DealBook: Report Details Missteps in Trading at JPMorgan

Long seen as one of the most careful banks on Wall Street, JPMorgan Chase on Wednesday drew back a curtain on a rare breakdown, showing traders acting on their own and concealing losses while managers seemingly turned a blind eye.

In a 129-page internal report dissecting a bad bet on credit derivatives that cost the bank more than $6 billion, the bank confessed, in painstaking detail, to widespread “failures.”

Yet the report, written by a JPMorgan management task force, is not the final word on the trading blunder. Federal investigators are examining whether fraud was committed and are planning to use the report as a guide for pursuing their inquiries, say officials briefed on the matter.

The report describes traders making overly optimistic estimates of their losses, but stops short of claiming outright fraud. Showing that traders crossed a legal line presents a challenge for investigators. In some derivatives markets, traders are afforded flexibility to estimate the value of their positions.

But the F.B.I., suspecting that some employees intentionally hid the losses last year, is using taped phone conversations to build criminal cases against London-based traders involved in the debacle, according to the officials briefed on the matter. And the report could help that effort, the officials said. Authorities expect to interview one of the junior traders in the coming weeks, one official said.

Congress is exploring potential wrongdoing, as well. The Permanent Subcommittee on Investigations has taken testimony, people close to the inquiry said, from Jamie Dimon, the bank’s chief executive, and Ina R. Drew, the former leader of the chief investment office,where the trading losses occurred.

The subcommittee’s investigation has already complicated things for the bank. It is rare for a bank to expose its missteps so publicly, but JPMorgan knew that the subcommittee would have eventually received the document from regulators and made it public.

The regulators at the Office of the Comptroller of the Currency, the people close to the inquiry said, are required to turn over such documents under a subpoena they received from the subcommittee. So last fall, a person close to JP Morgan said, the bank decided to release the report on its own terms.

“This was getting out there anyway,” another person close to the situation said. This person and others interviewed for this article spoke on the condition of anonymity because the details of the case are not public.

Federal authorities responded positively to the internal report. One Congressional official privately told JPMorgan that the bank was wise to release such a detailed document, one person briefed on the matter said, while some regulators at the comptroller’s office praised it as an “important step” for corporate governance.

The report centered on a breakdown at the chief investment office in London, a group created to invest JPMorgan’s own money and offset potential losses across the bank’s disparate businesses.

JPMorgan’s troubles began in January 2012, when the investment office ignored the basic rules of trading. On a well-functioning Wall Street desk, traders are told to end a deeply vulnerable position early, even if it means sustaining some minor losses.

But under Ms. Drew, the report said, JPMorgan traders did the opposite. In response to adverse moves in the markets and regulatory changes, the group made a series of aggressive derivatives trades. As these bets began to sour, the London team increased their trades rather than exiting. The traders thought that reducing the assets was too costly, the report says.

Some questioned the strategy. By the end of January, one trader became deeply unnerved. In an e-mail to a more senior trader, he said the size of the trades were becoming “scary” and advised that the unit take the “full pain” now.

But the traders “continued to build the notional size of the positions through late March,” according to the report, which was led by Michael J. Cavanagh, the bank’s co-head of corporate and investment banking.

In an April e-mail, Mr. Dimon asked JPMorgan’s chief risk officer, John Hogan, why the chief investment office hadn’t simply cut some of its positions to reduce risk. The office, Mr. Hogan replied, indicated that adding positions was the “most ‘efficient’ way to do it.”

The report does not name the architects of the trade; British privacy laws prevented it from doing so. But they are known to be Javier Martin-Artajo, a manager who oversaw the trading strategy from the bank’s London offices; Bruno Iksil, the trader known as the London Whale for placing the outsize bet; and Achilles Macris, the executive in charge of the international chief investment office. None of the employees have been accused of any wrongdoing. They have all since departed the bank.

The JPMorgan report, while taking aim at the London office’s strategy, also exposes major gaps in oversight that allowed this headstrong team of traders to carry out their wager. Ms. Drew, who helped steer the bank through the financial crisis, received the brunt of the blame.

“Ina Drew failed in three critical areas,” the report said, pointing to lax controls and a failure to ensure that her team “understood and vetted” the trade.

The management missteps also ensnared Barry L. Zubrow, a former chief risk officer, and Douglas L. Braunstein, formerly the bank’s chief financial officer but now a vice chairman at the bank. While the report acknowledged that Mr. Dimon could “appropriately rely upon” senior managers who oversaw the trading strategy, it also concluded that he “could have better tested his reliance on what he was told.”

