DealBook: Beneath the Calm, SAC Works to Contain Fallout From an Inquiry

At last month’s Hurricane Sandy benefit concert, Steven A. Cohen sat near the Madison Square Garden stage, grooving to performances by Bon Jovi and Billy Joel.

Last week, he flew a private jet to the World Economic Forum in Davos, Switzerland, rubbing shoulders with world leaders and Fortune 500 chieftains. And on Monday, he will show up at the Breakers Resort in Palm Beach, Fla., for one of the year’s biggest hedge fund conferences and, if he can squeeze it in, a round of golf.

For a man who has emerged as the Justice Department’s great white whale in its insider trading investigation — a Wall Street version of Captain Ahab pursuing Moby-Dick — Mr. Cohen, the billionaire owner of the hedge fund SAC Capital Advisors, does not appear concerned.

But inside the offices of SAC’s Stamford, Conn., headquarters, and at Midtown Manhattan law firms, Mr. Cohen’s employees and lawyers are working hard to contain the fallout from the investigation.

His executives have offered financial incentives to Mr. Cohen’s staff members to stay with SAC. Marketing officers are trying to persuade investors to keep their money at the fund. And defense lawyers are working furiously to persuade federal securities regulators not to file a civil fraud lawsuit against the firm.

“This has always been a stressful place to work,” said an SAC employee who requested anonymity because he was unauthorized to speak publicly about the fund. “Now it’s just more stressful.”

Neither SAC nor Mr. Cohen has been accused of any wrongdoing.

The main question now looming over the firm is whether its clients will stand by the fund, or its legal and regulatory problems will cause investors to head for the exits. Under the firm’s rules, SAC clients have until Feb. 15 to ask for their money back, and then cannot make another so-called redemption request for another three months.

Mr. Cohen’s fund was dealt a blow last week when a Citigroup unit that manages money for wealthy families disclosed that it was withdrawing its $187 million investment. The move by the bank was the most prominent client departure since November, when the multiyear investigation into SAC’s trading practices entered a more serious phase.

Citigroup’s withdrawal represents a tiny percentage of SAC’s $14 billion in assets under management. The fund has said it expects total investor redemptions for the first quarter of up to $1 billion, a number that an SAC spokesman has said will not adversely affect its business.

SAC is largely insulated from the potentially devastating effects that client defections can have on a hedge fund in part because of Mr. Cohen’s extraordinary wealth. Unlike other hedge fund managers who rely almost entirely on outside investors, Mr. Cohen has the comfort of knowing that about $8 billion of SAC’s fund belongs to him and his employees.

Still, the Citigroup decision stung, say people close to SAC’s business, because of the longstanding and lucrative relationship between the bank and the fund. Another concern, said these people, is that the move could influence other large SAC investors currently weighing whether to keep their money at the fund.

For Citigroup, its withdrawal of money from SAC carries substantial business risk. The bank has a vast relationship with SAC, earning revenue by providing the fund with financing and trading services.

SAC could exact retribution on Citigroup by terminating, or at least scaling back, its broader relationship with the bank. An SAC spokesman declined to comment.

Citigroup’s move came two months after federal authorities arrested Mathew Martoma, a former SAC portfolio manager, in what they described as the most lucrative insider trading case ever uncovered. The Martoma indictment represented the first time that the government had brought charges stemming from a trade in which Mr. Cohen had been involved. The Securities and Exchange Commission has warned Mr. Cohen that it might file a civil fraud action against SAC related to the case.

In addition to Mr. Martoma, at least seven former SAC employees have been tied to insider trading while at the fund. Three have pleaded guilty to criminal charges.

Citigroup issued a statement that its decision “should not be construed as a statement on the merits of any outstanding legal proceedings or potential regulatory action.” But the bank specifically cited the Martoma case, explaining that “in the event these legal and regulatory matters are resolved favorably for Mr. Martoma and SAC, Citi Private Bank expects to reconsider admission of SAC’s funds to its hedge fund platform.”

