wrongdoing on Murdoch’s watch, and feel the U.S.-based company needs fresh leadership.
Bloomberg News is reporting that two anonymous sources within News Corp. “have begun questioning the company’s response to the crisis and whether a leadership change is needed.”
Shares in News Corp. tumbled Monday to $14.98, down 13 per cent since July 4 — the day the Guardian newspaper reported that News of the World journalists had hacked into the voicemail belonging to murdered schoolgirl Milly Dowler.
A pivotal moment for the Murdoch family comes Tuesday when the media mogul and his son testify before British lawmakers investigating the hacking and alleged police bribery at a now-shuttered tabloid, News of the World.
“The future is looking increasingly grey” for James Murdoch, said Ivor Gaber, professor of political journalism at City University London. “There are now investors, particularly in the United States, who are suggesting that the time has come to end the Murdochs’ dynastic hold on News Corp.”
Some analysts believe Murdoch is positioning 42-year-old daughter Elisabeth as a successor in the event that 38-year-old James, chief executive of his father’s European and Asian operations, is forced to step aside or faces arrest.
“At the end of the day, that’s what made it a success. It’s ‘Brand Murdoch,’” said Richard Hillgrove, a London-based public relations consultant and former commentator for Murdoch-owned newspapers in New Zealand. “He’s going to do anything in his power to make sure it stays that way.”
Hillgrove described Elisabeth Murdoch, who is expected to join the board of News Corp. in October, as the “likely contender” for leadership of the company and noted that she appears “untainted and pretty clean” in comparison to the pressure bearing down on her brother, James.
There have been unconfirmed reports in the British media of family tension and dissatisfaction on the part of Elisabeth with how the company has been run; some observers speculate people close to the family have leaked information to elevate her stature.
However, a suit in the United States has questioned News Corp.’s move in February to buy Shine Group., the television production company founded in Britain by Elisabeth, in a $670 million deal viewed by some shareholders as overpriced and fueled by nepotism. And while the company is successful, Elisabeth lacks experience at the highest levels of international management.
Another Murdoch son, 39-year-old Lachlan, is on the board of News Corp., but he quit a high-level position in the company in 2005 and does not have a management role. He is saddled in part by the legacy of a failed investment in an Australian telecoms company a decade ago.
Chase Carey, the American deputy chairman and president of News Corp., could step in to head the group as an option from outside the family. He previously worked with Fox television, a company holding.
Murdoch crafted a behemoth over the decades, acquiring newspaper, television, publishing and entertainment interests in Asia, Europe, the United States and Latin America. New York-based News Corp., which employs more than 50,000 people, said it had total assets as of March of $60 billion, and total annual revenues of $33 billion, though the scandal has pushed down share prices.
In 2001, a former wife of Rupert Murdoch predicted that there would be heartache among her children — James, Lachlan and Elisabeth — when the time came to choose his successor. At the time, Anna Murdoch Mann told the Australian Women’s Weekly magazine that she would prefer that none of her children took the reins.
“I think they’re all so good that they could do whatever they wanted, really,” she said. “But I think there’s going to be a lot of heartbreak and hardship with this. There’s been such a lot of pressure that they needn’t have had at their age.”
The accusations of phone hacking and police bribery by journalists at the News of the World reached into the elder Murdoch’s inner circle with the arrest Sunday of Rebekah Brooks, former head of his British newspaper unit.
James Murdoch did not directly oversee News of the World, where the phone hacking of celebrities and others allegedly occurred, but he approved payments to some of the paper’s most prominent hacking victims, including 700,000 pounds ($1.1 million) to Professional Footballers’ Association chief Gordon Taylor.
He said he “did not have a complete picture” when he approved the payouts. Still, commentators view his position as fragile because of questions about whether the criminal investigation will go higher up the chain of command at News Corp. Additionally, the company could be liable under the U.S. Foreign Corrupt Practices Act, which bars American companies from bribing foreign officials for business.
Journalists at the News of the World hacked the voice mail of mobile telephones in an attempt to get information for stories that would help sell newspapers, and allegedly paid police for information that could also be used in the production of news reports.
