UPDATE 3-Cricket-Hughes shines as Australia reach 299-4

* Hughes falls just short of century

* Clarke and Hussey combine for 101

* Welegedera takes 3-99 (Adds quotes)

HOBART, Dec 14 (Reuters) – Phil Hughes made a solid 86 on his return to test cricket before Michael Clarke and Mike Hussey took up the running and steered Australia to 299 for four at close of play on the first day of the first test against Sri Lanka on Friday.

Hughes was the only batsmen to fall in the final session, lasting only a couple of overs after lunch before being bowled through the gate by Chanaka Welegedera, giving the Sri Lankan seamer his third wicket of the day.

Clarke, who had made 70 not out, and Hussey, unbeaten on 37, batted through the remainder of the day and if the evidence of their prolific partnerships in the recent series against South Africa is anything to go by, will take some shifting.

“Overall, 299 for four puts the ball in our court,” said Hughes. “I thought we were outstanding today. It really gives us momentum going into tomorrow.”

Sri Lanka’s bowlers, dubbed this week as the worst pace attack ever to tour Australia by former test bowler Rodney Hogg, made life uncomfortable for the batsmen at times but struggled for any real penetration under cloudy skies at Bellerive Oval.

“I think we showed we can put Australia under pressure and hopefully the bowlers will be fresh in the morning and we can get them out for less than 100 additional runs,” said Welegedera, who finished with 3-99 on his return after nine months out injured.

Clarke, who passed 1,400 runs for the year, has now put on 731 runs in partnerships with Hussey in the last four tests and will be looking to plunder a few more on Saturday despite taking a couple of painful knocks to his legs.

Friday, however, belonged to Hughes.

The lefthander was recalled to the side on the back of good domestic form following the retirement of Ricky Ponting at the end of the series against the Proteas.

The 24-year-old reached his fourth test half century with a square drive for three runs and then initially accelerated towards a century, most notably with an ugly but effective slog for six off spinner Rangana Herath.

CALAMITOUS RUNOUT

On the ground where his second spell as a test batsman ended amid questions about his technique after two failures against New Zealand last year, Hughes scored eight fours and one six in his 166-ball knock before Welegedera struck with a superb ball.

“It was nice to get a few,” he said. “It would have been nice to get a few more and get into three figures.”

Australia had lost openers Ed Cowan (four) and David Warner in the opening session, the latter run out for 57 on the stroke of lunch after a calamitous misunderstanding with Hughes.

Shane Watson, dropping down to fourth in the batting order to allow Hughes to come in at number three, followed them to the pavilion for 30 shortly before tea, the victim of an exceptional diving catch in the slips by skipper Mahela Jayawardene.

That was a second wicket for Welegedera and a measure of redemption for the bowler after he had Hughes caught behind for 77 only for the umpire to call a no ball.

Welegedera had also made the early breakthrough for the tourists when Cowan tried to pull a short delivery only for the ball to catch him high on the bat and carry to mid-on where Shaminda Eranga took a simple catch.

It could have been even better for the Sri Lankans, who were only centimetres away from the perfect start to the morning after Clarke had won the toss and elected to bat.

Cowan edged the second delivery of the day from Nuwan Kulasekara to the slips but Angelo Mathews was just unable to get his hands to it, despite an athletic dive. (Editing by Peter Rutherford)

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U.S. drops China’s Taobao website from “notorious” list

WASHINGTON (Reuters) – The United States on Thursday dropped a website owned by China‘s largest e-commerce company, Alibaba Group, from its annual list of the world’s most “notorious markets” for sales of pirated and counterfeit goods.

Taobao Marketplace, an online shopping site similar to eBay and Amazon that brings together buyers and sellers, “has been removed from the 2012 List because it has undertaken notable efforts over the past year to work with rightholders directly or through their industry associations to clean up its site,” the U.S. Trade Representative‘s office said in the report.

The move came just before an annual high-level U.S.-China trade meeting next week in Washington.

Taobao Marketplace is China’s largest consumer-oriented e-commerce platform, with estimated market share of more than 70 percent. The website has nearly 500 million registered users, with more than 800 million product listings at any given time. Most of the users are in China, Hong Kong, Taiwan and Macao.

The U.S. Chamber of Commerce has called Taobao “one of the single largest online sources of counterfeits.”

The Chinese Commerce Ministry strongly objected to Taobao’s inclusion on the USTR’s 2011 notorious markets list. A ministry spokesman said it did not appear to be based on any “conclusive evidence or detailed analysis.

Alibaba hired former USTR General Counsel James Mendenhall to help persuade USTR to remove Taobao from its list.

