Is it ethical to take box cutters onto airplanes?

Nat Heatwole thinks it is. The 20-year-old student admits that he planted packages — box cutters, bleach, molding clay, and matches among the items — found on two domestic flights earlier this month.

The FBI thinks it isn’t. In a Baltimore courtroom last week, they accused Heatwole of carrying concealed dangerous weapons onto the planes — a federal violation that could send him to prison for up to 10 years. Judge Susan Gauvey set a preliminary hearing for November 10, releasing him without bail in the meantime.

On one point, both sides agree: He broke the law. He deliberately put knives, matches, bleach, and modeling clay shaped like explosives into plastic bags and hid them below the sinks in the airplanes’ lavatories. But Heatwole contends that his actions, which he felt were needed to prove that airport security is seriously flawed, were acts of civil disobedience. Were they?

Civil disobedience is one of the few circumstances where lawbreaking may be ethical. Its tradition stretches back to Henry Thoreau and Mahatma Gandhi. It also finds a welcome at Guilford College, the Quaker school in Greensboro, North Carolina, where Heatwole is a student. Civil disobedience requires of its practitioners not only that they be willing to break the law, but that they accept the penalties for doing so, using the occasions of arrest and imprisonment to call public attention to bad law, unjust policy, or (in this case) inadequate implementation.

Heatwole did that. He made no effort to hide. In fact, having planted the last package, he promptly emailed the Transportation Security Administration, explaining what he had done and providing precise details, including dates and flight numbers, on where to find the goods. As though to confirm his contention of blundering at the TSA, it took officials nearly five weeks to locate the packages (actually discovered by maintenance workers doing lavatory repairs) and arrest Heatwole. In fact, once one of the packets had been found, the TSA ordered a systemwide search of U.S. airliners — only to call it off once his apparently misplaced email resurfaced in the TSA’s information systems.

So Heatwole’s point has been made. But what about the ethics of his action? Looking at this dilemma from the outside, you can make a powerful moral case that the need to make a fuss about security trumps any allegiance to government institutions whose failings may put citizens at real risk from real terrorists. On the other hand, you can make a powerful moral case for working within the nation’s system of laws to make corrections — as a member of a loyal opposition, rather than as a high-handed vigilante. And while you can argue for the need to improve safety in the long term, you can also understand the annoyance of those who feel their short-term travel plans were disrupted by some kid with a grievance.

And you can draw some analogies. About the time Heatwole was planting his packages, ABC News was testing the nation’s post-9/11 security by secretly shipping 15 pounds of depleted uranium from Jakarta to Los Angeles. It slipped through undetected.

Was that civil disobedience? I don’t think so, since the risk was wholly different. No news network, given its power with the public, faces any serious threat of getting ten years in prison. That doesn’t give ABC a clean bill of ethical health, however: News organizations that depend on making news rather than simply reporting it — creating incidents to report, rather than reporting what’s already there — can find themselves discounted by the public as unethical, sensationalist, and untrustworthy.

Which brings us back to the question of punishment. Heatwole knew the risk he faced and took it. What should Judge Gauvey do? She may, in fact, have no alternative but to punish him to the full extent of the law. To do any less would set up a curious legal defense for those smuggling weapons onto planes. If caught, they would have a handy escape hatch in the argument that they were just exercising their civilly disobedient right to test the system. “I was just checking you out,” they could say. “I’m not a terrorist after all!”

That’s presumably true in Nat Heatwole’s case. But will it be true if others of more malicious intent succeed in smuggling weapons aboard? Or will they have been emboldened by this back-door defense, which would give them immense advantage if they succeed but risk only negligible punishment if they fail?

Watching Heatwole’s trial and sentencing, we in the public will face a justice-versus-mercy dilemma of its own. We’ll long to set a smart, upstanding kid free. But we’ll demand the establishment of a firm expectation of justice in crimes of this sort. That may leave us facing the bizarre spectacle of sending Heatwole to prison for doing the right thing — and thanking him, as he goes, for strengthening the security system by behaving illegally. Of such ambiguous challenges is ethics made.

(c)2003 Institute for Global Ethics

“I can’t say we have fear in our hearts. But we have a sense of ‘Who will it be tomorrow?’ You begin to think about whether it’s worth writing so sharply, maybe some fact shouldn’t be used.”

