1 Human rights

Slaking a thirst for justiceApr 12th 2007 | BUENOS AIRES AND SANTIAGO From The Economist print edition

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A generation later, in both Argentina and Chile, the courts are dealing with the perpetrators of past atrocities

FOR the past 31 years, Viviana Díaz, a small, gentle woman now in her 50s, has devoted her life to finding out what happened to her father, Victor Díaz López, a former leader of Chile's Communist Party. Following the bloody coup against Salvador Allende's left-wing government in 1973, he became one of the military regime's most wanted men. After nearly three years in hiding, he was finally picked up by the DINA, the secret police of Chile's dictator, General Augusto Pinochet. His family never saw him again.

He was one of the many thousands who perished under the dictatorships that ruled many parts of Latin America in the final phase of the cold war in the 1970s and 1980s. A quarter of a century after the last successful military coup in Latin America, the region has moved on, with democracy for the most part firmly established. But in many countries, the past still poses some searching questions. Peace or justice?

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Retribution or reconciliation? Find the truth, however painful, or prefer the ease of forgetting?

Many argue for moving on rather than re-opening old wounds. Others reply that without justice there can be no healing and no guarantee of the rule of law. No group feels this more keenly than the relatives of the “disappeared”—those kidnapped by the state and taken to secret detention centres. Their tortured bodies, dumped in the sea or buried in unmarked graves, were rarely if ever found until well after the dictators departed. Unidentified remains are still turning up.

In most countries in the region where abuses occurred under authoritarian rule—Guatemala (where 200,000 died in a civil war between military dictatorships and left-wing guerrillas), Brazil, Mexico and Uruguay—the process of dealing with the crimes of the past has barely begun. To a lesser extent, that applies to El Salvador too (see article).

The process has gone furthest in Argentina and, especially, Chile. That marks a change. In Chile, some 3,000 people were killed or “disappeared” at the hands of Pinochet's regime. But the dictatorship's amnesty for its own crimes outlived it. Only recently have most families learned the fate of their loved ones.

Take Mr Díaz's case. His family learnt of his arrest through an anonymous phone call. Then silence. After four months of searching, Ms Díaz and her mother, a washerwoman, met a woman recently released from Villa Grimaldi, a secret detention centre. She had a message for them from Marta Ugarte, another of the many communist leaders interned there. Ugarte's wrists had broken after she was strung up from the ceiling and her breasts were burned with a blow-lamp. She wanted them to know that neither she nor Mr Díaz would ever get out alive.

For years, Ms Díaz staged demonstrations, petitioned the pusillanimous courts and badgered officials. But she was met only with death threats, repeated arrest and continuing silence. When democracy returned to Chile in 1990, the government set up an independent inquiry into the “disappeared”. Even then, the perpetrators could not be brought to

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justice. It was not until Pinochet's arrest in London in 1998 in response to an extradition request from Spain, and the British House of Lords' rulings that he lacked immunity under international law, that Chile's judges began to grow much bolder.

In a series of landmark rulings, Chile's Supreme Court removed most of the obstacles to trying the dictatorship's crimes. In 1999 it declared “disappearances” to be a continuing crime until death is proved. That meant they were not covered by the 1978 amnesty. In December 2006 it ruled that because Chile was in a situation of internal conflict after the 1973 coup, the Geneva Conventions applied. Serious violations of those conventions were war crimes and crimes against humanity, for which a statute of limitations could never be invoked, it said. Nor could they be subject to amnesty, it ruled last month.

According to Chile's Interior Ministry, 148 people, including nearly 50 military officers, have already been convicted for human-rights violations during the 17-year dictatorship. Over 400 more, nearly all from the armed forces, have been indicted or are under investigation. Pinochet was himself facing trial on several charges, including murder, torture and tax evasion, when he died in December at the age of 91.

It was as a result of one of these investigations that Ms Díaz finally learnt of her father's fate. Last month a man known (because of his size) as “the Elephant”, who led the Lautaro brigade, a previously unknown elite unit of the DINA, tearfully confessed to murdering Victor Díaz at a barracks in Santiago in 1977 by asphyxiating him with a plastic bag, while cyanide was injected into his veins. His body, weighed down by a railway sleeper, was then thrown into the sea from a military helicopter. The truth, however painful, has brought her peace, says Ms Díaz.

Trials and tribulations in Argentina

In Argentina, at least 13,000 people (and perhaps as many as 30,000) “disappeared” or were killed during the military dictatorship of 1976-83. Unlike Chile's, Argentina's military regime collapsed in confusion, following defeat in the Falklands war. The first act of the democratic government of Raúl Alfonsín in 1983 was to annul the amnesty rushed

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through by the junta just before it fell. A truth commission—the world's first—provided the material for investigations by prosecutors, one of whom was Luis Moreno Ocampo, now chief prosecutor of the International Criminal Court in The Hague. Nearly 500 people, including nine members of the four successive juntas, were charged. Argentina thus became the first country to put its own military rulers on trial. The army argued that it had been forced to act by large-scale guerrilla violence. As in Chile, Argentina's military government had at first enjoyed considerable civilian support.

Repeated barracks rebellions in protest against the prosecutions forced Mr Alfonsín to buckle. He approved a “full-stop” law halting new investigations, followed by another of “due obedience” which exonerated those who claimed to have been following orders—a defence dismissed in the Nuremberg trials after the second world war. His successor, Carlos Menem, issued pardons to 277 of those already convicted or indicted, including nearly 40 generals and several guerrilla leaders.

Argentines still argue about these pragmatic decisions. Public opinion was certainly against them, and the thirst for justice was huge. One crime was not covered by the various amnesties and pardons—that of taking away the babies of mothers who gave birth in captivity, and giving them to couples in the security forces to bring up as their own. The real mothers were then killed or “disappeared”. According to the “Grandmothers of the Plaza de Mayo”, who from 1977 demonstrated on the square of that name in Buenos Aires, some 500 babies were stolen in this way, only 87 of whom have so far been traced.

Reuters

Pinochet's amnesty was unpicked

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Pinochet's London arrest emboldened judges in Argentina too. Soon afterwards, General Jorge Videla, the junta president of 1976-81, was put on trial on charges of appropriating babies. For this, General Videla was sentenced to eight years imprisonment. He had already received a life sentence in 1985. His subsequent pardon was quashed by a judge last September on the ground that he was guilty of crimes against humanity and could never be pardoned. Because he is aged over 70, General Videla is now under house arrest.

In 2005 Argentina's Supreme Court annulled the “full-stop” and “due obedience” laws as being unconstitutional. That has paved the way for the prosecution of other junta crimes. Of the 772 people, nearly all in the military or secret police, now facing charges or investigations, 260 are in pre-trial detention (including 71 under house arrest), 46 are on bail, 41 are on the run, and 109 are dead, according to the Centre for Legal and Social Studies, a human-rights group. Five people have so far been convicted, including two on “disappearance” charges. The government expects another half-dozen trials to take place this year. Years of further trials lie ahead.

These prosecutions are backed both by the current Peronist president, Néstor Kirchner, whose government includes several former followers of the Montonero guerrillas, and by public opinion. Unlike armies in many other Latin American countries, the army in Argentina is no longer much respected. In opinion polls 70% of respondents approved of the court's annulment of the amnesty laws. No new prosecutions are being brought against former guerrillas. The government argues, with questionable logic, that they were not guilty of crimes against humanity and are thus subject to the statute of limitations.

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Viviana Díaz finally found truth

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But prosecuting Isabel Perón, the third wife of Juan Perón, the country's revered populist leader, is a step too far for many Argentines. On Perón's death in 1975, Isabel, a former cabaret dancer, succeeded him. Amid growing economic chaos and violence between the guerrillas and right-wing death-squads, she signed decrees in 1975 authorising the eradication of all “subversive elements”. Some say that the Argentine Anti-communist Alliance (known as the “Triple A”), a government-backed death-squad, was responsible for at least 1,500 killings during her 20-month presidency.

Since her release from prison by the Argentine junta in 1981, Mrs Perón has lived in Spain. She claims ignorance of abuses during her rule. But in January she was arrested in Madrid at the request of an Argentine judge investigating the “disappearance” of a Peronist militant in February 1976. Four days later, a second warrant for her arrest was issued by another judge on charges relating to the “Triple A” killings. Aged 75 and said by her lawyers to be suffering from manic depression, Mrs Perón has been released on bail while awaiting the outcome of extradition proceedings. Few expect them to succeed.

As the experiences of Chile and Argentina show, each country has to find its own way of dealing with past atrocities in accordance with its own particular circumstances and history. Sometimes, it may take a whole generation for society to be ready to learn the truth, as in Germany after the second world war. At other times, an amnesty, which may later be unpicked or annulled, may help to secure peace.

The rise of international human-rights law has helped those who argue that in

cases involving the worst crimes justice must never be sacrificed to peace. Where

conflict continues that principle may be hard to apply. Its proponents say justice is

essential not just as an end in itself but to deter future tyrants. Until recently, most

could expect to get off scot-free. Increasingly, other countries may follow the road

pioneered by Chile and Argentina.

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2 María Julia HernándezApr 12th 2007 From The Economist print edition

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María Julia Hernández, fighter for human rights, died on March 30th, aged 68

WHEN forensic teams from Argentina dug in 1992 into the earth at El Mozote, in the mountains of eastern El Salvador, they first came upon a reddish rubble, mixed up with the roots of thorn-plants and weeds. A little deeper they uncovered small, thin skulls, some of them blackened by fire. Underneath these were bundles of what seemed to be brown rags: the blood-soaked cotton dresses, trousers and socks of what had once been children, killed more than a decade before. The pockets of some still held their lucky plastic toys.

