May 13, 1997

San Jose Mercury News executive editor Jerry Cepos acknowledges that 1996 series on rise of crack cocaine in urban America was marred by shortcomings, including sensational implication that Central Intelligence Agency countenanced drug's spread in league with Nicaraguan dealers, to help finance rebels fighting against Sandinista Government; admits implications by investigative reporter Gary Webb were not supported by facts; says although members of drug ring met with Nicaraguan contra leaders paid by CIA, there is no proof that top agency officials knew of relationship; series provoked furor among black elected and community officials and prompted multiple Federal investigations; asserted that pair of Nicaraguan drug traffickers with CIA ties started nationwide crack trade in 1980's by selling drugs in black neighborhoods; agency's probe into allegations continues; photo (M)

New Jersey Assembly committee approves bill requiring tattoo and body-piercing parlors to get written consent from parent of any customer under age 18 (New Jersey Daily Briefing) (S)

Thirty pound show poodle that escaped from its carrying crate at Atlantic City International Airport and bit baggage worker in face remains at large for third day (New Jersey Daily Briefing) (S)

THE SECRETS OF DEEP BLUE -- The people who program Deep Blue let out some of its secrets. B2. RULING FAULTS WORKFARE -- A judge says New York unfairly calculates hours that welfare recipients must work to get benefits. B3. MOST VALUABLE SPEAKER -- Governor Whitman has plans to speak at seven commencements this year, but her first speech drew a decidedly mixed reception. B4. DEVELOPER FOR DOWNTOWN HOTEL -- A developer has been named to construct a new 14-story hotel that would be the first at Battery Park City. Metro Business, B6.

White House asks Supreme Court to overturn Federal appeals court ruling that notes taken by its lawyers in meetings with First Lady Hillary Rodham Clinton over Whitewater affair were not protected by lawyer-client privilege and must be surrendered to independent Whitewater counsel Kenneth J Starr; calls ruling extraordinary and indefensible; argues that decision puts at risk ability of officials throughout Government to obtain candid and informed legal assistance necessary to performance of their functions; brief by Mrs Clinton says ruling disregards compelling need for personal and Governmental lawyers to consult; case raises far-reaching questions over whether Government lawyers are independent auditors whose duty is to Government itself, or whether they have same ethical duties and confidential relationships as other lawyers when they advise individual clients (M)

Merger of Guinness PLC and Grand Metropolitan PLC, two of world's food and drink giants, is seen as effort to lure young consumers; there is renewed interest among drinkers on both names and higher-priced products; sales of distilled spirits are rising in non-Western nations; despite some objections, television and radio broadcasters are increasingly willing to accept commercials for distilled spirits; new partners in GMG Brands, as merged company will be called, are poised to profit from one of current bywords: drink less but drink better; table; photos (L)

New study finds strong evidence that publicly financed scientific research plays surprisingly important role in breakthroughs of industrial innovation in United States; this suggests that impending cuts in Federal science budget might eventually hurt the economy; study, prepared for National Science Foundation, finds that 73 percent of main science papers cited by American industrial patents in two recent years were based on domestic and foreign research financed by government or nonprofit agencies; study sharply contradicts currently popular view that public support of basic research is passe; Democrats and Republicans are united in earmarking Government financing for science for sizable cuts as one way to reduce Federal deficit; Clinton Administration said to be aiming for 14 percent reduction over five years, while Republicans want 20 percent reduction; chart (M)

Venezuelan Coke Bottler In $1.2 Billion Sale Panamerican Beverages, Latin America's largest soft drink bottling company and one of the world's largest Coca-Cola bottlers, has agreed to acquire Coca-Cola y Hit de Venezuela, Venezuela's leading soft drink bottler, in a cash and stock transaction valued at about $1.2 billion. The deal comes less than a year after the Cisneros Group, which owns a large stake in the Venezuelan operation, left a 50-year relationship with Pepsico and became a Coca-Cola bottler. The Coca-Cola Company, which already had a substantial equity position in Panamerican, will see its stake grow as a result of the purchase. $(Page D4.$)

Clyde Haberman NYC column discusses plight of young adults seeking apartment space in New York City and their views concerning political battle regarding rent control (M)

Dow Jones industrial average climbs 123.22 points, or 1.72 percent, to record 7,292.75, while Standard & Poor's index of 500 stocks rises 12.88 points, or 1.56 percent, to record 837.66; Nasdaq rises 9.14 points, or 0.68 percent, to 1,344.19, and Russell 2,000 index finishes at 363.76, up 2.34 points, or 0.64 percent; table (L)

Article discusses resurgence in Brooklyn over last two decades; areas that were written off twenty years ago have come back with surprising vigor; downtown has been totally recast with huge new office buildings and Marriott Hotel being built; other changes discussed; photo (M)

Michael J Fortier, former Army friend of Timothy J McVeigh, main defendant in April 1995 bombing of Federal office building in Oklahoma City that killed 168 people, testifies at McVeigh's trial in Denver that McVeigh cased Federal building several months before bombing, which he hoped would cause general uprising in America; says McVeigh ignored his objection that bombing would kill many people, arguing that while victims may be individually innocent, they were part of evil empire and guilty by association; says McVeigh originally planned to blow up building late in morning, when most people were preparing for lunch, for maximum effect; says McVeigh originally suggested staying inside truck that carried bomb, so he could shoot anyone who tried to interfere; says he knew for months of McVeigh's plans, and concedes he probably could have stopped bombing with single phone call; describes relationship with McVeigh and events that led to bombing (M)