Louise Cooper, an analyst in the London office of the brokerage BGC Partners, described years of speculation about who would take control after Rupert Murdoch as a perpetual process of “one’s up, another one’s down” that focuses on the tycoon’s children. In the end, she said, it is the patriarch’s decision.
“He still has absolute control over that company,” Cooper said. She said that barring further revelations about the involvement of James Murdoch in the scandal, “it’s difficult to write him off completely.”
Rupert Murdoch controls News Corp. through a family trust that holds 40 per cent of the company’s Class B voting shares. The succession question has centred on James, Elisabeth and Lachlan, children by Murdoch’s second marriage to Anna Torv, later Anna Murdoch Mann after she remarried.
Elisabeth is married to prominent British public relations executive Matthew Freud. She resigned as managing director of British Sky Broadcasting, a lucrative satellite broadcaster in which News Corp. is the biggest shareholder, in 2000 to go her own way. This month, Murdoch dropped a bid to take full control of BSkyB in response to the uproar over phone hacking.
Lachlan Murdoch, once seen as the heir apparent, had been elevated to deputy chief operating officer of News Corp. by the time he quit in 2005 to go back to Australia.
That left James as the expected heir. He has been chairman and CEO of the company’s European and Asian operations since 2007, and later became deputy chief operating officer of News Corp.
Rupert Murdoch has another daughter, Prudence, from his first marriage to Patricia Booker; she is married to Alasdair MacLeod, who stepped down last year after 20 years as a News Corp. executive, most recently as managing director of the Australian newspapers.
Murdoch also has two daughters, 9-year-old Grace and 7-year-old Chloe, with his third wife, Wendi Deng. She was a junior News Corp. executive in Hong Kong before marrying Murdoch in 1999 at the age of 32. Her name has occasionally cropped up in succession speculation in the past.
WATERLOO, ONT.
Britain’s phone hacking scandal reached a new intensity Wednesday as the scope of tabloid intrusion into private voicemails became more clear: Murder victims. Terror victims. Film stars. Sports figures. Politicians. The royal family’s entourage.
Almost no one, it seems, was safe from the reporters and investigators toiling for a tabloid determined to beat its rivals, whatever it takes.
The focal point was the News of the World tabloid, which faced a growing advertising boycott from major firms over the alleged phone hacking, and the top executives of its parent companies: Rebekah Brooks, chief executive of News International, and her boss, media potentate Rupert Murdoch.
Murdoch on Wednesday released a statement indicating that Brooks would continue to lead his British newspaper operation despite calls for her resignation.
The breathtaking scandal, which has already touched the offices of Prime Minister David Cameron and the London Police, widened as News International provided police with evidence that the tabloid had made illegal payments to police officers in its quest for information. Possible victims cited those payments to police as the reasons why an earlier police inquiry did not begin to turn up the extent of the hacking.
The list of potential victims grew as well. New revelations emerged Wednesday that the phones of relatives of people killed in the July 7, 2005 terrorist attacks on London’s transit system, as well those tied to slain schoolgirls, may also have been targeted.
The true extent of the hacking is not yet clear _ and may not be known for months as inquiries unfold.
Graham Foulkes, whose son died in the terrorist attacks, was told by police that he was on a list of potential hacking victims.
“I just felt stunned and horrified,” Foulkes told The Associated Press on Wednesday. “I find it hard to believe someone could be so wicked and so evil, and that someone could work for an organization that even today is trying to defend what they see as normal practices.”
Foulkes, who was to mourn his son Thursday on the sixth anniversary of the attack, said a completely independent investigation was needed because new information showed that the police were compromised by accepting “bribes” from the tabloid.
“The police are now implicated,” he said. “The prime minister must have an independent inquiry and all concerned should be prosecuted.”
Foulkes also demanded the resignation of Brooks, the former News of the World editor who is now chief executive of News International, the U.K. newspaper division of Murdoch’s News Corp. media empire. News Corp. owns a swath of newspapers, including News of the World, the Sun, and the Wall Street Journal.
“She’s gotta go,” Foulkes said. “She cannot say, oops, sorry, we’ve been caught out. Of course she’s responsible for the ethos and practices of her department. Her position is untenable.”