– Rimma Mikharyeva, deputy editor of the Togliatti Review, an investigative newspaper in Russia that prints tough exposés on business, politics, and organized crime. Mikharyeva’s colleague, editor-in-chief Aleksei Sidorov, 31, was stabbed to death earlier this month, presumably for the paper’s coverage, reported the New York Times. Sidorov’s predecessor was assassinated 18 months ago; 13 journalists have been murdered in Russia since 2000. (“A Prosperous Russian City Is Also Fatal for Journalists,” New York Times, Oct. 23)

TALLAHASSEE, Florida
Florida Governor Jeb Bush last week sparked a fiery debate over governmental separation of powers after overriding a court order allowing a man to remove the feeding tube that keeps alive his brain-damaged wife.

Governor Bush (R), acting on a one-time-only law hastily passed by the Florida Legislature, barred Michael Schiavo from allowing his wife Terri, who went on life support 13 years ago, to die.

Bush’s move, which came six days after the feeding tube was removed, overrides a series of court decisions favoring Schiavo, who said his wife told him she did not want to be kept alive artificially, though she never filled out a living will documenting that wish.

Terri Schiavo’s parents and siblings have fought her husband over removing the feeding tube, which was reinserted last week on Gov. Bush’s order, reported the New York Times. They argue that she still has cognitive functions. Medical authorities reject that argument, saying Terri Schiavo is in a vegetative state.

Last week’s flare-up in the case came after a final court ruling in favor of Michael Schiavo. Acting to stop him, the Florida Legislature, which had heard no evidence in the case, rushed through a contentious bill, voting 23-to-15 to authorize Gov. Bush to disregard the court rulings, reported the Times.

Bush, who in the past has voiced support for Schiavo’s parents, last week said his involvement in the case was “unique.” “I don’t think you’ll see me or the Legislature on a regular basis passing laws that deal with individuals or handfuls of people,” he told reporters.

The legislature and Bush came under sharp criticism last week from legal quarters, with many lawyers condemning their actions in the case as a stark violation of separation-of-powers principles.

“Courts get to decide particular cases, not legislatures,” Florida State University law professor Steven Gey told the Times.

“What if the courts decide, as I’m fairly sure they will, that the statute is unconstitutional?” University of Florida law professor Lars Noah asked the Times. “Could the Legislature then instruct the governor to ignore that judicial order?”

WASHINGTON
Last week’s arrest of a college student who deliberately broke the law to challenge airport security focused attention on the morality of tactics used by a growing number of people exposing potentially deadly security flaws, according to a report last week from USA Today.

Nathaniel Heatwole, a college sophomore, emailed the Transportation Security Administration (TSA) in September to say he had planted box cutters, bleach, modeling clay, and matches on six planes.

Heatwole’s email went unnoticed, according to USA Today, until last week, when the items were discovered on two Southwest Air flights, prompting his arrest on federal charges.

Heatwole told the TSA he was simply pointing out the flaws of their safety procedures, insisting that his motives were good.

Rep. John Mica (R-Fla.), chairman of the House of Representatives’ aviation subcommittee, last week spoke up in support of Heatwole, saying the student “has helped bring public attention to what has quietly been brushed aside in Congress.”

The TSA, which last week said it will change the way it screens email, said Heatwole’s motives are irrelevant. “Those who choose to game the system are diverting resources away from the war on terror and putting passengers at risk,” TSA spokesman Brian Turmail declared.

“There are those who, for whatever reason, decided to game the system,” Turmail told USA Today. “A lot of these gamers are in some ways the computer hackers of the air transportation system.”

It is a metaphor that many would embrace, pointing out that their efforts are designed to find flaws in a weak system in the aims of strengthening it.

“My first rule is do no harm,” explained former Federal Aviation Administration (FAA) security specialist Steve Elson, a constant air-safety gadfly who has taken it upon himself to test screening procedures by trying to smuggle harmless objects in lead-lined film bags onto airplanes.

Such people — trouble makers in the TSA’s view, but a type of whistle-blower in the eyes of supporters — “are putting themselves at tremendous risk, but they know something stinks and they’d like to clean it up,” retired FAA security agent Brian Sullivan told USA Today.