The Chinese company’s bid to shed its “notorious” label won support from the Motion Picture Association of America, a former critic of Taobao, which praised its effort to reduce the availability of counterfeit goods on its website.

But U.S. software, clothing and shoe manufacturers urged USTR to keep Taobao on the list.

To stay off in the future, USTR urged “Taobao to further streamline procedures … for taking down listings of counterfeit and pirated goods and to continue its efforts to work with and achieve a satisfactory outcome with U.S. rights holders and industry associations.”

USTR said it also removed Chinese website Sogou from the notorious markets list, based on reports that it has made “notable efforts to work with rights holders to address the availability of infringing content on its site.”

U.S. concerns about widespread piracy and counterfeiting of American goods in China are expected to be high on the agenda at next week’s meeting in Washington of the U.S.-China Joint Commission on Commerce and Trade.

The 2012 notorious markets list includes Xunlei, which USTR described as a Chinese-based site that facilitates the downloading and distribution of pirated movies.

Baixe de Tudo, a website hosted in Sweden but targeted at the Brazilian market, was also put on the list along with the Chinese website Gougou.

Warez-bb, which USTR described as a hub for pre-release music, software and video games, was also included. The forum site is registered in Sweden but hosted by a Russian Internet service provider, USTR said.

The full report can be found on USTR’s website at: http://www.ustr.gov/sites/default/files/121312%20Notorious%20Markets%20List.pdf

(Reporting by Doug Palmer; Editing by Will Dunham, Dan Grebler and Jim Marshall)

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Sitar maker: Ravi Shankar’s legacy inspires others

NEW DELHI (AP) — The walls of Sanjay Sharma‘s music shop are lined with gleaming string instruments and old photographs of legendary musicians.

Beatles George Harrison, John Lennon and Paul McCartney. Indian classicial musicians Zakir Hussain, Shiv Kumar Sharma and Vishwamohan Bhatt. And the man who brought these two very different musical worlds together: Ravi Shankar.

Like his grandfather and father before him, Sharma built, tuned and repaired instruments for the sitar virtuoso, who introduced Westerners to Indian classical music, and through his friendship with Harrison became a mainstay of the 1960s counterculture scene.

From his tiny shop tucked into the crowded lanes of central Delhi’s Bhagat Singh market, Sharma traveled the world with Shankar. Late in the maestro’s life, as his health and strength flagged, he even designed a smaller version of the instrument that allowed him to keep playing.

Shankar, who died Tuesday at age 92, was “a saint, an emperor and lord of music,” Sharma says in a tribute posted to the website of his sought-after shop, Rikhi Ram’s Music.

“When I opened my eyes there was him,” says Sharma, 44, surrounded by display cases full of sitars, sarangis (a stringed instrument played with a violin-like bow), guitars, tabla drums and sarods, a deeply resonating instrument played by plucking the strings.

Shankar “was music and music was him,” he says.

Sharma’s grandfather started the business in 1920 in the northern city of Lahore, now in Pakistan. He met a young Ravi Shankar at a concert there in the 1940s. Following the India-Pakistan partition and the relocation of the shop to New Delhi, the family began making sitars for Shankar in the 1950s.

By then, the musician was already famous in India and beginning to collaborate with some of the greats of Western music, including violinist Yehudi Menuhin and jazz saxophonist John Coltrane.

The Beatles visited in 1966 and bought instruments, memorialized in some of the many photographs that line the shop’s walls. Another shows Shankar’s daughter and the heir of his sitar legacy, Anoushka Shankar. But there is no picture of another Shankar daughter, American singer Norah Jones, who was estranged from her father.

Sharma’s own father succeeded his grandfather as the supplier of Shankar’s sitars. And then Sharma himself in the 1980s.

The bedroom-sized shop has two counters, one for conducting business and one for working on instruments under the beam of a large work lamp. Wood shavings and dust cover the floor of a workshop at the back.

As he chatted with visiting Associated Press journalists on Thursday, Sharma worked on a sitar, peering through his glasses as he used a mallet to hammer in a new fret. He plucked the strings, and as the sound resonated around the room, he leaned close in to the instrument and listened intently to the vibrations. Satisfied with the results, he moved on to the next fret.

It takes 15 months for a sitar to be ready for use. The actual crafting of the instrument from red cedar and hollowed-out, dried pumpkins takes three months. Then, it is left untouched to go through what is called “Delhi seasoning,” in which the extremes of New Delhi’s climate — blistering summer, followed by a brief monsoon, and a near-freezing, three-month winter — work their magic.

In 2005, a serious bout of pneumonia left Shankar with a frozen left shoulder.

“He was growing old and he wanted to experiment and change the instrument” so he could continue playing, Sharma says.