The forensic work at this, the most dreadful killing-field of modern Latin America, was memorably reported by Mark Danner in the New Yorker. But it might never have been carried out, and the massacre of 794 people, overwhelmingly civilians, in December 1981 might never have been forced to the world's attention, if María Julia Hernández had not been on the case. She was in charge of the Socorro Jurídico, later the Tutela Legal, which during El Salvador's murderous civil war of 1980-92 kept track of human-rights abuses for the archdiocese of San

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Salvador. She was therefore the person to whom Rufina Amaya Márquez first told her story.

Rufina had been the sole survivor of the massacre. When the troops of the elite Atlacatl battalion of the Salvadoran army had come to the village to flush out leftist rebels, she had been locked up with the other women. She had seen her husband beheaded with a machete; her baby daughter had been torn from her breast. But as the women were led away Rufina managed to hide beside a crab-apple tree, and the screaming of the others distracted the soldiers from seeing that she had gone. When night fell she crawled away into the maguey plants, her skirts knotted up so as not to hamper her, and dug a little hole into which she could press her face to weep without being heard.

Miss Hernández took all this down. She was a homely, sympathetic sort, who in her old-fashioned print dresses looked much like a priest's housekeeper; but she had been a professor of law at the University of Central America in San Salvador, and would fix those who tried to deceive her with a stony, intellectual stare. Since 1978, as El Salvador slid into disorder, she had been compiling for the archdiocese a book of the dead. These were the corpses left by right-wing death squads in the city streets most nights, their faces dissolved by battery acid and their backs or chests scored with the tags of their killers. Her colleagues would take photographs, and relatives of the missing would come to her office to leaf through the portfolio in the hope, or fear, of finding them. But El Mozote was an atrocity beyond any of this.

For years, with a lawyer's thoroughness and steely determination, Miss Hernández amassed the evidence. The government would not help; it denied that anything had happened, and dismissed Tutela Legal as a guerrilla front. The Reagan administration, intent on stamping out communist infection, agreed that Miss Hernández was a trouble-maker. She was undeterred. In 1989 six Jesuits were shot dead at her old university; Tutela Legal did the first investigation, and found that the army had ordered it. In 1991 her office published the first investigation into El Mozote, including the names of all the dead.

The signing of peace accords the next year ended the civil war, set up a Truth Commission and led to the dig at the site of the massacre. Miss Hernández had the names of those responsible; but in 1993 the new government declared an amnesty for all of them. She kept going, campaigning to overturn the amnesty and to bring the killings before the Inter-American Court of Justice. On her death the case had been reopened and, with her help, evidence was slowly being gathered again. She was also publicising corruption and brutality in El Salvador's police force.

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The heart entire

Her life was full of risks, cheerfully faced. Each day, settling to her work in a room as bare as a nun's cell, she began with a prayer: “Well, God, will I see you today, or will you leave me a bit longer, fighting?” Papers carrying death-threats were often pushed through the door. She drew strength from her dearest friend, Oscar Romero, who in 1977 had become archbishop of San Salvador and had set up the human-rights office. Like Christ calling the disciples, as she liked to remember it, he had summoned her from the university, “and I didn't really know how to [follow him], but I said yes.” Once she went searching for the archbishop, out into the countryside, and found him saying mass for the campesinos under a tree. From him she learned to love and defend the poor; and when he too was murdered by a death squad, at the altar, in 1980, she felt bound to continue the work he had begun.

She died relatively young, from a heart attack, in the same month that Romero had been killed and on the very day of his burial. Salvadorans found a fascinating symmetry in that. Miss Hernández had liked to show visitors where he was buried and to tell the story that, though he had been shot in the chest, his heart had been undamaged. She was sure it was still whole under the earth, evidence of his continuing power to encourage her, just as the reddish soil at El Mozote had preserved, in blood and bones, the truth.

3 Italian luxury goods

Tutto in famigliaApr 12th 2007 | MILAN AND ROME From The Economist print edition

To thrive in the globalising economy Italian luxury-goods firms must put economic logic before family and independence

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“IT IS very tricky to sack a cousin,” observes Francesco Trapani, the chief executive of Bulgari. The Roman jeweller was founded by Sotirio Boulgaris, a Greek immigrant to Italy, in 1884. The patriarch's grandsons, Paolo and Nicola, are respectively chairman and vice-chairman. Mr Trapani, who took over as chief executive in 1984 at the age of 27, is their nephew.

Yet Bulgari, the third-biggest luxury jeweller after Cartier and Tiffany, is different from most of the other family-owned luxury-goods firms in Italy. Mr Trapani listed Bulgari's shares in 1995, even though he knew he would be exposed to outside pressure as the boss of a public company. “If I don't perform, I am out,” he says.

Now other Italian luxury-goods firms are considering following Bulgari to the stockmarket. The industry is booming. Emerging markets in Asia are becoming increasingly important and demand more investment in products, stores and marketing. Famous brands are branching into new lines of business, including hotels and interior decoration.

The Italian companies also have an eye on their main competitors: French firms dominate the luxury-goods industry, with 36% of the global market. Some, such as Hermès, have listed their shares on the Paris bourse. Others have been swallowed by Moët Hennessy Louis Vuitton (LVMH), a publicly listed luxury-goods group created by Bernard Arnault, or by PPR, a quoted retail and luxury-goods empire established by François Pinault, a French financier who is Mr Arnault's arch-rival. By comparison, most Italian companies remain private and parochial.

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Lux in flux

Family bonds remain an asset, Mr Trapani says, unless they override business logic. (Members of the Bulgari clan collectively own 52% of the shares, so they still control the company.) Of the independent Italian firms, only Bulgari and Armani, which is privately owned, have properly embraced globalisation, he reckons. Gucci, another Italian firm to have spread its wings, is part of PPR.

In spite of their reluctance to become truly international, other Italian luxury-goods makers have until now thrived in this tricky, fickle trade chiefly thanks to a long tradition of craftsmanship in the country's northern regions. In addition, the business has high barriers to entry. It takes time to build a good name; luxury is capital intensive; and about 70% of new brands fail.

But globalisation is placing fresh demands on even the best-established brands, and that could cause old strategies to fail. Asians are now the biggest consumers of luxury goods. The first task is to conquer these new markets, which will provide openings for new brands—including, eventually, luxury brands from Asia itself. Flotations could provide the cash for this expansion. Going public also encourages a firm to be disciplined with its finances and increase its profile.

So much for the financial logic. But what would listings do for the creative minds behind the Italian brands? The transition would not be easy for Italian family-run stars like Ferragamo, Versace or Prada. Founders of French luxury firms, such as Hubert de Givenchy and Yves Saint Laurent, gave up their independence only reluctantly when they sold the business to LVMH and Gucci respectively.

Italian companies have come to this crossroads after a rough patch at the beginning of the decade. Luxury-goods companies depend on tourists, particularly Asians visiting Europe. The fall-out from the dotcom boom, terrorist attacks in America on September 11th 2001, SARS and the start of the war in Iraq dented consumer confidence and dampened demand for international travel.

The industry has now recovered and companies are making big plans for the future. Last year was a vintage one: international travel picked up and luxury-goods sales grew, on average, by 10-20%. Asian demand was particularly strong; sales in China were up by 50%.

Industry surveys estimate that global annual sales of luxury goods are €100 billion ($130 billion) to €150 billion. The Japanese in their home

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market are responsible for some one-third of demand, Europeans and Americans about one-quarter each. About two-fifths of sales are in Europe, but many of those are to tourists.

Investment in Asia will be the test of whether a brand can compete in the world market. Now that the Japanese market is saturated, China is the industry's promised land. As a rule of thumb, a country starts developing an appetite for luxury goods when the average output per person reaches $5,000 to $7,000 a year, the prosperity in Japan at the end of the 1970s, when Louis Vuitton entered the Asian market. In China's wealthiest cities GDP per person was around $7,000 in 2006.

With increasing wealth in China, attitudes to luxury have dramatically changed. A decade ago “showing off” in public was frowned upon: now young Chinese love to flaunt their designer labels. They go for Versace, Dolce & Gabbana (D&G) and Roberto Cavalli and their big, flashy logos that shout, “I am rich”. Robin Wight, chairman of Engine, a consultancy to luxury companies, compares their display to the “peacock's tail”. The Chinese market's double-digit growth is predicted to continue for at least the next few years. By 2014 about one-quarter of the industry's revenue will come from Chinese consumers, some predict.

To do well in China calls for big investments in advertising and promotion. The Italian industry's artisans used to be extremely successful, says Bulgari's Mr Trapani, but in today's global economy size matters. Bigger companies can invest more in advertising and marketing, which is all-important in an industry built on image and aspiration. They can pay for an extensive retail network, the latest technology for the back office and employ the most talented designers and managers.

Marketing costs can be very high, as are expenses for setting up shop and training sales staff. The growing presence of international brands in China is already bringing greater competition. Getting a retail licence can be tricky. Rents for property on the country's busiest streets are as extravagant as a piece of Louis Vuitton luggage. And most of the makers of luxury brands have yet to expand to cities other than Beijing, Shanghai and Guangzhou.

