November 2009

Afghan officials fear talk of exit strategy

KABUL – Afghan officials hope President Barack Obama's address on Afghanistan won't be weighted too heavily on an exit strategy — even though that's the message many Americans and Democrats in Congress want to hear.
If he talks extensively in his speech Tuesday night about winding down the war, Afghans fear the Taliban will simply bide their time until the Americans abandon the country much as Washington did after the Soviets left 20 years ago. That move plunged the nation into civil war and paved the way for al-Qaida and the Sept. 11 attacks.
Similarly, in neighboring Pakistan, too much talk of a finite U.S. troop presence gives commanders little reason to help fight Afghan militants — the very people they might eventually need to embrace as allies if the international community fails to secure Afghanistan and the Taliban retake Kabul.
From the Pakistani side of the volatile border, the fear is that a premature U.S. pullout would leave Pakistan vulnerable to an unchecked threat from Islamic extremists, who now control significant areas of the northwest.
"If the Americans leave the war unfinished — without stabilizing Afghanistan — it is bad for Pakistan," Mahmood Shah, a former security chief for Pakistan's tribal areas, said Monday. "Obama should announce a change of strategy that moves away from force to stabilization ... so that people will stop going to the Taliban in search of security."
So while Obama needs to reassure the American public that Afghanistan will not become his Vietnam, that message might be best muffled in the battle zones.
"Mentioning an exit strategy at the height of fighting is premature," said Hamid Gailani, majority leader in the Afghan parliament. Gailani hopes Obama's expected military buildup will be accompanied by a political plan that fosters economic development for his impoverished nation.
"If he speaks of a surge on the one hand and of an exit strategy on the other hand, it will not make any sense to people," Gailani said.
However, there is a case to be made for Obama to emphasize that U.S. forces aren't going to be in Afghanistan forever. That message could serve to undercut the argument of hardcore militants who lash out against foreign occupiers — and use it as a recruitment tool. It also could perhaps strengthen Afghan efforts toward reconciliation with some members of the Taliban, who say they won't negotiate until foreign forces leave.
"I think the insurgency has been very, very skilled at propaganda and I think that they will inevitably use the announcement of an increase in troop levels to make the case again and again that we're an occupation, that Karzai is a puppet," said Caroline Wadhams, senior national analyst at the Washington-based Center for American Progress think tank. "That's why I think it's so important that we continue to talk about how we're not going to be there forever."
On the other hand, Afghan officials worry that political pressure in the United States might encourage Obama to pull out before the Taliban have been seriously weakened.
Much of the relative success of the Iraq surge was that it changed perceptions — convincing both insurgents and government leaders alike that the U.S. would stay as long as it took to achieve its goals. That emboldened many Iraqi Sunnis to break with al-Qaida — a move that was a turning point in the war.
Afghans have a historic aversion to foreign occupation, but the repressive Taliban have little appeal to Afghans outside the rural areas dominated by ethnic Pashtuns. Still, Afghans tend to back whomever is winning.
When Obama rolled out his first strategy for Afghanistan and Pakistan in March, nearly 700 U.S. service members had been killed in Afghanistan, Pakistan and Uzbekistan as a result of the U.S. invasion of Afghanistan in late 2001. Now, eight months later, that number has grown to at least 845.
Back in the spring, Obama deployed an extra 21,000 U.S. troops to Afghanistan. When he delivers his national address from the U.S. Military Academy at West Point, N.Y., he's expected to announce an increase of up to 35,000 more.
To win backing for the unpopular war, the White House has punctuated its message with talk about exit ramps.
Last week, Obama said he wanted to "finish the job." White House press secretary Robert Gibbs said recently, "We are not going to be there another eight or nine years."
Even Gen. Stanley McChrystal, the top U.S. commander in Afghanistan, is giving hints, albeit privately, about a possible endgame.