Sharma, a large, balding man, created what he calls the “studio sitar,” a smaller version of the instrument. But holding it was still difficult. So Sharma went to a Home Depot near Shankar’s San Diego, California-area home and bought some supplies to build a detachable stand.

The musician was thrilled. Sharma says Shankar told him, “Your father was a brilliant sitar maker, but you are a genius.”

Shankar was performing in public until a month before his death. Despite ill health, he appeared re-energized by the music, Sharma said.

Now, as Sharma mourns the giant of Indian music, he also worries about the future of the art itself. He sees traditional Indian instruments gradually losing their place in their own country to zippy, electronic Bollywood music.

“We are losing the originality and the core of our Indian music,” says Shankar, himself a trained Hindustani classical musician who plays the sitar and tabla, the Indian pair-drums.

At the same time, Shankar’s work as a global ambassador of music has borne fruit, Sharma says: “Because the music has gone to the West, we’re getting lots of new musical aspirants from the Western countries.”

When jazz artist Herbie Hancock was in New Delhi a few years ago, he stopped by Sharma’s shop to buy a sitar.

And in one of the shop’s display windows gleams a newly crafted sitar made of teak.

“That,” Sharma said, “is for Bill Gates.”

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China, S.Africa suspend Brazil beef over BSE doubt

BRASILIA (Reuters) – China and South Africa informed Brazil on Thursday that they were suspending imports of beef from the world’s biggest exporter of the meat following a case of atypical BSE that was confirmed last week, Brazilian agriculture ministry officials said.

Including Japan, which suspended imports on Monday, three countries have now restricted purchases of beef from Brazil while seeking details about the death of an elderly cow in 2010 which never actually developed the disease.

None of these countries are significant buyers of Brazilian beef. Brazil’s top customer, Russia, has so far imposed no such restrictions, though it said on Thursday that it was weighing its options.

Brazil has launched a diplomatic offensive to clarify the details of the case of suspected atypical BSE, which it has been at pains to differentiate from regular BSE – known as mad cow disease – which is usually caused by contaminated feed.

Atypical BSE can arise in elderly cattle due to a spontaneous genetic mutation that causes it to begin producing distorted proteins known as prions. The proteins can trigger BSE, which eventually destroys the animal’s nervous system, and it is believed humans ingesting beef from a stricken animal can contract a fatal form of the disease.

The 13-year-old cow in southern Brazil tested positive for prions, a result confirmed by the World Organization for Animal Health (OIE) last week. But it died of other causes in 2010 and never actually developed the disease.

The animal was buried on the farm where it had been used for breeding purposes and never entered the food chain.

Outbreaks of mad cow disease in Europe, North America and Japan in the past decade, following an epidemic in Great Britain in the late 1980s, prompted some importers to embargo shipments and roiled the industry on several occasions.

In April, the United States reported a case of atypical BSE in an animal which never entered the food chain, but the country escaped a backlash from importers.

The Brazilian agriculture ministry’s secretary for animal and plant health, Enio Pereira, told Reuters this week that much of the two-year delay between the cow’s death and confirmation of prions in its tissue was caused by a logistical anomaly at the laboratory.

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HMRC warns 300,000 late filers

13 December 2012 Last updated at 19:06 ET

About 300,000 people who have failed to send in their tax returns for 2010-11 could soon see their goods seized.

The taxman is sending warning letters to those who have now run up late-filing penalties of £1,300 for that year, under self-assessment.

They can still pay, or ask for the penalty to be taken off their income in 2013-14 if they are in the PAYE system.

The letters are part of a continuing campaign against a persistent minority of non-filers.

A spokesman for HM Revenue & Customs (HMRC) said the defaulters could still pay their fines, and submit the late tax returns.

“These non-filers have ignored numerous communications from HMRC, dating back to April 2011, including flyers, reminder letters, penalty notices and warning letters,” he said.

“A customer can still phone us if they think they should not be in self-assessment, and will be taken through a number of questions to indicate if they should be in self-assessment or not.

“If they shouldn’t have been in it for 2010-11, penalties will then be waived,” he added.

About 7,000 higher-rate taxpayers who had missed tax returns from earlier years were sent similar warning letters in October.

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Aides: Chavez in tough fight, may miss swearing-in

CARACAS, Venezuela (AP) — Somber confidants of President Hugo Chavez say he is going through a difficult recovery after cancer surgery in Cuba, and one close ally is warning Venezuelans that their leader may not make it back for his swearing-in next month.

Information Minister Ernesto Villegas said Wednesday night that Chavez was in “stable condition” and was with close relatives in Havana. Reading a statement, he said the government invites people to “accompany President Chavez in this new test with their prayers.”