In 1991 Ermenegildo Zegna was the first Italian luxury company to enter the Chinese market. Today the firm has about 52 shops across the country. Almost all its peers have followed. China is the most interesting market, says Giancarlo Di Risio, Versace's boss, because it has some 120m consumers who can afford his “super-luxury” wares. Versace has five shops in China, which the company claims are doing well, and is

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planning to open another ten in 2007. Bulgari's four Chinese outlets are not making money yet. And Gucci has eight (profitable) shops in China.

Another call on the luxury firms' money is new businesses. Giorgio Armani is the pioneer of luxury-brand extension. He developed sub-brands, such as Emporio Armani and Armani Junior, to cater to different groups with different spending power. Now, in a joint venture with Emaar, a Dubai property developer, he is building a chain of hotels. The trick is to diversify without cheapening the brand.

After he took over at Versace in 2004, Mr Di Risio followed the Armani example, although he has continued to cater only to the super-rich. He is planning to build 15 super-luxury resorts around the world with Sunland Group, an Australian property developer.

It is all strikingly ambitious. But unlike their French rivals, few Italian luxury-goods makers have the scale or resources to place big bets on emerging markets and new lines of business without making themselves dangerously indebted.

That risk has always been there, but in China the risk is particularly large. Some observers remain sceptical of the Chinese boom and warn that most new Chinese consumers have low levels of brand awareness—and therefore low brand loyalty. Moreover, the Chinese prefer to buy luxury goods abroad, because of the prevalence of counterfeits at home. And prices in mainland China can be up to 30% higher than elsewhere because of high import duties and high consumption taxes.

Others warn that growth worldwide may be slower than the glitzy numbers forecast. Indeed, the industry could already be seeing slower growth. Sales could increase by 8-10% this year, reckons Antoine Belge, an analyst at HSBC, an investment bank, compared with a range of 7-18% last year. For the next ten years he predicts an average annual growth in sales of only 7%.

Brands on the block

If Italian luxury-goods firms are both to invest enough cash to succeed in Asia, and to have the ballast to absorb the odd setback, then they may have to list on the stockmarket. About 80 of them possess the brand awareness, growth, profitability and size to do so, says Pambianco, a Milan-based consultancy. These include D&G, Diesel and Armani, as well as Ermenegildo Zegna and Prada. Diesel and D&G are among the most profitable luxury companies in the world with annual sales of €1

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billion and €800m respectively, about one-fifteenth of LVMH's annual turnover.

A few of the best-known companies are planning a listing within the next two years. Prada, one of Italy's biggest, has tried to go public several times over the past six years. Next time a listing may come off. Intesa Sanpaolo, Italy's biggest bank, recently paid €100m for a 5% stake, valuing the firm at €2 billion. The company says it may list its shares next year.

Ferragamo, a Florentine maker of leather goods, hired Michele Norsa a few months ago, the first chief executive not to be a member of the 42-strong family, which nonetheless remains involved in the business. (Family can sometimes be counterproductive. In 1993 Ferragamo was bigger than Gucci and twice the size of Bulgari. Today the company is half the size of Bulgari and one-quarter that of Gucci.) “We intend to go public in the next 24 months,” says Mr Norsa.

Given that Versace is toying with the idea of a listing in 2008, Armani is the odd man out: Mr Armani, the founder of arguably the most successful of all Italian luxury-goods makers, prefers to be independent. L'Oréal, a French cosmetics company, and LVMH both ardently pursued him, but he believes his company, with some €400m in its coffers, can finance its own expansion. Financial markets do not really understand fashion, he says. If a new line of clothes is condemned by the critics, part of the fickleness of fashion, the company's share price will dive.

Should Italians follow the French example and merge into multi-brand groups? Their defenders say multi-brand groups mitigate the risk of big investments and save money through economies of scale in advertising, IT, distribution, raw materials and so on. Managers of individual brands are able to share know-how and best practice. They can, for instance, compare their experiences in entering the Chinese market and dealing with local taxation and legislation. Lastly, a house of brands reduces a company's exposure to the fickleness of the industry.

Yet the record of the two big luxury conglomerates is mixed. In the go-go 1990s Tom Ford and Domenico De Sole, at the time Gucci's creative and business heads, bought six fashion houses—Yves Saint Laurent, Balenciaga, Alexander McQueen, Stella McCartney, Bottega Veneta and Sergio Rossi—as well as Boucheron, a jeweller, and Bedat, a watchmaker. When PPR bought the group in 2001, almost all of them were leaking cash. Six years on, Yves Saint Laurent is still losing millions.

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Some of Italy's luxury-goods firms may well follow their French rivals onto the stockmarket to boost their resources for the brand battles ahead, but how much the families are prepared to cede control remains to be seen. That, in the end, may be what limits Italy's expansion.

4 Softbank

Receiving, not givingApr 12th 2007 | TOKYO From The Economist print edition

Reuters

Softbank's latest reinvention, as a mobile firm, proceeds apace. But the company's ability to churn through cash has not changed

AT THE height of the dotcom mania seven years ago, Softbank's stockmarket value hit almost $200 billion, making it very nearly the highest-priced company in Asia—not bad for a former software distributor floated only six years earlier. At the time the company had grown to oversee a vast and chaotic spread of internet investments in America and Japan. Its founder and head, Masayoshi Son (pictured above), who owned 38% of the company, looked as though he might overtake Bill Gates as the world's richest man. For young Japanese entrepreneurs, “Son-san” was more than just an adversary to Japan's buttoned-up corporate world; he was the messiah for a new age.

Times change. Mr Son's early investment in Yahoo! was a masterstroke. However, though Softbank still has a controlling stake in the valuable Yahoo! Japan, the country's biggest internet portal, most of its other

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investments have proved duds. Softbank's shares change hands at just under ¥3,000 ($25) compared with ¥198,000 at their peak. Foreign hedge funds think that this still values Softbank too richly, given its huge debt and complex corporate structure; they have borrowed Softbank shares to sell, in the hope of picking them up more cheaply after a plunge. The contrast with Japan's retail investors could not be starker. Mr Son is their hero. Thanks to them, Softbank is still the stockmarket's most heavily traded company. Some analysts who have issued critical reports on the firm have had to resort to bodyguards to protect themselves against angry shareholders.

Since the bubble burst, Softbank has reinvented itself at least twice, first as a fixed-line telecoms and broadband firm, and now that scheme has lost its shine, as a mobile-phone operator. A year ago it bought Vodafone's struggling mobile network in Japan. Rebranded Softbank, it is the smallest of Japan's big three mobile operators, with 16m out of 100m-odd mobile customers. At long last, Softbank has a business with scale and a sizeable customer base.

The business that Softbank acquired, for ¥1.8 trillion, was in awful shape, as a result of Vodafone's misreading of Japan's mobile market, one of the world's most sophisticated and a pioneer of third-generation (3G) services. In particular, Vodafone attempted to exploit economies of scale by offering the clunky 3G handsets it was selling in Europe to Japanese consumers too. To make matters worse, Vodafone underinvested in its Japanese 3G network, so coverage was poor.

Soon after the takeover, Softbank dramatically wrote down the value of Vodafone's fixed assets—raising the question of why it had paid so much for them in the first place. Undaunted, the new management began spending anew in the hope of setting things to rights. To improve coverage, it promised to increase the number of base stations from 25,000 to 46,000 by March this year. Since last autumn it has rolled out 30 new handsets.

Last October, new rules allowed people to keep their mobile-phone number when they change operators. In response, Softbank offered a series of cut-price tariff packages, including the offer of free calls to other Softbank subscribers. And it gave its customers the chance to pay for their handsets in instalments—an especially alluring innovation, since mobile firms in Japan do not offer customers subsidised handsets, unlike their counterparts in Europe. Executives at NTT DoCoMo, Japan's dominant mobile company, admit that the industry was caught off-balance by such promotions.

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A churn for the worse

Whether they have benefited Softbank is another matter. Such tactics work best in markets with high rates of churn, where customers jump readily from one operator to the next. But fewer than 5% of users have switched so far—a fraction of the churn-rate of Europe. That is partly because e-mail via mobile phone is hugely popular in Japan, and e-mail addresses linked to phones are not portable. And it is partly because each Japanese network has its own standard, so customers must buy new handsets when they switch.

Softbank has managed to reverse Vodafone's steady loss of subscribers—but at a cost. Revenue per subscriber is falling faster than subscriptions are growing, a problem that afflicts all operators save the second biggest, KDDI. That should spell lower revenues overall.

It is remarkable, therefore, that Softbank is reporting improved profitability at its mobile business. For instance, where profit margins under Vodafone were just 3.2%, they more than tripled to 11.7% during the new management's first two months last summer. They have since slipped a bit, but the leap has rekindled awe at Softbank's aggressive accounting.

The latest innovation seems to involve the handsets Softbank is selling on instalment. Analysts reckon it is booking all the revenues from the sale of each handset up front, even though the cash is to be received in instalments over up to two years. Softbank, in effect, has created a leasing business. Over the long term, that should have no impact on the company's cash flow, but in the accounts it could boost operating profit in the short term. The publication in a few weeks of Softbank's annual accounts for the year to April may cast more light on the matter.

In the previous financial year Softbank put an end to years of operating losses and has since seen operating profit grow each quarter. Indeed, over the past seven quarters, Softbank has reported a cumulative operating profit of ¥260 billion. But it is cash that services debt, and Softbank has a lot of debt—a net ¥2.4 trillion at the latest count, over eight times more than equity. Much of its cash is being swallowed by investments in Softbank's broadband, fixed-line and mobile businesses—including all those extra base stations that Softbank promised last year, but had not yet completed by its March deadline. As a result, free cash flow (net income adjusted for things like depreciation and capital expenditure) is estimated to have fallen ¥80 billion into the red over the same period.

