McHenry County judge picked for Vanecko case

McHenry County Judge Maureen P. McIntyre was selected today to preside over the politically charged involuntary manslaughter trial of former Chicago Mayor Richard Daley's nephew.

Michael Sullivan, chief judge of McHenry County Circuit Court, was tasked with naming a judge from his circuit last month after the Cook County judge originally picked to preside over the case stepped aside because of connections to Daley.

At the request of the special prosecutor who brought the charge against Richard Vanecko, Cook County's chief judge asked the Illinois Supreme Court to appoint a judge from outside the county to avoid the appearance of impropriety. The state’s highest court asked Sullivan last month to select a judge on his court to oversee the trial.

McIntyre is currently the presiding judge of the court's Family Division, hearing mostly cases of juvenile abuse and neglect, delinquency, and adoption.

Sullivan announced the appointment of McIntyre in a one-page order released this afternoon.

McIntyre was retained by voters in November to a six-year term. She has been on the bench in McHenry County since 1996.

Dan Wallace, administrator of the McHenry County Circuit Court, told the Tribune on Thursday that whichever judge was selected will travel to Cook County to preside over the criminal case against Vanecko, who was indicted in the 2004 death of David Koschman after a quarrel in the Rush Street bar district

Koschman, 21, of Mount Prospect, had been drinking in the Rush Street night life district early on April 24, 2004, when he and friends quarreled with a group that included Vanecko. During the altercation, Koschman was knocked to the street, hitting the back of his head on the pavement. He died 11 days later.

Last year, Cook County Judge Michael Toomin appointed veteran attorney Dan Webb as special prosecutor after an investigative series by the Chicago Sun-Times raised questions about whether authorities intentionally concealed evidence for political reasons.

In announcing the indictment against Vanecko in December, Webb said a special grand jury continued to probe how police and prosecutors handled the original investigation.

jmeisner@tribune.com

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Abbas sees Palestinian unity as Fatah rallies in Gaza

GAZA (Reuters) - President Mahmoud Abbas predicted the end of a five-year split between the two big Palestinian factions as his Fatah movement staged its first mass rally in Gaza with the blessing of Hamas Islamists who rule the enclave.

"Soon we will regain our unity," Abbas, whose authority has been limited to the Israeli-occupied West Bank since the 2007 civil war between the two factions, said in a televised address to hundreds of thousands of followers marching in Gaza on Friday, with yellow Fatah flags instead of the green of Hamas.

The hardline Hamas movement, which does not recognize Israel's right to exist, expelled secular Fatah from Gaza during the war. It gave permission for the rally after the deadlock in peace talks between Abbas's administration and Israel narrowed the two factions' ideological differences.

The Palestinian rivals have drawn closer since Israel's assault on Gaza assault in November, in which Hamas, though battered, claimed victory.

Egypt has long tried to broker Hamas-Fatah reconciliation, but past efforts have foundered over questions of power-sharing, control of weaponry, and to what extent Israel and other powers would accept a Palestinian administration including Hamas.

An Egyptian official told Reuters Cairo was preparing to invite the factions for new negotiations within two weeks.

Israel fears grassroots support for Hamas could eventually topple Abbas's Palestinian Authority (PA) in the West Bank.

"Hamas could seize control of the PA any day," Israeli Prime Minister Benjamin Netanyahu said on Thursday.

The demonstration marked 48 years since Fatah's founding as the spearhead of the Palestinians' fight against Israel. Its longtime leader Yasser Arafat signed an interim 1993 peace accord that won Palestinians a measure of self rule.

Hamas, which rejected the 1993 deal, fought and won a Palestinian parliamentary election in 2006. It formed an uneasy coalition with Fatah until their violent split a year later.

Though shunned by the West, Hamas feels bolstered by electoral gains for Islamist movements in neighboring Egypt and elsewhere in the region - a confidence reflected in the fact Friday's Fatah demonstration was allowed to take place.

"The success of the rally is a success for Fatah, and for Hamas too," said Hamas spokesman Sami Abu Zuhri. "The positive atmosphere is a step on the way to regain national unity."

Fatah, meanwhile, has been riven by dissent about the credibility of Abbas's statesmanship, especially given Israel's continued settlement-building on West Bank land. The Israelis quit Gaza unilaterally in 2005 after 38 years of occupation.