Mr. Martoma has pleaded not guilty and rejected requests by federal agents to cooperate against his former boss. Mr. Cohen has told his employees and clients that he is confident that he has acted appropriately at all times.

Yet the heightened government scrutiny has caused skittishness among SAC’s top ranks, forcing the fund to lavish even richer financial incentives on a group of employees that is already among the most highly compensated in the hedge fund industry.

This month, SAC told its stable of portfolio managers that it would increase year-end bonuses by three percentage points. SAC portfolio managers — the fund’s most senior traders, given the authority to make their own investment decisions and also feed Mr. Cohen their best ideas — are paid, on average, 20 percent of the profits they generate for the fund.

“The program is intended to retain our most valuable resource, our investment professionals,” said Jonathan Gasthalter, the SAC spokesman.

Another valuable resource is SAC’s outside investors, which account for about $6 billion, or 40 percent, of the fund’s assets. That money accounts for hundreds of millions of dollars in fees, which SAC uses to finance one of the world’s largest and most sophisticated hedge fund operations, with more than 1,000 employees and 125 teams of traders and analysts. Its operation is also one of the most successful, posting average annualized returns of about 30 percent since 1992.

Those results have in the past kept SAC’s customers satisfied, but the government scrutiny has made many of them uneasy. The firm’s marketing team has reached out to the fund’s investors to address their concerns and reassure them that the insider trading inquiry will not affect its performance.

Despite those efforts, several investors in addition to Citigroup, including Titan Advisors and a unit of Société Générale, have notified SAC that they are withdrawing money. Other clients, like Chapwood Investments and SkyBridge Capital, have said they will continue to invest with the fund.

SAC executives continued the charm offensive with major clients on Sunday, holding an annual golf outing in Palm Beach on the eve of a hedge fund conference at the Breakers sponsored by Morgan Stanley. The conference — a matchmaking event that connects top managers with the world’s richest investors — is considered an important stop on the hedge fund money-raising circuit.

Since Morgan Stanley does not invite the news media to its conference, there is not expected to be the same paparazzi-like reports on Mr. Cohen that emerged last week from Davos. Bloomberg News filed a dispatch that Mr. Cohen sat in on a panel discussion on data security called “The Digital Infrastructure Context.” And Henry Blodget, the editor of the financial Web site Business Insider, wrote a Twitter post on a sighting of Mr. Cohen.

“Steve Cohen was hanging in Davos lounge yesterday,” he wrote. “Didn’t look worried.”

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Ariel Sharon Brain Scan Shows Response to Stimuli

JERUSALEM — A brain scan performed on Ariel Sharon, the former Israeli prime minister who had a devastating stroke seven years ago and is presumed to be in a vegetative state, revealed significant brain activity in response to external stimuli, raising the chances that he is able to hear and understand, a scientist involved in the test said Sunday.

Scientists showed Mr. Sharon, 84, pictures of his family, had him listen to a recording of the voice of one of his sons and used tactile stimulation to assess the extent of his brain’s response.

“We were surprised that there was activity in the proper parts of the brain,” said Prof. Alon Friedman, a neuroscientist at Ben-Gurion University of the Negev and a member of the team that carried out the test. “It raises the chances that he hears and understands, but we cannot be sure. The test did not prove that.”

The activity in specific regions of the brain indicated appropriate processing of the stimulations, according to a statement from Ben-Gurion University, but additional tests to assess Mr. Sharon’s level of consciousness were less conclusive.

“While there were some encouraging signs, these were subtle and not as strong,” the statement added.

The test was carried out last week at the Soroka University Medical Center in the southern Israeli city of Beersheba using a state-of-the-art M.R.I. machine and methods recently developed by Prof. Martin M. Monti of the University of California, Los Angeles. Professor Monti took part in the test, which lasted approximately two hours.

Mr. Sharon’s son Gilad said in October 2011 that he believed that his father responded to some requests. “When he is awake, he looks at me and moves fingers when I ask him to,” he said at the time, adding, “I am sure he hears me.”

