PERISCOPE

Terror: Wrongful Arrests?

Since 9/11, the U.S. Justice Department has used a little-known legal tactic to secretly lock up at least 70 terror suspects--almost all of them Muslim men--and hold them without charges as "material witnesses" to crimes, in some cases for months. A report to be released this week by two civil-liberties groups finds that nearly 90 percent of these suspects were never linked to any terrorism acts, resulting in prosecutors and FBI agents issuing at least 13 apologies for wrongful arrest. By combing court records and interviewing defense lawyers, researchers for Human Rights Watch and the American Civil Liberties Union say they have assembled the first comprehensive look yet at the practice. Out of the 70 "material witness" arrests the groups were able to document, only eight suspects ended up being charged with terror-related crimes. Of the rest, 42 were released with no charges at all; 20 were charged with unrelated crimes, such as credit-card or immigration fraud. Justice spokesman Kevin Madden called "material witness" detentions a "critical" tool to thwart crimes and cited recent testimony from a top official, Chuck Rosenberg, noting that every material-witness arrest warrant must be based on "probable cause" and approved by a federal judge. "Justice cannot unilaterally arrest someone as a material witness," Rosenberg said.

--Michael Isikoff

OIL: Blasting Beijing's Bid

It's not often that corporate-takeover battles migrate from Wall Street to Main Street. And even less often do giant companies like Chevron, No. 6 on the Fortune 500, complain about unfair competition from a bigger player. But Chevron, which had been poised to gobble up Unocal, is now engaged in a battle that's likely to become a flash point in U.S.-Chinese relations. China National Offshore Oil Co., traded on stock exchanges but controlled by the Chinese government, is trying to top Chevron's bid for Unocal. Unocal is based in California, but 70 percent of its oil and gas reserves are in Asia; energy-hungry China, which owns 70 percent of CNOOC's stock, is hot for Asian energy.

Before the business aspects of this tale are submerged beneath the politics--look for an uproar this week, as pols start posturing-- note that the CNOOC bid for Unocal might not be high enough to top Chevron's. CNOOC is offering $67 a share in cash, helped by some cheap loans from the Chinese government. Chevron's offer--a package of three parts Chevron stock and one part cash--was valued at about $60 as of last Friday. But the CNOOC offer triggers an immediate tax, while Unocal holders wouldn't have to pay tax on their Chevron stock until they sell it. In addition, a Chevron purchase would be completed months earlier than a CNOOC purchase, which helps Chevron's bid. Thus a tax-advantaged $60 sooner is competitive with a fully taxable $67 later. Watch for a higher bid from one or both of the players--or maybe a Chevron-CNOOC deal to split up Unocal's assets.