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Softbank is still bleeding cash, in other words, which it must back up either with fresh injections of equity or debt or by selling something. Since Softbank's flotation in 1994, its ability to destroy value has been prodigious. In all, it has received more than ¥3.2 trillion from investors and has spent about ¥2.8 trillion of that in operating losses, investment losses and capital expenditure. Although Mr Son's machine is remarkable for sucking cash in at one end, it is also remarkable for spitting very little of it out at the other.

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March 29, 2007

5 Bare-Knuckle Enforcement for Wal-Mart’s Rules By MICHAEL BARBARO

The investigator flew to Guatemala in April 2002 with a delicate mission: trail a Wal-Mart manager around the country to prove he was sleeping with a lower-level employee, a violation of company policy.

The apparent smoking gun? “Moans and sighs” heard as the investigator, a Wal-Mart employee, pressed his ear against a hotel room door inside a Holiday Inn, according to legal documents. Soon after, the company fired the manager for what it said was improper fraternization with a subordinate.

Wal-Mart, renowned to outsiders for its elbows-out business tactics, is known internally for its bare-knuckled no-expense-spared investigations of employees who break its ironclad ethics rules.

Over the last five years, Wal-Mart has assembled a team of former officials from the C.I.A., F.B.I. and Justice Department whose elaborate, at times globetrotting, investigations have led to the ouster of a high-profile board member who used company funds to buy hunting equipment, two senior advertising executives who took expensive gifts

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from a potential supplier and a computer technician who taped a reporter’s telephone calls.

The investigators — whose résumés evoke Langley, Va., more than Bentonville, Ark. — serve as a rapid-response team that aggressively polices the nation’s largest private employer, enforcing Wal-Mart’s modest by-the-books culture among its army of 1.8 million employees.

Wal-Mart is certainly not the only company, or even the first, to investigate its employees, a practice used widely in corporate America to guard against fraud and protect trade secrets. But despite the retailer’s folksy Arkansas image, few companies are as prickly — or unforgiving — about its employees’ wayward behavior, a legacy of its frugal founder, Sam Walton, who equated misconduct with inefficiency that would cost customers money.

No case better demonstrates the company’s prowess — or, former employees say, its ruthlessness — than the exhaustive investigation of Julie Roehm and Sean Womack, two former top Wal-Mart marketing executives.

After Ms. Roehm sued Wal-Mart for wrongful termination, the company disclosed the results of the investigation last week in a detailed and at times salacious countersuit. Investigators obtained records that they said showed the two married executives had engaged in a sexual affair, accepted free meals from an advertising agency vying to win Wal-Mart’s business and begun negotiating a deal to leave Wal-Mart to work for that agency.

Yesterday, Ms. Roehm called Wal-Mart’s investigation “a smear campaign” intended to destroy her reputation and, in a nod to Wal-Mart’s investigative firepower, said the company had outmanned her with “ex-C.I.A. operatives” and “former F.B.I. men.”

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The Wal-Mart investigation was striking in its scope. Lawyers for Wal-Mart subpoenaed Mr. Womack’s wife, Shelley, compelling her to give sworn testimony about how she discovered a sexual relationship between her husband and Ms. Roehm. They prompted her to turn over dozens of embarrassing e-mail messages that her husband had sent to Ms. Roehm from a private account.

“I miss you ridiculously,” began one of the e-mail messages from Ms. Roehm to Mr. Womack. “I hate not being able to call you or write you. I think about us together all the time. Little moments like watching your face when you kiss me.”

Wal-Mart investigators also persuaded the top executives at a major advertising agency, Draft FCB, and its parent company, the Interpublic Group of Companies, to turn over hundreds of confidential e-mail messages, dinner receipts and notes from meetings. One revelation was that Ms. Roehm accepted a case of Effen vodka, valued at nearly $400, from the chief executive of Draft FCB, calling the gift, which violated Wal-Mart’s policies, “a HUGE hit” in a thank-you e-mail message.

Ms. Roehm and Mr. Womack have denied they engaged in a sexual relationship or did anything wrong. Mr. Womack did not respond to phone messages.

Kenneth H. Senser, a former top official at the C.I.A. and F.B.I. who runs Wal-Mart’s security department, said cases like these showed that Wal-Mart was determined to enforce consistently its employment policies, no matter how high the rank of the workers involved. Both Mr. Womack and Ms. Roehm, for example, were senior executives with six-figure salaries.

“It’s been very clear from these investigations that the company has taken a definitive stand,” said Mr. Senser, who interviewed both Ms. Roehm and Mr. Womack before they were fired in late 2006. “The chips are going to fall where they may. If it’s a senior vice president or cashier

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in the store, we are going to look at the allegations the same way — and not give somebody a pass.”

Mr. Senser, 47, and his staff of roughly 400, investigate allegations of misconduct, guard Wal-Mart executives and prepare for potential crises of all kinds, from hurricanes to terrorist attacks. (During Hurricane Katrina, they established an emergency response center inside Wal-Mart’s headquarters, filled with flat-screen televisions, that resembled one used by the F.B.I.)

Their backgrounds are impressive, if not slightly intimidating. Mr. Senser was a senior officer in the C.I.A.’s office of security, which was responsible for investigating agents considered a security risk. After that, he supervised the development of an internal security department at the F.B.I. when the agency discovered that Robert P. Hanssen, one of its agents, had spied for the Soviet Union and Russia.

Joe Lewis, who runs the internal corporate investigations unit at Wal-Mart, worked at the F.B.I. for 27 years, serving as acting assistant director for criminal investigations. He works closely with Thomas C. Gean, chief legal compliance officer, who was the United States attorney for the Western District of Arkansas.

In an interview, H. Lee Scott Jr., Wal-Mart’s chief executive, said that “it has reached the point where there are issues that take specialized skills to get to the bottom of.”

Mr. Scott conceded that the team has been unusually busy lately. “You almost have to laugh,” he said of executives engaging in egregious conduct. “You can’t make this stuff up.”

Three weeks ago, for example, Wal-Mart fired a computer technician, Bruce Gabbard, and one of his superiors, Jason Hamilton, after a two-month investigation conducted by Mr. Senser and his staff. They found that Mr. Gabbard, acting alone, had taped phone conversations between

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members of Wal-Mart’s media relations staff and this reporter of The New York Times. Using equipment he bought on eBay, he also intercepted text messages sent from his colleagues’ BlackBerries.

Mr. Scott, who personally apologized for the incident, said Mr. Gabbard had tried to uncover the source of leaked internal documents shared with newspapers like The Times “because he thought what was happening to his company was unfair and he was going to do something about it.” Mr. Gabbard has declined to comment.

Behind Wal-Mart’s response to such cases is a proud preoccupation with sticking to the rules. Inside Wal-Mart’s spare headquarters, large signs affixed to the doors of meeting rooms spell out a ban on gifts of any value from potential vendors, whether it is a free plane ticket or a cup of coffee.

No wonder, perhaps, that wasted money — from suppliers and Wal-Mart employees — is a recurring theme in the company’s investigations.

One of the company’s biggest investigations was of a board member and former vice chairman, Thomas M. Coughlin, whom it accused in 2005 of dipping into company funds to pay for CDs, beer, an all-terrain vehicle, duck-hunting boots and a customized dog kennel. His total theft, Wal-Mart said, was more than $500,000.

As with Ms. Roehm and Mr. Womack, Wal-Mart spared no detail in its case against Mr. Coughlin, who pleaded guilty to federal charges in the case. Investigators documented dozens of improper purchases that included fiber supplements and doughnuts and, in legal filings, described him as a rogue executive committed to defrauding the company.

But not all of Wal-Mart’s investigations involve money, or even high-stakes business matters, prompting employees to protest that the company’s investigative arm is, at times, used to intimidate employees who question authority or raise issues their bosses wish to remain secret.

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James W. Lynn, a factory inspection manager at Wal-Mart, was fired in 2002 for fraternization with a subordinate after an investigation that extended across several countries.

During the investigation, a company investigator followed Mr. Lynn and a lower-level female colleague who worked in Costa Rica on a business trip to Guatemala City, where he spied on the pair for at least four days — even booking a hotel room directly across the hall from the female employee’s room to keep watch on the pair. (In the end, both Mr. Lynn and the woman did say they kissed.)

Mr. Lynn, in an interview and in a wrongful-termination lawsuit filed against Wal-Mart, claims he was singled out because he openly criticized the working conditions in the Central American factories he inspected.

“Wal-Mart is the ultimate Big Brother in corporate America,” Mr. Lynn said. He disputes Wal-Mart’s claim that it investigates every employee the same way. “They are very opportunistic,” he said. “If it is someone they want to get rid of, they will go all out. If it’s somebody whose career they want to save, they won’t.”

Sarah Clark, a Wal-Mart spokeswoman, said the company “took the steps it deemed necessary to investigate the allegations of fraternization” and denied the company was motivated by Mr. Lynn’s criticism.

Mr. Senser, who arrived after the investigation of Mr. Lynn, said his staff knew its boundaries.

“We are not in the business of prosecuting people, or pursuing an allegation to find a violation of the law,” Mr. Senser said. “We operate for the benefit of our shareholders to make sure this company is being appropriately and ethically run. There is a difference.”

Stuart Elliott contributed reporting.