Professor Friedman said in a telephone interview that the test results “say nothing about the future” but may be of some help to the family and the regular medical staff caring for Mr. Sharon at a hospital outside Tel Aviv.

“There is a small chance that he is conscious but has no way of expressing it,” Professor Friedman said, but he added, “We do not know to what extent he is conscious.”

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Ariel Sharon Brain Scan Shows Response to Stimuli

JERUSALEM — A brain scan performed on Ariel Sharon, the former Israeli prime minister who had a devastating stroke seven years ago and is presumed to be in a vegetative state, revealed significant brain activity in response to external stimuli, raising the chances that he is able to hear and understand, a scientist involved in the test said Sunday.

Scientists showed Mr. Sharon, 84, pictures of his family, had him listen to a recording of the voice of one of his sons and used tactile stimulation to assess the extent of his brain’s response.

“We were surprised that there was activity in the proper parts of the brain,” said Prof. Alon Friedman, a neuroscientist at Ben-Gurion University of the Negev and a member of the team that carried out the test. “It raises the chances that he hears and understands, but we cannot be sure. The test did not prove that.”

The activity in specific regions of the brain indicated appropriate processing of the stimulations, according to a statement from Ben-Gurion University, but additional tests to assess Mr. Sharon’s level of consciousness were less conclusive.

“While there were some encouraging signs, these were subtle and not as strong,” the statement added.

The test was carried out last week at the Soroka University Medical Center in the southern Israeli city of Beersheba using a state-of-the-art M.R.I. machine and methods recently developed by Prof. Martin M. Monti of the University of California, Los Angeles. Professor Monti took part in the test, which lasted approximately two hours.

Mr. Sharon’s son Gilad said in October 2011 that he believed that his father responded to some requests. “When he is awake, he looks at me and moves fingers when I ask him to,” he said at the time, adding, “I am sure he hears me.”

Professor Friedman said in a telephone interview that the test results “say nothing about the future” but may be of some help to the family and the regular medical staff caring for Mr. Sharon at a hospital outside Tel Aviv.

“There is a small chance that he is conscious but has no way of expressing it,” Professor Friedman said, but he added, “We do not know to what extent he is conscious.”

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Unboxed: Literary History, Seen Through Big Data’s Lens

ANY list of the leading novelists of the 19th century, writing in English, would almost surely include Charles Dickens, Thomas Hardy, Herman Melville, Nathaniel Hawthorne and Mark Twain.

But they do not appear at the top of a list of the most influential writers of their time. Instead, a recent study has found, Jane Austen, author of “Pride and Prejudice, “ and Sir Walter Scott, the creator of “Ivanhoe,” had the greatest effect on other authors, in terms of writing style and themes.

These two were “the literary equivalent of Homo erectus, or, if you prefer, Adam and Eve,” Matthew L. Jockers wrote in research published last year. He based his conclusion on an analysis of 3,592 works published from 1780 to 1900. It was a lot of digging, and a computer did it.

The study, which involved statistical parsing and aggregation of thousands of novels, made other striking observations. For example, Austen’s works cluster tightly together in style and theme, while those of George Eliot (a k a Mary Ann Evans) range more broadly, and more closely resemble the patterns of male writers. Using similar criteria, Harriet Beecher Stowe was 20 years ahead of her time, said Mr. Jockers, whose research will soon be published in a book, “Macroanalysis: Digital Methods and Literary History” (University of Illinois Press).

These findings are hardly the last word. At this stage, this kind of digital analysis is mostly an intriguing sign that Big Data technology is steadily pushing beyond the Internet industry and scientific research into seemingly foreign fields like the social sciences and the humanities. The new tools of discovery provide a fresh look at culture, much as the microscope gave us a closer look at the subtleties of life and the telescope opened the way to faraway galaxies.

“Traditionally, literary history was done by studying a relative handful of texts,” says Mr. Jockers, an assistant professor of English and a researcher at the Center for Digital Research in the Humanities at the University of Nebraska. “What this technology does is let you see the big picture — the context in which a writer worked — on a scale we’ve never seen before.”