Rep. Mike Coffman, a Republican congressman from Colorado, said this week that during his visit to Kabul, he asked McChrystal: "If you get these troops that you are requesting, the 40,000, where's the tipping point? At what point will we begin to draw down?" According to Coffman, McChrystal responded: "Sometime before 2013."

A U.S. military spokesman in Kabul did not dispute the congressman's characterization of his conversation with McChrystal, but cautioned that the nature of the chat was purely speculative.

British Prime Minister Gordon Brown has been talking about ways to exit, too. In announcing an international conference on Afghanistan Jan. 28 in London, Brown on Saturday handed Afghan President Hamid Karzai a page of "milestones on which he's going to be judged."

Besides stepping up training and deployment of Afghan security forces, reducing corruption and appointing local leaders, Brown stated that by the end of next year, the Afghan government should have trained another 50,000 troops and must take control of at least five districts from the NATO-led force.

"I hope we will see this process happening in a way that people can feel more secure, that side-by-side with the British troops, the Afghans are taking responsibility for themselves so we can look forward to a time in the future — there is no timetable at the moment — when Afghan forces can take responsibility in new areas and British forces are able to come home."

That's not reassuring to many Afghans in places like Helmand province in southern Afghanistan where Taliban influence is strong.

"We are not at the stage when international forces can leave Afghanistan," said Daud Ahmadi, a spokesman for the governor of Helmand. "For now, we're talking about international forces who are coming. Helmand is one of the provinces where terrorists and drug dealers and the Taliban are destroying security."

It's not that Ahmadi doesn't want U.S. forces to leave eventually. He spoke enthusiastically about how the Afghan government has approved a new seventh corps of the Afghan National Army — Corps 215 Maiwand — to be based in the Helmand capital of Lashkar Gah where the first fresh U.S. troops are expected to arrive. Brown has said that the Afghans have vowed to deploy 5,000 members of the new Afghan army corps to Helmand, to be partnered by British troops next year.

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Associated Press Writers Kathy Gannon in Islamabad and Rahim Faiez in Kabul contributed to this report.

NY paparazzo testifies in Parker-Broderick case

ST. CLAIRSVILLE, Ohio – A paparazzo has testified that an Ohio police chief told him he had access to ultrasound photographs belonging to the woman who carried twins for Sarah Jessica Parker and Matthew Broderick.
Justin Steffman of New York testified Tuesday in the trial of Barry Carpenter, the suspended chief of Martins Ferry, where surrogate Michelle Ross lived. Carpenter and Police Chief Chad Dojack from nearby Bridgeport are accused of scheming to sell items from Ross' home.
A special prosecutor has said Carpenter entered Ross' home in May and removed items that identified her as the surrogate.
Steffman says Dojack offered to sell him the surrogate's address and contact information for $1,000. He says Carpenter said he had access to the plaster cast and ultrasound photos.
Dojack faces trial in January.

Clinton: Would look forward to coffee with Palin

WASHINGTON – Secretary of State Hillary Rodham Clinton says she would be happy to talk to Sarah Palin over coffee.
In an interview for broadcast Sunday on NBC's "Meet the Press," Clinton says she's never met the one-time GOP vice presidential hopeful and former Alaska governor and thinks it would be very interesting to sit down and talk with her.
Clinton was responding to a question about a passage in Palin's new book. Palin writes that if she and Clinton ever meet for coffee, "I know that we would fundamentally disagree on many issues." But Palin says, "my hat is off to her hard work on the 2008 campaign trail."
Clinton, in Singapore for a meeting of world leaders, says she's ready to have a cup of coffee and maybe she could make a case on some of the issues on which the two women disagree.

BofA knew of Merrill pain in November: House panel

WASHINGTON (Reuters) –
A congressional panel accused Bank of America Corp (BAC.N) on Tuesday of knowing about Merrill Lynch & Co's huge losses as early as November 2008, suggesting the bank lied to investors in saying it did not grasp the depth of the problems until the following month.

