U.S. Judges Offer Addicts a Way to Avoid Prison

Todd Heisler/The New York Times

Emily Leitch of Brooklyn, with her son, Nazir, 4, was arrested for importing cocaine but went to “drug court” to avoid prison.

Federal judges around the country are teaming up with prosecutors to create special treatment programs for drug-addicted defendants who would otherwise face significant prison time, an effort intended to sidestep drug laws widely seen as inflexible and overly punitive.

The Justice Department has tentatively embraced the new approach, allowing United States attorneys to reduce or even dismiss charges in some drug cases.

The effort follows decades of success for “drug courts” at the state level, which legal experts have long cited as a less expensive and more effective alternative to prison for dealing with many low-level repeat offenders.

But it is striking that the model is spreading at the federal level, where judges have increasingly pushed back against rules that restrict their ability to make their own determination of appropriate sentences.

So far, federal judges have instituted programs in California, Connecticut, Illinois, New Hampshire, New York, South Carolina, Virginia and Washington. About 400 defendants have been involved nationwide.

In Federal District Court in Brooklyn on Thursday, Judge John Gleeson issued an opinion praising the new approach as a way to address swelling prison costs and disproportionate sentences for drug trafficking.

“Presentence programs like ours and those in other districts mean that a growing number of courts are no longer reflexively sentencing federal defendants who do not belong in prison to the costly prison terms recommended by the sentencing guidelines,” Judge Gleeson wrote.

The opinion came a year after Judge Gleeson, with the federal agency known as Pretrial Services, started a program that made achieving sobriety an incentive for drug-addicted defendants to avoid prison. The program had its first graduate this year: Emily Leitch, a Brooklyn woman with a long history of substance abuse who was arrested entering the country at Kennedy International Airport with over 13 kilograms of cocaine, about 30 pounds, in her luggage.

“I want to thank the federal government for giving me a chance,” Ms. Leitch said. “I always wanted to stand up as a sober person.”

The new approach is being prompted in part by the Obama administration, which previously supported legislation that scaled back sentences for crimes involving crack cocaine. The Justice Department has supported additional changes to the federal sentencing guidelines to permit the use of drug or mental health treatment as an alternative to incarceration for certain low-level offenders and changed its own policies to make those options more available.

“We recognize that imprisonment alone is not a complete strategy for reducing crime,” James M. Cole, the deputy attorney general, said in a statement. “Drug courts, re-entry courts and other related programs along with enforcement are all part of the solution.”

For nearly 30 years, the United States Sentencing Commission has established guidelines for sentencing, a role it was given in 1984 after studies found that federal judges were giving defendants widely varying sentences for similar crimes. The commission’s recommendations are approved by Congress, causing judges to bristle at what they consider interference with their judicial independence.

“When you impose a sentence that you believe is unjust, it is a very difficult thing to do,” Stefan R. Underhill, a federal judge in Connecticut, said in an interview. “It feels wrong.”

The development of drug courts may meet resistance from some Republicans in Congress.

“It is important that courts give deference to Congressional authority over sentencing,” Representative F. James Sensenbrenner Jr., Republican of Wisconsin, a member and former chairman of the Judiciary Committee, said in a statement. He said sentencing should not depend “on what judge happens to decide the case or what judicial circuit the defendant happens to be in.”

At the state level, pretrial drug courts have benefited from bipartisan support, with liberals supporting the programs as more focused on rehabilitation, and conservatives supporting them as a way to cut spending.

Under the model being used in state and federal courts, defendants must accept responsibility for their crimes and agree to receive drug treatment and other social services and attend regular meetings with judges who monitor their progress. In return for successful participation, they receive a reduced sentence or no jail time at all. If they fail, they are sent to prison.

The drug court option is not available to those facing more serious charges, like people accused of being high-level dealers or traffickers, or accused of a violent crime. (These programs differ from re-entry drug courts, which federal judges have long used to help offenders integrate into society after prison.)