Mr. Jockers, 46, personifies the digital advance in the humanities. He received a Ph.D. in English literature from Southern Illinois University, but was also fascinated by computing and became a self-taught programmer. Before he moved to the University of Nebraska last year, he spent more than a decade at Stanford, where he was a founder of the Stanford Literary Lab, which is dedicated to the digital exploration of books.

Today, Mr. Jockers describes the tools of his trade in terms familiar to an Internet software engineer — algorithms that use machine learning and network analysis techniques. His mathematical models are tailored to identify word patterns and thematic elements in written text. The number and strength of links among novels determine influence, much the way Google ranks Web sites.

It is this ability to collect, measure and analyze data for meaningful insights that is the promise of Big Data technology. In the humanities and social sciences, the flood of new data comes from many sources including books scanned into digital form, Web sites, blog posts and social network communications.

Data-centric specialties are growing fast, giving rise to a new vocabulary. In political science, this quantitative analysis is called political methodology. In history, there is cliometrics, which applies econometrics to history. In literature, stylometry is the study of an author’s writing style, and these days it leans heavily on computing and statistical analysis. Culturomics is the umbrella term used to describe rigorous quantitative inquiries in the social sciences and humanities.

“Some call it computer science and some call it statistics, but the essence is that these algorithmic methods are increasingly part of every discipline now,” says Gary King, director of the Institute for Quantitative Social Science at Harvard.

Cultural data analysts often adapt biological analogies to describe their work. Mr. Jockers, for example, called his research presentation “Computing and Visualizing the 19th-Century Literary Genome.”

Such biological metaphors seem apt, because much of the research is a quantitative examination of words. Just as genes are the fundamental building blocks of biology, words are the raw material of ideas.

“What is critical and distinctive to human evolution is ideas, and how they evolve,” says Jean-Baptiste Michel, a postdoctoral fellow at Harvard.

Mr. Michel and another researcher, Erez Lieberman Aiden, led a project to mine the virtual book depository known as Google Books and to track the use of words over time, compare related words and even graph them.

Google cooperated and built the software for making graphs open to the public. The initial version of Google’s cultural exploration site began at the end of 2010, based on more than five million books, dating from 1500. By now, Google has scanned 20 million books, and the site is used 50 times a minute. For example, type in “women” in comparison to “men,” and you see that for centuries the number of references to men dwarfed those for women. The crossover came in 1985, with women ahead ever since.

In work published in Science magazine in 2011, Mr. Michel and the research team tapped the Google Books data to find how quickly the past fades from books. For instance, references to “1880,” which peaked in that year, fell to half by 1912, a lag of 32 years. By contrast, “1973” declined to half its peak by 1983, only 10 years later. “We are forgetting our past faster with each passing year,” the authors wrote.

JON KLEINBERG, a computer scientist at Cornell, and a group of researchers approached collective memory from a very different perspective.

This article has been revised to reflect the following correction:

Correction: January 27, 2013

An earlier version of this article misstated Matthew L. Jockers’s age. He is 46, not 48. It also misspelled the title of the movie known for the line “You had me at hello.” It is “Jerry Maguire,” not “Jerry McGuire.”

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Argentina and Iran to Investigate Jewish Center Bombing

BUENOS AIRES — Argentina announced Sunday that it had reached an agreement with Iran to establish a joint commission to investigate the 1994 bombing of a Jewish community center here.

Nearly 19 years ago, a suicide bomber drove a van full of explosives into the Argentina Israelite Mutual Association headquarters, killing 85 people and wounding about 300. Like a previous attack two years earlier that leveled Israel’s embassy in Buenos Aires, killing 29, it has never been solved.

The initial investigation into the community center bombing was thrown out in 2005 on accusations of corruption and incompetence by Argentine authorities, some of whom would later be charged for misconduct.

A special prosecutor, Alberto Nisman, has since taken over the investigation and accused Hezbollah, the Lebanese group with strong ties to Iran and Syria, of carrying out the bombing and senior Iranian officials of planning and financing it. Mr. Nisman declined to comment on the new agreement.