Democrats on the U.S. House Oversight and Government Reform Committee unveiled internal Bank of America documents they said show the bank was alarmed by the losses far before shareholders of both companies approved the merger last December 5.

The panel has for months been probing events leading up to the deal's completion on January 1. It has been trying to pinpoint when the bank knew Merrill was on its way to what would become a $15.8 billion loss. The panel has also been trying to determine whether Bank of America was prepared to try to stop the merger or seek government help to finish it.

On Tuesday, for example, the committee disclosed one handwritten note from an outside lawyer, dated November 12, 2008, that said Merrill "lost $7 billion in October."

The House committee is also investigating the government's role in encouraging the merger, which resulted in Bank of America receiving a $20 billion injection of taxpayer funds, on top of $25 billion it had previously obtained.

Tuesday's hearing was the committee's fourth to investigate the high-profile deal that occurred at the height of the U.S. financial crisis in late 2008.

Brian Moynihan, considered a frontrunner to replace outgoing Chief Executive Kenneth Lewis, was among those to testify at Tuesday's hearing.

Moynihan was the bank's general counsel when Bank of America closed its Merrill deal and is now the bank's retail banking chief.

Also testifying was Timothy Mayopoulos, the bank's general counsel until he was fired on December 10, 2008, and replaced by Moynihan.

Others to testify are two Bank of America directors, Charles "Chad" Gifford and Thomas May, who are part of a board committee to find Lewis' replacement.

Gifford is the former chief executive at FleetBoston Financial Corp, where he was Moynihan's boss. Bank of America bought FleetBoston in 2004.

The House panel has already questioned and faulted Lewis, Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson for how they handled the Merrill deal.

(Reporting by Rachelle Younglai and Jonathan Stempel, with additional reporting by Joe Rauch, editing by Matthew Lewis)

Army suicides to top 2008, but progress reported

WASHINGTON – Soldier suicides this year are almost sure to top last year's, but a recent decline in the pace of such deaths could mean the Army is making progress in stemming them, officials said Tuesday.
Army Vice Chief of Staff General Peter Chiarelli said that as of Monday, 140 active duty soldiers are believed to have died of self-inflicted wounds. That's the same as were confirmed for all of 2008.
"We are almost certainly going to end the year higher than last year — this is horrible, and I do not want to downplay the significance of these numbers in any way," he said.
But Chiarelli said there has been a tapering off in recent months from huge numbers of January and February.
"I do believe we are finally beginning to see progress being made," Chiarelli told a Pentagon press conference.
He attributed that to some unprecedented efforts the Army has been trying to work with soldiers through new programs.
Using some U.S. bases as examples of the trend downward, Chiarelli said there were 18 suicides reported this year at Fort Campbell in Kentucky — and that 11 of those were in the first four months of the year.
At Schofield Barracks in Hawaii, there were seven all year so far — five in the first five months of the year and only two since.
The Army widened suicide prevention in March in an attempt to make rapid improvements in its programs and policies. Army efforts to curb suicides also were increased Oct. 1 with the beginning of the so-called Comprehensive Soldier Fitness program, which aims to put the same emphasis on mental and emotion strength as the military traditionally has on physical strength. Basic training now includes anti-stress programs as part of a broader effort to help soldiers deal with the aftereffects of combat and prevent suicides.
Still, another jump in suicide figures for 2009 would make it the fifth straight year that such deaths have set a record as troops continue to come under the stress of two overseas wars. It compares with 140 in 2008, 115 in 2007 and 102 in 2006.
The numbers kept by the service branches don't show the whole picture of war-related suicides because they don't include deaths after people have left the military. The Department of Veterans Affairs tracks those numbers and says there were 144 suicides among the nearly 500,000 service members who left the military from 2002-2005 after fighting in at least one of the wars.
The true incidence of suicide among military veterans is not known, according to a report last year by the Congressional Research Service. Based on numbers from the Centers for Disease Control and Prevention, the VA estimates that 18 veterans a day — or 6,500 a year — take their lives, but that number includes vets from all previous wars.