This slipshod culture magnified the impact of simple human errors across the bank. At one point, the mathematical mistakes of an employee in London prevented others in the bank from seeing the potential losses accumulating beneath the surface.

Still, the problems lurking in the investment office should have set off alarms for executives outside the office. The report reveals, however, that the bank dismantled its early-warning system.

The investment office’s alarm system, based on a computer model, showed risk limits were exceeded in late January, according to the report. Senior executives made a temporary exemption for the investment office, which was approved by Mr. Dimon and others. But then, the bank introduced a new model that underestimated the losses building in the investment office, and allowed the traders to fly below the bank’s internal risk radar.

The flawed model, the report says, was built by a London-based mathematician who also provided analysis to the investment office’s traders. It appears the employee, who built the model with a simple spreadsheet, was out of his depth. The model wasn’t properly back-tested and contained errors, the report said.

JPMorgan’s report raises the possibility that the investment office pressured the managers to approve the new model. The model-builder received an e-mail on Jan. 23 from the trader to whom he reported, saying that he should “keep the pressure on our friends” in a group that validated models.

The public disclosures by the bank also came under scrutiny in the report. Failure to properly report trading losses could make JPMorgan vulnerable to lawsuits from investors. The bank’s disclosures are the subject of the Congressional investigation and an inquiry from the Securities and Exchange Commission.

The problem stems in part from the London traders, who underestimated the size of their losses, a misstep that has drawn the scrutiny of the F.B.I. and federal prosecutors. The bank restated its first-quarter results to reflect that the traders may have masked their losses by $459 million.

“In the course of the task force’s ensuing work, it became aware of evidence — primarily in the form of electronic communications and taped conversations — that raised questions about the integrity of the marks,” the report said.

Still, obstacles remain for a criminal prosecution. Authorities planned to interview Mr. Macris in his native Greece, but the talks have broken down. Instead, officials said, they now expect to interview a lower-level employee.

Some people close to the investigation also note that traders have some leeway when marking the value of trades. And the internal report shows how JPMorgan, after consulting its auditor, PricewaterhouseCoopers, approved the investment office’s valuations of its trades.

The report highlighted an episode that, in theory, might have made JPMorgan think twice before initially signing off on the first-quarter results. An “internal audit group” identified deficiencies in the unit that double-checked its traders’ valuations, calling out the group last March with a simple concern: it “needs improvement.”

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Well: Boosting Your Flu Shot Response

Phys Ed

Gretchen Reynolds on the science of fitness.

As this year’s influenza season continues to take its toll, those procrastinators now hurrying to get a flu shot might wish to know that exercise may amplify the flu vaccine’s effect. And for maximal potency, the exercise should be undertaken at the right time and involve the right dosage of sweat, according to several recent reports.

Flu shots are one of the best ways to lessen the risk of catching the disease. But they are not foolproof. By most estimates, the yearly flu vaccine blocks infection 50 to 70 percent of the time, meaning that some of those being inoculated gain little protection. The more antibodies someone develops, the better their protection against the flu, generally speaking. But for some reason, some people’s immune systems produce fewer antibodies to the influenza virus than others’ do.

Being physically fit has been found in many studies to improve immunity in general and vaccine response in particular. In one notable 2009 experiment, sedentary, elderly adults, a group whose immune systems typically respond weakly to the flu vaccine, began programs of either brisk walking or a balance and stretching routine. After 10 months, the walkers had significantly improved their aerobic fitness and, after receiving flu shots, displayed higher average influenza antibody counts 20 weeks after a flu vaccine than the group who had stretched.

But that experiment involved almost a year of dedicated exercise training, a prospect that is daunting to some people and, in practical terms, not helpful for those who have entered this flu season unfit.

So scientists have begun to wonder whether a single, well-calibrated bout of exercise might similarly strengthen the vaccine’s potency.

To find out, researchers at Iowa State University in Ames recently had young, healthy volunteers, most of them college students, head out for a moderately paced 90-minute jog or bike ride 15 minutes after receiving their flu shot. Other volunteers sat quietly for 90 minutes after their shot. Then the researchers checked for blood levels of influenza antibodies a month later.

