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Monday, August 23, 2010

AP IMPACT: Katrina a tale of SBA failure AP

CHALMETTE, La. Five years after Hurricane Katrina, Jay Young is still haunted by the desperate voices on the other end of the telephone crying and begging for help.

As a loan officer for a federal agency that was supposed to help homeowners and businesses get back on their feet, he had high expectations he could make a difference. But he recalls how he was forced to turn away many qualified applicants because of what he says was pressure from his supervisors to close files quickly.

Karen Bazile remembers having high hopes, too, when she applied for a loan from the same agency, the Small Business Administration, to rebuild her home in the New Orleans suburb of Chalmette. While she ultimately got the money, she quickly lost faith as she struggled with different loan officers who misplaced her paperwork and told her she had only 48 hours to find and fax critical documents or her application would be canceled.

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EDITORS NOTE: This story was reported by Associated Press writers Mitch Weiss, Michael Kunzelman, Holbrook Mohr, Cain Burdeau, Troy Thibodeaux and Jason Bronis. It was written by Weiss.

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Some 160 miles to the east, in Alabama, Erik Schmitz, former commodore of the Fairhope Yacht Club, takes in a breathtaking view of Mobile Bay from a posh new clubhouse rebuilt in part with a $1.5 million disaster loan, the maximum from the SBA. For Schmitz, the entire loan process was smooth sailing.

While stories of the Federal Emergency Management Agencys contaminated trailers and the Army Corps of Engineers inability to shore up the levees captured the headlines in the aftermath of the deadly storms of 2005, the bungling of the SBA, the lead federal agency helping people rebuild their homes and businesses, has largely been untold.

The sagas of Schmitz, Bazile and the SBAs Young, who worked out of the agencys massive loan processing center in Fort Worth, Texas, collectively reveal how the SBA failed in so many ways, an ominous experience as the agency prepares to play a similar role in the aftermath of the massive BP PLC oil spill.

These are stories of a mismanaged bureaucracy that still hurt half a decade later: tales of applications for low-interest disaster loans that should have been approved but were not, of applications deleted from the SBA computer system for no valid reason, of impossible-to-meet deadlines manufactured to clear backlogs, and of a process so chaotic and painful that thousands simply gave up.

An Associated Press investigation based on more than 200 interviews, thousands of pages of public documents obtained under the federal Freedom of Information Act and a first-ever detailed computer analysis of SBA data from hurricanes Katrina and Rita found that:

ï¿½ Despite the obvious need, 55 percent of homeowners and businesses that applied for help after the hurricanes were turned away. According to data provided by SBA, of 318,953 applications processed, 175,463 were rejected and 143,490 were approved.

ï¿½ Only 60 percent of the loan money approved by SBA ultimately reached applicants. Over the years, SBA officials have told congressional committees that the agency had approved more than $10 billion in loans, touting it as an example of how SBA had helped those on the Gulf Coast. However, according to the data, only $6.1 billion of the approved loan money has been dispensed. SBA officials say many applicants never accepted the loans because they found other ways to rebuild, including using insurance money. But many former applicants said in interviews that they just walked away because the entire process took too long and was too complicated.

ï¿½ Of the money SBA did distribute, $357 million ï¿½ nearly 6 percent ï¿½ has never been repaid. More than a dozen people whose loans were charged off told the AP that the agency hasnt contacted them about repayment.

ï¿½ Country clubs, yacht clubs, exclusive private schools and megachurches received millions in loans from the agency founded in 1953 with a mission to aid, counsel, assist and protect the interests of small business concerns. Some of the more substantial operations rebuilt bigger and better, often contradicting SBA rules that say damaged buildings should be repaired only to their original state.

ï¿½ Homeowners and businesses in higher-income areas were more likely to get a loan than those in lower-income areas, according to APs analysis of SBA data by ZIP code. The truth is that only the wealthy moved through the system easily, said Gale Martin, another former SBA loan officer. If you were of a certain income, we funded you first, which is not the way the system is supposed to work. Martin contended that contrary to the SBA mission to especially help people who didnt always have the means to rebuild, applicants with higher credit scores and bigger incomes were cherry-picked for processing first because those files could be closed quicker.

ï¿½ A disparity also existed along racial lines. For example, the predominantly white, wealthier Lakeview section of New Orleans had the citys highest ratio of approvals to rejections, while the lowest approval rates were in poorer, mostly black areas like the Lower 9th Ward. But a racial disparity was clear even among economically similar areas. SBA approved nearly 66 percent of loan applications in a predominantly white part of suburban St. Bernard Parish but approved only 42.1 percent in a predominantly black, adjacent section of eastern New Orleans with comparable median household income. SBA officials said they dont collect information about race on loan applications, but try to reach out to applicants in poor neighborhoods. Civil rights leaders say the agency hasnt done enough to help.

