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Gene Sharp, whose writings haveirked Iran and other governments.

The crisis gripping the na-tion’s financial system deep-ened, with Lehman BrothersHoldings Inc. racing to sell it-self over the weekend and other

major U.S. institutions scram-bling to show they have the fi-nancial wherewithal to ride outthe crisis.

Potential buyers of Lehmanwere heading toward a standoffwith federal officials Friday.Firms weighing offers for the bat-

tered investment bank sought fi-nancial assistance, while Trea-sury Secretary Henry Paulsonhas insisted he won’t support agovernment-led bailout, peoplefamiliar with the situation say.The weekend’s negotiationsover Lehman’s fate could definethe next chapter of the govern-ment’s handling of the crisis.

Friday’s unease spread be-yond Lehman. Shares of Ameri-can International Group Inc., thegiant insurer, fell more than30%. Standard & Poor’s said itmight lower its credit ratings onAIG because of its tumblingshare price and increasingspreads on the insurer’s debt.(See related article on page B1.)

Friday’s share dropprompted top AIG managementto consider holding a conferencecall for investors Monday morn-ing to announce a series of steps,including asset sales, aimed at re-assuring the market, accordingto a person familiar with the mat-ter.

Merrill Lynch & Co., whichboasts the largest force of retailbrokers on Wall Street, saw itsstock drop 12%, following a 17%drop Thursday. Washington Mu-tual Inc. shares fell 3.5% Friday, af-ter the thrift released some finan-cial projections late Thursday inhopes of reversing a week-longstock-price slide fueled by wor-ries about its capital levels and ac-

cess to cash. Speculation thatWaMu could be up for sale, withJ.P. Morgan Chase & Co. as a poten-tial suitor, fanned rollercoastertrading. While the New York bankremains interested in WaMu, notalks are under way, people famil-iar with the situation said.

The immediate concern forWall Street and Washington re-mained the fate of Lehman, withsome resolution expected overthe weekend. The Treasury De-partment and the Federal Re-serve have been working withthe 158-year-old Lehman to re-solve its problems, includingtalking to potential buyers ofthe bank, according to people

Please turn to page A10

By David Crawford

Swiss prosecutors pursuing aninternationalbriberyprobeofAls-tomSAsaynewevidencesuggeststhe French engineering giantspent at least tens of millions ofdollars more than previously sus-pected on illicit payments to wincontracts abroad.

Thepaymentsweremadeasre-centlyas June, evenafter The WallStreet Journal reported in Maythat French and Swiss investiga-torswerelookingintopossibleAls-tom bribes, two investigators fa-miliar with the case said.

In a statement Friday, a prose-cution spokeswoman said theamount of suspicious paymentsis tens or hundreds of millions ofeuros. People familiar with thematter say European prosecu-tors are focusing on at least$500 million in alleged bribes Al-stom paid through a Swiss slushfund between 2001 and 2008, aperiod that came after Francemade it illegal for businesses tomake payoffs to foreign officials.The $500 million figure is drawnfrom several hundred suspiciousconsulting contracts and bank re-ceipts.

The investigation illustratesthe tougher line European prose-cutors are taking against prac-tices multinationals have longemployed to win governmentcontracts abroad, including theuse of countries like Switzerlandto launder money. One of Als-tom’s chief competitors, Sie-mens AG of Germany, remainsunder investigation in Germanyfor an alleged multibillion-dol-lar bribe scheme.

The laundering of money forbribes via Switzerland has fig-ured in several investigations ofAlstom that authorities in indi-vidual countries treated as iso-

Please turn to page A8

Ass

ocia

ted

Pres

s

By Yaroslav Trofimov

HANOI—As a U.S. Navy pilot,John McCain flew 23 bombingsorties over Vietnam before hewas shot down and incarceratedin the infamous “HanoiHilton” prison camp.The courage he dis-played behind barsgave him the aura of awar hero, and it is stillpowering his electoralappeal.