Iran has refused to carry out international arrest warrants for nine people Argentina suspects in the attacks. But under the agreement, it will now permit prosecutors to interrogate suspects in Tehran. The suspects include a former Iranian president, Ali Akbar Hashemi Rafsanjani, and Iran’s defense minister, Gen. Ahmad Vahidi.

The accord stipulates that the two countries establish a five-member commission of international law experts. None can be of Argentine or Iranian nationality.

The accord, signed in Ethiopia, concluded several rounds of talks between Argentina’s foreign minister, Héctor Timerman, and his Iranian counterpart, Ali Akbar Salehi.

“Eighteen years of effort have failed to advance the case or prove anything against Iran, indicating that Iran is innocent,” the Tehran-based Fars news agency said in its lead story Sunday.

President Cristina Fernández de Kirchner hailed the accord as “historic.”

“The attack was followed only by failures and scandals. The trial ended up a farce,” Mrs. Kirchner wrote on social networks. “We will never allow the A.M.I.A. tragedy to be used like a chess piece in geopolitical affairs,” she said, referring to the Argentine Mutual Aid Association, the center that was bombed in 1994.

Each country has reasons to reach out. Iran is a consumer of Argentina’s agricultural commodities, an especially important tie as Argentina’s economy slows. Iran’s trade with Argentina has grown by 200 percent in the last few years, to more than $1.2 billion.

For its part, Iran is eager to counter its diplomatic isolation, expanding on the ties it has forged in Latin American nations like Venezuela, Bolivia and Ecuador.

Jewish groups, however, were wary of the negotiations.

“Argentina is legitimizing Iran’s style of governance and getting nothing in return,” said Guillermo Borger, the president of the Argentine Mutual Aid Association.

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7 Die in Fire at Factory in Bangladesh

A.M. Ahad/Associated Press

Firefighters and volunteers worked to extinguish the fire at a small garment factory in Bangladesh’s capital on Saturday.

DHAKA, Bangladesh — In the latest blow to Bangladesh’s garment industry, seven workers died Saturday after a fire swept through a factory here not long after seamstresses had returned from a lunch break. Workers said supervisors had locked one of the factory exits, forcing some people to jump out of windows to save their lives.

Abir Abdullah/European Pressphoto Agency

Relatives mourned beside the bodies of workers killed in the fire at a hospital in Dhaka.

Reuters

People sifted through the wreckage at the Smart Fashions factory.

The fatal fire comes roughly two months after the blaze at the Tazreen Fashions factory left 112 workers dead and focused global attention on unsafe conditions in Bangladesh’s garment industry. Tazreen Fashions, located just outside Dhaka, the capital, had been making clothing for some of the world’s biggest brands and retailers, including Walmart.

In the aftermath of the Tazreen Fashions fire, political and industrial leaders in Bangladesh pledged to quickly improve fire safety and even conducted high-profile, nationwide inspections of many of the country’s 5,000 clothing factories. And global brands promised they would not buy clothes from unsafe factories.

But Saturday’s fire in a densely populated section of Dhaka is a grim reminder that the problems remain. The blaze erupted about 2 p.m. at Smart Garment Export, a small factory that employed about 300 people, most of them young women who were making sweaters and jackets. All seven of the dead workers were women.

Masudur Rahman Akand, a supervisor in the fire department, said the factory’s workers were returning from lunch when the blaze erupted in a storage area. The factory was located on the second floor of a building, above a bakery, and it lacked proper exits and fire prevention equipment, Mr. Akand said.

“We did not find fire extinguishers,” he said. “We did not find any safety measures.”

With smoke filling the factory floor, workers apparently panicked. Mr. Akand said the seven workers who died either suffocated or were trampled by people trying to escape.

Eight other workers were hospitalized with injuries. Some of them told rescuers that many people could not quickly escape because one of the exits was blocked by a locked steel gate. Witnesses said people began jumping out of windows before the gate was unlocked.

