DealBook: Client Redemptions Loom for SAC Capital

12:46 p.m. | Updated

The hedge fund giant SAC Capital Advisors is steeling itself for a possible wave of withdrawal requests from clients amid the government’s intensifying scrutiny of its trading practices.

Investors have about a month to decide whether to pull out money from SAC, the $14 billion fund owned by the billionaire investor Steven A. Cohen.

While posting one of the best investment track records on Wall Street across two decades, SAC has attracted billions of dollars from pension funds, wealthy families and other money management firms. But since late November, when federal prosecutors brought its latest criminal insider trading charge against a former SAC employee — a case that it calls the most lucrative insider trading scheme ever uncovered — those clients are weighing whether continuing their relationship with the fund is worth the reputational risk.

The fund has a standard quarterly redemption deadline, and the next one will fall on Feb. 15. Already, several of SAC’s clients, including Lyxor Asset Management and Titan Advisors, have notified the fund that they intend to withdraw their money. Others, like Skybridge Capital, have told SAC they will continue to invest with the fund.

Questions remain about the intentions of several of SAC’s well-known clients, including Blackstone Group, one of the world’s largest and most influential allocators to hedge funds. Blackstone has about $550 million invested in SAC, making it one of the fund’s largest outside investors. A Blackstone spokesman declined to comment.

The fund has told its employees that it could face at least $1 billion of withdrawals, according to a report in The Wall Street Journal on Friday. A spokesman for SAC said it was “far too early to speculate about redemptions, and we do not expect redemptions to have a significant impact on our funds.”

Any withdrawals from clients would come after a year of decent performance for SAC. In 2012 the firm returned about 13 percent net of fees, which while slightly underperforming the Standard & Poor’s 500 stock market index, is superior to the results of the average hedge fund.

While a spate of redemptions can have a crippling effect on a hedge fund by forcing it to sell its holdings at unfavorable prices, SAC is more insulated than most of its competitors from the ill effects of client withdrawals. That is because of the $14 billion that SAC manages, only about 40 percent of that comes from outside clients. The rest — a fortune of about $8 billion — belongs to Mr. Cohen and his employees.

Also, SAC has protected itself with a stringent redemption policy. The fund’s clients can redeem only 25 percent of their investment each quarter. So, for example, if a client has $200 million invested with SAC, and asks for its money back by the Feb. 15 deadline, SAC would return $50 million every three months beginning in March. That way, SAC is protected from having a forced liquidation of its investment portfolio.

Still, an investor exodus can have a crippling effect on a hedge fund, often causing it to shut down. Last month, Diamondback Capital Management, another hedge fund that became ensnared in the government’s insider trading investigation, closed after its investors sought to pull out roughly one-quarter of the fund’s assets.

Diamondback’s management decided that the most prudent course of action was to wind down rather than reorganize the firm to manage the reduced amount of money.

Like Diamondback, SAC has become embroiled in the government’s broad crackdown on insider trading at hedge funds. At least seven former SAC traders and analysts have been tied to illegal trading while at the fund. And the Securities and Exchange Commission has warned SAC that it might filed a civil action against the fund for failing to properly supervise its employees.

Mr. Cohen has told his employees that he believes he and his fund have at all times acted appropriately, and that the fund has fully cooperated with the government’s investigation.

In recent weeks, SAC has gone on a charm offensive in an attempt to hold on to clients. The fund has told its investors that they would not be responsible for any penalties incurred as a result of any of the government’s legal inquiry. Instead, SAC has told them, Mr. Cohen and his management company would pick up the costs.

There have also been changes at the fund. SAC last week told its staff that it was closing its office in Chicago, which is home to about a dozen employees. Such a move is not unusual, as the fund has closed offices before, such as San Francisco, where it saw limited opportunities.

A spokesman said it didn’t make sense to have an office in Chicago. SAC has more than 1,000 employees – portfolio managers, analysts, traders, and support staff – in five offices across the globe, with its headquarters in Stamford, Conn.

Though Mr. Cohen has told his friends and employees that he remains committed to managing money for outside clients, he could decide to follow in the footsteps of several fellow billionaire hedge fund managers.

A number of star investors, having already amassed billions in personal wealth, have decided to get out of the business of managing other people’s money. In recent years, for example, both George Soros and his onetime protégé, Stanley Druckenmiller, returned money to clients and set up so-called family offices to manage their own fortunes.

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Would-Be Inauguration in Venezuela for Chávez

The People’s Love for Chávez Continues:
While Venezuelan President Hugo Chávez lies ill in Cuba, his many fans still flock to the streets at home in support. A recent rally shows Mr. Chávez has established a celebrated and enduring persona.

CARACAS, Venezuela — President Hugo Chávez’s supporters have not ruled out swearing him in from his hospital in Havana. His detractors are calling for government investigators to go check his pulse themselves. The justices whom Mr. Chávez’s allies have named to the Supreme Court have decided that he can continue to govern in absentia.

In a country that Mr. Chávez has dominated for so long, his health crisis and the decision to proceed on Thursday with a quasi-presidential inauguration that he is unable to attend are producing a stream of bizarre developments and national angst about who is in charge.

“Who’s governing Venezuela?” Julio Borges, an opposition member of the National Assembly, said during a noisy legislative debate this week on the biggest issue facing the country, overshadowing other urgent matters like pressures for a painful currency devaluation, stagnant oil production and chronic shortages of food and other staples on store shelves.