Yet Brooks, one of the most powerful women in British journalism, maintains she did not know about the phone hacking and has declared she will continue to direct the company.
Foulkes also challenged Murdoch _ a global media titan with vast newspaper, television, movie and book publishing interests in the United States, Britain, Australia and elsewhere _ to meet with him to discuss the gross intrusion into his privacy.
“I doubt he’s brave enough to face me,” said Foulkes.
In Parliament, lawmakers held an emergency debate to call for the prosecution of those responsible for hacking into the phone of Milly Dowler, a 13-year-old murder victim, and others.
The Dowler case touched a raw national nerve because the paper is accused of hampering the police investigation by deleting some of Milly’s phone messages, and giving them and her parents false hope that she was still alive after she was abducted in 2002 personal business card.
Cameron called for inquiries into the News of the World’s behavior as well as into the failure of the police’s original phone hacking inquiry, which did not uncover the allegations now emerging.
“We are no longer talking here about politicians and celebrities, we are talking about murder victims, potentially terrorist victims, having their phones hacked into,” Cameron said. “It is absolutely disgusting, what has taken place, and I think everyone in this House and indeed this country will be revolted by what they have heard.”
Ordinary Britons were equally horrified.
“It’s disgusting,” said Danny Wright, 25, of Liverpool. “It’s heartless and inconsiderate that they’d do it to victims and family of murder victims.”
He said it was wrong to hack into celebrities’ phones but far worse to do it to victims’ families “because of what they’ve been through.”
According to opposition Labour Party lawmaker Tom Watson, an April 2002 story in the News of the World made a specific reference to messages that had been left on Milly’s voicemail.
Bob Satchwell, executive director of the Society of Editors, said the Dowler case was crucial.
“That’s why the case has gotten so big,” he said. “If celebrities or politicians have their phones intercepted, that’s one thing. But the idea that they were doing this while a little girl was missing and a police inquiry was going on makes it a really gross intrusion.”
Satchwell said the hacking has become politically sensitive not only because Cameron’s communications chief Andy Coulson was forced to resign earlier this year because of his previous stewardship of the tabloid, but also because lawmakers opposed to Murdoch’s growing media power in Britain want to slow down his takeover of other properties.
He said the hacking of Dowler’s phone was revealed just as government regulators are preparing to decide whether Murdoch can take full control of British Sky Broadcasting.
“You have to ask yourself why that happened right now,” Satchwell said, cautioning that the public has yet to see clear evidence of illegal phone hacking except for two News of the World employees _ reporter Clive Goodman and investigator Glenn Mulcaire _ who have already served time in jail.
When police arrested Mulcaire, they seized 11,000 pages of notes, including the phone numbers of many suspected hacking victims. But police, still investigating, have in most cases not yet made clear who was actually hacked.
News of the World executives have admitted wrongdoing and offered cash settlements to a number of its victims.
The scandal has its roots in the tabloid’s efforts to scoop its competitors with news about the royal family. Representatives of the royals complained to police in late 2005 with suspicions that some of their voicemails had been hacked into.
Tabloid executives claimed at the time the two were rogue employees but that assertion has been undermined by a series of arrests at the newspaper earlier this year and by the company’s willingness to settle with other victims.
The tabloid’s parent company, News International, has insisted it is working closely with police and has a zero-tolerance policy for any wrongdoing or sketchy tactics.
Several companies hastily pulled ads Wednesday from the News of the World amid the public uproar.
Virgin Holidays canceled several ads due to run in the Sunday newspaper this week. Car makers Ford UK and Vauxhall and Halifax bank also said they have suspended advertising.
Mumsnet _ a popular online community for mothers _ removed ads from Murdoch broadcaster Sky after its members complained about the tabloid hacking.
After two years without seeing an increase in their Social Security checks, more than 59 million retirees and other beneficiaries can expect a bump up in benefits next year.
The Social Security trustees’ annual report released last month estimates that the cost-of-living adjustment in next year’s checks will be 0.7 percent. The increase, which will be announced in October, could be higher, depending on where prices head in the coming months.