SBA officials insist the agency today is better prepared to handle a major disaster.

Were not proud of what happened during the 2005 Gulf Coast hurricanes, said James Rivera, deputy associate administrator of SBAs office of disaster assistance. Our response was slow, but weve learned from our mistakes. Weve had five years to reflect on this.

During that period, agency officials say, they have added staff, improved technology and simplified the loan process to push money out quickly to disaster victims.

But recent reports by government watchdog groups and some critics have slammed SBA for being too slow to implement measures that could improve an agency with a troubled past.

Congressional investigators and SBA whistleblowers question whether the agency is any better equipped for a major disaster today, as the region grapples with the oil-spill related assault on three pillars of its economy ï¿½ seafood, tourism and offshore drilling.

The SBA is once again setting up disaster recovery centers along the Gulf Coast, although the oil spill effort will likely be overshadowed by the hurricanes economic toll. While BP is responsible for the financial impact caused by the spill, the SBA is helping people while they wait for the corporate assistance.

This is going to happen again ï¿½ tomorrow ï¿½ if theres another Katrina, Martin said. They didnt fix enough for it not to happen.

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Images of New Orleanians trapped inside the Superdome without food and water, or desperately waiting on rooftops for help, haunted Americans in September 2005. Police officers walked off the job, looters ransacked downtown shops, and critics scolded the Bush administration for being too slow to respond.

Meanwhile, a different kind of chaos was unfolding inside the SBA.

A new computer system that was supposed to speed and simplify the loan process crashed time and again, resulting in massive delays. But that wasnt the only problem.

There were lots of people sitting around not doing anything with thousands of applications pouring in everyday, said Brad Durtschi, a former SBA loan officer who now works for FEMA.

In the years leading up to the storms, the agencys staff had been cut. When Katrina hit, followed by Rita about three weeks later, SBA had only 880 employees to process hundreds of thousands of loan applications, including 190 loan officers working at the Fort Worth center.

SBA scrambled to hire several thousand additional staffers, many to work in Texas, where loan applications filed in dozens of makeshift disaster recovery centers along the Gulf Coast were sent for processing. The new loan officers ï¿½ many from the private sector, with no loan processing experience ï¿½ were rushed into service and expected to navigate a complex set of rules and regulations.

It was bedlam, Durtschi said.

The loan applications piled up, and the phones rang and rang. People wanted to know if their application had been approved, and when they would receive money to help reopen their business or rebuild their home. At one point, officers were told by supervisors not to answer phones because the questions were taking up too much time, former loan officers and supervisors told the AP.

By December 2005, the system was gridlocked. Hundreds of thousands of applications were sitting in computer queues awaiting processing. And the phone calls turned from inquisitive to frustrated to angry.

People called in everyday crying and begging, Martin said. We were forced to do things that were wrong.

With congressional pressure mounting to turn loans around more quickly, the agency began using new methods to clear the backlog that had little to do with helping people get loans, former loan officers and supervisors said.

Supervisors would reject applications if a single sheet of paper or signature was out of place. In the first four months following Katrina and Rita, the agency rejected more loans than it approved, according to an AP analysis. Loan officers were required to process up to twice as many applications per day. When one landed on their desk, a loan officer had to try three times within 24 hours to reach the potential borrower by telephone. If they didnt, the loan was either declined or indefinitely shelved.

If shelved, the loan application was effectively canceled and a letter was generated saying the applicant had 60 days to reapply. But many times, the loan officers, under pressure to reach quotas, would call only once or not at all, then withdraw or decline the application, the former loan workers said.

They and their supervisors described computer queues clogged with tens of thousands of loan applications, and of overwhelmed employees being told to put efficiency above all else and callously dismiss the pleas of desperate people.

People were homeless, living in their cars, said Young, now a bank loan officer. People were running out of rental assistance. They didnt have a place to go. They had worn out their favors with their families. And they needed to move on. And they would call and ask: Could you please do anything you can to help us?

I couldnt sleep, he said. I knew it wasnt right.

Said Durtschi: We had no compassion for these people. To our supervisors, it was all about production and we hurt a lot of people along the way.

A 2007 report from the SBAs Office of the Inspector General, which performs independent reviews and audits of the agency, criticized SBA for canceling pending approved loans without warning.

During one period in 2006, the report said, the agencys Buffalo, N.Y., call center terminated 7,752 pending loans without notifying borrowers in advance. In many cases, the investigators found, no call had ever been made to the applicant to begin final processing.