"The message today is that Fatah cannot be wiped out," said Amal Hamad, a member of the group's ruling body, referring to the demonstration attended by several Abbas advisers. "Fatah lives, no one can exclude it and it seeks to end the division."

In his speech, Abbas promised to return to Gaza soon and said Palestinian unification would be "a step on the way to ending the (Israeli) occupation".

(Editing by Dan Williams, Alistair Lyon and Jason Webb)

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Wall Street ends down on Fed concern

NEW YORK (Reuters) - U.S. stocks dipped on Thursday after minutes from the latest Federal Reserve meeting showed growing concern about the risks of the Fed's stimulative monetary policy, giving investors reason to pull back after a strong two-day run.

The Dow Jones industrial average <.dji> slipped 21.35 points, or 0.16 percent, to 13,391.20, according to the latest figures. The S&P 500 <.spx> dipped 3.09 points, or 0.21 percent, to 1,459.33. The Nasdaq Composite <.ixic> fell 11.70 points, or 0.38 percent, to 3,100.57.

(Editing by Kenneth Barry)

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NHL, union resume talks in hopes to save season

NEW YORK (AP) — After a long night of talks, the NHL and the union returned to the bargaining table, but not for long.

The sides met at the league office Thursday about three hours later than scheduled. The players' association said it had been updating members on negotiations.

Players and union staff began arriving at NHL headquarters a little before 1 p.m. EST, although executive director Donald Fehr wasn't with them. The group left the building about an hour later but expected to return later in the day.

With the lockout in its 110th day, both sides understand the urgency to save a shortened season. They still have several key issues to work out — pensions and salary cap limits, among them.

Commissioner Gary Bettman has said that the league told the union a deal needs to be in place by next week so a 48-game season can begin Jan. 19. All games through Jan. 14 along with the All-Star game have been canceled, claiming more than 50 percent of the original schedule.

The sides met in small groups throughout the day Wednesday. They then held a full bargaining session with a federal mediator at night that lasted nearly five hours and didn't wrap up until about 1 a.m. Thursday.

The biggest detail to emerge from those talks was that Fehr is still the executive director of the players' association, which passed on its first chance to declare a disclaimer that would dissolve the union and turn it into a trade association.

Last month, players voted overwhelmingly to give its executive board the right to declare the disclaimer, but that permission expired at midnight Wednesday. The disclaimer would allow individual players to file antitrust lawsuits against the NHL. Fehr wouldn't address the issue, calling it an "internal matter."

"The word disclaimer has yet to be uttered to us by the players' association," Bettman said. "It's not that it gets filed anywhere with a court or the NLRB. When you disclaim interest as a union, you notify the other side. We have not been notified and it's never been discussed, so there has been no disclaimer."

The thought was that the union wouldn't take action Wednesday if it saw progress was being made. Neither side would characterize the talks or address what, if any, movement toward common ground was reached.

"There's been some progress but we're still apart on a number of issues," Bettman said. "As long as the process continues I am hopeful."

A deal can't be done without a resolution on pensions. Bettman called the pension plan a "very complicated issue." A small group meeting on the pension issue was held Wednesday morning before the players' association presented its offer.

"The number of variables and the number of issues that have to be addressed by people who carry the title actuary or pension lawyer are pretty numerous and it's pretty easy to get off track. That is something we understand is important to the players."

The union's proposal Wednesday makes four offers between the sides since the NHL restarted negotiations Thursday with a proposal. The league presented the players with a counteroffer Tuesday night in response to one the union made Monday.

Fehr believed an agreement on a players-funded pension had been reached before talks blew up in early December. That apparently wasn't the case, or the NHL has changed its offer regarding the pension in exchange for agreeing to other things the union wanted.

The salary-cap number for the second year of the deal — the 2013-14 season — hasn't been established, and it is another point of contention. The league is pushing for a $60 million cap, while the union wants it to be $65 million.

In return for the higher cap number players would be willing to forgo a cap on escrow.

"We talk about lots of things and we even had some philosophical discussions about why particular issues were important to each of us," Bettman said. "That is part of the process."

The NHL proposed in its first offer Thursday that pension contributions come out of the players' share of revenues, and $50 million of the league's make-whole payment of $300 million will be allocated and set aside to fund potential underfunding liabilities of the plan at the end of the collective bargaining agreement.