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6 Citigroup to cut 17,000 jobs

By EILEEN ALT POWELL, AP Business Writer

Citigroup Inc., the nation's largest financial institution, said Wednesday it will eliminate about 17,000 jobs as part of a companywide restructuring to reduce costs and improve profit.

That amounts to about 5 percent of the bank's 327,000-strong work force. Citigroup said its plans include "shrinking the size of corporate centers," several of which are in New York. It also expects to move some 9,500 jobs to lower-cost locations.

Still, the elimination of the jobs won't reduce the bank's work force, but merely slow its growth, Citi executives said.

Robert Druskin, Citi's chief operating officer who developed the restructuring plan over the past three months, told a conference call with Wall Street analysts they should expect Citi's headcount to grow this year because of acquisitions and plans to open new branches, especially overseas.

"But that rate of growth will be at a significantly diminished rate," Druskin said.

Citigroup has a number of acquisitions in the works. It is expanding operations in China and earlier this month announced the purchase of a bank in Taiwan. Citi also has made a tender offer for a Japanese brokerage.

In early trading, the bank's shares were down 54 cents at $51.86 on the New York Stock Exchange.

The bank said in a statement that with previously announced information technology savings, the overhaul will save the New York-based bank about $2.1 billion in 2007, $3.7 billion in 2008 and $4.6 billion in 2009.

Citigroup executives have been under pressure from investors and analysts to get a handle on the bank's burgeoning expenses, which grew

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15 percent last year, twice the pace of revenue growth. As a result, its shares have lagged those of other big money center banks.

Citigroup said it will record a pretax charge of $1.38 billion in the first quarter of 2007, and additional charges totaling approximately $200 million pretax over the subsequent quarters of 2007. The bank reports its first-quarter earnings next week.

Charles Prince, the bank's chairman and chief executive officer, said that implementation of Druskin's recommendations "will improve business integration as well as our ability to move quickly and seize new growth opportunities."

Prince also emphasized that more expense cutbacks were possible, saying that Citi was adopting "a continuous approach to improving our efficiency -- this is not a one-time effort."

Druskin said that the review "did not simply give the entire organization an arbitrary number to cut" but, instead, looked at each business operation and benchmarked it against peers.

He added: "We have been very careful to maintain our revenue generating capability — in fact, this effort should enhance our capacity to grow."

Druskin said more jobs would be cut overseas than in the United States. He said the bank was more likely to rely on layoffs than on attrition to make sure the targeted positions were vacated.

Among the anticipated changes are:

• Elimination of layers of management, in some cases increasing the average number of employees that report to each manager.

• Staff reductions will include some at corporate headquarters.

• Expanding centralized procurement and requiring more sharing of resources, such as legal and human resources teams.

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• Consolidation of some back-office, middle-office and corporate functions to eliminate duplication.

"More than 9,500 jobs will be moved to lower-cost locations, both domestically and internationally, with about two-thirds through attrition," the report said.

Prince said on a recent trip to New Delhi that some of the back-office jobs would move to India, where Citi already operates call centers.

The 2007 cost savings were broken down as $650 million in the global consumer division, $400 million in markets and banking, $175 million in wealth management, $375 million in corporate operations and technology and $100 million in "other." That's in addition to $400 million previously announced information technology savings, Citigroup said.

Citigroup, which had assets of more than $1.8 trillion at year's end, is one of the world's largest financial institutions. It operates in more than 100 countries.

___

On the Net:

http://www.citigroup.com

April 12, 2007

Citigroup to Eliminate 17,000 Jobs By ERIC DASH

Citigroup has long carried the mantle as the world’s biggest bank in the world’s financial capital — big deals, big ambitions and in the last few years, big costs.

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Now, with expenses growing nearly twice as fast as revenue, Citigroup is intent on cutting those costs down to size. Yesterday, the bank said that it would shed 17,000 jobs and move 9,500 others.

It will be something of a cultural revolution for a company that has long emphasized expansion over efficiency. With shareholders impatient with Citigroup’s sluggish stock price, the job cuts will put its chief executive, Charles O. Prince III, to the test.

If his effort fails to make the bank more nimble to compete with the likes of Bank of America, Goldman Sachs and others, broader strategic changes may be next.

Some of the biggest body blows in the cost-cutting effort will be felt In New York, where Citigroup is the largest private employer. About 1,600 jobs will be eliminated in the city, where Citigroup has 27,000 employees and its headquarters.

An additional 200 jobs will be lost in New York State, about 75 jobs will be cut in Connecticut, and a handful will be shed in New Jersey. The first pink slips have already been handed out.

Over all, roughly 8 percent of Citigroup’s 327,000 workers worldwide, from entry-level consumer bankers to senior executives in the investment bank, will be affected.

The 17,000 jobs will be eliminated this year. About 9,500 positions will be moved to locations overseas, like India or Poland, or smaller American cities like Buffalo, where the cost of doing business is lower. Two-thirds of those jobs will be lost through attrition. And another round of cost-cutting may still be in the offing.

“We are initiating a change in how we run the business,” Mr. Prince said yesterday. “You will see a more efficient, more tightly managed, and more tough-minded Citigroup than you have in the past.

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Citigroup said it would take a $1.38 billion charge before taxes in the first quarter of 2007 and another $200 million over subsequent quarters the rest of the year.

The plan outlined yesterday is Citigroup’s first major overhaul since a merger forged the banking giant nearly a decade ago. The plan had been eagerly awaited by Wall Street for the last three months.

Amid a slump in financial shares, Citigroup’s stock fell 1.15 percent yesterday, to $51.80, giving back some of Tuesday’s gains. Since Mr. Prince took over as chief executive in October 2003, the company’s share price has barely budged.

Investors and analysts had been expecting the project to reduce operating expenses by at least $2 billion, including $400 million of previously announced expense reductions from technology improvements. But even with cost savings of $2.6 billion by next year, some investors question whether it is enough.

“It was very, very typical and trademark Chuck Prince — he promised a lot and didn’t deliver much,” said William Smith, president of SAM Advisors, a small asset management firm. “The problem Prince has right now is he painted himself into a corner with a financial conglomerate that doesn’t work. On the one hand, he has to invest in his businesses. On the other, he has to cut costs.”

Some investors question whether the overhaul can stimulate growth. Even though Citigroup did not adjust its 2007 forecasts, Mr. Prince argued that the cost savings would eventually free money to better “grow organically and fewer layers of management approvals should make the company more nimble.”

But not only have Citigroup’s expenses been high, revenue growth, particularly in the United States consumer division, has been sluggish.

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Mr. Prince appears to still have the support of Citigroup’s board, but the question is whether investors will grant him — and his plan — enough time to turn the company around.

Jason Goldberg, a banking analyst with Lehman Brothers, said that “2007 is a pivotal year; it just takes a long time to turn an oil tanker.”

With the cost-cutting effort set into motion, an examination of Citigroup’s business portfolio will now move to the top of the agenda.

The bank’s newly hired financial chief, Gary L. Crittenden, is conducting a comprehensive review of its portfolio of businesses in advance of a summer board meeting, according to a person close to the situation. Working with Citigroup’s senior management team, Mr. Crittenden is seeking to identify underperforming businesses and improve the way capital is deployed.

While Citigroup officials suggest that there are no plans to shed any of the core business units, some people close to the bank suggested that the financial review could lead to underperforming parts being sold off.

Mr. Prince played down the evaluation yesterday, saying that it involved simply getting a “fresh perspective on Citigroup and its businesses” from a “fresh set of eyes.”

Ever since Sanford I. Weill orchestrated the 1998 merger of Travelers and Citicorp to form the company, Citigroup had managed expenses in an episodic and decentralized manner. Big acquisitions fueled its growth. Managers ran each business group independently. Cost-cutting was done one deal at a time.

Now, Mr. Prince is calling for a continuous approach to cost management that he hopes foreshadows a “cultural change.”

Several staff functions, like the legal and human resources departments, will be centralized to take better advantage of Citigroup’s size.

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Management layers will be stripped away; several headquarters will be consolidated. And expense management, Mr. Prince said, will no longer be a “one-time effort” but continuously under review.

“We have had too many instances where people could opt out of things,” said Robert Druskin, Citigroup’s chief operating officer, who oversaw the cost review and will now be responsible for putting those plans to work. “There was not the hammer behind them.”

“Without being dictatorial, we are going to take away some of those choices that didn’t produce good results,” he added. “Quite frankly, too many people have their own chief of staff, their own financial person and head of H.R.”

Mr. Druskin has been working with consultants from Mercer Oliver Wyman, a firm specializing in the financial services industry, to conduct a broad-based “structural expense review.” Their mission was to flush out big expenses that have bogged down the company as it has bulked up.

Underscoring the bureaucracy, as recently as last fall, Citigroup had three separate cost-cutting initiatives — reviewing technology, compliance and corporate staff — with no single person directly responsible for companywide cost-cutting. Only last December were they folded into the single overhaul project supervised by Mr. Druskin.

Citigroup officials would not give details on where and in what business units the jobs would be cut. Of the 17,000 layoffs, about 9,700 positions, or about 57 percent, are expected to be outside the United States.

Affected workers will receive severance packages, the company said.

(Citigroup has also completed a severance agreement with Todd S. Thomson, the former head of its brokerage and private bank whom Mr.

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Prince dismissed in January over concerns that he abused his executive privileges.)

Citigroup expects to move more than 9,500 positions, from back-office and call center positions to corporate staff, to lower-cost locations. In Tokyo, some will be moved to Okinawa. Some in London could be headed to Poland. Over all, many back-office jobs could wind up in India, where the company is hiring at a rapid pace.