Afghanistan slips in corruption index despite aid

BERLIN – Afghanistan has slipped three places to become the world's second most-corrupt country despite billions in aid meant to bolster the government against a rising insurgency, according to an annual survey of perceived levels of corruption.
Only lawless Somalia, whose weak U.N.-backed government controls just a few blocks of the capital, was perceived as more corrupt than Afghanistan in Transparency International's Corruption Perceptions Index.
Iraq saw some improvement, rising to 176 of 180 countries, up two places up from last year. Singapore, Denmark and New Zealand were seen as the least corrupt countries in the list based on surveys of businesses and experts.
In Afghanistan, President Hamid Karzai's inability or unwillingness to tackle cronyism and bribery the past five years have resulted in an increase of support for the Taliban insurgents. That has prompted calls by the Obama administration for Karzai to tackle the practice or risk forfeiting U.S. aid.
Since 2001, the U.S. Congress has appropriated more than $39 billion in humanitarian and reconstruction assistance for Afghanistan, according to a report by the U.S. Special Inspector General for Afghanistan Reconstruction. European nations send about 1 billion euros ($1.49 billion) a year, a total of 9 billion euros since 2002.
International donors are increasingly questioning how much of the billions of dollars in aid might have been misappropriated.
The report said examples of Afghan corruption ranged from the sale of government positions to daily bribes for basic services.
Karzai unveiled an anti-corruption unit and major crime fighting force on Monday after heavy pressure from Washington.
In reaction to the report, Ershad Ahmadi, the deputy director general of the High Office of Oversight and Anti-corruption in Afghanistan, said that "corruption is a phenomenon that will not go away overnight. It is a problem that will continue to be with Afghanistan for a long time.
"Until we achieve that sort of national awakening that business as usual is not in the interest of a peaceful and prosperous Afghanistan, you will not be able to achieve success in your anti-corruption campaign," Ahmadi said.
Robin Hodess, Transparency's director of policy and research, said Tuesday that for a country to improve on the corruption perceptions index, it is imperative that "citizens believe that they have a government that works for them."
The governments have to show "that there is the political will to respond to the needs of the people," Hodess said.
In Iraq, corruption has become widespread since the U.S.-led invasion that toppled Saddam Hussein in 2003 with scarcity of serious government measures against corrupted officials.
That has undermined the largest nation-building efforts with siphoning billions of dollars away from the country's struggling economy, increasing frustrations among Iraqis mainly over corruption, lingering violence and poor public services.
A Bertelsmann Foundation report used in the corruption index noted that in Iraq "non-security institutions remain weak and debilitated. The Iraqi leadership faces many structural constraints on governance, such as a massive brain drain, a high level of political division, and extreme poverty."
The United States, which was in 19th place compared with 18th last year, remained stable despite Transparency's concerns over a lack of government oversight of the financial sector.
The report also pointed out that the U.S. legislature is another reason for concern, as it is "perceived to be the institution most affected by corruption."
There were some bright spots in the new report — Bangladesh, Belarus, Guatemala, Lithuania, Poland and Syria were among the countries that improved the most.

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Associated Press Writers Sinan Salaheddin in Baghdad and Fisnik Abrashi in London contributed to this report.