Last month, the NHL agreed to raise its make-whole offer of deferred payments from $211 million to $300 million as part of a proposed package that required the union to agree on three nonnegotiable points. Instead, the union accepted the raise in funds, but then made counterproposals on the issues the league stated had no wiggle room.

"As you might expect, the differences between us relate to the core economic issues which don't involve the share," Fehr said of hockey-related revenue, which likely will be split 50-50.

The NHL is the only North American professional sports league to cancel a season because of a labor dispute, losing the 2004-05 campaign to a lockout. A 48-game season was played in 1995 after a lockout stretched into January.

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Mars Meteorite May Be Missing Link to Red Planet’s Past

A Martian meteorite recently found on Earth may represent a missing link between Mars’ warm, wet past and its present cold and dry state, a new study shows.

The rock, which was discovered in Morocco in 2011, is of a previously unknown class that could fill in gaps in scientists’ understanding of the Red Planet‘s geological history, researchers said.

The meteorite — named NWA 7034 — is markedly dissimilar from other meteorites from Mars that scientists have studied on Earth.

Rare type

NWA 7034 has about 10 times more water content (about 6,000 parts per million) than any of the 110 other known meteorites that have fallen to Earth from Mars, suggesting that the meteorite probably came from the Martian surface, as opposed to deeper inside, said University of New Mexico planetary scientist Carl Agee, lead author of a paper describing the findings published in the Jan. 3 issue of the online journal Science Express.

Previously studied Martian meteorites, known as the SNC samples, appear to come from a different, less explored part of the Martian landscape. They probably broke away from Mars after a large asteroid impacted a certain region of the planet. But this newest sample is more representative of Mars’s surface, Agee told SPACE.com. [Mars Meteorites: Pieces of the Red Planet on Earth (Photos)]

The researchers think NWA 7034 represents the remains of a volcanic eruption on the Martian surface that occurred about 2.1 billion years ago. The meteorite was once lava from the eruption that cooled and hardened on the surface of the planet. The rock’s cooling was probably aided by water on Mars’ surface that was eventually imprinted on the chemical composition of the meteorite.

Middle-aged rock

The meteorite’s age is also of interest to scientists. Most of the SNC meteorite samples date to only around 1.3 billion years ago, with the oldest being about 4.5 billion years old. NWA 7034 represents a transition between the oldest and youngest Martian meteorite samples found on Earth, Agee said.

“Many scientists think that Mars was warm and wet in its early history, but the planet’s climate changed over time,” Agee said. Eventually, the Red Planet lost its atmosphere and became the cold, dry desert it is today. The new meteorite comes from the transitional period between these extremes, making it an important find for scientists hoping to learn how the Martian climate change occurred.

Agee’s conclusions are supported by data collected by the Mars rover missions and spacecraft in orbit around the planet, he said. The geochemical composition of the new meteorite falls in line with the rocks that rovers have analyzed on the surface of the Red Planet.

The researchers confirmed the meteorite’s Martian origins using a process of elimination. It took six months for Agee and his team to confidently report that the piece of space rock came from Mars. Because of the meteorite’s age, they knew it couldn’t come from an asteroid: All asteroids are much older than 2.1 billion years — most are probably at least 4.5 billion years old.

“We knew that it had to be from a planet,” Agee said. Mercury wasn’t an option: the composition of the volcanic meteorite didn’t match the surface of the closest planet to the sun. Venus didn’t fit either. Scientists hypothesize that that planet’s surface is too dry to produce a meteorite with NWA 7034′s water content, Agee added.

Mars was the only viable option, and with mounting evidence suggesting that the meteorite was similar in composition to the rocks analyzed by rovers, Agee’s hypothesis fit.

Follow Miriam Kramer on Twitter @mirikramer or SPACE.com @Spacedotcom. We’re also on Facebook & Google+. 

Copyright 2013 SPACE.com, a TechMediaNetwork company. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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Why U.S. lives under the shadow of 'W'

Julian Zelizer says former President George W. Bush's key tax and homeland security policies survive in the age of Obama

STORY HIGHLIGHTS

• Julian Zelizer: For all the criticism Bush got, two key policies have survived


• He says fiscal cliff pact perpetuates nearly all of Bush's tax cuts


• Obama administration has largely followed Bush's homeland security policy, he says


• Zelizer: By squeezing revenues, Bush tax cuts will put pressure on spending

Editor's note: Julian Zelizer is a professor of history and public affairs at Princeton University. He is the author of "Jimmy Carter" and of "Governing America."