For New York , the significance of Citigroup’s decision may lie more in the underlying trend than in the absolute number of jobs lost, mostly from the back-office and corporate staff ranks. In recent years, Citigroup has sent a steady stream of employees to lower-cost areas in New Jersey, Long Island and elsewhere.

Deutsche Bank is in the process of moving 1,300 employees to Jersey City, and the Royal Bank of Scotland is moving its headquarters to Stamford, Conn., where it is building a $400 million trading complex and adding 1,300 jobs. And with rents rising in Manhattan, others may follow.

Despite the Citigroup job cuts, Mayor Michael R. Bloomberg said yesterday that he was optimistic. “The businesses they are emphasizing are businesses that probably will have most of their employees here in New York City,” he said.

Citigroup’s consumer and credit card operations are expected to experience the brunt of the job cuts. Customer service employees and back-office workers will probably be among the groups most affected.

Employees within the investment bank and brokerage and private banking divisions also face layoffs. But across the company, many of the reductions are expected to come from eliminating overlapping or duplicative staff jobs.

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“We found, in many instances, that we had simply too many layers,” Mr. Druskin said.

Charles V. Bagli contributed reporting.

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April 1, 2007

7 For Girls, It’s Be Yourself, and Be Perfect, Too By SARA RIMER, The New York Times

Correction Appended

NEWTON, Mass., March 31 — To anyone who knows 17-year-old Esther Mobley, one of the best students at one of the best public high schools in the country, it is absurd to think she doesn’t measure up. But Esther herself is quick to set the record straight.

“First of all, I’m a terrible athlete,” she said over lunch one day.

“I run, I do, but not very quickly, and always exhaustedly,” she continued. “This is one of the things I’m most insecure about. You meet someone, especially on a college tour, adults ask you what you do. They say, ‘What sports do you play?’ I don’t play any sports. It’s awkward.”

Esther, a willowy, effervescent senior, turned to her friend Colby Kennedy. Colby, 17, is also a great student, a classical pianist, fluent in Spanish, and a three-season varsity runner and track captain. Did Colby worry, Esther asked, that she fell short in some way?

“Or,” said Esther, and now her tone was a touch sarcastic, “do you just have it all already?”

They both burst out laughing.

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Esther and Colby are two of the amazing girls at Newton North High School here in this affluent suburb just outside Boston. “Amazing girls” translation: Girls by the dozen who are high achieving, ambitious and confident (if not immune to the usual adolescent insecurities and meltdowns). Girls who do everything: Varsity sports. Student government. Theater. Community service. Girls who have grown up learning they can do anything a boy can do, which is anything they want to do.

But being an amazing girl often doesn’t feel like enough these days when you’re competing with all the other amazing girls around the country who are applying to the same elite colleges that you have been encouraged to aspire to practically all your life.

An athlete, after all, is one of the few things Esther isn’t. A few of the things she is: a standout in Advanced Placement Latin and honors philosophy/literature who can expound on the beauty of the subjunctive mood in Catullus and on Kierkegaard’s existential choices. A writer whose junior thesis for Advanced Placement history won Newton North’s top prize. An actress. President of her church youth group.

To spend several months in a pressure cooker like Newton North is to see what a girl can be — what any young person can be — when encouraged by committed teachers and by engaged parents who can give them wide-ranging opportunities.

It is also to see these girls struggle to navigate the conflicting messages they have been absorbing, if not from their parents then from the culture, since elementary school. The first message: Bring home A’s. Do everything. Get into a top college — which doesn’t have to be in the Ivy League, or one of the other elites like Williams, Tufts or Bowdoin, but should be a “name” school.

The second message: Be yourself. Have fun. Don’t work too hard.

And, for all their accomplishments and ambitions, the amazing girls, as their teachers and classmates call them, are not immune to the third message: While it is now cool to be smart, it is not enough to be smart.

You still have to be pretty, thin and, as one of Esther’s classmates, Kat Jiang, a go-to stage manager for student theater who has a perfect 2400 score on her SATs, wrote in an

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e-mail message, “It’s out of style to admit it, but it is more important to be hot than smart.”

“Effortlessly hot,” Kat added.

If you are free to be everything, you are also expected to be everything. What it comes down to, in this place and time, is that the eternal adolescent search for self is going on at the same time as the quest for the perfect résumé. For Esther, as for high school seniors everywhere, this is a big weekend for finding out how your résumé measured up: The college acceptances, and rejections, are rolling in.

“You want to achieve,” Esther said. “But how do you achieve and still be genuine?”

If it all seems overwhelming at times, then the multitasking adults in Newton have the answer: Balance. Strive for balance.

But balance is out the window when you’re a high-achieving senior in the home stretch of the race for which all the years of achieving and the disciplined focusing on the future have been preparing you. These students are aware that because more girls apply to college than boys, amid concerns about gender balance, boys may have an edge at some small selective colleges.

“You’re supposed to have all these extracurriculars, to play sports and do theater,” said another of Esther’s 17-year-old classmates, Julie Mhlaba, who aspires to medical school and juggles three Advanced Placement classes, gospel choir and a part-time job as a waitress. “You’re supposed to do well in your classes and still have time to go out.”

“You’re supposed to do all these things,” Julie said, “and not go insane.”

Stress Trumps Relaxation

Newton, which has a population of almost 84,000, is known for a liberal sensibility and a high concentration of professionals like doctors, lawyers and academics. Six miles west of Boston, with its heavily settled neighborhoods, bustling downtowns and high numbers of immigrants, Newton is a suburb with an urban feel.

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The main shopping area, in Newton Centre, is a concrete manifestation of the conflicting messages Esther and the other girls are constantly struggling to decode. In one five-block stretch are two Starbucks and one Peets Coffee & Tea, several psychotherapists’ offices, three SAT test-prep services, two after-school math programs, and three yoga studios promising relaxation and inner peace.

Smack in the middle of all of this is Esther’s church, the 227-year-old First Baptist, which welcomes everyone regardless of race, sexual orientation or denomination, and where Esther puts in a lot of time.

The test-prep business is booming. Kaplan (“Be the ideal college applicant!”) is practically around the corner from Chyten (“Our average SAT II score across all subjects is 720!”), which is three blocks from Princeton Review (“We’re all about scoring more!”). My First Yoga (for children 3 and up), with its founder playing up her Harvard degree, is conveniently located above Chyten, which includes the SAT Cafe.

High-priced SAT prep has become almost routine at schools like Newton North. Not to hire the extra help is practically an act of rebellion.

“I think it’s unfair,” Esther said, explaining why she decided against an SAT tutor, though she worried about her score (ultimately getting, as she put it, “above 2000”). “Why do I deserve this leg up?”

Parents view Newton’s expensive real estate — the median house price in 2006 was $730,000 — and high taxes as the price of admission to the prized public schools. There are less affluent parents, small-business owners, carpenters, plumbers, social workers and high school guidance counselors, but many of these families arrived decades ago when it was possible to buy a nice two-story Colonial for $150,000 or less.

Newton North, one of two outstanding public high schools here, is known for its academic rigor, but also its vocational education, reflecting the wide range of its 1,967 students. Nearly 73 percent of them are white, 7.3 percent black, nearly 12 percent Asian and 7.5 percent Hispanic. Many of the black and Hispanic students live in the Roxbury and Dorchester neighborhoods of Boston, and are bused in under a 35-year-old voluntary integration program.

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Newton North has a student theater, winning athletic teams and dozens of after-school clubs (ultimate Frisbee, mock trial, black leadership, Hispanic culture, Israeli dance). There is an emphasis on nonconformity — even if it is often conformity dressed up as nonconformity — and an absence of such high school conventions as, say, homecoming queens, valedictorians and class rankings.

‘Superhuman’ Resistance

Jennifer Price, the Newton North principal, said she and her faculty emphasized to students that they could win admission to many excellent colleges without organizing their entire lives around résumé building. By age 14, Ms. Price said, the school’s highest fliers are already worrying about marketing themselves to colleges: “You almost have to be superhuman to resist the pressure.”

If more students aren’t listening to the message that they can relax a bit, one reason may be that a lot of the people delivering the message went to the elite colleges. Ms. Price has an undergraduate degree from Princeton — she makes a point of saying that she got in because she was recruited to play varsity field hockey — and is a doctoral candidate at Harvard. Many of the teachers have degrees from the Ivy League and other elite schools.

But the message also tends to get drowned out when parents bump into each other at Whole Foods and share news about whose son or daughter just got accepted (or not) at Harvard, Yale, Brown, Penn or Stanford.

Or when the final edition of the award-winning student newspaper, the Newtonite, comes out every June, with its two-page spread listing all the seniors, and their colleges. For that entire week, Esther says, everyone pores over the names, obsessing about who is going where.

“In a lot of ways, it’s all about that one week,” she said.

There is something about the lives these girls lead — their jam-packed schedules, the amped-up multitasking, the focus on a narrow group of the nation’s most selective colleges — that speaks of a profound anxiety in the young people, but perhaps even more

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so in their parents, about the ability of the next generation to afford to raise their families in a place like Newton.

Admission to a brand-name college is viewed by many parents, and their children, as holding the best promise of professional success and economic well-being in an increasingly competitive world.

“It’s, like, a really big deal to go into a lucrative profession so that you can provide for your kids, and they can grow up in a place like the place where you grew up,” Kat said.