Mr. Chávez has long said, “I am the people,” a mantra that his supporters are invoking as they plan to don the sash the president would have worn had he been able to attend his inauguration, symbolically becoming presidents themselves.

“Anyone who has a sash, bring it along, because tomorrow the people will be invested as president of the republic, because the people are Chávez,” Diosdado Cabello, the president of the National Assembly, said Wednesday. “All of us here are Chávez, the people in the street are Chávez, the lady who cooks is Chávez, the comrade who works as a watchman is Chávez, the soldier is Chávez, the woman is Chávez, the farmer is Chávez, the worker is Chávez; we’re all Chávez.”

To no one’s surprise, the Supreme Court, full of Chávez loyalists, ruled on the eve of the ceremony that Mr. Chávez’s inauguration could be postponed and that his team of advisers could smoothly move, in his absence, from one term to the next.

The court declined to set a time limit for the swearing in, raising the possibility that the country’s deepening uncertainty could go on for weeks or months. And it did nothing to clear up the stubborn mystery of the president’s condition.

Luisa Estella Morales, the president of the Supreme Court, said Wednesday at a news conference that there was no need at this time for a delegation to go to Cuba and report back on the condition of Mr. Chávez, 58. Asked if the swearing in could occur in Havana, she said the time and place of the ceremony had not been determined.

 Ms. Morales said the Supreme Court’s ruling was meant to uphold the results of October’s presidential election.

“It’s one of the most important values that we should preserve as a constitutional court,” Ms. Morales said. “The sovereign Venezuelan people have expressed through their vote their desire to continue being governed by President Hugo Rafael Chávez Frías.”

The government has been opaque for months, acknowledging that he suffered from a relapse of cancer in the pelvic area, but not specifying the type of cancer or detailing his prognosis.

The lack of information has left Venezuela tied in knots. Mr. Chávez has loomed so large for so long — with speeches that have lasted for hours, frequent Twitter posts and his outsized singing, ranting, poetry-reciting and foe-bashing personality — that his sudden silence has created a sizable vacuum.

“We don’t have a president,” lamented Estela Martínez, 63, a nurse who has supported Mr. Chávez throughout his 14 years in office. She said she was afraid that the public was not getting the full truth about the president’s condition and that there was far more shouting than clarity from political leaders. “Someone has to take the reins of the country.”

Henrique Capriles Radonski, the opposition candidate who lost to Mr. Chávez in October, criticized the Supreme Court’s decision endorsing a delay in the inauguration. “Institutions should not respond to the interests of a government,” he said.

The State Department in Washington, which has been cautious about getting involved in the contentious political back-and-forth, said Wednesday that it would be eager to improve relations with Venezuela, which have long been strained.

María Iguarán and María Eugenia Díaz contributed reporting.

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Bits Blog: Do People Actually Shop on Phones? The Answer Is Decidedly Yes

In e-commerce, the mobile revolution is here.

In 2012, people spent $25 billion on purchases made from phones and tablets, an increase of 81 percent from the year before, according to eMarketer, which compiles data from 120 sources that track commerce.

That is still a minority of total e-commerce sales. Mobile accounted for just 11 percent of e-commerce and is expected to reach 15 percent this year. But eMarketer predicts that by 2016, mobile will be $87 billion, or a quarter of all e-commerce.

The shift is significant for a type of shopping riddled with challenges — like small screens that make it hard to view items and type. It reflects the consumers’ shift to doing everything from work to play on mobile devices.

“Particularly in the second half of the year and in the holiday season, there were signs that smartphones and tablets in particular had made much more progress than people had previously thought we would,” said Clark Fredricksen, vice president of communications at eMarketer.

And mobile shoppers spend a surprising amount when using these devices — an average of $329 per order when on tablets and $250 when on phones, eMarketer said.

Tablets in particular have significantly changed the way people shop. While in 2011, people spent more money making purchases from smartphones than from tablets, shopping on tablets surpassed phones last year: $13.9 billion was spent from tablets and $9.9 billion from phones.

People are more likely to use tablets while they are in a shopping mood, like lounging on the couch. And their bigger screens make shopping easier than it is on smartphones and in some cases easier than on computers, because shoppers can zoom in or drag items to their carts with their fingers.

For example, at Tea Collection, a children’s clothing retailer, just over a third of transactions now come from mobile devices. People are just as likely to buy from tablets as from computers, and some days more likely, but the conversion rate is lower on smartphones.

Leigh Rawdon, chief executive and co-founder of Tea Collection, said she was surprised at how quickly people have taken to shopping on mobile devices, and that she expects behavior to change yet again with the proliferation of smaller tablets like the iPad Mini that blur the line between phone and tablet.

Still, some retailers report that mobile commerce has not been as big as they expected.

“Many mobile storefronts have problems that make buying difficult,” Mr. Fredricksen said. “Even though sessions often start on smartphones, in the end consumers end up turning to computers or retail stores or even a tablet to seal the deal.”

Big e-commerce players that have poured resources into mobile shopping, like Amazon.com and eBay, are seeing significantly more mobile commerce than smaller shopping sites, Mr. Fredricksen said.

During the holidays, overall e-commerce sales on computers and mobile devices combined grew 14 percent to $42.3 billion, according to comScore. That was lower than expected. After a strong start around Thanksgiving, consumer spending shrank because of concerns about the fiscal crisis in Washington, comScore said.