Louis Clark, executive director of the Government Accountability Project watchdog group, said that ethos is becoming increasingly widespread, noting that his group has logged triple the normal number of such cases in the past two years.

“There is this dramatic increase since Sept. 11, particularly in issues of security and health issues,” Clark told USA Today. “I’ve heard people say Sept. 11 has jogged them into a greater sense of ethics and responsibility for their society.”

LAGO AGRIO, Ecuador
Petroleum giant ChevronTexaco went on trial last week in a tiny Ecuadorian town in a case pitting 30,000 impoverished locals against a powerful firm accused of polluting their land and rivers and causing disease and death.

Texaco entered Ecuador in the early 1970s. When the company abandoned its operations 20 years later, it left with 1.5 billion barrels of crude and roughly $20 billion in profits, reported the New York Times.

It also left behind a mixed legacy of a much-strengthened Ecuadorian economy and oil industry, but a shattered environment pitted with contaminated water, sludge, and petroleum, according to the Times.

Locals sued Texaco, which merged with Chevron in 2001, over the damage, saying it had destroyed their homelands and led to alarming rates of cancer among their population.

Texaco spent $40 million to cap more than 200 pits, and built schools and health care facilities in a clean-up process deemed completed by Ecuador’s government in 1998, noted the Times.

Critics say the company did an incomplete job, imperiling thousands and cowing the government with warnings that pursuing the lawsuit would threaten investment by other oil firms.

Last year, the 2d U.S. Circuit Court of Appeals in New York refused to dismiss the lawsuit against ChevronTexaco, clearing the way for last week’s opening arguments in the tiny Ecuador border town.

The case could set an important precedent for other multinationals doing business in nations with weak environmental protection laws — laws that the U.S.-based firm argued should trump its more-costly standard practices back home.

“It’s an important case,” Alejandro Garro, an expert in Latin American law at Columbia University, told the Times. “Once the judgment becomes final in Ecuador, then the plaintiffs, whatever judgment they get, will go to the United States to enforce that judgment.”

Special to Newsline from Canadian correspondent Errol P. Mendes

TORONTO
A survey by Deloitte & Touche LLP has found that Canadian chief operating officers (COOs) are more concerned about terrorist attacks than are their U.S. counterparts.

The survey involved 600 COOs in 16 countries and found that 35 percent of Canadian COOs were concerned about terrorist attacks, compared to 27 percent of their U.S. counterparts.

Among the COOs surveyed, Canadian executives were the second most concerned about terrorist attacks after the Japanese, of whom 42 percent expressed similar concerns.

The Globe & Mail is reporting that Carl Steidtmann, the chief economist of Deloitte & Touche, has concluded that Canadian concerns may stem from the fact that the United States — the largest business and trading partner of Canada — is also the country that was the target of the 9/11 attacks.

Mr. Steidtmann also said the fact that Canadian companies have to establish a more global orientation due to the small home market makes them more vulnerable.

WASHINGTON
Saying he is tired of watching tuition rates outpace inflation, a Republican lawmaker last week pushed for legislation that would withhold federal funds from universities and colleges that fail to curb the costs of getting an education.

Rep. Howard McKeon (R-Calif.) wants the measure to be rolled into the reauthorization of the Higher Education Act. His action is garnering both praise and criticism, reported the New York Times.

McKeon’s controversial proposal would halt the flow of some federal funds for universities that raise tuition at a rate more than twice that of inflation for two years in a row. Schools that do so would be required to explain their reasons, as well as their plans to avoid further steep hikes.

If a university violates the guideline for a third consecutive year, federal assistance, including Perkins Loans and work-study grants, would be cut off. However, Pell grants and Stafford loans, which go directly to students, would be unaffected, reported Georgetown’s Hoya campus paper.

“I’m not just trying to make enemies for nothing,” McKeon, a senior member of the House Committee on Education and the Workforce, said last week. “What I’m hoping is that we really get the attention of thousands of schools across the country, that they understand that this is a serious issue.”

“Our nation’s students, the future of our country, are being priced out of the promise of higher education,” McKeon said. “The cost of college just keeps going up.”