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On the Net: http://www.transparency.org

Afghanistan slips in corruption index despite aid

BERLIN – Afghanistan has slipped three places to become the world's second most-corrupt country despite billions in aid meant to bolster the government against a rising insurgency, according to an annual survey of perceived levels of corruption.
Only lawless Somalia, whose weak U.N.-backed government controls just a few blocks of the capital, was perceived as more corrupt than Afghanistan in Transparency International's Corruption Perceptions Index.
Iraq saw some improvement, rising to 176 of 180 countries, up two places up from last year. Singapore, Denmark and New Zealand were seen as the least corrupt countries in the list based on surveys of businesses and experts.
In Afghanistan, President Hamid Karzai's inability or unwillingness to tackle cronyism and bribery the past five years have resulted in an increase of support for the Taliban insurgents. That has prompted calls by the Obama administration for Karzai to tackle the practice or risk forfeiting U.S. aid.
Since 2001, the U.S. Congress has appropriated more than $39 billion in humanitarian and reconstruction assistance for Afghanistan, according to a report by the U.S. Special Inspector General for Afghanistan Reconstruction. European nations send about 1 billion euros ($1.49 billion) a year, a total of 9 billion euros since 2002.
International donors are increasingly questioning how much of the billions of dollars in aid might have been misappropriated.
The report said examples of Afghan corruption ranged from the sale of government positions to daily bribes for basic services.
Karzai unveiled an anti-corruption unit and major crime fighting force on Monday after heavy pressure from Washington.
In reaction to the report, Ershad Ahmadi, the deputy director general of the High Office of Oversight and Anti-corruption in Afghanistan, said that "corruption is a phenomenon that will not go away overnight. It is a problem that will continue to be with Afghanistan for a long time.
"Until we achieve that sort of national awakening that business as usual is not in the interest of a peaceful and prosperous Afghanistan, you will not be able to achieve success in your anti-corruption campaign," Ahmadi said.
Robin Hodess, Transparency's director of policy and research, said Tuesday that for a country to improve on the corruption perceptions index, it is imperative that "citizens believe that they have a government that works for them."
The governments have to show "that there is the political will to respond to the needs of the people," Hodess said.
In Iraq, corruption has become widespread since the U.S.-led invasion that toppled Saddam Hussein in 2003 with scarcity of serious government measures against corrupted officials.
That has undermined the largest nation-building efforts with siphoning billions of dollars away from the country's struggling economy, increasing frustrations among Iraqis mainly over corruption, lingering violence and poor public services.
A Bertelsmann Foundation report used in the corruption index noted that in Iraq "non-security institutions remain weak and debilitated. The Iraqi leadership faces many structural constraints on governance, such as a massive brain drain, a high level of political division, and extreme poverty."
The United States, which was in 19th place compared with 18th last year, remained stable despite Transparency's concerns over a lack of government oversight of the financial sector.
The report also pointed out that the U.S. legislature is another reason for concern, as it is "perceived to be the institution most affected by corruption."
There were some bright spots in the new report — Bangladesh, Belarus, Guatemala, Lithuania, Poland and Syria were among the countries that improved the most.

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Associated Press Writers Sinan Salaheddin in Baghdad and Fisnik Abrashi in London contributed to this report.

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On the Net: http://www.transparency.org

In Amazon, a frustrated search for cancer cures

SAO SEBASTIAO DE CUIEIRAS, Brazil (Reuters) –
The task of harvesting the secrets of Brazil's vast Amazon rain forest that could help in the battle against cancer largely falls to Osmar Barbosa Ferreira and a big pair of clippers.

In jungle so dense it all but blocks out the sun, the lithe 46-year-old shimmies up a thin tree helped by a harness, a strap between his feet, and the expertise gained from a lifetime laboring in the forest.

A few well-placed snips later, branches cascade to a small band of researchers and a doctor who faithfully make a long monthly trip to the Cuieiras river in Amazonas state in the belief that the forest's staggeringly rich plant life can unlock new treatments for cancer.

They may be right.

About 70 percent of current cancer drugs are either natural products or derived from natural compounds, and the world's largest rain forest is a great cauldron of biodiversity that has already produced medicine for diseases such as malaria.

But finding the right material is no easy task in a forest that can have up to 400 species of trees and many more plants in a 2.5-acre (1-hectare) area, and in a country where suspicion of outside involvement in the Amazon runs strong.