Villegas expressed hope about the president returning home for his Jan. 10 swearing-in for a new six-year term, but said in a written message on a government website that if Chavez doesn’t make it, “our people should be prepared to understand it.”

Villegas said it would be irresponsible to hide news about the “delicateness of the current moment and the days to come.” He asked Venezuelans to see Chavez’s condition as “when we have a sick father, in a delicate situation after four surgeries in a year and a half.”

Moving to prepare the public for the possibility of more bad news, Vice President Nicolas Maduro looked grim when he acknowledged that Chavez faced a “complex and hard” process after his latest surgery.

At the same time, officials sought to show a united front amid the growing worries about Chavez’s health and Venezuela’s future. Key leaders of Chavez’s party and military officers appeared together on television as Maduro gave updates on Chavez’s condition.

“We’re more united than ever,” said Maduro, who was flanked by National Assembly President Diosdado Cabello and Oil Minister Rafael Ramirez, both key members of Chavez’s inner circle. “We’re united in loyalty to Chavez.”

Analysts say Maduro could eventually face challenges in trying to hold together the president’s diverse “Chavismo” movement, which includes groups from radical leftists to moderates, as well as military factions.

Tapped by the 58-year-old president over the weekend as his chosen political heir, Maduro is considered to be a member of radical left wing of Chavez’s movement that is closely aligned with Cuba’s communist government.

Cabello, a former military officer who also wields power within Chavez’s movement, shared the spotlight with Maduro by speaking at a Mass for Chavez’s health at a military base.

Just returned from being with Chavez for the operation, Cabello called the president “invincible” but said “that man who is in Havana … is fighting a battle for his life.”

After Chavez’s six-hour operation Tuesday, Venezuelan television broadcast religious services where people prayed for Chavez, interspersed with campaign rallies for upcoming gubernatorial elections.

On the streets of Caracas, people on both sides of the country’s deep political divide voiced concerns about Chavez’s condition and what might happen if he died.

At campaign rallies ahead of Sunday’s gubernatorial elections, Chavez’s candidates urged Venezuelans to vote for pro-government candidates while they also called for the president to get well.

“Onward, Commander!” gubernatorial candidate Elias Jaua shouted to a crowd of supporters at a rally Wednesday. Many observers said it was likely Chavez’s candidates could get a boost from their supporters’ outpouring of sympathy for Chavez.

Opposition leader Henrique Capriles, who lost to Chavez in the October presidential election and is running against Jaua, complained Wednesday that Chavez’s allies are taking advantage of the president’s health problems to try to rally support. He took issue with Jaua’s statement to supporters that “we have to vote so that the president recovers.”

Maduro looked sad as he spoke on television, his voice hoarse and cracked at times after meeting in the pre-dawn hours with Cabello and Ramirez. The pair returned to Venezuela about 3 a.m. after accompanying Chavez to Cuba for his surgery.

“It was a complex, difficult, delicate operation,” Maduro said. “The post-operative process is also going to be a complex and hard process.”

Without giving details, Maduro reiterated Chavez’s recent remarks that the surgery presented risks and that people should be prepared for any “difficult scenarios.”

The constitution says presidents should be sworn in before the National Assembly, and if that’s not possible then before the Supreme Court.

Former Supreme Court magistrate Roman Duque Corredor said a president cannot delegate the swearing-in to anyone else and cannot take the oath of office outside Venezuela. A president could still be sworn in even if temporarily incapacitated, but would need to be conscious and in Venezuela, Duque told The Associated Press.

If a president-elect is declared incapacitated by lawmakers and is unable to be sworn in, the National Assembly president would temporarily take charge of the government and a new presidential vote must be held within 30 days, Duque said.

Chavez said Saturday that if an election had to be held, Maduro should be elected president.

The dramatic events of this week, with Chavez suddenly taking a turn for the worse, had some Venezuelans wondering whether they were being told the truth because just a few months ago the president was running for his fourth presidential term and had said he was free of cancer.

Lawyer Maria Alicia Altuve, who was out in bustling crowds in a shopping district of downtown Caracas, said it seemed odd how Maduro wept at a political rally while talking about Chavez.

“He cries on television to set up a drama, so that people go vote for poor Chavez,” Altuve said. “So we don’t know if this illness is for that, or if it’s that this man is truly sick.”

Some Chavez supporters said they found it hard to think about losing the president and worried about the future. His admirers held prayer vigils in Caracas and other cities this week, holding pictures and singing hymns.

Chavez has undergone four cancer-related surgeries since June 2011. He has also undergone months of chemotherapy and radiation treatments. Throughout his treatments, Chavez has kept secret some details of his illness, including the exact location and type of the tumors.