If a loan officer did manage to reach a borrower, the applicant was given 48 hours to fax documents to bring the loan to the closing phase. Often, the borrower didnt have all the paperwork readily available.

Maybe you need a deed and its at the courthouse, but the courthouse is under water. The documentation is destroyed, said Young, the former SBA loan officer. Or maybe you need payroll stubs, and that information is gone. Now youre told you have 48 hours to get it. Thats even if we reach you by phone. We have your old phone number. Sometimes we call, sometimes we dont.

When borrowers requested additional time, the agency was unyielding, Young said.

We never budged, he said. It was a manufactured deadline that put undue stress on people.

At the end of the 48 hours, youre wiped out from our queue, he said. You didnt exist.

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When a borrower did find the critical documents and fax them to Fort Worth, the paperwork would often get lost. The office had only a few fax machines to handle the crush. Receipt of the documentation was assured only if a loan officer waited by the machine to snag the papers.

Bazile remembers faxing 50- to 70-page packets two or three times before someone at the processing center would acknowledge receipt.

How could something like that get lost? she wondered. It was a constant frustration. Plus, the documents contained personal information, such as Social Security and bank account numbers.

Martin recalled once arguing unsuccessfully with her supervisor in favor of approving a loan for a small business owner and being told: Dont think about it. Move on.

They were ruthless, absolutely ruthless, Martin said of her bosses. We werent there to help the public.

Those same supervisors often conducted contests with cash prizes to reward loan officers who cleared the most applications, usually by rejecting as many as possible. One supervisor told the AP she won $100 for exceeding production quotas.

I would hear loan officers laughing about the loans they turned down, Young said. The same people kept winning.

In recent weeks, the AP found more than two dozen of the same supervisors still working in the Fort Worth office. But all of the current supervisors reached by the AP declined to comment, saying the agency prohibited them from talking.

Others recall that productivity was the mantra at staff meetings. At one, a supervisor explained to loan officers how to get people off the phone. Use an egg timer, he said. When it goes off, hang up.

Your performance was measured on the number of files you closed, said Bill Russell, a former loan officer and certified public accountant. It wasnt long until people discovered that to meet the quota, the easiest thing to do was just to deny the loan.

One supervisor who spoke to the AP on condition of anonymity out of fear she would lose her job said that on weekends fellow supervisors and other managers would order pizza and just empty the queue of applications.

The extra sessions were called Signoff Sunday, she said. It was all about getting these loans out of the system to make it appear like we were clearing up the backlog and helping people. But we werent helping people. What we were doing was saving our own jobs.

SBAs Rivera questioned whether supervisors pushed loans through without review.

Obviously when you have 4,250 employees, youre going to have some disgruntled employees, he said.

He said loan officers had to meet strict production quotas in line with the private sector. If they didnt, they could be let go.

But it was another campaign that created even more chaos in Fort Worth. By fall 2006, more than a year after Katrina, loans were still not moving quickly enough, former workers recalled. So SBA began 90-in-45, a campaign to remove 90,000 loan applications from the queue in just 45 days.

There was no real incentive to approve a loan, Young said.

When borrowers found out their applications had been canceled, they would often call pleading for another chance, he said, adding that his supervisors wouldnt let him help.

It was heart wrenching, he said, fighting back tears. There were some nights that my wife would ask, Whats wrong with you? Id sit there alone at the table, late at night, staring into space. Some nights I was up to 3 in the morning and I had to be up at 6.

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Over the past year, AP reporters visited dozens of Gulf Coast communities, even going door-to-door in two neighborhoods ï¿½ in Waveland, Miss., and Chalmette, La. with high concentrations of SBA loans that were approved but never disbursed.

Time and again, on streets where recovery has been hard to come by and where tall untended grass and cracked concrete foundations stand as reminders that many more people used to live and work here, the stories were remarkably consistent: A nightmare of lost paperwork; sudden and onerous deadlines; uncooperative, even combative loan officers at the other end of the phone line.

People in these communities are fiercely independent and wary of asking the government for help. Many said they did so because Katrina was so thoroughly destructive that they had no choice. But many of those who recalled their battles with SBA said they dreaded the possibility of having to ask the agency for help ever again.

Scott Peterson is still angry about the months he spent fighting with the SBA for a loan to reopen his flooded seafood restaurant in Waveland, a quiet beach town on the Mississippi coast that was nearly wiped off the map. He was rejected twice for a loan to repair the S&B Bar and Grill ï¿½ even though he believed he qualified.

He reopened in 2006, but not before maxing out his credit cards and borrowing money from his parents to rebuild. He says he did the best he could, but some of the windows on his restaurant are still boarded up and the roof leaks.