Princeton, New Jersey (CNN) -- Somewhere in Texas, former President George W. Bush is smiling.

Although some Democrats are pleased that taxes will now go up on the wealthiest Americans, the recent deal to avert the fiscal cliff entrenches, rather than dismantles, one of Bush's signature legacies -- income tax cuts. Ninety-nine percent of American households were protected from tax increases, aside from the expiration of the reduced rate for the payroll tax.

Julian Zelizer

In the final deal, Congress and President Barack Obama agreed to preserve most of the Bush tax cuts, including exemptions on the estate tax.

When Bush started his term in 2001, many of his critics dismissed him as a lightweight, the son of a former president who won office as result of his family's political fortune and a controversial decision by the Supreme Court on the 2000 election.

But what has become clear in hindsight, regardless of what one thinks of Bush and his politics, is that his administration left behind a record that has had a huge impact on American politics, a record that will not easily be dismantled by future presidents.

The twin pillars of Bush's record were counterterrorism policies and tax cuts. During his first term, it became clear that Obama would not dismantle most of the homeland security apparatus put into place by his predecessor. Despite a campaign in 2008 that focused on flaws with the nation's response to 9/11, Obama has kept most of the counterterrorism program intact.

Opinion: The real issue is runaway spending

In some cases, the administration continues to aggressively use tactics his supporters once decried, such as relying on renditions to detain terrorist suspects who are overseas, as The Washington Post reported this week. In other areas, the administration has expanded the war on terrorism, including the broader use of drone strikes to kill terrorists.

Now come taxes and spending.

With regard to the Bush tax cuts, Obama had promised to overturn a policy that he saw as regressive. Although he always said that he would protect the middle class from tax increases, Obama criticized Bush for pushing through Congress policies that bled the federal government of needed revenue and benefited the wealthy.

In 2010, Obama agreed to temporarily extend all the tax cuts. Though many Democrats were furious, Obama concluded that he had little political chance to overturn them and he seemed to agree with Republicans that reversing them would hurt an economy limping along after a terrible recession.

Opinion: Time to toot horn for George H.W. Bush

With the fiscal cliff deal, Obama could certainly claim more victories than in 2010. Taxes for the wealthiest Americans will go up. Congress also agreed to extend unemployment compensation and continue higher payments to Medicare providers.

But beneath all the sound and fury is the fact that the 2001 and 2003 tax cuts, for most Americans, are now a permanent part of the legislative landscape. (In addition, middle class Americans will breathe a sigh of relief that Congress has permanently fixed the Alternative Minimum Tax, which would have hit many of them with a provision once designed to make sure that the wealthy paid their fair share.)

As Michigan Republican Rep. Dave Camp remarked, "After more than a decade of criticizing these tax cuts, Democrats are finally joining Republicans in making them permanent." Indeed, the Congressional Budget Office estimates that the new legislation will increase the deficit by $4 trillion over the next 10 years.

The tax cuts have significant consequences on all of American policy.

Opinion: Christie drops bomb on GOP leaders

Most important, the fact that a Democratic president has now legitimated the moves of a Republican administration gives a bipartisan imprimatur to the legitimacy of the current tax rates.

Although some Republicans signed on to raising taxes for the first time in two decades, the fact is that Democrats have agreed to tax rates which, compared to much of the 20th century, are extraordinarily low. Public perception of a new status quo makes it harder for presidents to ever raise taxes on most Americans to satisfy the revenue needs for the federal government.

At the same time, the continuation of reduced taxes keeps the federal government in a fiscal straitjacket. As a result, politicians are left to focus on finding the money to pay for existing programs or making cuts wherever possible.

New innovations in federal policy that require substantial revenue are just about impossible. To be sure, there have been significant exceptions, such as the Affordable Care Act. But overall, bold policy departures that require significant amounts of general revenue are harder to come by than in the 1930s or 1960s.

Republicans thus succeed with what some have called the "starve the beast" strategy of cutting government by taking away its resources. Since the long-term deficit only becomes worse, Republicans will continue to have ample opportunity to pressure Democrats into accepting spending cuts and keep them on the defense with regards to new government programs.