Ecuadorean President Rafael Correa wished his close ally the best, while also acknowledging the possibility that cancer might end his presidency. “Chavez is very important for Latin America, but if he can’t continue at the head of Venezuela, the processes of change have to continue,” Correa said at a news conference in Quito.

___

Associated Press writer Christopher Toothaker contributed to this report.

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U.S. federal agency to test RIM’s BlackBerry 10

TORONTO (Reuters) – Research In Motion said a U.S. federal agency, which recently outlined plans to move away from BlackBerry in favor of Apple Inc’s iPhone, is now set to begin testing RIM‘s new BlackBerry 10 platform and devices.

The U.S. Immigration and Customs Enforcement agency (ICE), will early next year begin a pilot program on RIM’s new line of BlackBerry 10 smartphones and BlackBerry Enterprise Service 10 (BES 10), which allows corporations and government users to run the new devices on their networks, a RIM spokeswoman said late on Wednesday.

The news, which comes just as shares of the embattled company rallied to their highest close in seven months, signals that RIM’s BlackBerry 10 platform is gaining some traction ahead of its official launch next month.

RIM, a one-time pioneer in the smartphone industry, has lost market share in recent years to the iPhone and devices powered by Google Inc’s market-leading Android operating system, even among the business audience who once used BlackBerry devices exclusively.

Waterloo, Ontario-based RIM is now seeking to persuade both corporations and government users to stick with its smartphones, which have long been valued for their strong security features. It promises that its new line of devices, which will be powered by the BlackBerry 10 operating system, will be both smoother and faster than previous BlackBerry phones.

RIM is betting that these new devices – to be launched on January 30 – will revive its fortunes. But that may well depend to a large extent on the response from enterprise customers, many of whom have recently begun to flee to rival platforms.

ICE is one such example. The agency, in October, announced plans to end a long relationship with RIM, stating that its now aging line-up of BlackBerry devices could “no longer meet the mobile technology needs of the agency.

At the time, ICE outlined intentions to buy iPhones for more than 17,600 employees. It is not immediately clear whether the agency plans to revisit this plan or whether its intends to use RIM’s new BES 10 platform to manage both iPhones and BlackBerry devices. A spokeswoman for the agency was not immediately able to comment on the pilot program or the agency’s plans.

SHARES SURGE

The news comes soon after yet another rally in RIM shares on Wednesday, after Eric Jackson – a long-time bear on RIM’s stock – penned an opinion piece on his now bullish stance on the company.

Jackson, the founder of Ironfire Capital, in his piece, said parallels drawn by some analysts between RIM and its now-defunct rival Palm are flawed, as Palm never had the kind of installed subscriber base that RIM enjoys.

In his article, published on Wednesday on the TheStreet.com, Jackson contends that RIM’s new BlackBerry 10 devices have much better odds of success than Palm’s Pre device, which failed to capture a following despite positive reviews on the device and its operating system.

Jackson, who was short RIM’s stock for an extended period, argues that the positive sentiment building in RIM’s stock ahead of the launch of the make-or-break line of devices is unlikely to dissipate in a hurry, as a large portion of RIM’s 80 million subscribers are likely to upgrade to BB10 when the new devices are launched. Jackson said he now has a long position in RIM.

Shares in the company rose 5.6 percent to close at $ 13.31 on the Nasdaq – their highest close since May 1. Its Toronto-listed shares rose 5.8 percent to close at C$ 13.14.

The stock has more than doubled in price since September 24, when the shares were trading slightly above the $ 6 level in both New York and Toronto. The wave of optimism around BB10 has in recent weeks been bolstered by a number of analyst upgrades on the stock.

(Editing by Dan Grebler and Muralikumar Anantharaman)

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McAfee arrives in U.S. from Guatemala

MIAMI (Reuters) – Computer software pioneer John McAfee, who is wanted for questioning in Belize over the murder of a fellow American, arrived in Miami on Wednesday evening after he was deported by Guatemala, according to fellow passengers on an American Airlines flight.

After landing, McAfee, 67, was escorted from the plane by airport security officers, passengers said. Shortly afterward, he tweeted, “I am in South Beach,” referring to the popular tourist area on Miami Beach.

“Some people felt uncomfortable that he was on our flight. … We all knew the story,” said Maria Claridge, 36, a South Florida photographer who was on the Silicon Valley entrepreneur’s flight to Miami.

McAfee, who was seated in the coach section and had a whole row to himself, was wearing a suit and was “very calm” during the flight, she added.

“He looked very tired, he looked like a man who hadn’t slept in days. I’d say he even looked depressed,” said another passenger, Roberto Gilbert, a Guatemalan who lives in Miami.