In interviews, the federal judges who run the other programs pointed to a mix of reasons for their involvement.

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Economix Blog: Bernanke Defends Stimulus as Necessary and Effective

The Federal Reserve’s chairman, Ben S. Bernanke, picked an unusual time to offer his most recent defense of the Fed’s campaign to stimulate the economy: 7 p.m. on a Friday night in San Francisco, 10 p.m. back home on the East Coast.

The basic message was the same as Mr. Bernanke delivered to Congress earlier this week: The Fed regards its current efforts as necessary and effective, and the risks, while real, are under control.

“Commentators have raised two broad concerns surrounding the outlook for long-term rates,” Mr. Bernanke told a conference at the Federal Reserve Bank of San Francisco. “To oversimplify, the first risk is that rates will remain low, and the second is that they will not.”

If rates remain low, it may drive investors to take excessive risks. If rates jump, investors could lose money – not least the Fed.

Regarding the first possibility, Mr. Bernanke said that the Fed was keeping a careful eye on financial markets. But he noted that rates were low in large part because the economy was weak, and that keeping rates low was the best way to encourage stronger growth. “Premature rate increases would carry a high risk of short-circuiting the recovery, possibly leading — ironically enough — to an even longer period of low long- term rates,” he said.

At the other extreme, Mr. Bernanke said the Fed could “mitigate” any jump in rates by prolonging its efforts to hold rates down, for example by keeping some of its investments in Treasury and mortgage-backed securities.

Three more highlights from the question-and-answer session after the speech.

1. Mr. Bernanke, asked about the outlook for the Washington Nationals, responded by accurately quoting the “Las Vegas odds” of a World Series appearance: 8/1.

2. Although the decision may be made under a future chairman, Mr. Bernanke said the Fed should continue to offer “forward guidance” — predicting its policies — even after it concludes its long effort to revive the economy.

“Providing information about the future path of policy could be useful, probably would be useful, under even normal circumstances,” he said in response to a question. “I think we need to keep providing information.”

3. Not surprisingly, Mr. Bernanke often is asked to reflect on the financial crisis. He offered something a little different than his normal response on Friday night.

“In many ways, in retrospect, the crisis was a normal crisis,” he said. “It’s just that the intuitional framework in which it occurred was much more complex.”

In other words, there was a panic, and a run, and a collapse – but rather than a run on bank deposits, the run was in the money markets. Improving the stability of those markets is something regulators have yet to accomplish.

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Jury in Bell corruption trial may be deadlocked

A court spokeswoman said Thursday the jury in the Bell corruption case appears to be deadlocked.

“The jurors may be at an impasse,” said Patricia Kelly, a spokeswoman for L.A. County Superior Court.

Jurors sent a note to the judge Thursday morning, and all the attorneys in the case were called in.

Six former Bell City Council members are accused of stealing public money by paying themselves extraordinary salaries in one of Los Angeles County’s poorest cities.

Luis Artiga, Victor Bello, George Cole, Oscar Hernandez, Teresa Jacobo and George Mirabal are accused of misappropriation of public funds, felony counts that could bring prison terms.

They were arrested in September 2010 and have been free on bail.

The nearly $100,000 salaries drawn by most of the former elected officials are part of a much larger municipal corruption case in the southeast Los Angeles County city in which prosecutors allege that money from the city’s modest general fund flowed freely to top officials.

The three defendants who testified painted a picture of a city as a place led by a controlling, manipulative administrator who handed out enormous salaries, loaned city money and padded future pensions. Robert Rizzo, the former adminstrator, and ex-assistant city manager Angela Spaccia are also awaiting trial.

The four-week trial of the former council members turned on extremes.

Deputy Dist. Atty. Edward Miller said the council members were little more than common thieves who were consumed with fattening their paychecks at the expense of the city’s largely immigrant, working-poor residents.