Still, experts say, retirees could see all or some of that raise eaten up by higher Medicare premiums.
News of the potential rise in benefits didn’t generate much excitement last week among seniors at the Allen Center, a Baltimore senior center, although some retirees say they would be grateful for any boost.
“If it was $5 more, I would be happy,” Frances McCready, 69, a retired cashier, said about her monthly benefit Same day payday loans. “I would dance a jig.”
The past two years have been “very bad,” said McCready, who receives $616 a month from Social Security and about $400 working for the Department of Aging.
She said she lives with her son and his wife, who help her pay her bills.
“If it wasn’t for them, no way in the world could I make it,” she said.
The Social Security trustees projected the cost-of-living adjustment using inflation assumptions from December. Since then, the price of gas has spiked and then pulled back. If fuel prices tick up again, beneficiaries could see as much as a 2 percent increase.
The actual cost-of-living increase will be based on the inflation rate in July, August and September, and how it compares with the rate during the third quarter of 2008
Russia’s central bank unexpectedly raised its overnight deposit rate, signaling it may refrain from tightening monetary policy again as price pressures ebb and the economic recovery remains shaky.
Bank Rossii raised the fixed overnight deposit rate to 3.5 percent from 3.25 percent, effective May 31, the fourth increase since December, the Moscow-based central bank said today in an e-mailed statement. Nine of 20 economists in a Bloomberg survey predicted the move. The refinancing rate and overnight auction- based repurchase rates were left at 8.25 percent and 5.50 percent, in line with economists’ expectations.
Chairman Sergey Ignatiev is trying to keep inflation between 6 percent and 7 percent without stifling credit flows and undermining an economic recovery in the world’s biggest energy supplier. The inflation rate is now “in order” and the bank will be “very cautious” in raising borrowing costs to “avoid hurting economic growth,” Ignatiev said May 26.
Today’s increase and earlier measures “provide an acceptable balance between the risks of continued inflationary pressure and slowing economic growth for the nearest months,” the central bank said.
Ruble Weakens
Policy makers left mandatory reserve ratios unchanged for a second month after lifting them in January, February and March. Economists expect Bank Rossii to resume increases in the second half of the year, according to the median of 12 forecasts in a Bloomberg survey.
The ruble erased gains after advancing on the decision and was 0.1 percent lower against the dollar at 28.0850 at 5:40 p.m. in Moscow. Russia’s ruble bonds due March 2014 slid for the first time in three days, pushing the yield 3 basis points higher to 6.59 percent.
The Micex Index of 30 stocks added to gains after the announcement and was up 0.3 percent at 1,642.13 at 4:42 p.m.
“It’s a signal for the market that the central bank continues to be watching inflation, and that it potentially intends to tighten policy if economic growth firms and consumers proceed with their current behavior of lower savings and higher borrowing,” Dmitry Polevoy, chief economist for Russia and Kazakhstan at ING Groep in Moscow, said by telephone.
Slowest Growing
The slowest-growing economy among the so-called BRIC nations, Russia is relying on revenue from oil to bolster its recovery, while seeking ways to reduce its reliance on energy exports. Oil at more than $100 a barrel is no longer stoking economic expansion, which slowed to 4.1 percent in the first quarter from 4.5 percent in the fourth. Growth slid further in April, to 3 on line pay day loans.3 percent, the Economy Ministry said May 26.
The economy will expand 4.5 percent next year, compared with 9.1 percent for China and 7.8 percent for India, the International Monetary Fund forecast in April.
The pace of inflation has shown signs of steadying. Consumer-price growth in May will probably match the rate from the same month last year, when prices gained a monthly 0.5 percent, Ignatiev said May 26. The annual rate in April matched an 18-month high of 9.6 percent and reached 9.7 percent as of May 23, the central bank said today.
Consumer price growth “remains relatively low” in monthly terms, policy makers said in the statement. Food-price growth has slowed as the knock-on effects from last year’s drought, the country’s worst in 50 years, eased, the bank added.
Grain Ban Lifted
A ban on grain exports introduced as a result of the drought will be allowed to expire July 1, representing the “only serious, significant risk factor” for inflation, Ignatiev said today, the RIA Novosti news service reported.
