THE WEEK

By KATHLEEN ADAMS, CHRISTINE GORMAN, LINA LOFARO, MICHAEL QUINN, ALAIN L. SANDERS AND SIDNEY URQUHART

NATION

Another Nominee Up in Smoke

Retired Air Force General Michael Carns withdrew his name from consideration to become the next CIA director. The here-we-go-again reason: possible illegalities concerning household arrangements. Carns said the FBI had informed him that his decision in the late 1980s to let a young Filipino move to the U.S. with Carns' family may have violated labor and immigration laws. Worse, said the general, his family had had a falling out with the young man, who is making unspecified accusations that might embarrass Carns and the Administration if they come to light. President Clinton immediately turned to Deputy Defense Secretary John Deutch--who has previously turned down the CIA directorship--to become the reluctant new nominee.

Altering Suits

The House of Representatives passed a package of sweeping legal reforms, which Republicans hailed as a national liberation from frivolous lawsuits and Democrats denounced as a victory for business over consumers. One measure would pressure parties in certain federal lawsuits to settle or else risk paying a portion of the other side's legal fees. Another would establish national standards for product-liability cases and cap punitive damages in civil cases. After lobbying by pharmaceutical companies and doctors, the latter bill was amended to immunize the makers of FDA-approved drugs and devices from punitive damages and cap medical-malpractice awards for pain and suffering at $250,000.

Tax Maneuvers

House Republicans formally unveiled their long-promised tax-cut plan. Among the proposals: a $500-per-child tax credit for families earning up to $200,000 a year, a capital-gains tax reduction and various corporate tax breaks. The plan was immediately criticized by Democrats as a giveaway to the rich. The package, whose five-year cost in lost revenues is estimated at $189 billion, also received cool reviews in the Senate--even among Republicans, where deficit reduction is a pre-eminent concern.

Hatfield Keeps His Hat

A move by young G.O.P. conservatives to dump Oregon's Mark Hatfield from the chairmanship of the Senate Appropriations Committee fizzled in a closed-door party caucus. The conservatives were angry at Hatfield, who voted against the balanced-budget amendment--the lone Republican holdout.

Term-Limits Trouble

Fearing that the second biggest item on their wish list (after the balanced-budget amendment) may also be in trouble, House G.O.P. leaders postponed voting on a congressional term-limits amendment until the end of the month in order to gather more support.

Clinton Backs Labor

President Clinton signed an Executive Order barring federal agencies from doing business with companies that hire permanent replacement workers during strikes. Republicans in Congress immediately began an effort to reverse the order by legislation.

Smoking: The New Mumps

Upping the ante in the tobacco debate, FDA Commissioner David Kessler said that nicotine addiction begins when most smokers are teenagers and that smoking should properly be addressed as a "pediatric disease." The FDA, he said, is still studying whether to regulate or restrict the sale of tobacco-moves that would probably displease the current Congress.

New York: The New Texas

The Empire State became the 38th to authorize the death penalty. Fulfilling a key campaign promise, Republican Governor George Pataki signed a capital-punishment measure into law, ending 18 years of refusal to do so by his Democratic predecessors.

The Simpson Trial

The O.J. Simpson trial moved into what could prove to be its most explosive phase: the testimony of Detective Mark Fuhrman, the key investigator who defense attorneys have suggested is a racist and who, they say, may have planted evidence to frame Simpson. Taking the stand, Fuhrman denied engaging in a conversation about hating "niggers," as was recollected by a woman in a fax to the defense. Under questioning, Fuhrman then began a methodical account of his movements during the initial investigation-an account designed to show that he couldn't have monkeyed with evidence.

A Very Big Bet

Idaho's 1,300-member Coeur d'Alene tribe announced plans for a weekly national phone-in lottery, set to begin in the fall, that would feature an initial jackpot of $50 million. Odds are high, however, that lottery officials in several states-fearful that a national lottery could siphon off local gamblers-will try to halt the ambitious venture with a series of legal challenges.

WORLD

Murder in Pakistan

Gunmen shot and killed two U.S. diplomats and wounded a third in Karachi. The Americans, all U.S. consulate employees, were driving to work when the killers, armed with assault weapons, pulled up alongside the Americans' van and sprayed it with bullets. In Washington officials speculate that the shootings were revenge for the arrest and extradition of Ramzi Yousef, a suspect in the World Trade Center bombing. In a separate attack, terrorists exploded a bomb outside a Karachi mosque, killing a dozen people--many of them children.