Those volunteers who had exercised after being inoculated, it turned out, exhibited “nearly double the antibody response” of the sedentary group, said Marian Kohut, a professor of kinesiology at Iowa State who oversaw the study, which is being prepared for publication. They also had higher blood levels of certain immune system cells that help the body fight off infection.

To test how much exercise really is required, Dr. Kohut and Justus Hallam, a graduate student in her lab, subsequently repeated the study with lab mice. Some of the mice exercised for 90 minutes on a running wheel, while others ran for either half as much time (45 minutes) or twice as much (3 hours) after receiving a flu shot.

Four weeks later, those animals that, like the students, had exercised moderately for 90 minutes displayed the most robust antibody response. The animals that had run for three hours had fewer antibodies; presumably, exercising for too long can dampen the immune response. Interestingly, those that had run for 45 minutes also had a less robust response. “The 90-minute time point appears to be optimal,” Dr. Kohut says.

Unless, that is, you work out before you are inoculated, another set of studies intimates, and use a dumbbell. In those studies, undertaken at the University of Birmingham in England, healthy, adult volunteers lifted weights for 20 minutes several hours before they were scheduled to receive a flu shot, focusing on the arm that would be injected. Specifically, they completed multiple sets of biceps curls and side arm raises, employing a weight that was 85 percent of the maximum they could lift once. Another group did not exercise before their shot.

After four weeks, the researchers checked for influenza antibodies. They found that those who had exercised before the shot generally displayed higher antibody levels, although the effect was muted among the men, who, as a group, had responded to that year’s flu vaccine more robustly than the women had.

Over all, “we think that exercise can help vaccine response by activating parts of the immune system,” said Kate Edwards, now a lecturer at the University of Sydney, and co-author of the weight-training study.

With the biceps curls, she continued, the exercises probably induced inflammation in the arm muscles, which may have primed the immune response there.

As for 90 minutes of jogging or cycling after the shot, it probably sped blood circulation and pumped the vaccine away from the injection site and to other parts of the body, Dr. Kohut said. The exercise probably also goosed the body’s overall immune system, she said, which, in turn, helped exaggerate the vaccine’s effect.

But, she cautions, data about exercise and flu vaccines is incomplete. It is not clear, for instance, whether there is any advantage to exercising before the shot instead of afterward, or vice versa; or whether doing both might provoke the greatest response – or, alternatively, be too much and weaken response.

So for now, she says, the best course of action is to get a flu shot, since any degree of protection is better than none, and, if you can, also schedule a visit to the gym that same day. If nothing else, spending 90 minutes on a stationary bike will make any small twinges in your arm from the shot itself seem pretty insignificant.

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Room for Debate: A New Line in the Sand Against Terror?

The arid northern African state of Mali once seemed like one of the continent’s rare stable democracies. But a coup, an influx of Libyan arms after the fall of Muammar el-Qaddafi, and an uprising by well-financed militants have led to Islamists controlling the north. Even as they face off against French troops protecting the south, the stronghold raises the specter of a new base of terror just south of the Sahara.

With Islamist groups in Mali connecting with militants from Libya, Nigeria, Algeria and elsewhere, how can northern Africa avoid fostering terrorism and becoming the next Afghanistan?

Read the Discussion »

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Tablet Too Small? Try Lenovo’s 27-Inch ‘Table PC’

Google’s aptly-named Nexus 7 tablet made a splash when it debuted last year, at $ 199 and with a screen 7 inches across. Apple soon released its own iPad Mini to join the increasingly crowded world of miniature tablets, which — at about half the size of a regular iPad — are so small as to be pocketable.

Other manufacturers, however, aren’t taking the “smaller is better” route. Microsoft‘s Surface tablet debuted with a 10.6-inch screen, almost an inch across more than the iPad. And now at the recent Consumer Electronics Show, at least two companies were showing off “tablets” the size of an HDTV.

The “IdeaCentre Horizon Table PC”

That’s the actual name of Lenovo‘s new product, which Lenovo is calling an “interpersonal PC” (yes, that is an interpersonal Personal Computer, in case you were wondering). It’s a Windows 8 tablet, with a screen 27 inches across. It can apparently serve as an iMac-style, all-in-one desktop just fine, but Lenovo wants people to use it flat on their tables, like in a promo video which evokes the original Microsoft Surface.