McAfee had been held for a week in Guatemala, where he surfaced after evading police in Belize for nearly a month following the killing of American Gregory Faull, his neighbor on the Caribbean island of Ambergris Caye.

Police in Belize want to quiz McAfee as a “person of interest” in Faull’s death, although the technology guru’s lawyers blocked an attempt by Guatemala to send him back there.

Authorities in Belize say he is not a prime suspect in the investigation. McAfee has denied any role in Faull’s killing.

The goateed McAfee has led the world’s media on a game of online hide-and-seek in Belize and Guatemala since he fled after Faull’s death, peppering the Internet with pithy quotes and colorful revelations about his unpredictable life.

“I’m happy to be going home,” McAfee, dressed in a black suit, told reporters shortly before his departure from Guatemala City airport on Wednesday afternoon. “I’ve been running through jungles and rivers and oceans and I think I need to rest for a while. And I’ve been in jail for seven days.”

Guatemala’s immigration authorities had been holding McAfee since he was arrested last Wednesday for illegally entering the country with his 20-year-old Belizean girlfriend.

The eccentric tech pioneer, who made his fortune from the anti-virus software bearing his name, has been chronicling life on the run in a blog, www.whoismcafee.com.

He said he had no immediate plans after reaching Florida.

“I’m just going to hang in Miami for a while. I like Miami,” he told Reuters by telephone just before his plane left. “There is a great sushi place there and I really like sushi.”

BELIZE STILL WAITING

Residents of the Belizean island of Ambergris Caye, where McAfee has lived for about four years, said McAfee and Faull, 52, had quarreled at times, including over McAfee’s unruly dogs.

McAfee says Belize authorities will kill him if he turns himself in for questioning. He has said he was being persecuted by Belize’s ruling party for refusing to pay some $ 2 million in bribes.

Belize’s prime minister has rejected the allegations, calling McAfee paranoid and “bonkers.

Belize police spokesman Raphael Martinez said the country still wanted to question McAfee about the Faull case.

“He will be just under the goodwill of the United States of America. He is still a person of interest, but a U.S. national has been killed and he has been somewhat implicated in that murder. People want him to answer some questions,” he said.

Martinez noted that Belize’s extradition treaty with the United States extended only to suspected criminals, a designation that did not currently apply to McAfee.

“Right now, we don’t have enough information to change his status from person of interest to suspect,” he said.

Residents and neighbors on Ambergris Caye said McAfee was unusual and at times unstable. He was seen to travel with armed bodyguards, sporting a pistol tucked into his belt.

The predicament of McAfee, a former Lockheed systems consultant, is a far cry from his heyday in the late 1980s, when he started McAfee Associates. McAfee has no relationship now with the company, which was sold to Intel Corp.

McAfee was previously charged in Belize with possession of illegal firearms, and police had raided his property on suspicions that he was running a lab to produce illegal synthetic narcotics. He said he had not taken drugs since 1983.

“I took drugs constantly, 24 hours of the day. I took them for years and years. I was the worst drug abuser on the planet,” he told Reuters before his arrest in Guatemala. “Then I finally went to Alcoholics Anonymous, and that was the end of it.”

(Writing by Dave Graham, Michael O’Boyle and David Adams. Reporting by Sofia Menchu and Mike McDonald.; Editing by Peter Cooney)

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No progress in “fiscal cliff” talks as new poll hits Republicans

WASHINGTON (Reuters) – Sharp differences remained on Wednesday between congressional Republicans and the White House in talks to avert the “fiscal cliff” of steep tax hikes and budget cuts, and negotiators warned the showdown could drag on past Christmas.

A Wall Street Journal-NBC News poll released late on Wednesday, however, held the potential to shake up the stalemate. Three-quarters of those surveyed, including 61 percent of Republicans, said they would accept raising taxes on the wealthy to avoid the so-called cliff, as Democratic President Barack Obama is demanding.

With Republicans in Congress already divided, that rejection by their own supporters of the core demand of Republican House of Representatives Speaker John Boehner could further weaken his position.

Both sides refused to give any ground in public, one day after what Boehner described as a “frank” conversation with President Barack Obama about the remaining hurdles to a deal.

Boehner said Obama’s latest proposal for $ 1.4 trillion in new tax revenues did not fulfill his promise for a balanced approach to taming the federal deficit and could not pass Congress.

“I remain the most optimistic person in this town, but we’ve got some serious differences,” Boehner told reporters after a meeting with House Republicans where he warned members the negotiations could run through the holidays and up to the end-of-year deadline.

If a deal is not reached, taxes will go up for almost all working Americans at the start of the New Year and steep government spending cuts will kick in.