Miller said the accused represented the “one-percenters" of Bell who had “apparently forgotten who they are and where they live."

Defense attorneys said the former city leaders -- one a pastor, another a mom-and-pop grocery store owner, another a funeral director -- were dedicated public servants who put in long hours and tirelessly responded to the needs of their constituents.

Jacobo testified that Rizzo informed her she could quit her job as a real estate agent and receive a full-time salary as a council member. She said she asked City Attorney Edward Lee if that was possible and he nodded his head.

"I thought I was doing a very good job to be able to earn that, yes," Jacobo said.

Cole said Rizzo was so intimidating that the former councilman voted for a 12% annual pay raise out of fear the city programs he established would be gutted by Rizzo in retaliation if he opposed the pay hikes.

The defense argued that the prosecution failed to prove criminal negligence -- that their clients knew what they were doing was wrong or that a reasonable person would know it was wrong.

The attorney for Hernandez, the city’s mayor at the time of the arrests, said his client had only a grade-school education, was known more for his heart than his intellect and was, perhaps, not overly “scholarly.”

Prosecutors argued that the council members pushed up their salaries by serving on city boards that rarely met and, in one case, existed only as a means for paying them even more money.

Jurors were also left to deal with the question of whether council members were protected by a City Charter that was approved in a special election that drew fewer than 400 voters.

Defense attorneys say the charter allowed council members to be paid for serving on the authorities.

But the prosecutor argued that the charter -- a quasi-constitution for a city -- set salaries at what councils in similar-sized cities were receiving under state law: $8,076 a year. Because council members automatically serve on boards and commissions, the district attorney said the total compensation for all of each council member's work was included in that figure.

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What Ousted Groupon CEO's <cite>Battletoads</cite> Reference Meant

Groupon CEO Andrew Mason is many things, and one of them is clearly a Nintendo kid from the 1980s. After his firing Thursday from the daily-deals company that he co-founded, he sent a jocular e-mail to his staff admitting that he had been fired, asking for recommendations for a “fat camp” so he could lose the “Groupon 40,” and most inscrutably (to some) comparing his dismissal to playing the videogame Battletoads:

I’m OK with having failed at this part of the journey. If Groupon was Battletoads, it would be like I made it all the way to the Terra Tubes without dying on my first ever play through.

This was, to put it lightly, an extremely specific metaphor. It probably has a lot of investors scratching their heads today. To those of us about Mason’s age who played the same videogames he did, it makes total sense.

You might infer, with no other context, that Battletoads must be a really hard videogame. It’s probably fair to say that for those of us whose primary gaming device was the Nintendo Entertainment System, Battletoads was the hard videogame. It was by Rare, the developer that seemed to squeeze more juice out of the aging 8-bit console than anyone, even Nintendo itself, could manage. (It got a license to develop software after it impressed Nintendo by reverse-engineering the device.) Battletoads was the pinnacle of its performance on the NES. It had absolutely gorgeous graphics. Every level had a totally different gameplay feel than the last, never feeling repetitive.

And it was one of the hardest damned games, to the point of absolute unfairness. Beating the first level wasn’t so bad, completing the second one took some practice, and good luck after that unless you had the patience of Job. You couldn’t play Battletoads levels once and scrape by with quick reflexes; you had to play them over and over again, memorizing the traps and enemies so that you could avoid them with pixel-perfect precision. Some players stuck it out; some (like me) gave up.

Mason clearly stuck it out, because the specific level he referenced, the Terra Tubes, comes quite late in the game. Aficionados consider it the difficile de la difficile of Battletoads levels. Watch the video above and see how the player begins to dodge the game’s traps before they even appear on the screen — the only way to get around them.

So there are really two specific things that Mason is implying with this reference:

1. To get to the Terra Tubes on one’s first try, having never played the game before, would be a Herculean, almost impossible, achievement. Therefore, getting this far with Groupon was in and of itself either a colossal feat of genius or a lucky miracle, depending on how charitably you want to interpret the metaphor.