Peterson is hurting again in a new way, this time because the oil spill has made it hard to find the seafood that draws his customers.

Despite his resentment and lack of faith in the SBA, hes contemplating making another request for help.

Its going to be something to see when I apply again, he said, shaking his head while stirring a pot of chicken gumbo on his kitchen stove.

Bazile remembers how she became so upset dealing with the SBA process that she had to seek medical assistance.

I had no idea how overwhelming it was going to be, said Bazile, 44, a former newspaper reporter who now works in the St. Bernard Parish presidents office. My blood pressure shot up. My cardiologist asked me to stay home for a week or so, and so I did, but the problems didnt go away.

Dealing with the agency became a full-time job for Bazile, who lives on a street in Chalmette that saw one of the highest concentrations of SBA activity along the coast. She took a seven-week leave from her job at The Times-Picayune to contend with the mounds of paperwork and battery of phone calls it took to secure the money to rebuild her home.

More than once, a loan officer gave her a 48-hour deadline ï¿½ out of the blue ï¿½ to provide a required document or risk having her file closed. Phone messages went unreturned, and faxes to SBA mysteriously went missing.

It caused incredible emotional distress on me, said a tearful Bazile. Many, many times my husband said, Just let it go. Let it go. Well be all right. And we could have walked away. But, in the end, that low interest rate was the very key to the way were living right now. They owed it to us, and I wasnt going to let somebody bully me out of it.

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Many SBA applicants along the Gulf Coast had left their flooded homes and businesses and were living in tents, government-issued trailers, or with family and friends ï¿½ sometimes far from home. In many cases, SBA officials had encouraged them to apply for loans. Few of the more than 200 interviewed said they had a smooth ride.

Hassie Howell, who owned six rental properties on the same street in Chalmette, was approved for a $300,000 loan to fix up all six. He repeatedly called SBA to find out when he would receive the money. But each time he called, he said, he was transferred to another loan officer who wanted even more paperwork before the money could be released. When he sent in the documents, there were more unexplained delays.

More excuses, he said.

In the meantime, he was losing money.

Unable to wait any longer, Howell sold two properties elsewhere in Chalmette and used the proceeds to begin rebuilding the rental units.

When SBA called nearly a year later and told him it was ready to disburse the $300,000, Howell felt it was too little, too late. I didnt want anything to do with them, he said.

Today, the street is plagued by omnipresent concrete slabs and vacant decrepit homes. A neighboring street is a tangle of empty, garbage-strewn lots and shoulder-high weeds. Five of his homes have tenants.

The community was stable before Katrina, Howell said. Now it is transient.

If I had gotten the money early, we would have been up and others would have returned, said Howell, who now lives in Baton Rouge, La. The whole experience was a nightmare.

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From the Fairhope Yacht Clubs wraparound porch, Schmitz watches boats bob before a brilliant orange-and-pink sunset and describes how the old clubhouse, a rambling, one-story structure, was destroyed by Katrina.

That left members with a choice: Restore the facility to its former specs or build a new multistory clubhouse with amenities that could attract new members. They chose the latter.

The new clubs $4 million price tag includes an SBA loan of about $1.5 million. The facility is double the size of the old building, with a new restaurant and bar and a swimming pool that alone cost nearly $300,000. The Fairhope Yacht Club reopened in 2008; these days theres a waiting list to join.

For us, Katrina was an opportunity to build something bigger and better, said Schmitz, a short, thin former teacher who looked ready for a regatta, with his khaki shorts, white sneakers and red pullover shirt emblazoned with the yacht clubs logo ï¿½ a blue and white striped flag with the clubs initials.

The yacht club had enough insurance to rebuild without SBA money. But without the federal help there would have been no upgrade. I dont see anything wrong with that, Schmitz said.

Yet SBA regulations state that loan recipients should rebuild properties only to pre-storm conditions.

Any improvements beyond pre-disaster condition is upgrading, and is not eligible, according to SBA regulations.

Our program is set up to return you to your pre-disaster condition, said Jay MacKenna, an SBA spokesman. So if you had a 1,000-square-foot mobile home and that was totally destroyed, we could help you replace your 1,000-square-foot mobile home. We would not be providing you money to go out and buy a 2,000-square-foot mobile home.

There are certain exceptions, but they have to be authorized on a case-by-case basis. For example, the agency will allow an upgrade if an applicant uses their own money or borrows from a private lender to pay for the extra improvements. But agency officials have to check whether the borrower has the ability to repay the SBA loan and any other debts.

Borrowers dont always tell SBA about the extra expenditures, though, and the agency doesnt always check.