White House spokesman Jay Carney said Obama would not relent on his demand that Republicans drop their opposition to raising new revenue by increasing the tax rates for the wealthiest 2 percent of all Americans.

“There is no way to do this without rates going up on the top earners,” Carney said. The Republican stance that sufficient revenue could be gained by closing tax loopholes and limiting deductions was “just not plausible economic policy,” he said.

In what has now become a daily battle of sound bites and political stagecraft, a group of Republican congressmen posed in the cold outside the Capitol with a few dozen small children to illustrate their argument that Obama’s budget proposals would bury the next generation in unsustainable debt.

“We are going to relegate these kids, our grandkids, to a lower standard of living,” Republican Representative Sean Duffy of Wisconsin said. “We are going to leave them with higher tax rates. This is unacceptable.”

Obama and Boehner each have proposed cutting deficits by more than $ 4 trillion in the next 10 years as part of a deal to avert the cliff, but they differ on how to get there. Economists have warned that failure to strike a deal could send the economy back into recession.

On Tuesday, Boehner rejected a White House proposal to shrink the amount of deficit reduction that comes from revenue to $ 1.4 trillion from $ 1.6 trillion over 10 years. Boehner has called for $ 800 billion in revenue through tax reform.

‘A PRETTY FRANK CONVERSATION’

Boehner said Obama’s plan did not do enough to reduce the federal deficit. “The president and I had a pretty frank conversation about just how far apart we are,” he said of their Tuesday phone talk.

Carney ridiculed the Republican argument that sufficient revenue could be raised by closing tax loopholes or capping deductions. “Those magic beans are just beans, and that fairy dust is just dust,” he said. “It is not serious.”

Boehner has repeatedly offered gloomy assessments of the state of the talks in public, even as signs of progress have sprouted on Capitol Hill. The pace of staff-level talks has quickened in recent days as the two sides exchanged counter-offers that neither side said was sufficiently detailed.

The stubborn differences have dampened hopes of a potential deal before the Christmas holiday. “Keep your Christmas decorations up and make no plans” to leave Washington, was Boehner’s advice in the closed-door meeting with Republicans, Representative John Shimkus of Illinois told reporters.

In exchange for more tax revenues, Republicans have demanded deep spending cuts in politically popular social entitlement programs like the government-funded Medicare and Medicaid healthcare plans.

House Democratic Leader Nancy Pelosi said that House Democrats objected to Republican efforts to raise the age when seniors become eligible for Medicare, which now stands at 65, as a way to cut government spending.

“Raising the retirement age does not get you that much money, so you’re doing a bad thing when it comes to seniors, and you’re not achieving your goal,” she told CBS.

Senate Democratic leader Harry Reid said on Wednesday that Boehner and Republicans needed to make concessions on taxes. “To this point there hasn’t been a lot of progress, and I’m very, very disappointed,” he said on the Senate floor.

Financial markets have watched the negotiations with interest. JPMorgan Chase & Co CEO Jamie Dimon said the United States could have a “booming economy” in a couple of months if lawmakers in Washington reach agreement.

A budget deal could mean 4 percent economic growth and a drop in unemployment, Dimon said at a New York Times conference in New York. A deal would need to link any tax increases with spending cuts, he said.

“The table is set very well right now,” Dimon said.

The stock market was closely following an announcement by the Federal Reserve of a new stimulus plan but the fiscal cliff was not far from investors’ minds.

“This was expected, and the market is waiting for the year-end ‘fiscal cliff’ issue to be solved, so what we have to do is have confidence our political system can actually make a functional decision,” said Troy Logan, managing director and senior economist at Warren Financial Service, in Exton, Pennsylvania.

(Additional reporting by Jeff Mason, Richard Cowan, Rachelle Younglai, Mark Felsenthal; Writing by John Whitesides; Editing by Alistair Bell and Christopher Wilson)

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North Korea’s new leader burnishes credentials with rocket

SEOUL/TOKYO (Reuters) – North Korea successfully launched a rocket on Wednesday, boosting the credentials of its new leader and stepping up the threat the isolated and impoverished state poses to its opponents.

The rocket, which North Korea says put a weather satellite into orbit, has been labeled by the United States, South Korea and Japan as a test of technology that could one day deliver a nuclear warhead capable of hitting targets as far as the continental United States.

“The satellite has entered the planned orbit,” a North Korean television news-reader clad in traditional Korean garb triumphantly announced, after which the station played patriotic songs with the lyrics “Chosun (Korea) does what it says”.

The rocket was launched just before 10 a.m. Korea time (9 p.m. ET on Tuesday), according to defense officials in South Korea and Japan, and easily surpassed a failed April launch that flew for less than two minutes.