Azizul Hoque, a police supervisor, said the investigation was continuing. “We do not know the reason or the source or the origin of the fire,” he said.

It was unclear whether the Smart Garment factory was making clothing for international brands or retailers. Dhaka’s industrial areas are filled with factories, large and small, that produce clothing for much of the Western world.

Julfikar Ali Manik reported from Dhaka, and Jim Yardley from New Delhi.

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Well: Ask Well: Squats for Aging Knees

You are already doing many things right, in terms of taking care of your aging knees. In particular, it sounds as if you are keeping your weight under control. Carrying extra pounds undoubtedly strains knees and contributes to pain and eventually arthritis.

You mention weight training, too, which is also valuable. Sturdy leg muscles, particularly those at the front and back of the thighs, stabilize the knee, says Joseph Hart, an assistant professor of kinesiology and certified athletic trainer at the University of Virginia, who often works with patients with knee pain.

An easy exercise to target those muscles is the squat. Although many of us have heard that squats harm knees, the exercise is actually “quite good for the knees, if you do the squats correctly,” Dr. Hart says. Simply stand with your legs shoulder-width apart and bend your legs until your thighs are almost, but not completely, parallel to the ground. Keep your upper body straight. Don’t bend forward, he says, since that movement can strain the knees. Try to complete 20 squats, using no weight at first. When that becomes easy, Dr. Hart suggests, hold a barbell with weights attached. Or simply clutch a full milk carton, which is my cheapskate’s squats routine.

Straight leg lifts are also useful for knee health. Sit on the floor with your back straight and one leg extended and the other bent toward your chest. In this position, lift the straight leg slightly off the ground and hold for 10 seconds. Repeat 10 to 20 times and then switch legs.

You can also find other exercises that target the knees in this video, “Increasing Knee Stability.”

Of course, before starting any exercise program, consult a physician, especially, Dr. Hart says, if your knees often ache, feel stiff or emit a strange, clicking noise, which could be symptoms of arthritis.

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Well: Ask Well: Squats for Aging Knees

You are already doing many things right, in terms of taking care of your aging knees. In particular, it sounds as if you are keeping your weight under control. Carrying extra pounds undoubtedly strains knees and contributes to pain and eventually arthritis.

You mention weight training, too, which is also valuable. Sturdy leg muscles, particularly those at the front and back of the thighs, stabilize the knee, says Joseph Hart, an assistant professor of kinesiology and certified athletic trainer at the University of Virginia, who often works with patients with knee pain.

An easy exercise to target those muscles is the squat. Although many of us have heard that squats harm knees, the exercise is actually “quite good for the knees, if you do the squats correctly,” Dr. Hart says. Simply stand with your legs shoulder-width apart and bend your legs until your thighs are almost, but not completely, parallel to the ground. Keep your upper body straight. Don’t bend forward, he says, since that movement can strain the knees. Try to complete 20 squats, using no weight at first. When that becomes easy, Dr. Hart suggests, hold a barbell with weights attached. Or simply clutch a full milk carton, which is my cheapskate’s squats routine.

Straight leg lifts are also useful for knee health. Sit on the floor with your back straight and one leg extended and the other bent toward your chest. In this position, lift the straight leg slightly off the ground and hold for 10 seconds. Repeat 10 to 20 times and then switch legs.

You can also find other exercises that target the knees in this video, “Increasing Knee Stability.”

Of course, before starting any exercise program, consult a physician, especially, Dr. Hart says, if your knees often ache, feel stiff or emit a strange, clicking noise, which could be symptoms of arthritis.

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The Lede Blog: Egypt's Soccer Riots, a View From the Ground

Video posted online appears to show fans of Cairo’s Al Ahly soccer team celebrating a court verdict.

It was one of the world’s deadliest episodes of soccer violence — a clash between fans of the Egyptian team Al Masry, of Port Said, and players and fans from Al Ahly, of Cairo, a year ago that killed 74 and wounded over 1,000.