Schmitz said the club didnt ask SBA if it could upgrade. But it was no secret; everyone in the community knew they were building a bigger yacht club. He said he never saw anyone from the SBA visit while the clubhouse was under construction.

We just told them we needed the money to rebuild. It was quick and fast and we didnt have any problems, he said. It was a wonderful experience.

Before the money was disbursed, the agency verified Fairhope had injected sufficient funds into the project to meet the guidelines, said SBA spokeswoman Carol Chastang.

There was no indication anywhere in the file that the yacht club upgraded their facilities using SBA disaster loan proceeds, she said in an e-mail.

But she also said the yacht club had completed much of the rebuilding with insurance and outside funding by the time it applied for the SBA disaster loan.

What does that tell you about how the entire process worked? Did they really need the money? This violates the spirit of the rules, said Gale Martin, one of the former SBA loan officers.

For his part, Schmitz said the clubs members helped navigate the loan through the system.

You have to understand that we have people from all walks of life, he said. We have lawyers. Weve got people who ï¿½ loan officers, and all this ï¿½ who all knew pretty much the inside track on all this stuff, and they took care of it for us.

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Associated Press writers Brian Skoloff, Becky Bohrer, Carrie Osgood, Peter Prengaman and the AP News Research Center contributed to this story.

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The AP National Investigative Team can be reached at investigate at ap.org

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Spanish hostages freed by al-Qaida arrive in Spain AP

BARCELONA, Spain Two Spanish aid workers kidnapped almost nine months ago by an al-Qaida affiliate arrived Tuesday in Barcelona after a multi-million-dollar ransom was reportedly paid for their freedom ï¿½ a sign of the terrorist groups growing sophistication in bankrolling operations through kidnappings, experts said.

Aid workers Roque Pascual and Albert Vilalta were abducted last November when their convoy of 4-by-4s was attacked by gunmen on a stretch of road in Mauritania. They were whisked away to Mali, whose northern half is now one of the many stretches of remote desert where al-Qaida of Islamic Maghreb, or AQIM, has stretched its tentacles.

Late on Monday afternoon, the pair stepped out of a helicopter that landed on the grounds of the presidential palace in Burkina Faso and were handed a cell phone. Reporters overheard them saying into the phone muchas gracias ï¿½ or many thanks.

Spanish newspaper El Mundo reported that Spain had paid euro3.8 million in ransom to secure the aid workers release. The government refused to comment.

The two men arrived early Tuesday in Barcelona where they were greeted at the airport by family members and government officials. Vilalta, who suffered multiple bullet wounds to his leg when he tried to flee his abductors on the day of the kidnapping, walked with the aid of a single crutch.

Now we are free and Im very happy and very moved, he said.

For the rest of my life I will try to make up to you what I put you through, said Pascual, raising a clinched fist in the air in a sign of victory.

Both men thanked the Spanish goverment for its diplomatic efforts to free them.

Originally based in Algeria, AQIM had limited reach until 2006, when the organization, then called the Salafist Group for Call and Combat, brokered a deal with al-Qaidas leadership in the Middle East, allowing them to become in essence a franchise of the larger terrorist network.

Since then they have abducted Austrian, Swiss, Italian, French and Canadian nationals. Experts say the majority were released after multimillion dollar ransoms were paid, money that is being reinvested to grow the groups footprint.

In February 2008, AQIM abducted two Austrian tourists vacationing in Tunisia. They were released eight months later after the Austrian government paid $5 million, according to reports in the Algerian press. In December of the same year, the group abducted Canadian national Robert Fowler, the U.N. special envoy to Niger, who was released after a reported $8 million was paid, according to an article in the World Defense Review by Africa expert Peter Pham.

Its clear that ransoms are being paid, since no political demand is usually made in connection with these kidnappings, said Pham, who is the senior vice president at the National Committee on American Foreign Policy and who recently traveled to Mauritania and Morocco in order to research the growth of the group.

It would be illogical to assume that AQIM is carrying out these kidnappings and making no demands for their hostages. The dangerous innovation that we have seen in recent years is that the ransoms have gone beyond acting as startup money. Its now been incorporated into their business model and has become a major component of their strategy, he said.

He pointed to the prisoner exchange that is believed to have taken place last week before the release of Pascual and Vilalta.

Soon after they were kidnapped on Nov. 29, Mauritanian commandos led a raid across the border into Mali, where the terrorist group is believed to have an operating base. There they seized Omar Ould Sid Ahmed Ould Hama. He was sentenced by a Mauritanian court to 12 years in prison for taking part in the kidnapping of the aid workers.