The North American Aerospace Defense Command (NORAD) said that it “deployed an object that appeared to achieve orbit”, the first time an independent body has verified North Korean claims.

North Korea followed what it said was a similar successful launch in 2009 with a nuclear test that prompted the United Nations Security Council to stiffen sanctions that it originally imposed in 2006 after the North’s first nuclear test.

The state is banned from developing nuclear and missile-related technology under U.N. resolutions, although Kim Jong-un, the youthful head of state who took power a year ago, is believed to have continued the state’s “military first” programs put into place by his deceased father Kim Jong-il.

North Korea lauded Wednesday’s launch as celebrating the prowess of all three Kims to rule since it was founded in 1948.

“At a time when great yearnings and reverence for Kim Jong-il pervade the whole country, its scientists and technicians brilliantly carried out his behests to launch a scientific and technological satellite in 2012, the year marking the 100th birth anniversary of President Kim Il Sung,” its KCNA news agency said.

Washington condemned Wednesday’s launch as a “provocative action” and breach of U.N. rules, while Japan’s U.N. envoy called for a Security Council meeting. However, diplomats say further tough sanctions are unlikely to be agreed at the body as China, the North’s only major ally, will oppose them.

“The international community must work in a concerted fashion to send North Korea a clear message that its violations of United Nations Security Council resolutions have consequences,” the White House said in a statement.

Japan’s likely next prime minister, Shinzo Abe, who is leading in opinion polls ahead of an election on December 16 and who is known as a North Korea hawk, called on the United Nations to adopt a resolution “strongly criticizing” Pyongyang.

BEIJING BLOCK

China had expressed “deep concern” prior to the launch which was announced a day after a top politburo member, representing new Chinese leader Xi Xinping, met Kim Jong-un in Pyongyang.

On Wednesday its tone was measured, regretting the launch but calling for restraint on possible counter-measures, in line with previous policy when it has effectively vetoed tougher sanctions.

“China believes the Security Council’s response should be cautious and moderate, protect the overall peaceful and stable situation on the Korean peninsula, and avoid an escalation of the situation,” Chinese Foreign Ministry spokesman Hong Lei told journalists.

Bruce Klingner, a Korea expert at the Heritage Foundation, told a conference call: “China has been the stumbling block to firmer U.N. action and we’ll have to see if the new leadership is any different than its predecessors.”

A senior adviser to South Korea’s president said last week it was unlikely there would be action from the U.N. and that Seoul would expect its allies to tighten sanctions unilaterally.

Kim Jong-un, believed to be 29 years old, took power when his father died on December 17 last year and experts believe the launch was intended to commemorate the first anniversary of the death.

The April launch was timed for the centennial of the birth of Kim Il Sung, the grandfather of its current ruler.

Wednesday’s success puts the North ahead of the South which has not managed to get a rocket off the ground.

“This is a considerable boost in establishing the rule of Kim Jong-un,” said Cho Min, an expert at the Korea Institute of National Unification.

There have been few indications the secretive and impoverished state, where the United Nations estimates a third of the population is malnourished, has made any advances in opening up economically over the past year.

North Korea remains reliant on minerals exports to China and remittances from tens of thousands of its people working on labor projects overseas.

The 22 million population often needs handouts from defectors who have escaped to South Korea in order to afford basic medicines.

Given the puny size of its economy – per capita income is less than $ 2,000 a year – one of the few ways the North can attract world attention is by emphasizing its military threat.

Pyongyang wants the United States to resume aid and to recognize it diplomatically, although the April launch scuppered a planned food deal.

It is believed to be some years away from developing a functioning nuclear warhead although it may have enough plutonium for around half a dozen nuclear bombs, according to nuclear experts.

The North has also been enriching uranium, which would give it a second path to nuclear weapons as it sits on vast natural uranium reserves.

“A successful launch puts North Korea closer to the capability to deploy a weaponized missile,” said Denny Roy, a senior fellow at the East-West Center in Hawaii.

“But this would still require fitting a weapon to the missile and ensuring a reasonable degree of accuracy. The North Koreans probably do not yet have a nuclear weapon small enough for a missile to carry.”

Pyongyang says that its development is part of a civil nuclear program, but has also boasted of it being a “nuclear weapons power”.

(Additional reporting by Jumin Park and Yoo Choonsik in SEOUL; David Alexander, Matt Spetalnick and Paul Eckert in WASHINGTON; Linda Sieg in TOKYO; Sui-Lee Wee in BEIJING; Rosmarie Francisco in MANILA; Writing by David Chance; Editing by Raju Gopalakrishnan)

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