A $ 10,000 bathtub

That’s basically what the first Surface amounted to — the Microsoft prototype of years ago, which never saw widespread use. It was a super-expensive, bathtub-sized table, with a Windows Vista PC inside and a camera array which optically scanned its top surface. It wasn’t a true touchscreen, in other words, so much as an expensive hack that was mostly just good for demos and reminding people of the desks in “Tron.”

Lenovo’s “Table PC” is smaller than that Surface, but will also be a lot cheaper when it comes out “beginning in early summer,” at $ 1,699. And like in those giddy tech demos, it’s designed for multiple people to use it at once; for things like sorting through vacation photos, or even playing animated digital board games, using physical accessories like special dice. (Lenovo calls this sort of hybrid activity “phygital,” a name which probably won’t catch on.)

What about the games and apps?

Thanks to Microsoft’s push for developers to make tablet apps, the Windows Market is starting to fill with touch titles. Lenovo is mostly pushing its own shop, however, run in partnership with Intel, which has “5,000+ multi-user entertainment apps.” It’s not clear how many of those are actually designed for the Horizon Table PC, but it comes with a selection of entertainment and children’s titles, and with the built-in BlueStacks player it should be able to run certain Android apps as well.

Is 27 inches a little too big?

The Asus Transformer AiO, also shown off at CES, is based on a similar concept. It’s an 18.4-inch all-in-one Windows 8 PC, where the screen can detach and become a huge (but not as huge) tablet. Most of the hardware is in the base station, but it can connect to it wirelessly inside the home, Wii U style. It also converts to an Android tablet, for use separate from the base station.

Jared Spurbeck is an open-source software enthusiast, who uses an Android phone and an Ubuntu laptop PC. He has been writing about technology and electronics since 2008.

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Anti-doping officials want Armstrong under oath

A televised confession by Lance Armstrong isn't enough.

Anti-doping officials want the disgraced cyclist to admit his guilt under oath before considering whether to lift a lifetime ban clouding his future as a competitive athlete. That was seconded by at least one former teammate whom Armstrong pushed aside on his way to the top of the Tour de France podium.

"Lance knows everything that happened," Frankie Andreu told The Associated Press on Tuesday. "He's the one who knows who did what because he was the ringleader. It's up to him how much he wants to expose."

Armstrong has been in conversations with U.S. Anti-Doping Agency officials, touching off speculation that he may be willing to cooperate with authorities there and name names.

Interviewer Oprah Winfrey didn't say if the subject was broached during the taping Monday at a downtown Austin hotel. In an appearance on "CBS This Morning," she declined to give details of what Armstrong told her, but said she was "mesmerized and riveted by some of his answers."

Asked whether the disgraced cyclist appeared genuinely contrite after a decade of fierce denials, Winfrey replied, "I felt that he was thoughtful, I thought that he was serious, I thought that he certainly had prepared for this moment. I would say that he met the moment."

She was promoting what has become a two-part special, Thursday and Friday, on her OWN network.

Around the same time, World Anti-Doping Agency officials issued a statement saying nothing short of "a full confession under oath" would cause them to reconsider Armstrong's lifetime ban from sanctioned events.

The International Cycling Union also urged Armstrong to tell his story to an independent commission it has set up to examine claims that the sport's governing body hid suspicious samples from the cyclist, accepted financial donations from him and helped him avoid detection in doping tests.

The ban was only one of several penalties handed to Armstrong after a scathing, 1,000-page report by USADA last year. The cyclist was also stripped of his seven Tour de France titles, lost nearly all of his endorsements and was forced to cut ties with the Livestrong cancer charity he founded in 1997.

The report portrayed Armstrong as the mastermind of a long-running scheme that employed steroids, blood boosters such as EPO, and a range of other performance-enhancers to dominate the tour. It included revealing testimony from 11 former teammates, including Andreu and his wife, Betsy.

"A lot of it was news and shocking to me," Andreu said. "I am sure it's shocking to the world. There's been signs leading up to this moment for a long time. For my wife and I, we've been attacked and ripped apart by Lance and all of his people, and all his supporters repeatedly for a long time. I just wish they wouldn't have been so blind and opened up their eyes earlier to all the signs that indicated there was deception there, so that we wouldn't have had to suffer as much.

"And it's not only us," he added, "he's ruined a lot of people lives."

Armstrong was believed to have left for Hawaii. The street outside his Spanish-style villa on Austin's west side was quiet the day after international TV crews gathered there hoping to catch a glimpse of him. Nearby, members of his legal team mapped out a strategy on how to handle at least two pending lawsuits against Armstrong, and possibly a third.