2. Dying on the Terra Tubes, which are designed to make you die over and over, is no shameful thing.

Whether you agree with Groupon’s ousted CEO on these points or not is up to you, of course, but now you understand what he was saying.

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Jane C. Wright, Pioneering Oncologist, Dies at 93

Dr. Jane C. Wright, a pioneering oncologist who helped elevate chemotherapy from a last resort for cancer patients to an often viable treatment option, died on Feb. 19 at her home in Guttenberg, N.J. She was 93.

Her death was confirmed by her daughter Jane Jones, who said her mother had dementia.

Dr. Wright descended from a distinguished medical family that defied racial barriers in a profession long dominated by white men. Her father, Dr. Louis T. Wright, was among the first blacks to graduate from Harvard Medical School and was reported to be the first black doctor appointed to the staff of a New York City hospital. His father was an early graduate of what became the Meharry Medical College, the first medical school in the South for African-Americans, founded in Nashville in 1876.

Dr. Jane Wright began her career as a researcher working alongside her father at a cancer center he established at Harlem Hospital in New York.

Together, they and others studied the effects of a variety of drugs on tumors, experimented with chemotherapeutic agents on leukemia in mice and eventually treated patients, with some success, with new anticancer drugs, including triethylene melamine.

After her father died in 1952, Dr. Wright took over as director of the center, which was known as the Harlem Hospital Cancer Research Foundation. In 1955, she joined the faculty of the New York University Medical Center as director of cancer research, where her work focused on correlating the responses of tissue cultures to anticancer drugs with the responses of patients.

In 1964, working as part of a team at the N.Y.U. School of Medicine, Dr. Wright developed a nonsurgical method, using a catheter system, to deliver heavy doses of anticancer drugs to previously hard-to-reach tumor areas in the kidneys, spleen and elsewhere.

That same year, Dr. Wright was the only woman among seven physicians who, recognizing the unique needs of doctors caring for cancer patients, founded the American Society of Clinical Oncologists, known as ASCO. She was also appointed by President Lyndon B. Johnson to the President’s Commission on Heart Disease, Cancer and Stroke, led by the heart surgeon Dr. Michael E. DeBakey. Its recommendations emphasized better communication among doctors, hospitals and research institutions and resulted in a national network of treatment centers.

In 1967, Dr. Wright became head of the chemotherapy department and associate dean at New York Medical College. News reports at the time said it was the first time a black woman had held so high a post at an American medical school.

“Not only was her work scientific, but it was visionary for the whole science of oncology,” Dr. Sandra Swain, the current president of ASCO, said in a telephone interview. “She was part of the group that first realized we needed a separate organization to deal with the providers who care for cancer patients. But beyond that it’s amazing to me that a black woman, in her day and age, was able to do what she did.”

Jane Cooke Wright was born in Manhattan on Nov. 30, 1919. Her mother, the former Corinne Cooke, was a substitute teacher in the New York City schools.

Ms. Wright attended the Ethical Culture school in Manhattan and the Fieldston School in the Bronx (now collectively known Ethical Culture Fieldston School) and graduated from Smith College, where she studied art before turning to medicine. She received a full scholarship to New York Medical College, earning her medical degree in 1945. Before beginning research with her father, she worked as a doctor in the city schools.

Dr. Wright’s marriage, in 1947, to David D. Jones, a lawyer, ended with his death in 1976. She is survived by their two daughters, Jane and Alison Jones, and a sister, Barbara Wright Pierce, who is also a doctor.

As both a student and a doctor, Dr. Wright said in interviews, she was always aware that as a black woman she was an unusual presence in medical institutions. But she never felt she was a victim of racial prejudice, she said.

“I know I’m a member of two minority groups,” she said in an interview with The New York Post in 1967, “but I don’t think of myself that way. Sure, a woman has to try twice as hard. But — racial prejudice? I’ve met very little of it.”