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Flu Widespread, Leading a Range of Winter’s Ills

It is not your imagination — more people you know are sick this winter, even people who have had flu shots.

The country is in the grip of three emerging flu or flulike epidemics: an early start to the annual flu season with an unusually aggressive virus, a surge in a new type of norovirus, and the worst whooping cough outbreak in 60 years. And these are all developing amid the normal winter highs for the many viruses that cause symptoms on the “colds and flu” spectrum.

Influenza is widespread, and causing local crises. On Wednesday, Boston’s mayor declared a public health emergency as cases flooded hospital emergency rooms.

Google’s national flu trend maps, which track flu-related searches, are almost solid red (for “intense activity”) and the Centers for Disease Control and Prevention’s weekly FluView maps, which track confirmed cases, are nearly solid brown (for “widespread activity”).

“Yesterday, I saw a construction worker, a big strong guy in his Carhartts who looked like he could fall off a roof without noticing it,” said Dr. Beth Zeeman, an emergency room doctor for MetroWest Medical Center in Framingham, Mass., just outside Boston. “He was in a fetal position with fever and chills, like a wet rag. When I see one of those cases, I just tighten up my mask a little.”

Massachusetts General Hospital in Boston started asking visitors with even mild cold symptoms to wear masks and to avoid maternity wards. The hospital has treated 532 confirmed influenza patients this season and admitted 167, even more than it did by this date during the 2009-10 swine flu pandemic.

At Brigham and Women’s Hospital, 100 patients were crowded into spaces licensed for 53. Beds lined halls and pressed against vending machines. Overflow patients sat on benches in the lobby wearing surgical masks.

“Today was the first time I think I was experiencing my first pandemic,” said Heidi Crim, the nursing director, who saw both the swine flu and SARS outbreaks here. Adding to the problem, she said, many staff members were at home sick and supplies like flu test swabs were running out.

Nationally, deaths and hospitalizations are still below epidemic thresholds. But experts do not expect that to remain true. Pneumonia usually shows up in national statistics only a week or two after emergency rooms report surges in cases, and deaths start rising a week or two after that, said Dr. Gregory A. Poland, a vaccine specialist at the Mayo Clinic in Minnesota. The predominant flu strain circulating is an H3N2, which typically kills more people than the H1N1 strains that usually predominate; the relatively lethal 2003-4 “Fujian flu” season was overwhelmingly H3N2.

No cases have been resistant to Tamiflu, which can ease symptoms if taken within 48 hours, and this year’s flu shot is well-matched to the H3N2 strain, the C.D.C. said. Flu shots are imperfect, especially in the elderly, whose immune systems may not be strong enough to produce enough antibodies.

Simultaneously, the country is seeing a large and early outbreak of norovirus, the “cruise ship flu” or “stomach flu,” said Dr. Aron J. Hall of the C.D.C.’s viral gastroenterology branch. It includes a new strain, which first appeared in Australia and is known as the Sydney 2012 variant.

This week, Maine’s health department said that state was seeing a large spike in cases. Cities across Canada reported norovirus outbreaks so serious that hospitals were shutting down whole wards for disinfection because patients were getting infected after moving into the rooms of those who had just recovered. The classic symptoms of norovirus are “explosive” diarrhea and “projectile” vomiting, which can send infectious particles flying yards away.

“I also saw a woman I’m sure had norovirus,” Dr. Zeeman said. “She said she’d gone to the bathroom 14 times at home and 4 times since she came into the E.R. You can get dehydrated really quickly that way.”

This month, the C.D.C. said the United States was having its biggest outbreak of pertussis in 60 years; there were about 42,000 confirmed cases, the highest total since 1955. The disease is unrelated to flu but causes a hacking, constant cough and breathlessness. While it is unpleasant, adults almost always survive; the greatest danger is to infants, especially premature ones with undeveloped lungs. Of the 18 recorded deaths in 2012, all but three were of infants under age 1.

That outbreak is worst in cold-weather states, including Colorado, Washington, Wisconsin, Minnesota and Vermont.

Although most children are vaccinated several times against pertussis, those shots wear off with age. It is possible, the authorities said, that a new, safer vaccine introduced in the 1990s gives protection that does not last as long, so more teenagers and adults are vulnerable.

And, Dr. Poland said, if many New Yorkers are catching laryngitis, as has been reported, it is probably a rhinovirus. “It’s typically a sore, really scratchy throat, and you sometimes lose your voice,” he said.

Though flu cases in New York City are rising rapidly, the city health department has no plans to declare an emergency, largely because of concern that doing so would drive mildly sick people to emergency rooms, said Dr. Jay K. Varma, deputy director for disease control. The city would prefer people went to private doctors or, if still healthy, to pharmacies for flu shots. Nursing homes have had worrisome outbreaks, he said, and nine elderly patients have died. Homes need to be more alert, vaccinate patients, separate those who fall ill and treat them faster with antivirals, he said.

Dr. Susan I. Gerber of the C.D.C.’s respiratory diseases branch, said her agency has not seen any unusual spike of rhinovirus, parainfluenza, adenovirus, coronavirus or the dozens of other causes of the “common cold,” but the country is having its typical winter surge of some, like respiratory syncytial virus “that can mimic flulike symptoms, especially in young children.”