The AP reported earlier Tuesday that Justice Department officials were likely to join a whistleblower lawsuit against Armstrong by former teammate Floyd Landis, citing a source who works outside the government and requested anonymity because he was not authorized to speak on the record about the matter.

The lawsuit by Landis, who was stripped of the 2006 Tour de France title after testing positive, alleges that Armstrong defrauded the U.S. government by repeatedly denying he used performance-enhancing drugs. The deadline to join the False Claims Act lawsuit, which could require Armstrong to return substantial sponsorship fees and pay a hefty penalty, is Thursday.

Landis is hardly the only one seeking money back from Armstrong.

During his long reign as cycling champion, Armstrong scolded some critics in public, didn't hesitate to punish outspoken riders during the race, and waged legal battles against still others in court.

The London-based Sunday Times has already filed a lawsuit to recover about $500,000 it paid Armstrong to settle a libel case, and Dallas-based SCA Promotions, which tried to deny him a promised bonus for a Tour de France win, has threatened to bring another lawsuit seeking to recover more than $7.5 million awarded by an arbitration panel.

In Australia, the government of the state of South Australia said it will seek the repayment of several million dollars in appearance fees paid to Armstrong for competing in the Tour Down Under in 2009, 2010 and 2011.

"We'd be more than happy for Mr. Armstrong to make any repayment of monies to us," South Australia Premier Jay Weatherill said.

___

Litke reported from Chicago, Vertuno from Austin, Texas. Pete Yost in Washington and John L. Mone in Dearborn, Mich., also contributed to this report.

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Boeing 787s Are Grounded by Japanese Airlines

TOKYO — Japan’s two largest airlines said Wednesday they would ground their fleets of Boeing’s new 787 aircraft, the Dreamliner, after one operated by All Nippon Airways made an emergency landing in western Japan.

The 137 passengers and crew used emergency slides to exit the aircraft after possible battery trouble and smoke forced the ANA flight to Tokyo from Ube in western Japan to land at Takamatsu airport in southern Japan instead, according to the public broadcaster, NHK. One elderly passenger suffered a slight hip injury during the evacuation, NHK said.

The emergency landing comes after a string of problems in the last month with the aircraft, including a battery fire, fuel leaks, and a cracked cockpit window.

All Nippon said after Wednesday’s incident that it was grounding all 17 of its Dreamliners for inspections. Japan Airlines said it would also temporarily ground the five Boeing 787s it still operates; two others are already undergoing safety checks.

Akihiro Ota, Japan’s transportation minister, said the emergency landing raised concerns over the Dreamliner’s safety, and that he would dispatch safety officials to investigate. “I see this as a serious incident which could have led to a serious accident,” Mr. Ota told reporters in Tokyo.

All Nippon’s vice president, Osamu Shinobe, told a reporters at a news conference at Tokyo’s Haneda Airport, “I apologize for the grave concern and trouble we have caused our passengers, their families and others.” He said the airline was still investigating.

Federal authorities in the United States have also voiced concern about problems the new aircraft has faced but still endorsed it as a safe airplane.

The Federal Aviation Administration last week ordered a comprehensive review of the 787’s manufacturing and design, with a special focus on the plane’s electrical systems. But in a news conference last Thursday, the Transportation Secretary, Ray LaHood, made no mention of a possible grounding of 787s.

Still, the review is unusual and comes 15 months after the 787 entered service after a lengthy certification process by the F.A.A. It comes during a formal investigation by the National Transportation Safety Board into what caused a battery fire in a Japan Airlines plane that had flown to Boston from Tokyo last week.

Late Tuesday in Tokyo, the N.T.S.B. said it was “currently in the process of gathering information about the B-787 emergency landing in Japan earlier today."

Eight airlines now fly the 787: All Nippon Airways and Japan Airlines in Japan currently own 24 of the 50 delivered by Boeing since November 2011. The other operators are Air India, Ethiopian Airlines, Chile’s LAN Airlines, Poland’s LOT, Qatar Airways and United Airlines.

Boeing has sought to ease concerns about the plane’s design and reliability, and insisted it was no more trouble-prone than other new commercial airplane programs. The 787 relies more on electrical systems than previous generations of airplanes. Electrical systems, not mechanical ones, operate hydraulic pumps, de-ice the wings, pressurize the cabin and handle other tasks. The plane also has electric brakes instead of hydraulic ones.