Politics: Are the days of Congress 'going big' over?

With his income tax cuts enshrined, Bush can rest comfortably that much of the policy world he designed will remain intact and continue to define American politics. Obama has struggled to work within the world that Bush created, and with this legislation, even with his victories, he has demonstrated that the possibilities for change have been much more limited than he imagined when he ran in 2008 or even in 2012.

Follow us on Twitter @CNNOpinion

Join us on Facebook/CNNOpinion

The opinions expressed in this commentary are solely those of Julian Zelizer.

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Family of slain auto shop owner: 'We are lost'

A longtime Southwest Side business owner was shot and killed during a robbery at his muffler shop; His family talked with CBS's Susanna Song. (Source: CBS Chicago)

After Michael Kozel was shot in a hold-up robbery at his Gage Park muffler shop Wednesday, he reached out to his son, just hours before his death.

"'They shot me in the back,'" Michael Kozel Jr., recalled his father's last words to him.

Kozel said he believes his dad reached out to him at about 5:30 p.m. even before he had an ambulance called. When the man's only son got the call, he raced over from his job and found his father being treated by paramedics inside an ambulance.

Kozel, 57, was pronounced dead at John H. Stroger Jr. Hospital of Cook County at 9:09 p.m.

Thursday, Kozel's family remembered him as a compassionate man who turned his love for cars into a living that supported his tight-knit family.

Two men entered Kozel's business, Independent Mufflers Inc. in the 5600 block of South Western Avenue, about 5:20 p.m. and demanded money, police said. Kozel tried to flee but was shot in the back once as he tried to run away, authorities said.

An employee at his shop said Thursday that Kozel was with two employees at the time of the hold-up, one of whom was robbed.

He was the fifth homicide in Chicago in the first two days of 2013, according to the Cook County medical examiner's office.

Kozel's family gathered at their South Side residence on the 2700 block of West Siepp Street in the Wrightwood neighborhood Thursday morning, tearful and visibly shaken by the loss of their patriarch.

His daughter, Amber Kozel, 30, said her father owned the muffler shop for more than 20 years. He had owned other various businesses in the automotive industry throughout his career, she said.

"He's been in the business for 35 years -- it all started with a love for cars," Amber Kozel said.

"He was in the business because he was a people person," said Kozel's wife, Antonia Kozel, 55.

Kozel grew up off of 26th Street and lived his whole life in Chicago, family said.

Amber Kozel said her father was often mistaken for Santa Claus by children because of his "big belly and big beard."

"Kids would stare at him awestruck," she said. "As in 'What should I say to Santa?'"

Antonia Kozel said her husband was a loving and giving family man.

"He would give anyone the shirt off his back," she said. "He didn't deserve this."

"Everything was taken care of for us as kids," Amber Kozel said.

Kozel's family said he was hard-working and spent long hours at the muffler shop -- usually 10-hour days, Monday through Saturday.

He had regular, loyal clientele at the muffler shop, his family said.

Kozel's son said his father was a carefree man.

While the area sees break-ins regularly, Kozel's 31-year-old son said the muffler shop was "like Fort Knox" when it was all locked up.

The shop had been robbed once before a few years ago, he said, and his father gave up the money.

Kozel leaves behind three grandchildren -- an 8-year-old boy, a 7-year-old girl and a 2-year-old boy, family said.

The family joined Kozel at the hospital Wednesday night before he died.

"We are lost," Kozel's son said.

Family members later returned to the shop in a tan SUV because Kozel's widow wanted to return to the site of the shooting.

"I think she just wants to be here," said Angelica Kozel, a family member, referring to Kozel's widow.

Manny Serna, 27, and two other men used thick white paint to cover graffiti on Thursday morning, which previously had been painted onto the muffler shop's garage door.

While the graffiti had been there for some time before Kozel's shooting, Serna said it was "out of respect" that they painted over the black spray paint. It was Michael Kozel's idea, Serna said.

"It's the least I can do," Serna said. "I was a manager at this muffler shop for 10 years and recently went my own way. But he was a great man."

Serna said he was a long-time friend of the family.

Serna pointed to a bullet hole in the garage door.

"See that hole? That's the last of him," Serna said.

Serna said Kozel was shot inside the muffler shop. The bullet that killed his former boss then traveled through the garage door, he said.