"If we had very clear rules, we could attract scientists from all over the world," said the doctor, Drauzio Varella, with a mix of enthusiasm and frustration. "We could transform a big part of the Amazon into an enormous laboratory."

As it stands, though, foreigners are barred from helping oncologist Varella and the researchers from Sao Paulo's Paulista University, who are among a tiny handful of Brazilian groups licensed to study samples from the Amazon.

Varella, 66, believes his high profile has helped. He is a well-known writer and television personality who shot to fame in 1999 with a book and subsequent hit movie based on his work as a doctor in a brutal Sao Paulo prison called Carandiru.

But a move by his team in the 1990s to partner with the U.S. National Cancer Institute produced a storm of accusations of "bio-piracy" and for years it has been blocked from the international cooperation and funding that could increase the chances of finding the Holy Grail of a cancer cure.

Their work has also been regularly delayed by bureaucratic demands, once stopping their collections for two years.

In more than a decade of searching, the group has brought back 2,200 samples from this tributary of the mighty, tea-dark Rio Negro (Black River) to its laboratory in Sao Paulo, of which about 70 have shown some effect against tumors. Just those samples have given the team enough analysis work for 20 years, said Varella, a lanky marathon runner whose younger brother died of cancer.

"If we can find 70, imagine what a big university with international resources could do -- they could screen for an absurd amount of diseases," said Varella, who still spends part of his time treating prisoners in Sao Paulo.

"As well as the impact this could have on human health, it could bring resources for preservation and to improve the quality of life of people who live here."

Ironically, it was a foreigner who inspired Varella to begin his search. Robert Gallo, a U.S. researcher and leading AIDS expert who co-discovered the HIV virus, asked Varella during a trip to the Amazon in the early 1990s if anyone was researching the medical potential of the forest.

JIGSAW PUZZLE

Among the natural products being used to fight cancer today is Taxol, a chemotherapy drug that comes from the bark of the Pacific yew tree.

David Newman, head of the Natural Products Branch of the U.S. National Cancer Institute, said several promising cancer drugs derived from natural sources as varied as a deep-water sponges and microbes are currently going through clinical trials. Often the natural compounds are tweaked or mimicked to better fight cancer cells.

"It's a detective story and a jigsaw puzzle, but you don't know how many pieces there are or what the picture looks like," he said. "In one teaspoon of soil from the Amazon, you find over a thousand microbes that have never been isolated."

Out of an estimated 80,000 species of flower-bearing plants in the Amazon, only about a fifth have been identified.

Newman said progress in Brazil has been greatly hampered by the inability of companies to patent a natural product under legislation passed in the 1990s, leaving no incentive to invest in research.

He cited the example of a Brazilian viper snake whose venom proved vital to the development of blood pressure drug captopril in the 1970s, a find that might not have happened under today's laws.

Further analysis of the promising compounds found by Varella's team has been held up while the university waits for access to a nuclear-magnetic resonance machine that can isolate the active elements.

"We're still a long way from discovering an actual medicine that could cure a type of cancer but we have strong signs that some plants have substances that inhibit the growth of tumors," said Mateus Paciencia, a bearded 34-year-old botanist.

Their main hope is that growing concern over the environment and increasing government efforts to slow the destruction of the Amazon by ranchers and loggers will turn the tide in favor of sustainable forest industries, of which they say their work is a prime example.

"There is nothing more sustainable than this," said Paciencia. "We take a kilogram worth of samples from a tree that weighs a ton and get an extract that lasts 10 years."

As he hung from a tree trunk, Ferreira said his relationship with the forest had been transformed by his job. He used to cut down trees with a chainsaw and sell the lumber in the city of Manaus, about 80 km (50 miles) down river from the research site.

"I think we'll find a medicine, and it won't take too long," he said. "If I deforest, I'm killing not just one plant but destroying a lot of other plants as well. So the job we're doing here is much better."