The C.D.C. and the local health authorities continue to advocate getting flu shots. Although it takes up to two weeks to build immunity, “we don’t know if the season has peaked yet,” said Dr. Joseph Bresee, chief of prevention in the agency’s flu division.

Flu shots and nasal mists contain vaccines against three strains, the H3N2, the H1N1 and a B. Thus far this season, Dr. Bresee said, H1N1 cases have been rare, and the H3N2 component has been a good match against almost all the confirmed H3N2 samples the agency has tested.

About a fifth of all flus this year thus far are from B strains. That part of the vaccine is a good match only 70 percent of the time, because two B’s are circulating.

For that reason, he said, flu shots are being reformulated. Within two years, they said, most will contain vaccines against both B strains.

Joanna Constantine, 28, a stylist at the Guy Thomas Hair Salon on West 56th Street in Manhattan, said she recently was so sick that she was off work and in bed for five days — and silenced by laryngitis for four of them.

She did not have the classic flu symptoms — a high fever, aches and chills — so she knew it was probably something else.

Still, she said, it scared her enough that she will get a flu shot next year. She had not bothered to get one since her last pregnancy, she said. But she has a 7-year-old son and a 5-year-old daughter, “and my little guys get theirs every year.”

Jess Bidgood contributed reporting.

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F.D.A. Requires Cuts to Dosages of Ambien and Other Sleep Drugs

The Food and Drug Administration announced on Thursday that it was requiring manufacturers of popular sleeping pills like Ambien and Zolpimist to cut their recommended dosage in half for women, after laboratory studies showed that they can leave people still sleepy in the morning and at risk for accidents.

The agency issued the requirement for drugs containing the active ingredient zolpidem, by far the most widely used sleep aid. Using lower doses means less of the drug will remain in the blood in the morning hours, and leave people who take it less exposed to the risk of impairment while driving to work.

Women eliminate zolpidem from their bodies more slowly than men and the agency told manufacturers that the recommended dosage for women should be lowered to 5 milligrams from 10 milligrams for immediate-release products like Ambien, Edluar and Zolpimist. Dosages for extended-release products should be lowered to 6.25 milligrams from 12.5, the agency said. The agency also recommended lowering dosages for men.

An estimated 10 to 15 percent of women will have a level of zolpidem in their blood that impairs driving eight hours after taking the pill, while only about 3 percent of men do, said Dr. Robert Temple, deputy director for clinical science in the F.D.A.'s Center for Drug Evaluation and Research.

Doctors will still be told that they can prescribe the higher dosage if the lower one does not work, Dr. Temple said.

“Most people thought that by the morning it is gone,” he said. “What we’re reminding people is that is sort of true, but that in some women who take a full 10 milligram dose, and in a lot of people who take the control release dose, it is not entirely true. Some people will be impaired in the morning.”

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Nokia Sees Results From New Smartphone Line

BERLIN — Nokia said Thursday that its struggling mobile phone business was showing signs of a rebound, turning a profit in the fourth quarter fueled by sales of its Lumia smartphones that use Microsoft software.

Stephen Elop, the Nokia chief executive, said sales of smartphones and more basic cellphones, as well as profitability at the Nokia Siemens network-equipment venture, all came in better than expected during the three months through December.

“While we definitely experienced some tough challenges in the first half of 2012, we are managing through these issues,” Mr. Elop said in a conference call with journalists.

Nokia has amassed nearly €5 billion, or $6.5 billion, in losses since Mr. Elop, a former Microsoft executive, announced plans to phase out Nokia phones that used its own Symbian operating system for the Lumia line, which uses the Windows Phone 8 software, in February 2011.

Sales of Lumia phones increased only modestly during the early part of 2012, raising concern that the company’s turnaround strategy, marked by cost cutting and the sale of subsidiary businesses, would not be enough to save the former market leader.

But in the fourth quarter, amid heavy television and print ad spending in Europe and North America, Nokia said it sold 4.4 million Lumia phones, up from 2.9 million in the third quarter.

The company said revenue from the sale of 86.3 million mobile phones of all kinds amounted to €3.9 billion in the quarter, without providing comparative figures.

The company’s shares surged as much as 16 percent in Helsinki on the news.

In a statement, Nokia said that it expected operating profit at its devices and services business, which makes up about half of its total sales, to break even or generate a profit of as much as 2 percent of sales in the fourth quarter. In October, Nokia had told investors that it expected the business to make an operating loss of as much as 10 percent of sales.

But sales of its Lumia smartphone and Asha feature phones rose more than expected. Also, Nokia Siemens, its network gear venture, will report an operating profit of 13 percent to 15 percent of sales in the fourth quarter, compared with an expected range of 4 percent to 12 percent.

Looking ahead, Nokia said it expected to return to an operating loss of 2 percent of sales in the first quarter amid the post-holiday buying lull and harsh competition. But the results for the coming three months could vary widely, Nokia warned, from an even bigger 6 percent operating loss to a 2 percent operating profit.

Pete Cunningham, an analyst at Canalys, a research firm in Reading, England, said Nokia’s improving financial position was a positive step. But the company, which ceded its market leadership to Samsung and Apple, is not out of the woods yet.

“On face value, this is a positive for Nokia,” Mr. Cunningham said. “But 2013 could still turn out to be another very difficult year for Nokia. It is way too premature to say that the company has made a turnaround.”