Russian grain prices are now about half global levels, First Deputy Prime Minister Viktor Zubkov said in a meeting with Prime Minister Vladimir Putin May 28.
Unlike their counterparts in Brazil, China and India, Russian policy makers preferred currency gains and higher reserve requirements for lenders as inflation-fighting tools to help fledgling growth. The ruble has gained 9 percent so far this year after the bank relaxed currency controls.
Elections
With parliamentary elections at the end of the year and presidential elections in early 2012, policy makers will probably step up their inflation-fighting rhetoric and revive efforts to meet this year’s price goal, according to Timothy Ash, head of emerging-market research at Royal Bank of Scotland Group Plc in London.
Previously the central bank “put a greater weight on growth, but with signs the population is becoming increasingly sensitive to the impact of inflation on real disposable incomes, and with opinion polls showing a dip in support for the ruling elites, controlling inflation is also center stage,” Ash wrote in a note e-mailed on May 26.
The central bank cited high unemployment, slowing industrial production growth, and an “extremely low” level of investment as key risks to growth. Consumers are borrowing and spending more while saving less, which could boost economic growth and inflation, it said.
International Monetary Fund Managing Director Dominique Strauss-Kahn’s arrest is an embarrassment that won’t derail attempts to bolster aid for Greece as officials head to Brussels for crisis talks, economists said.
Strauss-Kahn, 62, had been scheduled to meet German Chancellor Angela Merkel today and then attend discussions with euro-area finance ministers in Brussels tomorrow as officials consider further support to stave off a Greek default. He has been charged with attempted rape and a criminal sex act on a woman in a New York hotel. Strauss-Kahn denies the charges.
“Its incredibly embarrassing, and not the IMF’s or Dominique Strauss-Kahn’s finest hour, but I don’t think this ought to undermine what’s going on,” Peter Westaway, chief European economist at Nomura International Plc in London, said in an interview. “I don’t think it will affect negotiations on Greece. In the end, issues for Greece and policy making are more important than that and they’ll carry on.”
European officials are working to prevent the region’s first default as Greek ministers plead for terms to be relaxed on 110 billion-euros ($155 billion) of aid from the IMF and European Union in a debt crisis that has also engulfed Ireland and Portugal. Economists said that talks to reconsider Greece’s aid terms are taking place between institutions rather than individuals and so can endure such turmoil.
“It’s not a fatal blow to the Greek situation,” James Nixon, chief European economist at Societe Generale in London, said in an interview. “Any of these negotiations are larger than a single person.”
EU-Led Aid
The Greek government said in a statement that it “operates institutionally and continues without interruption implementing the program for the country to exit the crisis.” The EU has led efforts to aid Greece and has contributed two-thirds of the funds committed to the rescue of the nation’s economy.
The IMF will be represented at Monday’s euro-area finance ministers’ meeting by Deputy Managing Director Nemat Shafik, who oversees the organization’s work in a number of EU nations, IMF spokesman Bill Murray said in an e-mailed statement today.
Seventeen nations use the euro.
Greece is seeking an extension to the loans and has argued Europe should issue common bonds to stem the region’s fiscal crisis. Eighty-five percent of those surveyed last week in a Bloomberg Global Poll said the country won’t honor its debts, with majorities predicting the same fate for Portugal and Ireland.
Greek Position
Greek Prime Minister George Papandreou on May 13 opposed a debt restructuring, appealing to claims made by the IMF that the country’s debt “is sustainable.” Germany opposes a common-bond issue, saying such a move would weaken member states’ incentives to cut their deficits.
It’s too early to say whether Greece needs more help with its debt crisis, though “extra measures” may be needed if the country can’t return to financial markets next year as planned under the European-led aid program agreed last year, German Finance Minister Wolfgang Schaeuble said in an interview with ARD television in Berlin.
It’s “disappointing” that Strauss-Kahn’s meeting with Merkel is cancelled because the IMF had been pressing for stronger measures that may involve the possibility of a restructuring of Greek debt, Societe General’s Nixon said.