She added, “It could be I met it — and wasn’t intelligent enough to recognize it.”

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F-35 Jets Returned to Service by Pentagon

The Pentagon lifted its grounding of the new F-35 jet fighter on Thursday after concluding that a turbine blade had cracked on a single plane after it was overused in test operations.

The office that runs the program said no other cracks were found in inspections of the other engines made so far, and no engine redesign was needed.

It said the engine in which the blade cracked was in a plane that “had been operated at extreme parameters in its mission to expand the F-35 flight envelope.”

The program office added that “prolonged exposure to high levels of heat and other operational stressors on this specific engine were determined to be the cause of the crack.”

All flights were suspended last week for the 64 planes built so far once the crack, which stretched for six-tenths of an inch, was found during a routine inspection.

Pratt & Whitney, which makes the engines, investigated the problem with military experts. The company, a unit of United Technologies, said on Wednesday that the crack occurred after that engine was operated more than four times longer in a high-temperature flight environment than the engines would in normal use.

The F-35, a supersonic jet meant to evade enemy radar, is the Pentagon’s most expensive program and has been delayed by various technical problems. The program could cost $396 billion if the Pentagon builds 2,456 jets by the late 2030s.

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Meet the Common Man's Robot: Headless and Adorable

LONG BEACH, California — Go into the typical American home and you’ll find a television, a computer, perhaps a videogame console, and even an iPad. But you won’t find a robot. What’s wrong with us?

We haven’t found the right robot. Or at least that’s Keller Rinaudo’s take on the problem, presented at the TED conference Tuesday along with his creation: A $150 robot named Romo, which can stream video, wheel around in response to remote control, and be custom programmed.

Except that Romo isn’t so much a robot as an iPhone accessory, a base with tracked a wheels for movement. You plug your Apple smartphone into Romo’s movable hinge, and the iPhone forms Romo’s face, as well as its brain, eyes, ears, and means of remote control and communication.

“By leveraging the power of the iPhone’s processor we can create a robot that is Wi-Fi enabled and computer-vision capable for $150, which is about 1 percent of what these kinds of robots would cost in the past,” Rinaudo told the audience at TED.

This makes Romo just one of the most ambitious members of an entire generation of cheap, rapidly developed hardware devices that owe their existence to smartphones and their ability to leverage the processors, screens, and sensors that come along with those devices.

To the Romo, the iPhone supplies a camera with which to detect your face; a display to show Romo’s eyes, which follow the user; and a Wi-Fi connection, which is used to beam video to a different Apple device, which can be used to drive the Romo around. The iPhone’s processor, meanwhile, is used to evaluate command logic that can be set up by the user ahead of time using a simplified, drag-and-drop programming interface.

Rinaudo keeps coming back to the lively animated face, complete with a goofy smile, which he hopes will help Romo sell when it comes on the market this June.

“It has to be something people want to take home and have around their kids,” Rinaudo says. “It should be friendly and it should be cute.”

That cuteness will be enough to get the Romo in the door, but whether it appeals to the common man or woman will have more to do with its functionality. Maybe future versions can be adorable while also being able to fetch drinks from the fridge.

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Well: Think Like a Doctor: The Man Who Wobbled

The Challenge: Can you solve the medical mystery of a man who suddenly becomes too dizzy to walk?

Every month, the Diagnosis column of The New York Times Magazine asks Well readers to try their hand at solving a medical mystery. Below you will find the story of a 56-year-old factory worker with dizziness and panic attacks. I have provided records from his two hospital visits that will give you all the information available to the doctor who finally made the diagnosis.

The first reader to offer the correct diagnosis gets a signed copy of my book, “Every Patient Tells a Story,” and the satisfaction of solving a case that stumped a roomful of specialists.