Mexican Scandal Widens

The Mexican government is seeking the extradition from the U.S. of former deputy attorney general Mario Ruiz Massieu. Ruiz Massieu, who served as his country's top drug-enforcement official, is accused of blocking the investigation of his brother's murder (his brother had been the No. 2 man in Mexico's ruling P.R.I. party) and is suspected of taking money from drug traffickers. The government asked the U.S. to freeze more than $7 million deposited by Ruiz Massieu in American banks.

Christopher in the Middle East

Traveling through the Middle East, U.S. Secretary of State Warren Christopher spoke of a "new burst of energy'' in the flagging peace process. Israel and the Palestinians established a July 1 deadline for reaching agreement on extending Palestinian self-rule, now limited to the Gaza Strip and Jericho, to the rest of the West Bank. There were strong hints that Israel and Syria would resume talks in Washington. And with Christopher at his side, Egyptian President Hosni Mubarak slightly softened Cairo's refusal to vote for an extension of the 25-year-old Nuclear Nonproliferation Treaty unless Israel joins too.

Bosnian Atrocities

A just released report from the CIA concludes that 90% of Bosnian war atrocities were committed by the Serbs, with at least the tacit approval of their leaders. The report, based on aerial photographs and firsthand accounts, comes just as the U.S. and its European allies are portraying Serb leader Slobodan Milosevic as a peacemaker, seeking to lure him into serious negotiations with the Bosnian government and Croatia. Meanwhile, in northwestern Bosnia, the U.N. High Commissioner for Refugees cut emergency food aid to more than 100,000 Croatian Serbs and Muslim rebels, saying their leaders were making relief efforts impossible.

Zhirinovsky Does India

Russian ultranationalist Vladimir Zhirinovsky, paying a first-ever visit to the Indian subcontinent, thrust himself into the middle of a long-running border dispute. India should be restored to its pre-1947 boundaries, he declared, a fiat that would effectively wipe Pakistan and Bangladesh off the map.

BUSINESS

Dollar's Roller-Coaster Ride

The dollar took a steep dive over four days last week-hitting record lows against the yen-but leveled off when Federal Reserve Chairman Alan Greenspan hinted at an interest-rate hike.

Jobless Rate Down, Stocks Up

The nation's unemployment rate reached its lowest point in 41/2 years as employers added more than 300,000 new jobs to their payrolls in February. "The fundamentals of this economy overall are healthier than they have been in a generation," a jubilant President Clinton told a news conference. Wall Street chimed in to close on Friday at a record 4035.

Orange Co.: Distress Sale

Struggling to cope with last December's staggering $1.7 billion bankruptcy, officials in California's Orange County announced plans to sell off area assets such as libraries, courts and a juvenile-detention facility-tapping every possible revenue source except higher taxes. Officials also said they would lay off more than 1,000 county employees.

Losing Their Barings

Lawyers for Nicholas Leeson, the trader whose high-flying deals put Barings Bank out of business, insisted that Leeson never intended to run away from the debacle. Indeed, his weeklong dash from Singapore was allegedly nothing more than a long-planned holiday. In Singapore accountants looking into Leeson's transactions reported that two months' worth of records had disappeared. Finally, a Dutch banking and insurance firm, ING Group, completed its takeover of Barings.

SPORT

He's Ba-a-a-ack?

The rumor mill began humming after Michael Jordan showed up for three straight practice sessions with his old team the Chicago Bulls. "I have decided to end my baseball career," Jordan said. All sorts of speculation were rife, and late Saturday word spread that Jordan would rejoin the Bulls for their March 24 game against the Orlando Magic and Shaquille O'Neal, the N.B.A.'s current megastar.

Did Cocaine Kill Reggie Lewis?

Boston Celtics star Reggie Lewis, who collapsed and died 19 months ago while shooting baskets, may have suffered heart damage from cocaine use--rather than a common-cold virus--according to an exhaustive article in the Wall Street Journal. The Celtics, who were portrayed as covering up Lewis' alleged drug abuse, denounced the piece as "racist" and threatened to bring a $100 million lawsuit against the Journal.

OneAustralia Goes Down Under

In just 2 min. 22 sec., Australia's $3 million entry in the America's Cup trials broke in half in rough seas off San Diego and sank to the bottom of the Pacific. All 17 crew members were rescued. Team official sent an older boat into the races to replace the sunken sloop.

--By Kathleen Adams, Christine Gorman, Lina Lofaro, Michael Quinn, Alain L. Sanders and Sidney Urquhart