Yet now, even thejailers who once tor-tured Sen. McCain arelining up to offer effu-sive—if somewhat em-barrassing—endorse-ments for his presiden-tial candidacy.

“If I had a vote in the U.S., Iwould choose McCain,” beams re-tired Col. Tran Trong Duyet, thecamp’s former commander. “Iwant him in the White House.”

This unlikely sentiment iswidely shared in this fast-grow-ing country of 85 million. “Themajority of the people in Vietnamknow Sen. McCain and feel com-fortable about him,” says Duong

Trung Quoc, a memberof Vietnam’s NationalAssembly and secretary-general of the Associa-tion of Vietnamese His-torians. “Nobody hereknows about Obama.”

The fascinationwith Sen. McCain’s pres-idential bid shows whathas and hasn’t changedin Vietnam in the morethan three decadessince Hanoi’s Commu-nist regime won its

“American War.” Converts sincethen to a gospel of free-marketeconomics, Vietnam’s rulers to-day see America not as a foe butas an increasingly valuable part-

Please turn to the back page

7 7

By Philip Shishkin

BOSTON—In February,the Iranian governmentshowed a fictionalized videoon the dangers of foreignplots against the state. One ofits stars: a mysterious Ameri-can named Gene Sharp.

In June 2007, VenezuelanPresident Hugo Chavez pub-licly accused Mr. Sharp of stir-ring unrest in Venezuela.Last year in Vietnam, authori-ties arrested several opposi-tion activists who were dis-tributing a book written byMr. Sharp. In 2005, fires de-

stroyed two Moscow bookstoresselling Russian translations ofthe same book.

The target of all this intrigueand animosity is 80 years old

and slightly stooped. Hewalks with a cane.

Working from a modesthouse in East Boston, Mr.Sharp is nearly unknown tothe U.S. public. But he is de-spised by many authoritarianregimes and respected by op-position activists around theglobe. Mr. Sharp has hadbroad influence on interna-tional events over the pasttwo decades, helping to ad-vance a global democratic

Please turn to page A10

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JOURNAL REPORT: ENCORE

Best bets in

educational travel | R1(

How to avoid bad news

(and stay solvent) | B1

Lehman Races Clock; Crisis Spreads

John McCain Has Some Odd Fans:His Jailers at the ‘Hanoi Hilton’

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They Play Down Torture and Wish Him Well;

Museum Visitors Want to See His Cell

American RevolutionaryQuiet Boston Scholar Inspires Rebels Around the World

L ehman’s potential buyersheaded toward a standoff

with federal officials. Firmsweighing offers for the bat-tered investment banksought financial assistance,while Treasury SecretaryPaulson has insisted he won’tsupport a government-ledbailout. Some resolution isexpected over the weekend. A1n Investors stepped up theirbets against Lehman as itsshares tumbled, less than amonth after SEC rules restrict-ing short-selling expired. B1n Heightened concerns overLehman, AIG and WaMucaused the investment-gradecredit market to swoon. B6

n Pressure is rising on AIG,which faces a possible down-grade, as well as Merrill Lynch,to take action. Shares of bothcontinued to plummet. B1

n Alstom spent at least tens ofmillions of dollars more thanpreviously suspected on illicitpayments to win contractsabroad, prosecutors say. A1

n The Dow industrials fell11.72 points to 11421.99 asstocks and oil prices seesawed.Energy stocks offset slump-ing financial shares. B1, B6n Soybean prices had theirbiggest one-day gain amidfears of a shortage before theharvest begins this fall. B6

n Retail sales in August wereweak across the board, falling0.3% from July, a sign that con-sumer spending is weak. A4

n GM’s Wagoner told lawmak-ers that the seizing up of creditmarkets has left Detroit’s automakers in need of loans. A4

n WaMu CEO Fishman hireda close aide from his days ata Brooklyn, N.Y., bank as spe-cial assistant to the CEO. B16

n A government-backed res-cue plan for Alitalia was in jeop-ardy as talks between unionsand investors collapsed. B5

n Deutsche Bank reached adeal to buy a nearly 30%stake in Deutsche Post’s bank-ing unit for $3.89 billion. B3

n China agreed to use itsforeign-exchange reserves tobuy $300 million in bondsfrom Costa Rica, in a politi-cally driven investment. B3