The Patient’s Story:

The middle-aged man clicked his way through the multiple reruns of late-late-night television. He should have been in bed hours ago, but lately he hadn’t been able to get to sleep. Suddenly his legs took on a life of their own. Stretched out halfway to the center of the room, they began to shake and twitch and jump around. The man watched helplessly as his legs disobeyed his mental orders to stop moving. He had no control over them. He felt nauseous, sweaty and out of breath, as if he had been running some kind of race. He called out to his wife. She hurried out of bed, took one look at him and called 911.

The Patient’s History:

By the time the man arrived at Huntsville Hospital, in Alabama, the twitching in his legs had subsided and his breathing had returned to normal. Still, he had been discharged from that same hospital for similar symptoms just two weeks earlier. They hadn’t figured out what was going on then, so they weren’t going to send him home now.

The patient considered himself pretty healthy, but the past year or so had been tough. In 2011, at the age of 54, he had had a mild stroke. He had no medical problems that put him at risk for stroke — no high blood pressure, no high cholesterol, no diabetes. A work-up at that time showed that he had a hole in his heart that allowed a tiny clot from somewhere in his body to travel to the brain and cause the stroke. He was discharged on a couple of blood thinners to keep his blood from making more clots. He hadn’t really felt completely well, though, ever since. His balance seemed a little off, and he was subject to these weird panic attacks, in which his heart would pound and he would feel short of breath whenever he got too stressed. Mostly he could manage them by just walking away and focusing on his breathing. Still, he never felt as if he was the kind of guy to panic.

And he had always been quick on his feet. The first half of his career he had been in the steel business — building huge metal trusses and supports. He and his team put together 60-plus tons of steel structures every day. For the past decade he had been machining car parts. After his stroke, work seemed to get a lot harder.

The Dizziness:

A few weeks ago, he stood up and wham — suddenly the whole world went off-kilter. He felt as if he was constantly about to fall over in a world that no longer lay down flat. His first thought was that he was having another stroke. He went straight to his doctor’s office. The doctor wasn’t sure what was going on and sent him to that same emergency room at Huntsville Hospital. After three days of testing and being evaluated by lots of specialists, his doctors still were not sure what was going on. He hadn’t had a heart attack; he hadn’t had a stroke. There was no sign of infection. All the tests they could think of were normal.

The only abnormal finding was that when he stood up, his blood pressure dropped. Why this happened wasn’t clear, but the doctors in the hospital gave him compression stockings and a pill — both could help keep his blood pressure in the normal range. Then they sent him home. He was also started on an antidepressant to help with the panic attacks he continued to have from time to time.

You can read the report from that hospital admission below.

You can also read the consultation and discharge notes from that hospital visit here.

He had been home for nearly two weeks and still he felt no better. He tried to go back to work after a week or so at home, but after driving for less than five miles, he felt he had to turn around. He wasn’t sure what was wrong; he just knew he didn’t feel right. Then his legs started jumping around, and he ended up back in the hospital.

The Doctor’s Exam:

It was nearly dawn by the time Dr. Jeremy Thompson, the first-year resident on duty that night, saw the patient. Awake but tired, the patient told his story one more time. He had been at home, watching TV, when his legs started jumping on their own and he started feeling short of breath. His wife sat at the bedside. She looked just as worried and exhausted as he did. She told the resident that when he spoke that night at home, his speech was slurred. And when the ambulance came, he could barely walk. He has never missed this much work, she told the young doctor. It’s not like him. Can’t you figure out what’s wrong?

The resident had already reviewed the records from the patient’s previous hospital admissions. He asked a few more questions: the patient had never smoked and rarely drank; his father died at age 80; his mother was still alive and well. The patient exam was normal, as were the studies done in the E.R.

The first E.R. doctor thought that his symptoms were a result of anxiety, culminating in a full-blown panic attack. The resident thought that was probably right. In any case he would discuss the case with the attending in a couple of hours during rounds on the new patients. Till then, he told the worried couple, they should just try to get a little sleep.