Just one week before they were freed, Hama was quietly extradited to Mali, where a diplomatic source at a Western embassy said he was handed back to AQIM. The official spoke on condition of anonymity because he is not authorized to speak.

Hama, says Pham, is an example of the groups growing reach and its use of its new capital to recruit the most able fighters. Hama, who is from Mali, is neither Algerian nor Mauritanian ï¿½ as was the case for the majority of the groups recruits in its early years.

Pham says Hama, who goes by the alias Omar Sahraoui is believed to have been a senior commander of the Polisario Front in Western Sahara, a Muslim group trained by the Soviets. Their fighters are far more skilled then the typical AQIM recruit. And unlike AQIM, the Polisario is a nationalistic movement and is not linked to militant Islam.

Its an example of how the cash flow from these kidnappings is enabling them to hire the best guns, says Pham. If youre reaching into the Polisario, youre no longer looking for true believers. ... Now they can afford well-trained mercenaries. So the success rate of their operations will also go up, he said.

Rudolph Atallah, who recently retired from his post as Africa Counterterrorism Director in the Office of the Secretary of Defense, says that its against international law for Western governments to pay ransoms to terrorists. But there is no question, he says, that AQIM is making money from kidnappings. The money is funneled through intermediaries, he said.

The helicopter sent to Mali to retrieve the aid workers also included high-level officials from the entourage of Burkina Fasos President Blaise Compaore. An adviser to Compaore is believed to have helped in the hostage negotiation.

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Associated Press writers Brahima Ouedraogo in Burkina Faso; Rukmini Callimachi in Dakar; Ahmed Mohamed in Nouakchott, Mauritania; Ciaran Giles in Madrid and Martin Vogl in Bamako, Mali, contributed to this report.

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Mexico police recover 7 bodies from mines AP

MONTERREY, Mexico Authorities said Monday that seven bodies were pulled from mine shafts in central Mexico, while mounting drug violence forced U.S. diplomats to pull their kids out of a school in the northern city of Monterrey.

Police in the central state of Hidalgo recovered seven bodies from two mines that were being used as clandestine graveyards by drug gangs, state Assistant Attorney General Carmen Archundia said.

Archundia said investigators were led to the mines by a group of suspects, including three police officers, arrested last week. The bodies were removed over the weekend from a mine in the city of Pachuca, the capital of Hidalgo state, and from a mine in the nearby town of Mineral del Chico.

In May, authorities discovered 55 bodies from an abandoned mine near Taxco, a colonial-era city south of Mexico City that is popular with international tourists.

The U.S. consulate in Monterrey said Monday that it was temporarily pulling diplomats children out of a school where a shooting outside killed two security guards for a private company.

The battle outside the American School Foundation of Monterrey, a private school attended by many Americans, also wounded three other guards for the FEMSA bottling company.

The U.S. Ambassador has urged U.S. personnel at the consulate to keep their children at home while we assess the risks and what measures can be taken to reduce it, the consulate said in a statement.

U.S. consular employees in Monterrey ï¿½ like others in conflict-ridden parts of northern Mexico ï¿½ have already been authorized to send their families out of Mexico, with some U.S. government assistance. U.S. diplomats can be ordered to evacuate their families, a step that has not yet been taken in Mexico.

The consulate did not say what additional measures might be taken, saying only that we have engaged security officials at a national level on measures to address the overall security of the Monterrey area.

The consulate said the gunbattle may have been the result of an attempted kidnapping targeting relatives of a business executive.

It added that it did not appear that U.S. families were targeted, but noted that the sharp increase in kidnapping incidents in the Monterrey area, and this event in particular, present a very high risk to the families of U.S. citizens who might become incidental victims.

School officials were not immediately available for comment.

FEMSA has said the guards were on standard patrols in the area when the gunmen attacked, and said it did not appear related to any attempt to kidnap a relative of one of the companys executives.

Companies based in Monterrey, a business hub that is Mexicos most prosperous city, have tried to protect areas where their employees work, live or go to school amid a rising tide of drug-fueled violence.

Mexican authorities played down the idea that the shooting outside the school was tied to a kidnapping attemptl.

An employee at the press office of the Nuevo Leon state prosecutors office who was not authorized to be quoted by name said the main working hypothesis of investigators is that members of a drug gang happened on the FEMSA security detail and mistook them for gunmen from a rival drug cartel.

The security guards were traveling in three sport utility vehicles at the time of the attack.

Elsewhere, police in the border city of Tijuana found two bodies on the outskirts of town Monday and were searching for more. Baja California state prosecutors said recently arrested suspects told authorities at least four more bodies had been buried in the same area, which is across the border from San Diego.