“The meeting could have been quite important in injecting some realism in the discussions and presumably now that voice won’t be heard,” he said. “The IMF have been pushing for a more realistic position, and presumably the gravity of that voice has been lost.”
‘Leadership Vacuum’
Eswar Prasad, a senior fellow at the Brookings Institution in Washington, said that Strauss-Kahn’s arrest may still unsettle investors at a time of tension because of the region’s debt crisis.
“Just the perception that DSK’s departure could create a leadership vacuum at the IMF and shift the institution’s attitude towards Greece and other weak European countries may be enough to roil markets and raise uncertainty at a vulnerable time for the euro zone,” he said.
Hotel Incident
The charges against Strauss-Kahn stem from an incident that allegedly occurred yesterday against a 32-year-old female at a Sofitel hotel in midtown Manhattan, the New York Police Department said in an e-mailed statement early today. He will appear in a Manhattan court later today, police Deputy Commissioner Paul Browne told BBC television in an interview.
Strauss-Kahn played a key role in efforts to stem the European debt crisis which started last year in Greece, with a pledge to contribute about a third of future bailouts in the region by the EU. His term at the IMF is scheduled to expire next year. Speculation in France had mounted that he would leave early to stand for president.
The charges against him won’t affect moves to extend aid to Portugal, which is implementing austerity measures to qualify for an international aid package of as much as 78 billion euros from the EU and IMF, said Gilles Moec, European economist at Deutsche Bank AG.
“The progress can continue and there should not be a change in its dynamics,” he said in an interview.
Take a domestic economy that’s slowly building up steam, and possibly giving off the first faint whiff of inflation. Figure in a healthy rise in corporate profits for American companies.
Then contemplate how scary the rest of the world looks: Japan staggered by an earthquake, revolutions rolling through the Middle East and a still-simmering sovereign debt crisis in Europe.
The way some investment gurus in St. Louis tell it, we’re looking at a formula for rising stock prices in the U.S., a shaky time for stocks elsewhere, and a sorry year for bond investors.
The case for U.S. stocks is built on two factors: profits and prices. Profits are rising, but stock prices haven’t caught up.
To Americans on Main Street, worried about employment and stagnant paychecks, the economy seems anything but rosy. But corporate America is rolling in money. Profits bottomed out two years ago, and they’re now back to the record levels of 2007.
Analysts, who tend to be a bit optimistic, are forecasting a 14.5 percent increase in profits on Standard & Poor’s 500 companies over the next 12 months.
If profits are back to the go-go years, stock prices aren’t. The S&P 500, a broad measure of the stock market, is still 15 percent below its 2007 high.
Stocks in the S&P are selling at 15.6 times trailing earnings and 12.8 times this year’s expected earnings free instant credit score. A low PE, or price-to-earnings, ratio is one sign that stocks may be cheap, and the historical trailing average is about 16. Meanwhile, interest rates are too low to make bonds a tempting alternative.
That has some investors smelling a bargain in the stock market. “We view this market as undervalued,” says John Meara, president of Argent Capital Management in Clayton.
So, why aren’t investors lapping up stocks? In fact, they’re doing the opposite. Americans have pulled money out of domestic stock mutual funds for nine of the past 12 months, including March, according to the Investment Company Institute. They’re favoring foreign stocks and taxable bond funds instead.
After nearly 11 years of dashed hopes, Americans are scared of stocks, says Meara. “People don’t believe. If they believed, we’d have an upward move in the market,” he says.
Still, if the market really is undervalued, it’s not wildly so. “The risk/reward opportunity in stocks does not signal a screaming buy to us at this point,” writes Morningstar analyst Heather Brilliant. Morningstar thinks the market may be slightly overvalued after its recent snap-back.
After all, profits can’t rise at 14 percent per year forever. The profit recovery has been driven mainly by cost-squeezing.
In the long run, Wall Street needs consumers to spend more. After two years of paying down debt
A powerful blast at a factory making explosives and weapons in southern Yemen killed at least 78 people on Monday after the facility was briefly taken over by Islamic militants and then looted by residents of the area, officials said.