Another employee, Mike Shaw, said he had worked for Kozel for about six months and remembered him as a man who got along with everyone.

Shaw, 52, called Kozel a "good guy" and enjoyed working for him.

Kozel was with two employees at the time of the hold-up, said Shaw. He said one of the employees was also robbed at gunpoint.

Shaw said he lived in the Gage Park community and said he never felt unsafe.

"Today had been rough on everybody," said Shaw. "I don't think [it's] going to re-open anytime soon."

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Syria rebels in push to capture air base

AZAZ, Syria (Reuters) - Rebels battled on Thursday to seize an air base in northern Syria, part of a campaign to fight back against the air power that has given President Bashar al-Assad's forces free rein to bomb rebel-held towns.

More than 60,000 people have been killed in the 21-month-old uprising and civil war, the United Nations said this week, sharply raising the death toll estimate in a conflict that shows no sign of ending.

After dramatic advances over the second half of 2012, the rebels now hold wide swathes of territory in the north and east, but are limited in exerting control because they cannot protect towns and villages from Assad's helicopters and jets.

Hundreds of fighters from rebel groups were attempting to storm the Taftanaz air base, near the northern highway that links Syria's two main cities, Aleppo and the capital Damascus.

Rebels have been besieging air bases across the north in recent weeks, in the hope this will reduce the government's power to carry out air strikes and resupply loyalist-held areas.

A rebel fighter speaking from near the Taftanaz base overnight said the base's main sections were still in loyalist hands but insurgents had managed to infiltrate and destroy a helicopter and a fighter jet on the ground.

The northern rebel Idlib Coordination Committee said the rebels had detonated a car bomb inside the base.

The government's SANA news agency said the base had not fallen and that the military had "strongly confronted an attempt by the terrorists to attack the airport from several axes, inflicting heavy losses among them and destroying their weapons and munitions".

Rami Abdulrahman, head of the opposition-aligned Syrian Observatory for Human Rights which monitors the conflict from Britain, said as many as 800 fighters were involved in the assault, including Islamists from Jabhat al-Nusra, a powerful group that Washington considers terrorists.

Taftanaz is mainly a helicopter base, used for missions to resupply army positions in the north, many of which are cut off by road because of rebel gains, as well as for dropping crude "barrel bombs" of explosives on rebel-controlled areas.

"WHAT IS THE FAULT OF THE CHILDREN?"

Near Minakh, another northern air base that rebels have surrounded, government forces have retaliated by regularly shelling and bombing nearby towns.

In the town of Azaz, where the bombardment has become a near nightly occurrence, shells hit a family house overnight. Zeinab Hammadi said her two wounded daughters, aged 10 and 12, had been rushed across the border to Turkey, one with her brain exposed.

"We were sleeping and it just landed on us in the blink of an eye," she said, weeping as she surveyed the damage.

Family members tried to salvage possessions from the wreckage, men lifting out furniture and children carrying out their belongings in tubs.

"He (Assad) wants revenge against the people," said Abu Hassan, 33, working at a garage near the destroyed house. "What is the fault of the children? Are they the ones fighting?"

Opposition activists said warplanes struck a residential building in another rebel-held northern town, Hayyan, killing at least eight civilians.

Video footage showed men carrying dismembered bodies of children and dozens of people searching for victims in the rubble of the destroyed building, shouting "God is greatest". The provenance of the video could not be independently confirmed.

In addition to their tenuous grip on the north, the rebels also hold a crescent of suburbs on the edge of Damascus, which have come under bombardment by government forces that control the center of the capital.

On Wednesday, according to opposition activists, dozens of people were incinerated in an inferno caused by an air strike on a petrol station in a Damascus suburb where residents were lining up for precious fuel.

The civil war in Syria has become the longest and bloodiest of the conflicts that rose out of uprisings across the Arab world in the past two years.

Assad's family has ruled for 42 years since his father seized power in a coup. The war pits rebels, mainly from the Sunni Muslim majority, against a government supported by members of Assad's Shi'ite-derived Alawite minority sect and some members of other minorities who fear revenge if he falls.

The West, most Sunni-ruled Arab states and Turkey have called for Assad to leave power. He is supported by Russia and Shi'ite Iran.