On Saturday, a court in Cairo handed down death sentences for 21 of those involved in the riots. The violence that the verdict prompted, involving hard-core “ultra” supporters of both teams, killed at least 28 and wounded at least 300, my colleagues David Kirkpatrick and Mayy El Sheikh reported.

Pictures and video from Port Said and Cairo were markedly different. In Cairo, as the video at the top of this post shows, there were widespread celebrations. In Port Said, a city of about 600,000.

Rioters looted and burned a police barracks and set fire to a police station. They attacked members of the news media, damaging television cameras that sought to film the violence and ending their broadcasts. They closed off all roads into Port Said as well as the railroad station, and the Ministry of Electricity and Energy said rioters had attacked a power facility as well.

Video posted online appears to show protesters in Port Said.

In Cairo, Mr. Kirkpatrick and Ms. El Sheikh reported, the families of those killed in the clash last year “held pictures of the victims in the air. Some danced and chanted. A few fainted. And the Cairo ultras celebrated for hours outside their team’s headquarters.”

Video posted online appears to show celebrations in Cairo.

Tara Todras-Whitehill, a photographer in Cairo, posted further pictures of the celebrations on her Twitter account.

Ultras chanting ‘Min of Interior it’s ur turn next’ and calling for execution of Tantawi. Can’t win in #Egypt #PortSaid http://t.co/Up8vK9hv

— T Todras-Whitehill (@taratw) 26 Jan 13

Ultras celebrate in their Zamalek stadium the verdict of 21 in #PortSaid massacre. #Egypt #Cairo http://t.co/bR5BtvHB

— T Todras-Whitehill (@taratw) 26 Jan 13

It was not immediately clear where the following picture also posted on Twitter, by Tom Gara of The Wall Street Journal, came from. But it apparently shows a man playing an accordion in the midst of one riot.

The craziest photo to come out of Egypt for a long time: http://t.co/PmVRM4K3

— Tom Gara (@tomgara) 26 Jan 13

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Labor Relations Board Rulings Could Be Undone

By ruling that Mr. Obama’s three recess appointments last January were illegal, the federal appeals court ruling, if upheld, would leave the board with just one member, short of the quorum needed to issue any rulings. The Obama administration could appeal the court ruling, but no announcement was made on Friday.

If the Supreme Court were to uphold Friday’s ruling, issued by the United States Court of Appeals for the District of Columbia Circuit, it would mean that the labor board did not have a quorum since last January and that all its rulings since then should be nullified.

Many Republicans and business groups applauded Friday’s ruling. They often assert that the appointments Mr. Obama made to the board have transformed it into a tool of organized labor. But many Democrats and labor unions say Mr. Obama’s appointments restored ideological balance to the board after it was tipped in favor of business interests under President George W. Bush

Mark G. Pearce, the board’s chairman, issued a statement saying the board disagreed with the ruling and suggested that other appeals courts hearing cases about the constitutionality of Mr. Obama’s appointments could reach a different conclusion.

“In the meantime, the board has important work to do,” said Mr. Pearce, whose agency oversees enforcement of the laws governing strikes and unionization drives. “We will continue to perform our statutory duties and issue decisions.”

Unless the Senate confirms future nominees to the board — Senate Republicans have blocked several of Mr. Obama’s board nominees — Mr. Pearce will be the only member left if Friday’s ruling is upheld. The board has five seats.

Representative Darrell Issa, a California Republican who is the chairman of the Oversight and Government Reform Committee, issued a statement that urged the recess appointees to “do the right thing and step down.” He added, “To avoid further damage to the economy, the N.L.R.B. must take the responsible course and cease issuing any further opinions until a constitutionally sound quorum can be established.”

The three disputed recess appointees included two Democrats, Sharon Block, deputy labor secretary, and Richard Griffin, general counsel to the operating engineers’ union; and one Republican, Terence Flynn, a counsel to a board member. Mr. Flynn resigned last May after being accused of leaking materials about the group’s deliberations. Another Republican member, Brian Hayes, stepped down when his term expired last month.

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