Many women and children from the surrounding villages were killed in the explosion, which left bodies blackened and burned, said medical and security officials in Abyan province. The blast appeared to be accidental, and one factory worker said it was caused by a looter who dropped a lit cigarette that ignited a heap of gunpowder.
The tragedy was rooted in Yemen’s rapidly deteriorating security under a surge of unprecedented protests that threatens to topple the autocratic president who has ruled the impoverished and divided nation for 32 years.
On Sunday, militants took over the factory and the nearby the town of Jaar, taking advantage of the growing lawlessness in a part of Yemen that was already largely beyond the government’s reach. Like several other parts of Yemen, police and security forces there had melted away in the face of the political unrest.
The militants are adherents of the ultraconservative Islamic movement known as Salafism. The allegiance of their particular group is bought by Yemen’s government, while other Salafis agitate for the its overthrow and the establishment of Islamic rule. Nonetheless, seeing an opening to seize weaponry, the group took what they wanted and left.
They made off with two armored cars, a tank, several pickup trucks mounted with machine guns and ammunition, said 28-year-old factory worker Hakim Mohammed.
Later, dozens of locals entered the facility and looted whatever they could find, including cables, doors and vehicle fuel, Mohammed said.
The factory makes munitions, Kalashnikov assault rifles and explosives used in road construction in the mountainous area.
Some of the looters emptied large barrels of gunpowder because they wanted to use the containers for storing water, Mohammed said. A cigarette ignited what he said were massive piles of the explosive.
Among the wounded, 27 people were in critical condition, said officials at al-Razi hospital in Jaar. They spoke on condition of anonymity because they were not authorized to speak to journalists.
Chinese specialists working at the factory left several days ago because of the political turmoil and the absence of security in the area, said resident Walid Mohammed Muqbil.
Another resident, Seif Mohammed, said the blast could be heard 10 miles (15 kilometers) from the factory.
Yemen has been hit by weeks of unrest and unraveling security as protesters throughout the country demand the president’s ouster and the introduction of political freedoms. A government crackdown has killed 92 protesters, according to the Shiqayiq Forum for Human Rights.
As the situation has escalated, police and security forces have withdrawn from some towns and cities in Yemen, chased out by protesters in some cases.
The area around the weapons factory was one of the places where units abandoned their posts.
The deputy governor of Abyan province, Saleh al-Samty, blamed the national government for the tragedy, saying it was a result of the lack of order resulting from the security pullback.
Japanese Prime Minister Naoto Kan said Friday he will not resign after acknowledging that his office had unknowingly received donations from a foreign supporter _ illegal in Japan _ days after he lost his foreign minister for a similar reason.
Kan explained during a parliamentary committee session that because the donor had a Japanese name, he did not know the individual was a foreign national.
Kan said his campaign office was investigating the matter and would return the money in full if media reports are confirmed. Major daily the Asahi Shimbun reported Thursday that Kan received a total of 1.04 million yen ($12,500) between 2006 and 2009 from a South Korean resident of Japan.
“This person has a Japanese name, and I thought he was a Japanese citizen,” said Kan. “I was completely unaware that he was a foreign national.”
Political funding laws prohibit lawmakers from accepting donations from foreigners to prevent domestic politics from being influenced by foreign countries.
The news brings further pressure on Kan, whose approval ratings have tumbled below 20 percent amid public dismay over gridlock in parliament guaranteed payday loans. The opposition controls the upper house, making it difficult for the ruling Democratic Party of Japan to pass legislation, including the budget and related bills.
Earlier this week, Seiji Maehara resigned as foreign minister after acknowledging that he received a total of 250,000 yen ($3,000) over the past several years from a 72-year-old Korean woman who has lived most of her life in Japan.
Hundreds of thousands of ethnic Koreans, many descended from laborers brought forcibly to Japan before and during World War II, live in the country legally but without citizenship. Many were born in Japan and have taken Japanese names and citizenship.
But some Koreans have decided against becoming naturalized as a way to maintain their ethnic identity or as a form of protest against the Japanese government for its past policies.
Kan said the donor was an individual introduced by a friend several years ago. It wasn’t immediately clear if the donor was born in Japan.
Powered by WordPress -- XHTML 1.0