While problems are common with early models — including with the first Airbus A380, the Boeing 777 or even the first 747s — analysts say the issue could become a growing embarrassment for Boeing if travelers or airlines begin to lose confidence in the plane.

So far, safety experts said that the problems with the 787 pointed more to teething problems than structural faults. But the problem is more than just one of reputation for Boeing: the plane maker has said it expects to sell 5,000 787s in the next 20 years, but analysts believe it will be years before it breaks even because of delays.

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Well: Turning to the Web for a Medical Diagnosis

Thirty-five percent of American adults said they have used the Internet to diagnose a medical condition for themselves or someone else, according to a new Pew Research Center study. Women are more likely than men to turn to the Internet for diagnoses. Other groups more likely to do so are younger people, white adults, people with college degrees and those who live in households with income above $75,000.

The study, released by Pew’s Internet and American Life Project on Tuesday, points out that Americans have always tried to answer their health questions at home, but that the Internet has expanded the options for research. Previous surveys have asked questions about online diagnoses, but the Pew study was the first to focus on the topic with a nationally representative sample, said Susannah Fox, an associate director at Pew Internet. Surveyors interviewed 3,014 American adults by telephone, from August to September 2012.

Of the one in three Americans who used the Internet for a diagnosis, about a third said they did not go to a doctor to get a professional medical opinion, while 41 percent said a doctor confirmed their diagnosis. Eighteen percent said a doctor did not agree with their diagnosis. As far as where people start when researching health conditions online, 77 percent said they started at a search engine like Google, Bing or Yahoo, while 13 percent said they began at a site that specializes in health information.

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At War Blog: Russian Military Ordered to Switch Portyanki for Socks

Near the end of World War II, Soviet and American soldiers met at the Elbe River in Germany. Lacking a common language, they compared their boots.

The Americans wore socks and lace-up boots. The Russians wore something that boggled the minds of their allies from the West: pieces of cloth twirled around their feet and inserted into bulky, knee-high boots.

The cloth strips, called portyanki, have been a signature element of the Russian military uniform since the 16th century. On Monday Russia’s minister of defense issued an order for a militarywide switch to socks.

“I have an instruction for you,” the minister, Sergei K. Shoigu, said to a gathering of the equivalent of the chiefs of staff and regional commanders in comments broadcast on NTV television news. “In 2013, or at least by the end of this year, we will forget foot bindings. I’m asking you, please, if there is need we will provide additional funds. But we need to finally, fully reject this concept in our armed forces.”

It is hardly the stuff to alarm a Central Intelligence Agency military analyst. But it sheds light on the Russian military all the same.

NTV in Russia, reporting the change, noted that foot bindings were a common solution in militaries predating industrial looms, though “Russia is just about the only country where new enlisted men still learn to twirl portyanki.” (The video below gives a sense of what twirling looks like.)

The bindings are not unique to Russia. Such foot coverings were known as puttees when they had wide-scale use in the United States, Canadian and British militaries before and during World War I. Then, they were worn wrapped around the calf, above the boot.

(The video below shows another variety of these sock alternatives.)

In the Russian version, a swath of cloth about a foot wide, cotton in the summer, flannel in the winter, is inserted into the boot, effective against trench foot and frostbite alike, if bound correctly.

In basic training, even before breaking down a Kalashnikov, a Russian conscript learns to twist the portyanki around his feet to form mummylike cocoons, fit for the inside of the standard-issue Russian infantry boots, made today, as they were a century ago, of blackened canvas on a sole of rawhide. Running in these heavy boots, former soldiers say, is all but impossible.

This system of footwear had its principal advantage in military-industrial planning and logistics, freeing up Soviet factories from sewing millions of socks and allowing soldiers to tear wraps from old sheets in the field, if needed. During the Afghan war, however, Russian soldiers soured on the heavy boots; officers allowed soldiers to shed them for nonregulation running shoes.

The switch to socks began during the never-completed military reform in 2007, so some units march at parades in socks and lace-up boots, others in portyanki and boots without laces.

The minister’s statement on socks to the assembled generals may also have carried a deeper meaning, said Ruslan Pukhov, an analyst with the Center for Analysis of Strategies and Technologies. The cloth strips, almost a symbol of the Russian enlisted man’s life, are also emblematic of outmoded practices, he said.