Mr. Cunningham said he used the Lumia 920, Nokia’s newest smartphone, during the Christmas holidays and liked the experience.

“But the more I used the phone, the more apparent it became to me that there are big gaps between Lumia and its competitors in terms of the functionality and usability of its apps,” Mr. Cunningham said. “I still think there is a lot of work to be done on Lumia.”

Mr. Elop said Nokia would continue to innovate to close the gap with competitors. The big issues that Nokia faces, he said, are “managing efficiently, building great products and changing the way we operate. We’re beginning to see that happen.”

Nokia’s shares closed up nearly 13 percent at €3.39 in Helsinki trading.

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Iranian Captives Freed in Major Prisoner Exchange in Syria

ISTANBUL — More than 2,000 prisoners incarcerated by the Syrian authorities were being released on Wednesday in return for 48 Iranians freed by rebels after five months in captivity in what appeared to be the biggest prisoner swap since the uprising against President Bashar al-Assad began almost two years ago.

The exchange, brokered by Turkey and Qatar, came days after Mr. Assad warned on Sunday that he would not abandon the fight against armed adversaries pressing on the approaches to the Syrian capital, Damascus, and brushed aside calls for him to quit.

Word of the exchange dominated news in Iran, the Syrian government’s only Middle East ally, leading the Web site of the official Islamic Republic News Agency. Iran state television showed a brief clip of the released hostages at the Sheraton Hotel in Damascus, grinning, flashing victory signs and holding flowers. In an interview on Iran state TV, the Foreign Ministry spokesman, Ramin Mehmanparast, thanked those involved in the swap for the hostages and expressed happiness that “we managed to get them released.”

Precise details of the exchange, including when the 48 Iranians would be repatriated, remained unclear. Mr. Mehmanparast also said two Iranian engineers who had been abducted earlier in Syria remained captive. But Prime Minister Recep Tayyip Erdogan of Turkey, a regional power broker allied to the Western and Arab nations seeking Mr. Assad’s departure, said he hoped the exchange on Wednesday would lead to freedom for more prisoners in Syria.

“We wish many other innocent people, and people in need, to be released from Syrian jails without delay,” Mr. Erdogan said in a televised news conference in Niamey, Nigeria, where he arrived on an official visit.

“This process needs to be appreciated. We are not in a position to say anything more than, ‘May this produce some good.’ ”

The exchange emerged from months of behind-the-scenes negotiations involving a Turkish charitable foundation, the Humanitarian Relief Foundation, an Islamist-leaning aid organization based in Istanbul and widely known as I.H.H.

The aid group had set up an operation center in Damascus to unite 2,130 prisoners, including 73 women, at one base while another aid team remained in Douma, near the Syrian capital, to oversee the return of the 48 Iranians.

“Captivity is a hard thing,” said Bulent Yildirim, the foundation’s director, who coordinated the exchange in Damascus.

“I saw young women crying, many people lost a lot of weight, and there were also many sick people.”

The Syrian opposition has claimed that the Iranians are members of Iran’s Islamic Revolutionary Guards Corps, but Tehran has denied the assertion, saying the captives are Shiite civilian pilgrims. The Iranians were seized in August while traveling on a bus from Damascus International Airport to a Shiite shrine on the outskirts of the capital, Iran’s Press TV said.

Opposition fighters had threatened to kill the Iranians unless Mr. Assad’s forces halted military operations. But since then the fighting around Damascus has intensified.

Iran is Mr. Assad’s main ally in a region where most Arab states and neighboring Turkey have turned against him. The Iranian captives offered the rebels holding them a source of powerful pressure on the Syrian leader to release opposition prisoners in return.

“We expect the swap to be completed in the next hour,” Huseyin Oruc, a member of the aid group’s executive board said in a telephone interview around midday. He said the captives released by the Syrian authorities included four Turks and a Palestinian.

By midafternoon it was not clear whether the 2,130 prisoners had been freed.

“It is the first time that the ‘humanitarian diplomacy’ we initiated succeeded in releasing such a large group of people at once,” Mr. Oruc said. “There are many more held captive and our efforts to free them will continue without delay.”

The Turkish aid group gained international attention in 2010 for organizing a flotilla of boats heading to Gaza, ostensibly with relief supplies, that prompted a deadly Israeli commando raid in which eight Turks and an American of Turkish descent died. At the time of the raid, the group was reported to have extensive connections with Turkey’s political elite. The episode began an unraveling of Turkey’s once close ties with Israel.

In recent months, the organization has also been part of negotiations to free smaller numbers of prisoners, including two Turkish journalists held in Syria, Reuters reported. It has been active since the early 1990s in charitable works in the Middle East and Africa, focusing most recently on Gaza.

Since the start of the uprising against Mr. Assad, the organization has also cast itself as a leading private charitable organization in Syria, delivering food and other basic supplies and pursuing what it calls “humanitarian diplomacy” to help free captive civilians.

While the numbers involved in Wednesday’s exchange seemed dramatic, some rebel commanders said more modest prisoner exchanges had become a feature of the conflict.

The leader of a rebel fighting group in the central city of Hama, reached via Skype, said pro-government militia members had captured his uncle and two other relatives in a village in the northern Idlib province more than a month ago.