If McKeon’s standards went into effect today, 24 percent of the nation’s post-secondary institutions — public universities, private colleges, and for-profit trade schools — would be put on the watch list, according to an analysis from the American Council on Education.

Universities say McKeon’s proposal is unfair by failing to take into account double-digit hikes in costs the schools cannot control, including healthcare premiums and utility costs, reported the Times.

A new analysis from the College Board found across-the-board tuition hikes in higher education: 14 percent at both public universities and community colleges, and 6 percent at private universities — all far above the rate of inflation. Those hikes were partially offset by a record disbursement of financial aid: $105 billion in grants and loans, the Times reported.

NEW BEDFORD, Massachusetts
The coastal Massachusetts city of New Bedford, increasingly seen as a home port for heroin traffickers, last week took one more step toward implementing a controversial program that would test its school children for drug use.

The city, stricken this year by nine homicides, including the murder of a 14-year-old boy at a crack house, has been inching toward adopting the voluntary drug testing program, reported the Boston Globe last week.

The program calls on parents to voluntarily sign up their middle- and high-school students for random drug tests to be conducted at school. The anonymous results would be sent only to parents, not to the students’ schools nor to law enforcement. Students who test positive, as well as their parents, would attend follow-up workshops.

While the program has been gaining support in the community, some caution that it could consume limited school funds and erode civil rights, especially if authorities subpoenaed the drug test results for investigative or criminal use, noted the Globe.

“We’re not out to violate anyone’s civil rights,” said New Bedford mayor Frederick Kalisz, Jr. “We’re out to protect future generations.”

While the U.S. Supreme Court has upheld enforced drug testing of students in extracurricular programs, it has not ruled on the constitutionality of random testing for the student population. Many experts say that since the New Bedford program is voluntarily, it likely would pass muster, according to the Globe.

LONDON
Saying they are frustrated by a lack of help from some school heads, U.K. teachers at 25 schools have taken steps to keep violent students out of their classrooms, voting to refuse to teach disruptive pupils.

The industrial actions follow mounting incidents and greater awareness of violent outbursts by students, including punching, head-butting, biting, and shooting, reported the BBC.

When school leaders fail to back teachers’ concerns over letting violent students stay in the classrooms, the National Association of Schoolmasters Union of Women Teachers (NASUWT) says it will take matters into its own hands.

The NASUWT has helped teachers hold ballots affecting 25 schools this year, blocking menacing students from remaining in the classroom — efforts the organization says are supported by parents whose students also face dangers from their violent classmates.

U.K. Education minister Ivan Lewis says the government also is joining the effort to protect students and teachers by launching services “to make sure that parents are held accountable for the behavior of their children.”

Services include parenting contracts, health and child care information, and a 24-hour parental advice hotline, reported the BBC.

HELSINKI, Finland
The Reuters news agency reports that a new law being considered in Finland would allow parents to track their children’s whereabouts, in some cases without their consent, via signals sent from their cell phones and monitored by global positioning technology.

The proposed law is scheduled to be debated by the Finnish parliament in early November. The initiative is expected to have an impact in the rest of the European Union as well, according to Reuters, since it “is based on the EU’s directive on privacy and electronic communications.”

Juhapekka Ristola, a Finnish transport and communications ministry official, told the news agency, “Roughly similar legislation will be a reality in the European Union area in the near future.”

The law, if passed, would allow parents to locate their children via tracking signals sent back from their cell phones without their kids’ consent if the child is under 15 years of age, according to Reuters. Tracking people over 15 would require the consent of the child. In the case of an emergency, no consent would be required.

Finland’s two largest cell phone operators, TeliaSonera and Elisa, already offer the ability to locate users of its service via their handsets.

LONDON
Britain’s police ranks, struggling to recover from allegations of racism, were put on notice again last week with at least four resignations and three suspensions over racist behavior.

The officers, whose behavior included commending Hitler’s “right idea” and donning a Ku Klux Klan-style hood to threaten harassment against a British-Asian recruit, were recorded by an undercover BBC reporter.

The reporter’s story, which aired last week, prompted three resignations and two suspensions at the Greater Manchester Police and one resignation and one suspension at the North Wales Police, reported the Reuters news agency.

