FDA Knew of Vaccine Plant's

Problems in June 2003

The Food and Drug Administration found serious problems of bacterial contamination at an influenza vaccine plant in England in 2003, 16 months before British regulators effectively closed the site and impounded its flu shots because of fears they were tainted.

Those earlier problems were among many revelations in documents released by a House committee looking into how the United States lost about half this winter's flu vaccine supply just as the season for giving the shots began.

The documents also revealed that the agency was nine months late in giving Chiron Corp., the owner of the plant, a detailed report of the problems it found and then rebuffed the company's efforts to learn more about what it could do to fix things. At the same time, FDA managers overruled its inspection team and made its fixes voluntary rather than mandatory.

About 48 million doses of vaccine from Chiron's plant outside Liverpool were withheld from the U.S. market early last month after the British denied the company a license to sell them.

Acting FDA Commissioner Lester M. Crawford said that no protocols had been violated in the agency's response to the problems at the Liverpool plant.

Crawford testified that except for the late delivery of its full report on the agency's June 2003 inspection, the FDA has done nothing wrong -- and it would do nothing differently if given the chance.

-- David Brown

House Republicans Change

Rules to Protect DeLay

Emboldened by their election success, House Republicans changed their rules to allow Majority Leader Tom DeLay (Tex.) to keep his post even if a grand jury indicts him.

House Republicans, in an unrecorded voice vote behind closed doors, changed a 1993 party rule that required leaders who are indicted to step aside. Under the revised rule, an indicted leader can keep his or her post while the Republican Steering Committee -- controlled by party leaders -- decides whether to recommend any action by all GOP House members.

The rule change applies equally to state and federal indictments.

Republicans made it clear they will not act if they think their leaders are targeted by grand juries or prosecutors motivated by politics, which is the charge DeLay and his allies have repeatedly leveled at a grand jury based in Austin. The grand jury has indicted three of DeLay's political associates in connection with fundraising activities for a political action committee closely linked to DeLay.

DeLay told reporters that he does not expect to be indicted but supports the rule change.

-- Charles Babington

Iran's Nuclear Goals

Are Questioned Anew

The United States has intelligence that Iran is working to adapt missiles to deliver a nuclear weapon, further evidence that the Islamic republic is determined to acquire a nuclear bomb, Secretary of State Colin L. Powell said.

But the information he shared with reporters is classified and based on a single source, according to two U.S. officials who said the information has not been verified. Powell and other senior Cabinet members were briefed earlier this month.

According to one official with access to the material, a "walk-in" source approached U.S. intelligence earlier this month with more than 1,000 pages purported to be Iranian drawings and technical documents, including a nuclear warhead design and modifications enabling Iranian ballistic missiles to deliver an atomic strike.

Powell's comments came three days after an agreement between Iran and three European countries -- Britain, France and Germany -- designed to limit Tehran's ability to divert its peaceful nuclear energy program for military use. The primary focus of the deal, due to go into effect on Monday, is a stipulation that Iran indefinitely suspend its uranium enrichment program.

In a report released last week, the International Atomic Energy Agency chief, Mohamed ElBaradei, wrote that "all the declared nuclear material in Iran has been accounted for," but said he could not rule out the possibility that Iran was conducting a clandestine nuclear weapons program.

-- Robin Wright, Dafna Linzer

and Keith B. Richburg

Pension Agency's Deficit

More Than Doubles

Struggling under a cascade of bankruptcy filings in the airline and steel industries, the government's pension insurance agency said that its deficit has more than doubled in the past year -- to $23.3 billion.

Pensions of about 44 million workers and retirees are insured by the Pension Benefit Guaranty Corp. If it cannot meet its obligations, taxpayers could be called on to pay the bill, they said.

After running a surplus that peaked at $9.7 billion in 2000, the PBGC sank into deficit as the stock market and interest rates used in figuring future liabilities declined. It showed a deficit of $3.6 billion in fiscal 2002. That leaped to $11.2 billion for fiscal 2003.

The agency's deficit or surplus is the difference between the value of its assets and that of the future benefits it promises to cover. Set up under the 1974 Employee Retirement Income Security Act, the PBGC takes over traditional pension plans when the employers that operate them cannot meet their obligations, and it pays the pensions, up to certain limits.

The PBGC put its current liabilities at $62.3 billion, against assets of $39 billion, in its single-employer plan. Its much smaller multi-employer plan, which covers workers mostly in trucking and construction, has assets of about $1.1 billion and liabilities of about $1.3 billion.

-- Albert R. Crenshaw

Wholesale Inflation Rose

Steeply Last Month

Wholesale inflation rose 1.7 percent in October, the fastest pace in more than 14 years, largely because of steep jumps in energy and food costs, the Labor Department reported.

The government also reported that consumer prices accelerated. The consumer price index, the most widely followed U.S. inflation gauge, increased 0.6 percent in October, the most since May.

Some of the increases for wholesale and consumer prices were caused by hurricane damage in the Southeast, which disrupted oil supplies from the Gulf of Mexico and produce shipments from Florida, while the cleanup efforts boosted demand for construction equipment and materials, financial analysts said.

-- Nell Henderson

Kmart and Sears Agree

To $11 Billion Merger

Discounter Kmart Holding Corp. said it will buy department store rival Sears, Roebuck and Co., one of the most venerable names in U.S. retailing, in an $11 billion deal.

The two chains will operate under their current names, but executives said the companies would swap major product lines.

The combined company will have $55 billion in annual revenue and 3,500 stores. In size, it will trail only Wal-Mart Stores Inc. and Home Depot Inc.

-- Michael Barbaro