Deeper changes, with higher stakes, are under way in the Russian military. Since 2007, the political leadership has systematically thinned the top-heavy officer ranks to alter the “egg-shaped” hierarchy of the army into a pyramid form. Mr. Shoigu’s order to complete the switch to socks, Mr. Pukhov said, signaled to the generals that they would not be exempt from following through with the reforms begun by his disgraced predecessor, Anatoly E. Serdyukov, who is under investigation for real estate deals involving the ministry’s property.

“We cannot fight the wars of the 21st century with the equipment we used 35 years ago in Afghanistan,” Mr. Pukhov said. “That is impossible to think about.”

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TSX off 10-month high, energy weakness offsets RIM jump

TORONTO (Reuters) – Canada‘s main stock index finished short of a 10-month high on Monday as investor optimism for Research In Motion Ltd shares over the upcoming launch of its BlackBerry 10 devices was offset by falling energy shares.

Weakness in the materials sector, which includes mining stocks, also added pressure, while volatile oil prices were a drag on the energy sector. The two heavyweight sectors kept an otherwise positive index in check.

RIM shares extended a 13-percent gain made on Friday. The stock added 10.44 percent to C$ 14.70 and helped the information technology sector gain 2.48 percent.

“The investor confidence is brought about simply because of hope, and hope that the new BlackBerry 10 is going to be an answer to their prayers,” said Fred Ketchen, director of equity trading at ScotiaMcLeod.

“There has been some talk that this is a revival of RIM. We’ll have to wait and see,” he added.

The Toronto Stock Exchange‘s S&P/TSX composite index <.gsptse> finished little changed, up a 0.91 of a point, or 0.01 percent, at 12,603.09. Earlier, it touched 12,636.68, its highest since March 5, 2012.</.gsptse>

The index, which marked its fifth consecutive day of gains, swung back and forth between positive and negative territories in choppy trade.

“There’s a lot of indecisiveness out there. People don’t really know which way to go and you’re getting these markets that aren’t really doing much of anything,” said Julie Brough, vice president at Morgan Meighen & Associates.

Investors kept a close watch on the U.S. debt ceiling talks, seen as a significant catalyst for the markets, with hopes that a compromise will be reached. “There is reasonable optimism that it would be resolved,” Brough said.

The energy sector was down 0.5 percent, with Canadian Natural Resources Ltd slipping 1.81 percent to C$ 29.26 and Talisman Energy Inc falling 2.64 percent to C$ 11.78. Oil prices were volatile, with Brent crude rising to $ 112 on supply concerns.

Encana Corp shares dropped 2.31 percent to C$ 19.05 after the surprise resignation of the chief executive officer of Canada’s largest natural gas producer.

The three energy companies were the three biggest drags on the index.

Materials stocks, home to mining firms, was down 0.3 percent amid a slew of deals within the sector.

Miner Alamos Gold Inc said it will buy Aurizon Mines Ltd for about C$ 780 million ($ 793 million) in cash and stock to get access to Aurizon’s only operating gold mine, Casa Berardi, in northern Quebec. Aurizon shares jumped 34 percent to C$ 4.57, while Alamos Gold fell 11.94 percent to C$ 14.90.

Russia’s state uranium firm agreed to pay $ 1.3 billion to take Canada’s Uranium One Inc private, as the successor to the Soviet Union’s nuclear industry seeks to strengthen its grip on supplies. Uranium One’s stock rose 14.52 percent to C$ 2.76.

In other company news, shares of Harry Winston Diamond Corp rose 4.41 percent to C$ 14.90 on the company’s plans to sell its high-end watches-to-necklaces division to Swatch Group in a $ 750 million cash deal that expands the Swiss watchmaker’s luxury offering and lets the Canadian group concentrate on its diamond mines.

(Additional reporting by Solarina Ho; Editing by James Dalgleish and Nick Zieminski)

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AP source: Armstrong tells Oprah Winfrey he doped

AUSTIN, Texas (AP) — After a decade of denial, Lance Armstrong has finally come clean: He used performance-enhancing drugs to win the Tour de France.

The disgraced cyclist made the confession to Oprah Winfrey during an interview taped Monday, a person familiar with the situation told The Associated Press. The person spoke on condition of anonymity because the interview is to be broadcast Thursday on Winfrey's network.

The admission Monday came hours after an emotional apology by Armstrong to the Livestrong charity that he founded and took global on the strength of his celebrity as a cancer survivor who came back to win one of sport's most grueling events.