British police were given a black eye in 2000, when Greater Manchester Police’s chief constable, David Wilmot, said his force was “institutionally racist,” reported the Guardian. Wilmot’s charge was accompanied by widespread criticism of the police after a failed investigation into the 1993 murder of black student Stephen Lawrence.

Last week, Greater Manchester’s deputy chief constable Alan Green pledged swift punishment for any officer exhibiting racist behavior. “We will be unrelenting in our actions against racism, both inside and outside the Greater Manchester police service,” Green pledged.

Mark Daly, the undercover reporter, was arrested in June after the police were tipped off about his work. Daly faces a hearing next month on charges that he “gained his salary by deception and damaged a bullet-proof vest by hiding a pinhole camera in it,” according to the Guardian.

From Personnel Today and the U.K Health & Safety Executive:

“Exclusive research by Personnel Today and the Health & Safety Executive (HSE) has revealed the extent of the U.K.’s stress overload — an estimated 1,554,256 working days lost to stress every year. Worryingly, it is a problem that is getting worse, with more than half of U.K. organizations reporting an increase in workplace stress.

“A massive 83 percent of HR professionals say they believe stress is holding back the U.K.’s efforts to close the productivity gap, while 60 percent claim it is adding to staff retention problems.

“The ‘Stress in the U.K. Workplace’ survey, based on responses from almost 700 senior HR practitioners, suggests that stress-related illness now accounts for around 11 percent of all sickness absence.

“HR has a fundamental role to play in combating stress after nearly half the employers questioned said the culture in their business was causing stress. The main causes cited by respondents are all basic management failures that must be addressed by the HR function. These problems include unreasonable demands on staff, a lack of support and training, poor relationships at work, and poorly defined job roles.

“Meanwhile, a separate survey of UK employees, based on questions developed by Personnel Today, highlights the pressures of the modern workplace with 35 percent of staff admitting they felt unsupported by managers.

“The National Employee Benchmarks Survey, by BMRB, questioned almost 2,000 employees and found that more than half of the U.K. workforce feels under pressure to work long hours. The issue of stress has reached such proportions that 42 percent worry about their job outside working hours, 40 percent feel they cannot report concerns over excessive pressure, and 19 percent dread going into work.

“A quarter of the workforce admitted that worrying about work was affecting their sleep while just over a third of all employees in the UK said they felt overwhelmed by their workload….

“The results of the ‘Stress in the U.K. Workplace’ survey will now be used by the HSE to fine-tune its Stress Management Standards, which are due to be phased in next year….”

You Have Not Done Enough

“You have not done enough, you have never done enough, so long as it is still possible that you have something to contribute.”

– Dag Hammarskjöld (Swedish economist and philosopher, U.N. secretary general, 1905-1961)

Several years ago, before digital cameras were the rage, a Web camera appeared in the front window of a shop in our coastal village. It was programmed to take pictures every few minutes of the comings and goings on Main Street, posting them on a Web site popular with tourists, vacation-home owners, and others nostalgic for New England. When residents protested, annoyed that they couldn’t even walk downtown without having their image published worldwide, the store abandoned its practice.

We didn’t know it at the time, but our town was pioneering a massive debate, soon to consume every nation, about the ethics of camera phones.

Camera phones are nothing but conventional cell phones with tiny lenses and built-in digital cameras. Once the user takes a photo, it can be sent to a friend’s cell phone with a few keystrokes — or to a Web site where it can be posted in real time. The estimated number of camera phones sold in the United States: 1.9 million this year, up to 4.9 million next year. Estimated number already on the streets of Japan: more than 25 million.

So what’s the issue? Hands up, everyone who’s never seen tourists snapping pictures indiscriminately on city streets with real cameras. Hands up, all those who are utterly sure that pictures of themselves aren’t right now in family photo albums in Kalamazoo or Kharkov or Kyoto. Hands up, those who regularly agonize that amateur shutterbugs are invading our privacy.

The real issue isn’t photography itself, which has been around for more than a century. True, some big-city health clubs are beginning to ban camera phones, lest nude pictures get snapped in locker rooms. And yes, it’s been said that celebrity parties have asked guests to check cell phones at the door, fearing that every visitor could become the paparazzi. We’re told that Samsung Electronics in Korea has banned camera phones from its research facilities, fearing industrial espionage. It’s been reported that magazine distributors in Japan post placards urging customers not to photograph pages from magazines they would otherwise buy. But all that could have happened before camera phones. What’s new is the sudden ease with which pictures can be surreptitiously taken and instantly published.