(Editing by Kieran Murray)

Thousands cheer stars of 'Twilight' sequel in LA

LOS ANGELES — Exactly 12 months ago, Kristen Stewart and Robert Pattinson were surprised to be greeted by throngs of eager fans of the novel "Twilight" at the premiere of the big-screen adaptation.
What a difference a year makes.
The actors unveiled the sequel — "The Twilight Saga: New Moon" — at the same location Monday night in the Westwood neighborhood of Los Angeles. But this time they knew what was coming.
"I'm not as scared as I was last year," said Stewart, despite a brief touch-and-go moment as she signed autographs. "At some point, the security guy said, 'This is very unsafe.' And I was like, 'Uh.' Other than that, everything was cool."
Pattinson, who plays vampire Edward Cullen in this latest adaptation of author Stephenie Meyer's popular series, said this year's crowd of thousands of screaming fans was larger than the 2008 turnout.
"And it seems different to me because we have done this world tour in the last week and it has just been unbelievable in every single city," he said. "It is about 10 times bigger than any other city in the world."
Some "twi-hards" __ as they call themselves __ arrived as early as Thursday afternoon to secure a place in line for tickets allowing them to watch the stars' arrivals on the red carpet. The 800 available tickets were all distributed by Monday morning, but the line still stretched for blocks well after lunchtime.
Nicole Zamora, 36, was sixth in line after getting to Westwood on Thursday afternoon. She and her three sisters wore "New Moon" T-shirts they'd made for the occasion and said they spent the weekend "reading, listening to the iPod and trying to sleep — anything to pass the time."
Christina Fuentes and four of her friends traveled from New Jersey for the "New Moon" premiere. The 24-year-old wore vampire teeth ("They just clip on," she said) and carried a homemade sign that read, "We flew in from NJ! We've been camping out for three days just to see you!" She pasted her airline boarding pass to the poster as proof.
Scores of other fans — mostly young women — crowded onto street corners near the Mann Village and Bruin theaters, site of the premiere. They sat on beach chairs, displayed homemade signs and wore T-shirts proclaiming their allegiance to either the handsome vampire played by Pattinson or his werewolf rival, Taylor Lautner.
Lautner, who rises to headliner status in "New Moon," said he was also amazed by Monday's fan response.
"It's the amount of passion," he said. "It's not normal."
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Associated Press entertainment writer Sandy Cohen contributed to this story.

Life In Kenya Sparked 'Phone Banking' Firm (Investor's Business Daily)