An Important Clue:

Dr. Robert Centor was definitely a morning person. His cheerful enthusiasm about teaching and taking care of patients made him a favorite among residents. At 7:30 that morning, he stood outside the patient’s door as Dr. Thompson relayed the somewhat frustrating case of the middle-aged man with worsening dizziness and panic attacks. Then they went into the room to meet the patient. He was a big guy, tall and muscular with the first signs of middle-aged thickening around his middle. His complexion had the look of someone who spent a lot of time outdoors. Dr. Centor introduced himself and pulled up a chair as the rest of the team watched. He asked the patient what brought him to the hospital.

“Every time I get up, I get dizzy,” the man replied. Sure, he had had some balance problems ever since his stroke, he explained, but this felt different – somehow worse. He could hardly walk, he told the doctor. He just felt too unstable.

“Can you get up and show us how you walk?” Dr. Centor asked.

“Don’t let me fall,” the patient responded. He carefully swung his legs over the side of the bed. The resident and intern stood on either side as he slowly rose. He stood with his feet far apart. When asked to close his eyes as he stood there, he wobbled and nearly fell over. When he took a few steps, his heel and toes hit the ground at the same time, making a strange slapping sound.

Seeing that, Dr. Centor knew where the problem lay and ordered a few tests to confirm his diagnosis.

You can see the review report and notes for the patient’s second hospital visit below.

Solving the Mystery:

What tests did Dr. Centor order? Do you know what is making this middle-aged man wobble? Enter your guesses below. I’ll post the answer tomorrow.

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Rules and Regulations: Post your questions and diagnosis in the Comments section below. The correct answer will appear tomorrow on Well. The winner will be contacted. Reader comments may also appear in a coming issue of The New York Times Magazine.

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DealBook: Heinz Case May Involve a Side Bet in London

Regulators have escalated an investigation into suspicious trades placed ahead of the $23 billion takeover of H. J. Heinz, focusing on a complex derivative bet routed through London, according to two people briefed on the matter.

The development builds on a recent regulatory action mounted against a Goldman Sachs account in Switzerland that bought Heinz options contracts. It also comes a week after the Federal Bureau of Investigation said it opened a criminal inquiry.

An unusual spike in trading volume in Heinz options a day before the deal was announced first attracted investigators. The Securities and Exchange Commission is also examining fluctuations in ordinary stock trades. The Financial Industry Regulatory Authority, Wall Street’s self-regulatory group, recently referred suspicious stock trades to the S.E.C., a person briefed on the matter said.

Now the S.E.C. is looking into a more opaque corner of the investing world, examining a product known as a contract-for-difference, a derivative that allows investors to bet on changes in the price of stocks without owning the shares. Such contracts are not regulated in the United States, but are popular in Britain. Regulators there recently opened an inquiry into the Heinz trades, one of the people briefed on the matter said.

The expansion of the Heinz investigation illustrates the growing challenges facing American regulators. Charged with policing the American exchanges, authorities increasingly find themselves having to hunt through a dizzyingly complex global marketplace.

After a number of prominent crackdowns on insider stock trading, a campaign that scared the markets, investors are seeking subtler and more sophisticated tools to seize on confidential tidbits. Trading operations also flocked overseas, a careful move that forces the S.E.C. to navigate a maze of international regulations before identifying suspect traders.

The Heinz case illustrates the shift, as the S.E.C. relies on Swiss authorities to expose the trader behind the Heinz options bets.

The suspicious options trades were routed through a Goldman Sachs account in Zurich, where laws prevent the firm from sharing details of the account holder’s identity. In a complaint filed two weeks ago, the S.E.C. froze the account of “one or more unknown traders.” A federal judge upheld that freeze last week, a move that will prevent the traders from spending their winnings or moving the money.