Those two characteristics — stealth and sharing — will be the focus of this new debate. We’re used to talking about the right to remain private behind some kind of barrier — the physical walls of our home, the electronic firewalls keeping computer hackers away from our personal information, the walls of confidentiality we expect from lawyers, accountants, doctors, or ministers. This new debate centers on public privacy — the presumption that, even in public, we have the right to live an unrecorded life.

That presumption depends on the fact that most people have only a fleeting and selective memory. It depends, in other words, on the presumption of evanescence. We’ve always assumed that the passing dailiness of our lives will disappear without a trace. But what if something could lock in those moments forever — and without our approval?

That strange new possibility has people greatly concerned. Should they be? Not if their principal fear is terrorism, fraud, corruption, and sundry other vices. Camera phones may prove effective crime fighters. But if their fear concerns the misuse of these images, there’s a brave new world of concern out there.

Is it inconceivable that computers can be taught (like humans) to recognize images as they now recognize voices? Is it impossible to imagine vast data banks of images, refreshed every second from the Web sites of cell-phone snappers on every street? Is it far-fetched that someone could locate every picture of you in the last five years, building a profile of your activities that makes credit-card or phone-bill sleuthing look like child’s play? Is it beyond credibility that the person asking for that information may have malicious designs?

To the extent that such a world can be imagined, it will breed fear. And fear will raise calls for government regulation of camera phones. Other Web-based activities have so far managed to escape such regulation, though porn is pushing that limit. The camera-phone craze, by its sheer popularity in an age fascinated with visual imagery, could shatter that limit altogether.

Will camera-phone users voluntarily adopt an etiquette of restraint and an ethic of self-regulation? Or will they be regulated against their will by alarmed citizens and concerned legislators? This time, I suspect, the technology is too powerful to escape regulation. The question is not when, but how.

(c)2003 Institute for Global Ethics

“Our view is give them lawyers and let the process take its course, and if they are found guilty of crimes they will pay their price and would have had fair representation. If not, they should be released.”

– Adel al-Jubeir, foreign policy adviser to Saudi Arabia’s Crown Prince Abdullah, discussing his government’s efforts to pay for lawyers and bond for hundreds of Saudi citizens detained or prosecuted in U.S. anti-terrorism efforts. The Saudi government says its actions are aimed at making sure trials are fair; an FBI official says they are “tantamount to buying off a witness.” (“FBI Says Saudis Buy Off Witnesses,” Associated Press, Oct. 17)

WASHINGTON
In an unusual but not unprecedented move, a federal judge has ordered five journalists to reveal their sources for stories they reported involving Wen Ho Lee, a former nuclear weapons scientist at the Los Alamos National Laboratory who was charged in 1999 with espionage.

While Lee later pleaded guilty to one felony count of unauthorized copy of classified documents onto computer tapes, 59 other counts were dropped in what subsequently was described as a bungled case by the federal government, resulting in an apology to Lee from the judge on behalf of the government.

U.S. District Court Judge Thomas Penfield Jackson’s ruling comes in a civil case brought by Lee against the U.S. Department of Energy and the Federal Bureau of Investigation.

Lee’s suit alleges violations of the Privacy Act, which, according to the Los Angeles Times, “bars unauthorized disclosure of certain personal information by government agencies.” Lee alleges that government agents disclosed personal information about him to reporters during the media frenzy that ensued after his arrest.

According to the Associated Press, Judge Jackson wrote in his opinion, “‘It does not detract from the importance of the First Amendment principle at stake to conclude, in the instant case at least,’ that making possible evidence of government leaks available for trial outweighs the interest of keeping sources confidential.”

Former Energy Department secretary and current New Mexico Governor Bill Richardson stated in a deposition that he does not recall speaking with reporters about Lee. Several other government officials involved also claim that they either did not speak with reporters or do not recall speaking with them, the AP reported.

The journalists and their employees contest the ruling and are likely to appeal.