Esther, however, is aiming for a decidedly nonlucrative profession. Inspired by her father, Greg Mobley, who is a Biblical scholar, she wants to be a theologian.

She says she is interested in “Scripture, the Bible, the development of organized religion, thinking about all this, writing about all this, teaching about all this.” More than anything else, she wrote in an e-mail message, she wants to be a writer, “and religion is what I most like to write about.”

“I have such a strong sense of being supported by my faith,” she continued. “It gives me priorities. That’s why I’m not concerned about making money, because I know that there is so much more to living a rich life than having money.”

First Baptist Church counts on Esther. She organizes pancake suppers, tutors a young congregant and helps lead the youth group’s outreach to the poor.

On a springlike Sunday afternoon toward the end of winter, Esther could be found with her father, her two brothers and members of her youth group handing out food to homeless people on Boston Common. She had spent the morning in church.

About 2 p.m., a text message flashed across her cellphone from Gabe Gladstone, a co-captain of mock trial: “Where are you?” Esther, a key member of the group, was needed at a meeting.

Esther messaged back: “I’m feeding the homeless, I’ll come when God’s work is done.”

Fending Off ‘Anorexia of the Soul’

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On a Saturday afternoon in late November, Esther and her mother, Page Kelley, sat at the dining room table talking about the contradictions and complexities of life in Newton. Esther’s father was with his sons, Gregory, 15, who plays varsity basketball for Newton North, and Tommy, 10, coaching Tommy’s basketball team.

Ms. Kelley, 47, an assistant federal public defender, and Mr. Mobley, 49, a professor at Andover Newton Theological School in Newton, grew up in Kentucky and came north for college. Ms. Kelley is a graduate of Smith College and Harvard Law School. Mr. Mobley has two graduate degrees from Harvard.

Amid all the competitiveness and consumerism, and the obsession with achievement in Newton, Ms. Kelley said, “You just hope your child doesn’t have anorexia of the soul.”

“It’s the idea that you end up with this strange drive,” she continued. “One of the great things about Esther is that she does have some kind of spiritual life. You just hope your kid has good priorities. We keep saying to her: ‘The name of the college you go to doesn’t matter. There are a lot of good colleges out there.’ ”

Esther said her mother is her role model. “I think the work she does is very noble,” she said.

“She has these impressive degrees,” Esther said, “and she chooses to do something where she’s not making as much money as she could.”

As close as mother and daughter are, there is one important generational divide. “My mother applied to one college,” Esther said. “She got in, she went.”

Back from basketball practice with his sons, Mr. Mobley joined the conversation. To Mr. Mobley, a formalized, competitive culture pervades everything from youth sports to getting into college. He pointed out to his wife that the lives of their three children were far more directed “than any of the aimless hours I spent in my youth daydreaming and meandering.”

Ms. Kelley asked, “Is that because of us?”

“Yes — and no,” he said. “It’s because of 2006 in America, and the Northeast.”

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The bar for achievement keeps being raised for each generation, he said: “Our children start where we finished.”

As the afternoon turned into early evening, Esther went out to meet her best friend, Aliza Edelstein. The family dog, a Jack Russell terrier named Bandit, was underfoot, trolling for affection.

“I’m not worried about Esther because I know her,” Mr. Mobley said. “Esther’s character is sealed in some fundamental way.”

Ms. Kelley, however, wondered aloud: “Don’t you worry that she never rebelled? When I was growing up, you were supposed to rebel.”

But she acknowledged that she had sent her own mixed signals. “As I’m sitting here saying I don’t care what kind of grades she gets, I’m thinking, she comes home with a B, and I say: ‘What’d you get a B for? Who gave you a B? I’m going to talk to them.’

“You do want your child to do well.”

Mr. Mobley nodded. “We’re not above it,” he said. “It’s complicated.”

On a Fierce Mission to Shine

To sit in on classes with Esther in her vibrant high school where, between classes, the central corridor, called Main Street, is a bustling social hub, is to see why these students are genuinely excited about school.

Their teachers are pushing them to wrestle with big questions: What is truth? What does Virgil’s “Aeneid” tell us about destiny and individual happiness? How does DNA work? How is the global economy reshaping the world (subtext: you have to be fluid and highly educated to survive in the new economy)?

Esther’s ethics teacher, Joel Greifinger, spent considerable time this winter on moral theories. An examination of John Rawls’s theory of justice led to extensive discussions about American society and class inequality. Among the reading material Mr. Greifinger presented was research showing the correlation between income and SAT scores.

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The class strengthened Esther’s earlier decision not to take private SAT prep.

In her honors philosophy/literature class, Esther has been reading Nietzsche, Kierkegaard, “Sophie’s Choice” and Viktor Frankl’s “Man’s Search for Meaning.” Amid a discussion of the strangely unsettling emptiness Frankl encountered upon his release from a Nazi concentration camp, Esther quoted Sartre: “You are condemned to freedom.”

Her honors teacher, Mike Fieleke, nodded. “That’s the existential idea. If we don’t awaken to that freedom, then we are slaves to our fate.”

A few weeks earlier, Esther, taking stock of her own life, wrote in an e-mail message: “I feel like I’m on the verge. I feel like I’m just about to get out of high school, to enter into adulthood, to reach some kind of state of independence and peacefulness and enlightenment.”

More immediately, she wrote, Mr. Fieleke had told her “he thought, from reading my papers and hearing me speak in class, that I was just on the verge of some really great idea.”

“I asked him if he thought that idea would come by next Wednesday, when our big Hamlet paper was due. He said I might feel this way all year long.”

The most intensely pressurized academic force field at school is the one surrounding the students on the Advanced Placement and honors track. About 145 of the 500 seniors are taking a combined total of three, four and five Advanced Placement and honors classes, with a few students even juggling six and seven.

Esther’s friend Colby takes four Advanced Placement and one honors class. “I’m living up to my own expectations,” Colby said. “It’s what I want to do. I want to do well for myself.”

Another of Esther’s friends, from student theater, Lee Gerstenhaber, 17, was juggling four Advanced Placement classes with intense late-night rehearsals for her starring role as Maggie, the seductive Southern belle in “Cat on a Hot Tin Roof.” It was too much. About 4 a.m one day last fall, she was still fighting her way through Advanced Placement physics homework. She dissolved in tears.

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“I had always been able to do it before,” Lee recalled later. “But I finally said to myself, ‘O.K., I’m not Superwoman.’ ”

She dropped physics — and was incandescent as Maggie.

Esther’s schedule includes two Advanced Placement and one honors class. Among certain of her classmates who are mindful that many elite colleges advise prospective applicants to pursue the most rigorous possible course of study, taking two Advanced Placement classes is viewed as “only two A.P.’s.” But Esther says she is simply taking the subjects she is most interested in.

She also shrugged off advice that it would look better on her résumé to take another science class instead of her passion, A.P. Latin. Like so many of her classmates, Esther started taking Latin in the seventh grade, when everyone was saying Latin would help them with the SAT. But now, except for Esther and a handful of other diehards who are devoted to Latin — and to their teacher, Robert Mitchell — everyone else has moved on.

“I like languages,” said Esther, who also takes Advanced Placement Spanish. “And I really like Latin.”

Who Needs a Boyfriend?

This year Esther has been trying life without a boyfriend. It was her mother’s idea. “She’d say, ‘I think it’s time for you to take a break and discover who you are,’ ” Esther said over lunch with Colby. “She was right. I feel better.”

Esther turned to Colby: she seems to pretty much always have a boyfriend.

“I never felt like having a boyfriend was a burden,” Colby said. “I enjoy just being comfortable with someone, being able to spend time together. I don’t think that means I wouldn’t feel comfortable or confident without one.”

Esther said: “I’m not trying to say that’s a bad thing. I’m like you. I never thought, ‘If I don’t have a boyfriend I’ll feel totally forlorn and lost.’ ”

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But who needs a boyfriend? “My girlfriends have consistently been more important than my boyfriends,” Esther wrote in an e-mail message. “I mean, girlfriends last longer.”

Boyfriends or not, a deeper question for Esther and Colby is how they negotiate their identities as young women. They have grown up watching their mothers, and their friends’ mothers, juggle family and career. They take it for granted that they will be able to carve out similar paths, even if it doesn’t look easy from their vantage point.

They say they want to be both feminine and assertive, like their mothers. But Colby made the point at lunch that she would rather be considered too assertive and less conventionally feminine than “be totally passive and a bystander in my life.”

Esther agreed. She said she admired Cristina, the spunky resident on “Grey’s Anatomy,” one of her favorite TV shows.

“She really stands up for herself and knows who she is, which I aspire to,” Esther said.

Cristina is also “gorgeous,” Esther laughed. “And when she’s taking off her scrubs, she’s always wearing cute lingerie.”

Speaking of lingerie, part of being feminine is feeling good about how you look. Esther is not trying to be one of Newton North’s trendsetters, the girls who show up every day in Ugg boots, designer jeans — or equally cool jeans from the vintage store — and tight-fitting tank tops under the latest North Face jacket.

She never looks “scrubby,” to use the slang for being a slob, but sometimes comes to school in sweats and moccasins.

“I think sometimes I might be trying a little too hard not to conform,” Esther says.

She says she is one of the few girls in her circle who doesn’t have a credit card. But she is hardly immune to the pressure to be a good consumer.

During the discussion around the dining room table, Esther’s mother expressed her astonishment over her daughter’s expertise in designer jeans. They had been people-

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watching at the mall. Esther, as it turned out, knew the brand of every pair of jeans that went by.

So what were the coolest jeans at Newton North?