 “The  only  way to release them is capturing  hostages,” the commander said, adding that negotiations were under way to win the release of his relatives in return for 12 captives held by the rebels. Two months ago, the commander said, nine members of the pro-government militia, known as shabiha, were  exchanged for five captured rebels. Syria’s uprising began in March 2011 with peaceful demonstrations, but a harsh suppression broadened into civil war with an estimated 60,000 people killed, according to United Nations estimates.

Sebnem Arsu reported from Istanbul and Alan Cowell from London. Hwaida Saad contributed reporting from Beirut, Lebanon, and Thomas Erdbrink from Tehran.

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At Disney Parks, a Bracelet Meant to Build Loyalty (and Sales)

Editors' Note Appended

ORLANDO, Fla. — Imagine Walt Disney World with no entry turnstiles. Cash? Passé: Visitors would wear rubber bracelets encoded with credit card information, snapping up corn dogs and Mickey Mouse ears with a tap of the wrist. Smartphone alerts would signal when it is time to ride Space Mountain without standing in line.

Fantasyland? Hardly. It happens starting this spring.

Disney in the coming months plans to begin introducing a vacation management system called MyMagic+ that will drastically change the way Disney World visitors — some 30 million people a year — do just about everything.

The initiative is part of a broader effort, estimated by analysts to cost between $800 million and $1 billion, to make visiting Disney parks less daunting and more amenable to modern consumer behavior. Disney is betting that happier guests will spend more money.

“If we can enhance the experience, more people will spend more of their leisure time with us,” said Thomas O. Staggs, chairman of Disney Parks and Resorts.

The ambitious plan moves Disney deeper into the hotly debated terrain of personal data collection. Like most major companies, Disney wants to have as much information about its customers’ preferences as it can get, so it can appeal to them more efficiently. The company already collects data to use in future sales campaigns, but parts of MyMagic+ will allow Disney for the first time to track guest behavior in minute detail.

Did you buy a balloon? What attractions did you ride and when? Did you shake Goofy’s hand, but snub Snow White? If you fully use MyMagic+, databases will be watching, allowing Disney to refine its offerings and customize its marketing messages.

Disney is aware of potential privacy concerns, especially regarding children. The plan, which comes as the federal government is trying to strengthen online privacy protections, could be troublesome for a company that some consumers worry is already too controlling.

But Disney has decided that MyMagic+ is essential. The company must aggressively weave new technology into its parks — without damaging the sense of nostalgia on which the experience depends — or risk becoming irrelevant to future generations, Mr. Staggs said. From a business perspective, he added, MyMagic+ could be “transformational.”

Aside from benefiting Disney’s bottom line, the initiative could alter the global theme parks business. Disney is not the first vacation company to use wristbands equipped with radio frequency identification, or RFID, chips. Great Wolf Resorts, an operator of 11 water parks in North America, has been using them since 2006. But Disney’s global parks operation, which has an estimated 121.4 million admissions a year and generates $12.9 billion in revenue, is so huge that it can greatly influence consumer behavior.

“When Disney makes a move, it moves the culture,” said Steve Brown, chief operating officer for Lo-Q, a British company that provides line management and ticketing systems for theme parks and zoos.

Disney World guests currently plod through entrance turnstiles, redeeming paper tickets, and then decide what to ride; food and merchandise are bought with cash or credit cards. (Disney hotel key cards can also be used to charge items.) People race to FastPass kiosks, which dispense a limited number of free line-skipping tickets. But gridlock quickly sets in and most people wait. And wait.

In contrast, MyMagic+ will allow users of a new Web site and app — called My Disney Experience — to preselect three FastPasses before they leave home for rides or V.I.P. seating for parades, fireworks and character meet-and-greets. Orlando-bound guests can also preregister for RFID bracelets. These so-called MagicBands will function as room key, park ticket, FastPass and credit card.

MagicBands can also be encoded with all sorts of personal details, allowing for more personalized interaction with Disney employees. Before, the employee playing Cinderella could say hello only in a general way. Now — if parents opt in — hidden sensors will read MagicBand data, providing information needed for a personalized greeting: “Hi, Angie,” the character might say without prompting. “I understand it’s your birthday.”

Editors' Note: January 9, 2013

A picture with an earlier version of this article  showed people using a new MagicBand technology that Walt Disney World plans to introduce in the coming months. The people in the picture, which was provided by Disney, are actually models posing to demonstrate the new system, not Disney World customers. Such a posed picture should not have been used to illustrate the article.

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Economic Scene: Health Care and Pursuit of Profit Make a Poor Mix

Thirty years ago, Bonnie Svarstad and Chester Bond of the School of Pharmacy at the University of Wisconsin-Madison discovered an interesting pattern in the use of sedatives at nursing homes in the south of the state.

Patients entering church-affiliated nonprofit homes were prescribed drugs roughly as often as those entering profit-making “proprietary” institutions. But patients in proprietary homes received, on average, more than four times the dose of patients at nonprofits.

Writing about his colleagues’ research in his 1988 book “The Nonprofit Economy,” the economist Burton Weisbrod provided a straightforward explanation: “differences in the pursuit of profit.” Sedatives are cheap, Mr. Weisbrod noted. “Less expensive than, say, giving special attention to more active patients who need to be kept busy.”

This behavior was hardly surprising. Hospitals run for profit are also less likely than nonprofit and government-run institutions to offer services like home health care and psychiatric emergency care, which are not as profitable as open-heart surgery.