The confession was a stunning reversal, after years of public statements, interviews and court battles in which he denied doping and zealously protected his reputation.

Winfrey tweeted afterward, "Just wrapped with (at)lancearmstrong More than 2 1/2 hours. He came READY!" She was scheduled to appear on "CBS This Morning" on Tuesday to discuss the interview.

Even before the taping session with Winfrey began around 2 p.m., EST, Armstrong's apology suggested he would carry through on promises over the weekend to answer her questions "directly, honestly and candidly."

The cyclist was stripped of his Tour de France titles, lost most of his endorsements and was forced to leave the foundation last year after the U.S. Anti-Doping Agency issued a damning, 1,000-page report that accused him of masterminding a long-running doping scheme.

About 100 staff members of the charity Armstrong founded in 1997 gathered in a conference room as Armstrong arrived with a simple message: "I'm sorry." He choked up during a 20-minute talk, expressing regret for the long-running controversy tied to performance-enhancers had caused, but stopped short of admitting he used them.

Before he was done, several members were in tears when he urged them to continue the charity's mission, helping cancer patients and their families.

"Heartfelt and sincere," is how Livestrong spokesman Katherine McLane described his speech.

Armstrong later huddled with almost a dozen people before stepping into a room set up at a downtown Austin hotel for the interview.

The group included close friends and advisers, two of his lawyers and Bill Stapleton, his agent, manager and business partner. They exchanged handshakes and smiles, but declined comment when approached by a reporter. Most members of that group left the hotel through the front entrance around 5 p.m., although Armstrong was not with them.

No further details about the interview were available immediately because of confidentiality agreements signed by both camps. But Winfrey promoted it as a "no-holds barred" session, and after the voluminous USADA report — which included testimony from 11 former teammates — she had plenty of material for questions. USADA chief executive Travis Tygart, a longtime critic of Armstrong's, called the drug regimen practiced while Armstrong led the U.S. Postal Service team, "The most sophisticated, professionalized and successful doping program that sport has ever seen."

Armstrong also went after his critics ruthlessly during his reign as cycling champion. He scolded some in public and didn't hesitate to punish outspoken riders during the race itself. He waged legal battles against still others in court.

Betsy Andreu, the wife of former Armstrong teammate Frankie Andreu, was one of the first to publicly accuse Armstrong of using performance-enhancing drugs. She called news of Armstrong's confession "very emotional and very sad," and got choked up as well when asked to comment.

"He used to be one of my husband's best friends and because he wouldn't go along with the doping, he got kicked to the side. Lance could have a positive impact if he tells the truth on everything. He's got to be completely honest," she said.

At least one of his opponents, the London-based Sunday Times, has already filed a lawsuit to recover about $500,000 it paid him to settle a libel case, and Dallas-based SCA Promotions, which tried to deny Armstrong a promised bonus for a Tour de France win, has threatened to bring yet another lawsuit seeking to recover more than $7.5 million an arbitration panel awarded the cyclist in that dispute.

In addition, former teammate Floyd Landis, who was stripped of the 2006 Tour de France title for doping, has filed a federal whistle-blower lawsuit that accused Armstrong of defrauding the U.S. Postal Service. The Justice Department has yet to decide whether it will join the suit as a plaintiff.

The lawsuit most likely to be influenced by a confession might be the Sunday Times case. Potential perjury charges stemming from Armstrong's sworn testimony in the 2005 arbitration fight would not apply because of the statute of limitations. Armstrong was not deposed during the federal investigation that was closed last year.

Armstrong is said to be worth around $100 million. But most sponsors dropped him after USADA's scathing report — at the cost of tens of millions of dollars — and soon after, he left the board of Livestrong.

After the USADA findings, he was also barred from competing in the elite triathlon or running events he participated in after his cycling career. World Anti-Doping Code rules state his lifetime ban cannot be reduced to less than eight years. WADA and U.S. Anti-Doping officials could agree to reduce the ban further depending on what information Armstrong provides and his level of cooperation.

Whether his confession would begin to heal those ruptures and restore that reputation remains to be seen.

Diagnosed with testicular cancer in October 1996, the disease soon spread to his lungs and brains. Armstrong's doctors gave him a 40 percent chance of survival at the time and never expected he'd compete at anything more strenuous than gin rummy. Winning the demanding race less than three years later made Armstrong a hero.

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Jim Litke reported from Chicago.

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