“The coolest jeans are True Religions,” Esther said.

“They look,” she said, and here she smiled sheepishly as she stood up to reveal her denim-clad legs, “like these.”

Aliza and several of Esther’s other friends chipped in to buy them for her 17th birthday, in November.

Encouraged to Ease Up a Little

The amazing boys say they admire girls like Esther and Colby.

“I hate it when girls dumb themselves down,” Gabe Gladstone, the co-captain of mock trial, was saying one morning to the other captain, Cameron Ferrey.

Cameron said he felt the same way.

One of Esther’s close friends is Dan Catomeris, a school theater star. “One of the most attractive things about Esther is how smart she is,” said Dan, whose mother is a professor at Harvard Business School. “There’s always been this intellectual tension between us. I see why she likes Kierkegaard — he’s existential, but still Christian. She really likes Descartes. I was not so into Descartes. I really like Hume, Nietzsche, the existentialist authors. The musician we’re most collectively into is Bob Dylan.”

Sometimes, though, everybody wants some of these hard-charging girls to chill out. Tom DePeter, an Advanced Placement English teacher, wants his students to loosen up so they can write original sentences. The theater director, Adam Brown, wants the girls to “let go” in auditions.

Peter Martin, the girls’ cross-country coach, says girls try so hard to please everyone — coaches, teachers, parents — that he bends over backward not to criticize them. “I tell them, ‘Just go out and run.’ ” His team wins consistently.

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But how do you chill out and still get into a highly selective college?

One of Esther’s favorite rituals is to hang out at her house with Aliza, eating Ben and Jerry’s and watching a DVD of a favorite program like “The Office.” Their friendship helped Esther and Aliza keep going last fall, when there was hardly time to hang out. Esther recalled in an e-mail message how one night she had telephoned Aliza, who is also a top student, and a cross-country team captain, to say she was feeling overwhelmed.

“I said, ‘Aliza, this is crazy, I have so much homework to do, and I won’t be able to relax until I do it all. I haven’t gone out in weeks!’ And Aliza (who had also been staying in on Fridays and Saturdays to do homework) pointed out: ‘I’d rather get into college.’ ”

By Dec. 15, Newton North was in a frenzy over early admissions answers. Esther’s friend Phoebe Gardener had been accepted to Dartmouth. Her friend Dan Lurie was in at Brown. Harvard wanted Dan Catomeris.

Esther was in calculus class, the last period of the day when her cellphone rang. It was her father. The letter from Williams College — her ideal of the small, liberal arts school — had arrived.

Her father would be at her brother’s basketball game when she got home. Her mother would still be at the office. Esther did not want to be alone when she opened the letter.

“Dad, can you bring it to school?” she asked.

Ten minutes later, when her father arrived, Esther realized that he had somehow not registered the devastating thinness of the envelope. The admissions office was sorry. Williams had had a record number of highly qualified applicants for early admission this year. Esther had been rejected. Not deferred. Rejected.

Her father hugged her as she cried outside her classroom, and then he drove her home.

Esther said several days later: “Maybe it hurt me that I wasn’t an athlete.”

But she was already moving on. “I chose Williams,” she said, with a shrug. “They didn’t choose me back.”

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About that thin envelope: Mr. Mobley, unschooled in such intricacies, said he hadn’t paid much attention to it. He had wanted so much for his daughter to get into Williams, he said, and believed so strongly in her, that it was as if he had wished the letter into being an acceptance.

“It was a setback,” Mr. Mobley said weeks later. “But it’s not a failure.”

And Then One Day, a Letter Arrives

Has this all been a temporary insanity?

Esther’s friend Colby learned in February that she had been accepted at the University of Southern California. Soon, more letters of acceptance rolled in: from the University of Miami, the University of Texas at Austin, Tulane. With the college-application pressure behind her, she can go back to being the pragmatic romantic who opened her journal last August and wrote her “life list,” with 35 goals and dreams, in pink ink.

She wants: To write a novel. Own a (red) Jeep Wrangler. Get into college. Name her firstborn daughter Carmen. Go to carnival in Rio de Janeiro. Learn to surf. Live in a Spanish-speaking country. Learn to play the doppio movimiento of Chopin’s Sonata in B Flat. Own a dog. Be a bridesmaid. Vote for president. Write a really good poem. Never get divorced.

In mid-January Esther was thrilled to receive an acceptance letter from Centre College, one of her fallback schools, in Kentucky. But she was still dreaming about her remaining top choices: Amherst, Middlebury, Davidson and Smith, her mother’s alma mater.

Esther’s application to Smith included a letter from her father. He wrote about how, when Esther was a baby, they had gone to his wife’s 10th college reunion. He described the alumni parade as an “angelic procession of women in white, decade by decade, at every stage in the course of human life.”

He wrote about seeing the young women, the middle-aged graduates and, finally, “the elderly women, some with the assistance of canes and wheelchairs, but with no diminution of the confidence that a great education brings.”

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“I still remember holding Esther as we watched those saints go marching into the central campus for the commencement ceremony,” he wrote.

“Lord,” he concluded, and he could have been talking about any of the schools his daughter still has her heart set on, “I want Esther to be in that number.”

Epilogue: Esther learned last week that she had gotten into Smith. She learned on Saturday that she had been rejected by Amherst and Middlebury. She is still hoping for Davidson.

Correction: April 3, 2007

A front-page article on Sunday about the experiences of high-achieving high school girls in Newton, Mass., misstated a verb property of Latin, which one of the girls in the article studies. It is the subjunctive mood; there is no subjunctive "tense."

April 4, 2007

8 A Great Year for Ivy League Schools, but Not So Good for Applicants to Them By SAM DILLON

Harvard turned down 1,100 student applicants with perfect 800 scores on the SAT math exam. Yale rejected several applicants with perfect 2400 scores on the three-part SAT, and Princeton turned away thousands of high school applicants with 4.0 grade point averages. Needless to say, high school valedictorians were a dime a dozen.

It was the most selective spring in modern memory at America’s elite schools, according to college admissions officers. More applications poured into top schools this admissions cycle than in any previous year on record. Schools have been sending decision letters to student applicants in recent days, and rejection letters have overwhelmingly outnumbered the acceptances.

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Stanford received a record 23,956 undergraduate applications for the fall term, accepting 2,456 students, meaning the school took 10.3 percent of applicants.

Harvard College received applications from 22,955 students, another record, and accepted 2,058 of them, for an acceptance rate of 9 percent. The university called that “the lowest admit rate in Harvard’s history.”

Applications to Columbia numbered 18,081, and the college accepted 1,618 of them, for what was certainly one of the lowest acceptance rates this spring at an American university: 8.9 percent.

“There’s a sense of collective shock among parents at seeing extraordinarily talented kids getting rejected,” said Susan Gzesh, whose son Max Rothstein is a senior with an exemplary record at the Laboratory School, a private school associated with the University of Chicago. Max applied to 12 top schools and was accepted outright only by Wesleyan, New York University and the University of Michigan.

“Some of his classmates, with better test scores than his, were rejected at every Ivy League school,” Ms. Gzesh said.

The brutally low acceptance rates this year were a result of an avalanche of applications to top schools, which college admissions officials attributed to three factors. First, a demographic bulge is working through the nation’s population — the children of the baby boomers are graduating from high school in record numbers. The federal Department of Education projects that 3.2 million students will graduate from high school this spring, compared with 3.1 million last year and 2.4 million in 1993. (The statistics project that the number of high school graduates will peak in 2008.) Another factor is that more high school students are enrolling in college immediately after high school. In the 1970s, less than half of all high school graduates went directly to college, compared with more than 60 percent today, said David Hawkins, a director at the National Association of College Admission Counseling.

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The third trend driving the frantic competition is that the average college applicant applies to many more colleges than in past decades. In the 1960s, fewer than 2 percent of college freshmen had applied to six or more colleges, whereas in 2006 more than 2 percent reported having applied to 11 or more, according to The American Freshman: National Norms for Fall 2006, an annual report on a continuing long-term study published by the University of California, Los Angeles.

“Multiple applications per student,” Mr. Hawkins said, “is a factor that exponentially crowds the college admissions environment.”

One reason that students are filing more applications is the increasing use of the Common Application, a form that can be completed and filed via the Internet.

The ferocious competition at the most selective schools has not affected the overall acceptance rate at the rest of the nation’s 2,500 four-year colleges and universities, which accept an average of 70 percent of applicants.

“That overall 70 percent acceptance rate hasn’t changed since the 1980s,” Mr. Hawkins said.

But with more and more students filling out ever more applications, schools like the California Institute of Technology received a record number of applications this year — 3,595, or 8 percent more than last year — and admitted 576 students. Among so many talented applicants, a prospective student with perfect SAT scores was not unusual, said Jill Perry, a Caltech spokeswoman.

“The successful students have to have shown some passion for science and technology in high school or their personal life,” Ms. Perry said. “That means creating a computer system for your high school, or taking a tractor apart and putting it back together.”

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The competition was ferocious not only at the top universities, but at selective small colleges, like Williams, Bowdoin and Amherst, all of which reported record numbers of applications.

Amherst received 6,668 applications and accepted 1,167 students for its class of 2011, compared with the 4,491 applications and 1,030 acceptance letters it sent for the class of 2002 nine years ago, said Paul Statt, an Amherst spokesman.

“Many of us who went to Amherst three decades ago know we couldn’t get in now; I know I couldn’t,” said Mr. Statt, who graduated from Amherst in 1978.

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