(Additional reporting by Khaled Yacoub Oweis in Amman and Dominic Evans in Beirut; Writing by Peter Graff; Editing by Ruth Pitchford)

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Wall Street rallies on "fiscal cliff" agreement

NEW YORK (Reuters) - Stocks began the new year with a broad rally on Wednesday, sparked by a last-minute deal in Washington to avert the "fiscal cliff" of tax hikes and spending cuts that threatened to derail the economy.

In 2013's first trading session, the S&P 500 was on target for its best percentage gain since November 19 and highest close since October 19.

The Dow Jones industrial average <.dji> gained 229.64 points, or 1.75 percent, to 13,333.78. The Standard & Poor's 500 Index <.spx> rose 26.53 points, or 1.86 percent, to 1,452.72. The Nasdaq Composite Index <.ixic> jumped 74.26 points, or 2.46 percent, to 3,093.77.

U.S. markets were closed on Tuesday for New Year's Day.

Nine stocks rose for every one falling on the New York Stock Exchange and all 10 of the S&P 500 industry sector indexes gained at least 1 percent. The S&P financial index <.gspf> was up 2.2 percent.

The S&P Information Technology index <.gspt> gained 2.1 percent, including Hewlett-Packard , which climbed nearly 5 percent to $14.95. HP's gain followed a miserable 2012 when the stock fell nearly 45 percent.

Congress passed a bill to prevent huge tax hikes and delay spending cuts that would have pushed the world's largest economy off a "fiscal cliff" and possibly into recession.

The vote avoided steep income-tax increases for a majority of Americans but failed to resolve a major showdown over cutting the budget deficit, leaving investors and businesses with only limited clarity about the outlook for the economy. Spending cuts of $109 billion in military and domestic programs were temporarily delayed, and another fight over raising the U.S. debt limit also looms.

"We got through the fiscal cliff. The next big thing, and probably more contentious thing, is negotiating the debt ceiling and possibly entitlement reform in early 2013," said Jim Russell, senior equity strategist for U.S. Bank Wealth Management in Cincinnati.

Hard choices about budget cuts and the critical need to raise the debt ceiling will confront Congress about the same time in two months "so the fur will be flying," Russell said.

U.S. stocks ended 2012 with the S&P 500 up 13.4 percent for the year, as investors largely shrugged off worries about the fiscal cliff. For the year, the Dow gained 7.3 percent and the Nasdaq jumped 15.9 percent.

Bank shares rose following news that U.S. regulators are close to securing another multibillion-dollar settlement with the largest banks to resolve allegations that they unlawfully cut corners when foreclosing on delinquent borrowers.

Bank of America Corp rose 3 percent to $11.95 and Citigroup Inc gained 3.7 percent to $41.03. The KBW bank index <.bkx> rose 2.4 percent and the S&P financial sector <.gspf> climbed 2.2 percent.

Shares of Zipcar Inc surged 48.2 percent to $12.21 after Avis Budget Group Inc said it would buy Zipcar for about $500 million in cash to compete with larger rivals Hertz and Enterprise Holdings Inc. Avis advanced 4.8 percent to $20.78.

Shares of Apple rose 2.5 percent to $545.56, helping to lift the S&P technology index <.gspt> up 2.3 percent following a report that the most valuable tech company has started testing a new iPhone and a new version of its iOS software.

Economic data showed U.S. manufacturing ended 2012 on an upswing despite fears about the fiscal cliff, but construction spending fell in November for the first time in eight months.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Pa. governor sues NCAA over Penn State sanctions

STATE COLLEGE, Pa. (AP) — In a bold challenge to the NCAA's powers, Pennsylvania's governor claimed in a lawsuit Wednesday that college sports' governing body overstepped its authority and "piled on" when it penalized Penn State over the Jerry Sandusky child molestation scandal.

Gov. Tom Corbett asked that a federal judge throw out the sanctions, which include an unprecedented $60 million fine and a four-year ban on bowl games, arguing that the measures have harmed students, business owners and others who had nothing to do with Sandusky's crimes.

A small number of top NCAA officials inserted themselves "into an issue they had no authority to police under their own bylaws and one that was clearly being handled by the justice system," Corbett said at a news conference.

The case, filed under federal antitrust law, could define just how far the NCAA's authority extends. Up to now, the federal courts have allowed the organization broad power to protect the integrity of college athletics.

In a statement, the NCAA said the lawsuit has no merit and called it an "affront" to Sandusky's victims.