The series of well-timed options trades, bets that produced $1.7 million in potential profits, came just a day before Berkshire Hathaway and the investment firm 3G Capital announced that they had agreed to buy the ketchup maker. News of the deal sent the company’s shares, and the value of the options contracts, soaring.

The S.E.C. called the trading “highly suspicious,” given that there was scant options trading in Heinz in previous months.

“Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag,” Daniel M. Hawke, head of the commission’s market abuse unit, said recently.

While the identity remains a secret, the account holder is a Goldman private wealth management client, according to a person briefed on the matter who was not authorized to speak on the record. Goldman executives in Zurich know the identity of the person, but laws prohibit those executives from sharing the name with American regulators and even Goldman executives outside of Switzerland.

Finma, the Swiss regulator, is the gatekeeper for American regulators. The S.E.C. contacted Finma in an effort to learn more about the trading, and the Swiss regulator has promised to help. It could take weeks to identify the traders.

Goldman has hired outside counsel to advise it on the situation, according to people briefed on the situation who were not authorized to speak on the record. The bank, which is not accused of wrongdoing, is cooperating with the investigation.

An S.E.C. spokesman declined to comment.

The agency’s inquiry may cast a cloud over the Heinz deal. After the traders are identified, the focus will turn to the insiders who had information on the deal and could have leaked details. Dozens of people had confidential information about the deal, including bankers, lawyers and executives for both the buyers and the seller.

As the agency continues to build its case against the options trades, it also is examining suspicious contracts-for-difference.

Investors increasingly favor the contracts because they require little capital investment and can be traded on margin. They are popular on the London Stock Exchange, where regulators are now focusing some attention.

In essence, the derivatives contracts are a side bet on the price of a stock. They have drawn criticism for being opaque, in part because users are not actually trading the shares of a company, but rather a contract linked to those shares.

Regulators have examined the use of the contracts before when accusations of insider trading have arisen. In 2008, the British Financial Services Authority fined an investor for market abuse, saying the investor had used a contract-for-difference to profit from inside information on the Body Shop, a retailer. The person was making a bet in this case that the shares would fall in value.

Despite the focus on such complex products in the Heinz case, the S.E.C. is also examining more mundane activity in equity trades ahead of the deal.

Finra is helping the agency build its investigation. The group’s Office of Fraud Detection and Market Intelligence is coordinating with the S.E.C.

A Finra official declined to comment on Wednesday.

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Tribune Co. hires advisors to explore sale of newspaper unit

Tribune Co. has hired investment bankers to advise the media company on the potential sale of its newspaper publishing unit.

The company announced that it has retained JPMorgan Chase & Co. and Evercore Partners to assess whether to sell the division that includes the Los Angeles Times, Chicago Tribune and six other daily newspapers.

The bankers will analyze bids from suitors, but their hiring does not necessarily mean that the assets would be sold.

"There is a lot of interest in our newspapers, which we haven't solicited," Gary Weitman, a Tribune spokesman, said in a statement. "Hiring outside financial advisors will help us determine whether that interest is credible, allow us to consider all of our options, and fulfill our fiduciary responsibility to our shareholders and employees."

Tribune hopes to sell the newspaper group intact instead of selling each paper individually, according to a person familiar with the matter.

The Chicago company has a healthy balance sheet and doesn't feel financial pressure to sell the properties, according to the person. It's unclear how long the process could take.

There has been widespread speculation that Tribune would attempt to unload the newspaper business to focus on its more promising television operations. Rupert Murdoch's News Corp. is among the possible bidders for the newspaper assets.

Tribune emerged from its four-year bankruptcy at the end of 2012 and appointed broadcasting veteran Peter Liguori as chief executive in January.

JPMorgan Chase holds an ownership stake in Tribune.

Evercore Partners, a boutique investment bank, also is working for the parent company of the New York Times on its planned divestiture of the Boston Globe.

walter.hamilton@latimes.com

andrew.tangel@latimes.com

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