>

7 7

What’s News–

n Hurricane Ike began tobatter the Texas coast.But even as waves startedcrashing over Galveston Is-land’s 17-foot seawall, asmany as 20,000 residentsshunned orders to evacuate.Authorities in Houston, fear-ing traffic gridlock, told resi-dents to remain and “hunkerdown.” Forecasters warnedIke could grow into a Cate-gory 3 hurricane, with peakwinds of up to 120 mph. A3

Insurers are girding for lossesthat may far exceed Rita’s $2billion toll in 2005 and mightapproach Katrina’s $43 billion.

n The Justice Departmentproposed guidelines designedto loosen restrictions on howFBI agents conduct national-security investigations. A3

n Alaska lawmakers voted tosubpoena Palin’s husband in aprobe of her alleged effort to im-properly fire a state trooper. A6

n Obama sharpened his at-tack on McCain with a TV adthat portrays his Republicanrival as as out-of-touch. A6n Biden released 10 years oftax returns, in what was inpart an attempt to pressurePalin to do the same. A6

n Pakistan’s military warnedit could strike back at U.S. sol-diers if they conduct cross-bor-der raids from Afghanistan. A7n Taliban militants attackeda convoy in Afghanistan, spark-ing a clash that killed 10 insur-gents and five Afghan guards.

n A car bomb ripped through acommercial district in a mainlyShiite town north of Bagdhad,killing at least 32 people. A8

n A South African judge threwout charges against Zuma, clear-ing the way for the ANC leaderto become president. A8

n Talks on deploying moni-tors in Georgia broke down.Saakashvili’s critics are question-ing his handling of the war. A7

n Thailand’s Samak failed inhis bid to return as prime minis-ter after members of his partyand coalition deserted him. A7

n A district court judge in NewOrleans was suspended for twoyears by a federal judicial panelfor alleged misconduct. A4

n The U.S. placed sanctionson several Venezuelan officials,saying they aided Colombianguerrillas in drug trafficking. A7

n A Chinese dairy companywhose baby formula has beenimplicated in a wave of ill-nesses began a major recall. A8n Chinese officials detainedexecutives of an illegal iron-ore mine where a mudslidekilled at least 178 people. A8

n Firefighters extinguisheda blaze in the Channel Tunnelthat has shut the link betweenFrance and England. A8

C O N T E N T SBooks W13,14The Buzz B3,4Campaign ’08 A6Corporate News B5,6Food & Drink W3,9Leisure & Arts W14,18

Letters to Editor A12Markets Lineup B4Opinion A11-13Remembrances A9Sports W12U.S. News A2-4World News A7,8

s Copyright 2008 Dow Jones & Company All Rights Reserved

Tran TrongDuyet

Rescuers ferry Bill Murphy, center, to higher ground in High Island, Texas, ahead of Hurricane Ike. Article onpage A3, and continuing storm coverage on WSJ.com.

—Inside—

7 7

–Markets–Stocks (Friday):DJIA 11421.99, t 11.72;Nasdaq 2261.27, s3.05; S&P500 index 1251.70, s2.65.Bonds: 10-year Treas.t29/32, yield 3.730%;30-year Treas.t 1 30/32,yield 4.325%.Dollar: 107.87 yen, +0.72;euro $1.4217, +2.70 cent vs.the dollar.Commod: Oil $101.18 abarrel, s$0.31; Gold (Comex)$760.30 per troy ounce ,s19.00; DJ-AIGindex 175.763, s2.725.

Alstom BribesCould Top$500 Million,Probers Say

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Business & Finance

Ed Harris on the

Old West, directing

a new movie—and

crooning | W2

By Susanne Craig,Deborah Solomon,

Carrick Mollenkamp andMatthew Karnitschnig

WSJ.com

The Culture

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