A shareholder might even applaud the creativity with which profit-seeking institutions go about seeking profit. But the consequences of this pursuit might not be so great for other stakeholders in the system — patients, for instance. One study found that patients’ mortality rates spiked when nonprofit hospitals switched to become profit-making, and their staff levels declined.

These profit-maximizing tactics point to a troubling conflict of interest that goes beyond the private delivery of health care. They raise a broader, more important question: How much should we rely on the private sector to satisfy broad social needs?

From health to pensions to education, the United States relies on private enterprise more than pretty much every other advanced, industrial nation to provide essential social services. The government pays Medicare Advantage plans to deliver health care to aging Americans. It provides a tax break to encourage employers to cover workers under 65.

Businesses devote almost 6 percent of the nation’s economic output to pay for health insurance for their employees. This amounts to nine times similar private spending on health benefits across the Organization for Economic Cooperation and Development, on average. Private plans cover more than a third of pension benefits. The average for 30 countries in the O.E.C.D. is just over one-fifth.

We let the private sector handle tasks other countries would never dream of moving outside the government’s purview. Consider bail bondsmen and their rugged sidekicks, the bounty hunters.

American TV audiences may reminisce fondly about Lee Majors in “The Fall Guy” chasing bad guys in a souped-up GMC truck — a cheap way to get felons to court. People in most other nations see them as an undue commercial intrusion into the criminal justice system that discriminates against the poor.

Our reliance on private enterprise to provide the most essential services stems, in part, from a more narrow understanding of our collective responsibility to provide social goods. Private American health care has stood out for decades among industrial nations, where public universal coverage has long been considered a right of citizenship. But our faith in private solutions also draws on an ingrained belief that big government serves too many disparate objectives and must cater to too many conflicting interests to deliver services fairly and effectively.

Our trust appears undeserved, however. Our track record suggests that handing over responsibility for social goals to private enterprise is providing us with social goods of lower quality, distributed more inequitably and at a higher cost than if government delivered or paid for them directly.

The government’s most expensive housing support program — it will cost about $140 billion this year — is a tax break for individuals to buy homes on the private market.

According to the Tax Policy Center, this break will benefit only 20 percent of mostly well-to-do taxpayers, and most economists agree that it does nothing to further its purported goal of increasing homeownership. Tax breaks for private pensions also mostly benefit the wealthy. And 401(k) plans are riskier and costlier to administer than Social Security.

From the high administrative costs incurred by health insurers to screen out sick patients to the array of expensive treatments prescribed by doctors who earn more money for every treatment they provide, our private health care industry provides perhaps the clearest illustration of how the profit motive can send incentives astray.

By many objective measures, the mostly private American system delivers worse value for money than every other in the developed world. We spend nearly 18 percent of the nation’s economic output on health care and still manage to leave tens of millions of Americans without adequate access to care.

Britain gets universal coverage for 10 percent of gross domestic product. Germany and France for 12 percent. What’s more, our free market for health services produces no better health than the public health care systems in other advanced nations. On some measures — infant mortality, for instance — it does much worse.

In a way, private delivery of health care misleads Americans about the financial burdens they must bear to lead an adequate existence. If they were to consider the additional private spending on health care as a form of tax — an indispensable cost to live a healthy life — the nation’s tax bill would rise to about 31 percent from 25 percent of the nation’s G.D.P. — much closer to the 34 percent average across the O.E.C.D.

A quarter of a century ago, a belief swept across America that we could reduce the ballooning costs of the government’s health care entitlements just by handing over their management to the private sector. Private companies would have a strong incentive to identify and wipe out wasteful treatment. They could encourage healthy lifestyles among beneficiaries, lowering use of costly care. Competition for government contracts would keep the overall price down.

We now know this didn’t work as advertised. Competition wasn’t as robust as hoped. Health maintenance organizations didn’t keep costs in check, and they spent heavily on administration and screening to enroll only the healthiest, most profitable beneficiaries.

One study of Medicare spending found that the program saved no money by relying on H.M.O.’s. Another found that moving Medicaid recipients into H.M.O.’s increased the average cost per beneficiary by 12 percent with no improvement in the quality of care for the poor. Two years ago, President Obama’s health care law cut almost $150 billion from Medicare simply by reducing payments to private plans that provide similar care to plain vanilla Medicare at a higher cost.

Today, again, entitlements are at the center of the national debate. Our elected officials are consumed by slashing a budget deficit that is expected to balloon over coming decades. With both Democrats and Republicans unwilling to raise taxes on the middle class, the discussion is quickly boiling down to how deeply entitlements must be cut.

We may want to broaden the debate. The relevant question is how best we can serve our social needs at the lowest possible cost. One answer is that we have a lot of room to do better. Improving the delivery of social services like health care and pensions may be possible without increasing the burden on American families, simply by removing the profit motive from the equation.

E-mail: eporter@nytimes.com;

Twitter: @portereduardo

Read More..

Economic Scene: Health Care and Pursuit of Profit Make a Poor Mix

Thirty years ago, Bonnie Svarstad and Chester Bond of the School of Pharmacy at the University of Wisconsin-Madison discovered an interesting pattern in the use of sedatives at nursing homes in the south of the state.

Patients entering church-affiliated nonprofit homes were prescribed drugs roughly as often as those entering profit-making “proprietary” institutions. But patients in proprietary homes received, on average, more than four times the dose of patients at nonprofits.