Also on Monday, a judge ordered the released of 13 Tijuana city police officers who were arrested by soldiers and sent to prison more than a year ago on charges of protecting drug traffickers. The judge ruled there wasnt enough evidence.

This version CORRECTS that bodies in Taxco mine were found in May instead of July.

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Pakistani president defends govt flood response AP

SHADAD KOT, Pakistan Pakistans president defended the governments much-criticized response to the countrys record-breaking flood crisis as emergency workers worked frantically to shore up a system of levees protecting two southern cities.

The floods, which began nearly a month ago with hammering rains in the countrys northwest, have affected more than 17 million people, a U.N. official said, warning that the crisis was outstripping relief efforts. About 1,500 people have died in the floods, most in the first few days, though the crisis continues to grow.

President Asif Ali Zardari said that anger at the government in the coming months is inevitable given the scale of the disaster, comparing it to the anti-government sentiment generated by the aftermath of Hurricane Katrina in the United States.

There will be discontent, there is no way any nation, even a superpower .... can bring the same level of satisfaction that will be close to the expectations of the people, Zardari said in an interview Monday with a small group of foreign reporters in the capital, Islamabad. Surely we will try and meet them as much as we can.

Still, he defended his handling of the crisis and said the government had functioned to its fullest capacity.

The widespread misery of the floods has triggered speculation of social unrest, food riots or even a challenge to the governments rule before its term ends in 2013.

The floods have so far destroyed or damaged 1.2 million homes and affected 17.2 million people, U.N. spokesman Maurizio Giuliano said.

The floods are outrunning our relief efforts. We move faster and faster, but the finish line keeps moving further ahead, Giuliano said.

In Shadad Kot, in the southern province of Sindh, authorities are increasingly worried that even the 10 miles 18 kilometers of new levees soldiers have built may not hold back floods in the city, and Qambar city further to the south.

Workers piled stones and sandbags to plug leaks in the levees, trying to stay ahead of any damage to the defenses.

It is the last-ditch effort to save the city, said Brig Khawar Baig. We are trying to block the water here. If it crosses over, we fear it will go further south and inundate more towns.

Ninety percent of Shadad Kots 350,000 residents have already fled the city. Many have also left Qambar and other nearby towns.

On the eastern side of the city, levees were under pressure from 9-foot 2.7-meter -high floodwaters, said Yaseen Shar, the top administrative official.

Zardari has been criticized for traveling to Europe on a 10-day trip just as the crisis was unfolding. The anger against the already unpopular president among some sections of the media has left him looking more politically isolated than ever.

I have my own reasons for being where I was at what times, he said, saying his meetings with the leaders of France and Great Britain were essential.

Zardaris party has a solid majority and there is no constitutional mechanism to get rid of him before elections. Historically the army in Pakistan has stepped in to end civilian rule, but analysts agree the current crop of generals do not want to enter into politics.

Asked whether there may be political consequences from the floods, Zardari said: Anybody can lose the coming election and some other political force can win, he said, adding that he still thought his Pakistans Peoples Party would emerge victorious.

The floodwaters have devastated lives from the mountainous north to the southern plains, and they are expected to begin draining into the Arabian Sea in the coming days.

Since the floods swept the country more than three weeks ago, the Taliban and al-Qaida have been relatively quiet. But on Monday, three bomb attacks rocked the northwest, one of which killed the head of an anti-Taliban militia on the outskirts of the main city of Peshawar.

Hundreds of people who fled the deluge blocked a highway near the town of Kot Adu in Punjab province to protest the slow pace of aid deliveries.

No food came here for the last two days ... We can wait ï¿½ children cant, said Mohammad Iqbal, one of about 400 protesters.

Local charities, the Pakistani army and international agencies are providing food, water, medicine and shelter to the displaced, but millions have received little or no help. Aid officials warn that waterborne diseases such as cholera now pose a threat.

On Sunday, the government said the world has given or pledged more than $800 million of aid.

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Associated Press writers Khalid Tanveer in Muzaffargarh, Aaron Favila in Kot Adu and Tim Sullivan in Sukkur contributed to this report.

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Supplies reach Chilean miners; now, the long wait AP

COPIAPO, Chile Trapped nearly half a mile inside the earth and facing perhaps four months before rescue, 33 Chilean miners began getting food, water and oxygen from above ground Monday as rescue teams worked to gauge their state of mind and brace them for the long wait ahead.

Through a newly installed communications system, each of the men spoke and reported feeling hungry but well, except for one with a stomach problem, a Chilean official said. They requested toothbrushes.

