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 battle local and foreign forces in Afghanistan, while the Pakistani Taliban mainly wage war against Islamabad.

These concerns have led Pakistan to the conclusion 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 190 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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Obama hits Romney for ‘cradle-to-grave tax hikes and fees’

President Barack Obama delivers a speech to supporters at a campaign rally at Elm Street Middle School in Nashua, …NASHUA, N.H. — Mocking Mitt Romney's vow to bring "big change" to Washington, President Barack Obama charged at a campaign rally here Saturday that his Republican rival was actually offering a "big re-run" of George W. Bush's policies. The embattled incumbent also hit Romney's record as governor of nearby Massachusetts, accusing him of imposing "cradle-to-grave tax hikes and fees."

"He's been running around saying he's got a five-point plan for the economy," Obama told some 8,500 people. "Turns out it's a one-point plan: Folks at the very top get to play by a different set of rules than you do."

"They get to pay lower tax rates, outsource jobs. They want to let Wall Street run wild and make reckless bets with other folks' money," the president said. "That was his philosophy when he was a CEO.  That was his philosophy as governor."

"And as President Clinton said, he does have a lot of brass because he's not talking about big change, but all he's offering is a big rerun of the same policies that created so much hardship for so many Americans," Obama said.

Romney campaign spokesman Ryan Williams dismissed such talk as "desperate attacks" and said they were "laughable coming from a president whose only plan for a second term is to recycle the failed policies of the last four years while raising taxes by $2 trillion."

Polls suggest that Romney has the edge among voters on which candidate would better revive the still-sputtering economy, while Obama leads on who would better defend middle-class interests. The president has spent months trying to paint his rival as an out-of-touch multi-millionaire, while Romney has portrayed his huge success as an investor as evidence he is the better candidate to spur growth.

Obama, eager to deny Romney New Hampshire's four electoral college votes, highlighted the Republican's tenure as governor of neighboring Massachusetts.

The president accused Romney of pushing a tax cut that "overwhelmingly benefited" the wealthiest 278 families in the state while raising taxes and fees in a way that disproportionately hurt the middle class.

"Now, when he's asked about this, he says, 'no, these weren't taxes, these were fees,'" Obama said.

"But keep in mind there were higher fees to be a barber, higher fees to become a nurse. There were higher fees for gas. There were higher fees for milk. There were higher fees for blind people who needed to get a certificate that they were blind. He raised fees to get a birth certificate -- which would have been expensive for me."

"He raised fees for marriage certificates and fees for funeral homes -- so there were literally cradle-to-grave tax hikes and fees," said Obama.

"As governor, Mitt Romney worked with Democrats to close a $3 billion deficit, balance four budgets while cutting taxes 19 times, create tens of thousands of new jobs, and lower the Massachusetts unemployment rate to 4.7 percent," said the Romney campaign's Williams.

"As president, Mitt Romney will bring real change to Washington," said Williams, adding that the Republican's policies will "finally deliver a real recovery."

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