Mobile phone banking presents a "mega market opportunity," says Carol Realini, CEO of Redwood City, Calif.-based Obopay.
Analysts, too, see big potential for bank accounts and payments tied to cell phones. They point 15ut that mobile banking has already taken off in emerging markets such as Kenya, where many handset owners previously didn't have access to banks.
Nokia (NYSE:NOK - News), the world's No. 1 maker of cell phones, has bet on growth in mobile banking by partnering with and investing $35 million in privately held Obopay. Other investors include Qualcomm (NasdaqGS:QCOM - News) and a number of venture firms.
In August, the Finnish cell phone maker said its soon-to-launch Nokia Money service would use Obopay's mobile banking platform. Obopay also has partnerships with other big firms such as MasterCard (NYSE:MA - News). It operates its own Obopay mobile payment service in the U.S. and India, and plans to expand soon into three more countries.
Realini recently spoke with IBD about mobile banking and how she got the idea for her four-year-old company while in Kenya in 2002.
IBD: So, you were in Kenya ... ?
Realini: I walked into a prepaid cell phone store in Kinshasa, and it looked exactly like a bank. People were standing in line with bags of money. The currency had been devalued, so it took basically a shopping bag of money to buy your prepaid minutes. I said, "This is interesting. What if we generalized the value that was being loaded on the phone?" If we did that, we could have a banking system, and people could have mobile bank accounts.
IBD: A KPMG survey said security and privacy are among the issues keeping people away from mobile banking. What's your take on that?
Realini: That's an academic question to people, because if they had a reason to want to do mobile financial services, they would get comfortable with these issues. People trust their mobile phones. They're already depending on mobile for essential services.
The other thing is, this is a regulated service. So anybody in any market will have to go out and get licenses from different agencies.
The one thing I laugh about with the KPMG thing is, it turns out that the mobile phone is inherently more secure than traditional banking products, like (debit) cards. Here's the reason: You know within six minutes if you've lost your mobile phone. It takes you (an average of about) 18 hours to know that you've lost your debit card.
IBD: What's different about mobile banking in emerging markets vs. developed nations?
Realini: One of the big differences is the application that's going to drive the initial adoption, because it's got to start somewhere. In the Philippines, it was prepaid "top off" -- a better way to prepay to top off your phone. In Kenya, it was domestic remittances (a family member working in a remote location sending money to family members at home) because there's a lot of urban migration going on.
IBD: What's the spark in the U.S.?
Realini: There are three things in the U.S. that we're seeing. One is what we call family transfer ... and that has two different pieces. One is a traditional remittance. This is: I'm working in Modesto (Calif.), but my family's in San Jose. I get paid, I send the money home. The second kind is more Remittances 2.0. Families are moving around, maybe the kids are in college, mom's at work and I want to provide an urgent transfer or an allowance to my kids.
The second thing we're seeing is there's a big desire for an easier and safer way to buy things online. Today you have to put your credit card information in, maybe give a lot of personal information on Web sites. We think that the mobile phone has the potential to make it (so you enter) less information and an easier way to (buy goods) online. That was the application that drove it in Korea -- I use my mobile phone number as my preferred way to (buy things) online.
No. 3 is budget control. This is where I want to have mobile banking on my phone because I want to check my balance before I spend money in the store.
IBD: What is Obopay's function in its partnerships with Nokia Money or MasterCard MoneySend?

Realini: We build the back-end platform and also the technology to reach all mobile phones. Then we get licenses from regulatory bodies to operate the service in the markets that we're in.

This is very similar to (No. 1 online payment service) PayPal's business model.

IBD: The players in mobile banking include eBay's (NasdaqGS:EBAY - News) PayPal Mobile and Safaricom, a Vodafone (NYSE:VOD - News) affiliate in Kenya. Who are key players?

Realini: I want to talk about one thing that makes us different. I want to go back to Nokia. Nokia is launching the service, but they really want and almost insist on it being an open system (where) we're going to support other handsets. And that's important because it's like text messaging. The value of this is going to be greater the more participants you have. Therefore, you don't want to create any sort of limits on who can use the system.

Now you had asked me about who are the other players. I think M-Pesa (in Kenya), and you have Smart and GCash (both Philippines-based) and (France Telecom's (NYSE:FTE - News)) Orange Money -- are all examples of carrier-specific money offerings. You also have some of the Internet players, whether it be Amazon (NasdaqGS:AMZN - News) or Pay-Pal, who are extending their Internet payment capabilities to mobile. Then there are other independent players. But a lot of those are technology providers who are helping banks or mobile carriers offer bank-specific or mobile-carrier-specific solutions.

IBD: What will be the next big developments in mobile banking?

Realini: The TowerGroup (research firm) summed up this market pretty succinctly (in a recent report): The biggest share of mobile banking/mobile payments users is going to be in the Asia-Pacific region through 2012. That is really where it's going to happen first in volume. It's going to be followed by Eastern Europe, the Middle East, Africa and Latin America.

There are 4 billion phones and 1 billion banked people. So you're going to see a lot of people with mobile phones who have never been customers of banks.

This is going to be a mega market opportunity. We estimate it's going to be 7 trillion in annual (transaction) volume by 2020. Whenever you have a market that big, there's going to be a lot of success created within that market opportunity.