Penn State said it had no role in the lawsuit. In fact, it agreed not to sue as part of the deal with the NCAA accepting the sanctions, which were imposed in July after an investigation found that football coach Joe Paterno and other top officials hushed up sexual-abuse allegations against Sandusky, a former member of Paterno's staff, for more than a decade for fear of bad publicity.

The penalties include a cut in the number of football scholarships the university can award and a rewriting of the record books to erase 14 years of victories under Paterno, who was fired when the scandal broke in 2011 and died of lung cancer a short time later.

The lawsuit represents a reversal by the governor. When Penn State's president consented to the sanctions last summer, Corbett, a member of the Board of Trustees, embraced them as part of the university's effort to repair the damage from the scandal.

Corbett said he waited until now to sue over the "harsh penalties" because he wanted to thoroughly research the legal issues and did not want to interfere with the football season.

The deal with the NCAA has been unpopular with many fans, students and alumni. Corbett, who is up for re-election next year, deflected a question about whether his response has helped or hurt him politically.

"We're not going to get into the politics of this," he said.

An alumni group, Penn Staters for Responsible Stewardship, applauded the lawsuit but said Corbett should have asked questions when the NCAA agreement was made.

"If he disapproved of the terms of the NCAA consent decree, or if he thought there was something illegal about them, why didn't he exercise his duty to act long before now?" the group said.

Paterno's family members said in a statement that they were encouraged by the lawsuit. Corbett "now realizes, as do many others, that there was an inexcusable rush to judgment," they said.

Corbett's lawsuit accuses the NCAA of cynically exploiting the Sandusky case, saying its real motives were to "gain leverage in the court of public opinion, boost the reputation and power of the NCAA's president" and "enhance the competitive position of certain NCAA members." It said the NCAA has not cited a rule that Penn State broke.

Corbett charged that the NCAA violated the Sherman Antitrust Act, which prohibits agreements that restrain interstate commerce. Legal experts called it an unusual case whose outcome is difficult to predict.

The NCAA has faced antitrust litigation before, with a mixed record of success. In 1984, the Supreme Court ruled against the NCAA's exclusive control over televised college football games. And in 1998, the Supreme Court let stand a ruling that said the NCAA's salary cap for some assistant coaches was unlawful price-fixing.

But federal courts have consistently rejected antitrust challenges to NCAA rules and enforcement actions designed to preserve competitive balance, academic integrity and amateurism in college athletics.

In this case, the courts might not be as sympathetic to the NCAA, said Matthew Mitten, director of the National Sports Law Institute at Marquette University Law School.

"It's difficult to justify the sanctions as necessary to protect the amateur nature of college sports, preserve competitive balance or maintain academic integrity," he said.

Joseph Bauer, an antitrust expert at the University of Notre Dame law school, said of Corbett's line of reasoning: "I don't think it's an easy claim for them to make, but it's certainly a viable claim."

Sandusky, 68, was convicted in June of sexually abusing 10 boys over a 15-year period, some of them on Penn State's campus. He is a serving a 30- to 60-year prison sentence.

Michael Boni, a lawyer for one of the victims, said he does not consider the lawsuit an affront. But he said he hopes Corbett takes a leading role in pushing for changes to state child-abuse laws.

"I really question who he's concerned about in this state," Boni said.

Michael Desmond, a businessman who appeared with Corbett at the news conference, said business at his five State College eating establishments was down about 10 percent during Penn State home game weekends this year.

"The governor's actions are going to be immensely popular with all Penn State alumni," Desmond said.

Corbett, a Republican, said his office did not coordinate its legal strategy with state Attorney General-elect Kathleen Kane, who is scheduled to be sworn in Jan. 15. Instead, the current attorney general, Linda Kelly, granted the governor authority to pursue the matter.

Kane, a Democrat, ran on a vow to investigate why it took prosecutors nearly three years to charge Sandusky. Corbett was attorney general when his office took over the case in 2009.

Kane had no comment on the lawsuit because she was not consulted about it by Corbett's office.

State and congressional lawmakers have objected to use of the NCAA fine to finance child-abuse prevention efforts in other states. Penn State has already made the first $12 million payment, and an NCAA task force is deciding how it should be spent.

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Associated Press writer Peter Jackson in Harrisburg, Pa., contributed.

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