February 9, 1998

Justice Dept ponders whether to broaden its antitrust battle with Microsoft Corp by filing Sherman Act case against computer giant; sweeping case against Microsoft would be landmark test of how smokestack-era doctrine of antitrust applies to high-technology industry; but Washington would prefer to avoid long-running, high-profile Sherman Act case; policy makers and economists say issue is to try to insure that Microsoft's near-monopoly of PC operating-system software is not used to exercise 'chokehold control' over new markets of Internet software and Internet commerce; Sen Orrin G Hatch warns that antitrust scrutiny of Microsoft is preferable to more heavy-handed Government intervention such as an 'Internet Commerce Commission'; there is similar sentiment within Justice Dept; senior official there says 'dialogue' element of Government's dealings with Microsoft would be reopened if only company agreed to discuss ground rules of competition (M)

District Council 37, part of American Federation of State, County and Municipal Employees, is experiencing probably worst crisis ever as prosecutors press investigation of seven of its 56 union locals and because of suspension of well-known president, Charles Hughes; crisis is embarrassing blow to Mayor Rudolph Giuliani since Hughes and Stanley Hill, district council's embattled executive director, are among his closest and most enthusiastic labor allies; suspension of Hughes follows complaints of lax ethics and financial controls after he allegedly helped drive local, which represents 22,000 school crossing guards, $8 million into debt; Hughes, who has denied wrongdoing, is also being investigated for allegedly taking $800,000 in unusual expense reimbursements; prosecutors are investigating allegations that officials at several locals accepted kickbacks; scandals have raised questions about Hill's stewardship by many union members, who say he has failed to set tough tone warning leaders of 56 locals against lining their pockets; photo (M)

Texas Gov George W Bush asks Federal court to block $2.3 billion in payments to roughly 150 lawyers in state's $15.3 billion settlement with tobacco industry for health-related damages caused by smoking, calling proposed fees outrageous; Dan Morales, state's Attorney General who orchestrated settlement and who believes Bush's move could undermine accord, accuses him of pandering for campaign contributions from big tobacco in future run for White House; controversy mirrors problems in Florida, where lawyers are trying to collect up to 25 percent of state's $11.3 billion settlement with industry; fight over fees in both states may be dwarfed by that which could occur if Congress approves $368.5 billion national settlement with tobacco industry, which in most respects would supersede agreements reached with states; several members of Congress have offered legislation that would cap amounts to be paid to hundreds of private lawyers who assisted in case (M)

Peter Marks reviews Moscow Art Theater's new production of Chekhov's The Three Sisters, directed by Oleg Yefremov, presented at Brooklyn Academy of Music; photo (M)

Despite billions of dollars in aid, many parts of Appalachia, such as Booneville, Ky, remain in poverty, looking much as they did 30 years ago, when Pres Lyndon B Johnson declared war on poverty; money and countless programs have had only marginal effects on breaking cycle of poverty and despair across region, where 25 percent or more of residents live below poverty level--nearly double national average; with state welfare regulations forcing recipients to find work, and with Federal Government reviewing eligibility benefits of children who receive disability benefits, many residents could lose vital monthly checks they have relied on for years; situation in Owsley County, where 46 percent of population is ranked below poverty line, and where more than half adult population is unemployed and illiterate discussed; photos (M)