Writing about his colleagues’ research in his 1988 book “The Nonprofit Economy,” the economist Burton Weisbrod provided a straightforward explanation: “differences in the pursuit of profit.” Sedatives are cheap, Mr. Weisbrod noted. “Less expensive than, say, giving special attention to more active patients who need to be kept busy.”

This behavior was hardly surprising. Hospitals run for profit are also less likely than nonprofit and government-run institutions to offer services like home health care and psychiatric emergency care, which are not as profitable as open-heart surgery.

A shareholder might even applaud the creativity with which profit-seeking institutions go about seeking profit. But the consequences of this pursuit might not be so great for other stakeholders in the system — patients, for instance. One study found that patients’ mortality rates spiked when nonprofit hospitals switched to become profit-making, and their staff levels declined.

These profit-maximizing tactics point to a troubling conflict of interest that goes beyond the private delivery of health care. They raise a broader, more important question: How much should we rely on the private sector to satisfy broad social needs?

From health to pensions to education, the United States relies on private enterprise more than pretty much every other advanced, industrial nation to provide essential social services. The government pays Medicare Advantage plans to deliver health care to aging Americans. It provides a tax break to encourage employers to cover workers under 65.

Businesses devote almost 6 percent of the nation’s economic output to pay for health insurance for their employees. This amounts to nine times similar private spending on health benefits across the Organization for Economic Cooperation and Development, on average. Private plans cover more than a third of pension benefits. The average for 30 countries in the O.E.C.D. is just over one-fifth.

We let the private sector handle tasks other countries would never dream of moving outside the government’s purview. Consider bail bondsmen and their rugged sidekicks, the bounty hunters.

American TV audiences may reminisce fondly about Lee Majors in “The Fall Guy” chasing bad guys in a souped-up GMC truck — a cheap way to get felons to court. People in most other nations see them as an undue commercial intrusion into the criminal justice system that discriminates against the poor.

Our reliance on private enterprise to provide the most essential services stems, in part, from a more narrow understanding of our collective responsibility to provide social goods. Private American health care has stood out for decades among industrial nations, where public universal coverage has long been considered a right of citizenship. But our faith in private solutions also draws on an ingrained belief that big government serves too many disparate objectives and must cater to too many conflicting interests to deliver services fairly and effectively.

Our trust appears undeserved, however. Our track record suggests that handing over responsibility for social goals to private enterprise is providing us with social goods of lower quality, distributed more inequitably and at a higher cost than if government delivered or paid for them directly.

The government’s most expensive housing support program — it will cost about $140 billion this year — is a tax break for individuals to buy homes on the private market.

According to the Tax Policy Center, this break will benefit only 20 percent of mostly well-to-do taxpayers, and most economists agree that it does nothing to further its purported goal of increasing homeownership. Tax breaks for private pensions also mostly benefit the wealthy. And 401(k) plans are riskier and costlier to administer than Social Security.

From the high administrative costs incurred by health insurers to screen out sick patients to the array of expensive treatments prescribed by doctors who earn more money for every treatment they provide, our private health care industry provides perhaps the clearest illustration of how the profit motive can send incentives astray.

By many objective measures, the mostly private American system delivers worse value for money than every other in the developed world. We spend nearly 18 percent of the nation’s economic output on health care and still manage to leave tens of millions of Americans without adequate access to care.

Britain gets universal coverage for 10 percent of gross domestic product. Germany and France for 12 percent. What’s more, our free market for health services produces no better health than the public health care systems in other advanced nations. On some measures — infant mortality, for instance — it does much worse.

In a way, private delivery of health care misleads Americans about the financial burdens they must bear to lead an adequate existence. If they were to consider the additional private spending on health care as a form of tax — an indispensable cost to live a healthy life — the nation’s tax bill would rise to about 31 percent from 25 percent of the nation’s G.D.P. — much closer to the 34 percent average across the O.E.C.D.

A quarter of a century ago, a belief swept across America that we could reduce the ballooning costs of the government’s health care entitlements just by handing over their management to the private sector. Private companies would have a strong incentive to identify and wipe out wasteful treatment. They could encourage healthy lifestyles among beneficiaries, lowering use of costly care. Competition for government contracts would keep the overall price down.

We now know this didn’t work as advertised. Competition wasn’t as robust as hoped. Health maintenance organizations didn’t keep costs in check, and they spent heavily on administration and screening to enroll only the healthiest, most profitable beneficiaries.

One study of Medicare spending found that the program saved no money by relying on H.M.O.’s. Another found that moving Medicaid recipients into H.M.O.’s increased the average cost per beneficiary by 12 percent with no improvement in the quality of care for the poor. Two years ago, President Obama’s health care law cut almost $150 billion from Medicare simply by reducing payments to private plans that provide similar care to plain vanilla Medicare at a higher cost.

Today, again, entitlements are at the center of the national debate. Our elected officials are consumed by slashing a budget deficit that is expected to balloon over coming decades. With both Democrats and Republicans unwilling to raise taxes on the middle class, the discussion is quickly boiling down to how deeply entitlements must be cut.

We may want to broaden the debate. The relevant question is how best we can serve our social needs at the lowest possible cost. One answer is that we have a lot of room to do better. Improving the delivery of social services like health care and pensions may be possible without increasing the burden on American families, simply by removing the profit motive from the equation.

E-mail: eporter@nytimes.com;

Twitter: @portereduardo

Read More..