Dave Tomlin, the AP’s general counsel, told his news agency, “Before the First Amendment lets you compel reporters to reveal sources, we think you have to do more than get a small handful of government officials to shrug their shoulders and claim they don’t know or can’t remember.”

Similarly, New York Times spokeswoman Catherine Mathis told the Washington Post, “We continue to believe that the confidentiality of our sources is critical to providing the public with important information and plan to seek an appeal.”

According to the AP, “Under federal law, journalists have no unqualified privilege to keep their sources confidential, the Supreme Court ruled in a 1972 case.”

The reporters directly involved in the case are Bob Drogin of the Los Angeles Times, James Risen and Jeff Gerth of the New York Times, H. Josef Hebert of the Associated Press, and Pierre Thomas of CNN.

NEW YORK
The New York Stock Exchange’s hectic bidding floor lost a bit of its fervor for a moment last week after the floor’s five leading players were hit with fines of roughly $150 million for trading violations.

The firms named in last week’s action are those that lead the high-volume, high-stress fray of buying and selling stock shares on the floor. The NYSE is the only major exchange that still uses the “open-outcry” trading system, in which specialist firms match sellers and buyers directly on the floor, reported the Reuters news agency. Specialist firms are companies that actually engineer the trades, and are appointed by the exchange to work with a particular type of stock.

The specialist traders are suspected of failing to act as mere intermediaries for many trades: Instead of invisibly hooking up buyers and sellers, they allegedly bought the shares themselves, raised the prices a notch or two, and then sold them, pocketing the profits.

The firms — Bear Stearn’s Bear Hunter; FleetBoston’s Fleet Specialist; Goldman Sachs’ Spear, Leeds & Kellogg; LaBranche & Company; and Van der Moolen — also allegedly made their own trades before executing customers’ orders, causing price difference that cost clients, reported Reuters.

The firms are to be fined various amounts, with the grand total “in the ballpark” of $150 million, NYSE interim chairman John Reed told lawmakers in Washington last week.

Nearly all of the firms say they may appeal the fines, noting that the NYSE has yet to provide them with data backing up the claims of improper trading and how they calculated potential losses to clients.

“The exchange has provided us no detailed information. We have neither the data nor the specifics as to how the amounts were reached,” said Van der Moolen Specialists vice chairman Robert Fagenson. “Without access to that data, we cannot perform our own analysis.”

The New York Times notes that last week’s action, normally a rather straightforward regulatory move by the NYSE, was shaped by the U.S. Securities and Exchange Commission (SEC), which pressed for higher fines and for changes in the investigation of the five firms.

The unusually active involvement by the SEC follows allegations of regulatory weakness and conflicts of interest at the NYSE, and “underscores the uncertain future of the exchange’s regulatory role,” according to the Times.

GENEVA
Swiss banks last week agreed to provide investigators with limited access to 4.1 million accounts that may contain funds owed to Holocaust survivors and their heirs — accounts that until now have been kept hidden by the banks’ secrecy rules.

The accounts, opened between 1933 and 1945, have been eyed as the possible property of people who survived or died at the hands of Hitler and his supporters, reported the New York Times.

After World War II, many banks refused to turn over funds to claimants unable to provide necessary documents, such as death certificates, which were never issued by Nazi concentration camps.

Under a $1.25 billion settlement with Holocaust victims in 1988, Swiss banks agreed to provide court investigators with information about their accounts in case they could be traced to victims or heirs.

But over the past five years, the banks have released information on only 36,000 accounts, according to the Times.

Last week’s move wedges open the banks’ holdings, and follows a recent court report criticizing the banks for using secrecy laws to deny access to requested information.

Roger Witten, a lawyer for the banks, last week disputed charges that the banks had been stonewalling investigators and warned that the number of questionable accounts had been overstated.

Under the terms of last week’s deal, the banks will allow investigators to perform a test run, trying to match 550 claims against the listings of 4.1 million accounts. If matches are made, investigators may find leverage to expose the accounts to wider scrutiny, noted the Times.

To date, claims officials have distributed only $131.5 million in connection with 1,751 bank accounts; $800 million has been set aside for such payments. The remainder of the $1.25 billion settlement is allocated for other Holocaust victims.