It was a positive sign, and Chiles president said the nation was crying with excitement and joy after engineers broke through Sunday to the mens refuge. It had been 17 days since a landslide at the gold and copper mine caused a tunnel to collapse and entombed them more than 2,200 feet below ground.

Still, doctors and psychological experts were trying to safeguard the very sanity of the miners in the months to come, and said they were implementing a plan that included keeping them informed and busy. The miners reported that a shift foreman named Luis Urzua had assumed leadership of the trapped men.

They need to understand what we know up here at the surface, that it will take many weeks for them to reach the light, Health Minister Jaime Manalich explained.

Engineers worked to reinforce the 6-inch-wide bore hole that broke through to the refuge, using a long hose to coat its walls with a metallic gel to decrease the risk of rock falling and blocking the hard-won passage through the unstable mine.

The lubricant makes it easier to pass supplies through in capsules nicknamed palomas, Spanish for dove. The first of the packages, which are about 5 feet long and take about an hour to descend from the surface, held rehydration tablets and a high-energy glucose gel to help the miners begin to recover their digestive systems.

Rescue teams also sent oxygen down after the miners suggested there was not enough air in the stretches of the mine that run below where the main shaft collapsed.

The shelter, a living-room-sized chamber off one of the mines lower passages that is easily big enough for all 33 men, is far enough from the landslide to remain intact, and the men can also walk around below where the rocks fell. The temperature there is around 90 to 93 degrees 32-34 degrees Celsius.

Actual food will be sent down in several days, after the mens stomachs have had time to adjust, said Paola Neuman of the medical rescue service.

Rescuers also sent down questionnaires to determine each mans condition, along with medicine and small microphones to enable them to speak with their families during their long wait. Rescue leader Andre Sougarret said they were organizing the families into small groups to make their talks as orderly as possible.

Meanwhile, an enormous machine with diamond-tipped drills capable of carving a 26-inch-wide tunnel through solid rock and boring at about 65 feet a day was on its way from central Chile to the San Jose gold and copper mine, outside Copiapo in north-central Chile.

The machine was donated by the state-owned Codelco copper company and carried on a truck festooned with Chilean flags. Just setting it up will take at least three more days.

Engineers were also boring two more narrow shafts to the trapped men, but stopped Monday just above their refuge while they made sure that the lifeline was fully secure. Only when these three shafts are complete will they begin carving out the tunnel large enough to fit a man, Mining Minister Laurence Golborne said.

We cannot be 100 percent precise, but the idea is to establish three or four points of contact so that we can guarantee better life conditions to our comrades down there, he said.

Besides their immediate physical needs such as medicine to restore their raw stomachs and sleep cycles, the rescuers were preparing psychiatric counseling. A first step was the questionnaires, which were also intended to help identify their natural leader ï¿½ someone who can make sure the men are keeping busy and mentally focused.

Above ground, rescuers and family members thought that might be Mario Gomez, who at 63 is perhaps the oldest of the veteran miners down below. Gomezs letter to his wife, Liliana, which the miners tied to the drill bit, was full of expressions of faith and determination, revealing to the world that the miners were holding strong.

Even if we have to wait months to communicate ... I want to tell everyone that Im good and well surely come out OK, Gomez wrote, scrawling the words on a sheet of notebook paper. Patience and faith. God is great and the help of my God is going to make it possible to leave this mine alive.

But Urzua, 54, was the shift foreman at the time of the collapse, and Golborne said Monday that it seems the miners respect hierarchies.

For the miners families, euphoria and anxiety made for a sleepless night. They shivered through the cold and fog in Chiles Atacama desert.

We stayed up all night long hoping for more news. They said that new images would appear, so we were up hoping to see them, said one, Carolina Godoy.

The men already have been trapped underground longer than all but a few miners rescued in recent history. Last year, three miners survived 25 days trapped in a flooded mine in southern China, and two miners in northeastern China were rescued after 23 days in 1983. Few other rescues have taken more than two weeks.

The miners survival after 17 days is very unusual, but since theyve made it this far, they should emerge physically fine, said Davitt McAteer, who was assistant secretary for mine safety and health at the U.S. Labor Department under President Bill Clinton.

The health risks in a copper and gold mine are pretty small if you have air, food and water, McAteer said.

Mine officials and relatives of the workers were determined not to give up hope that the men were safe below where the tunnel collapsed Aug. 5 at the mine, about 530 miles north of Santiago, the capital.

Rescuers had drilled repeatedly in an effort to reach the shelter, but failed seven times. They blamed the errors on the mining companys maps. According to Gomezs note, at least some of those earlier probes were close enough that the trapped miners heard them. The eighth attempt finally worked.

Gomez wrote that the miners used vehicles for light and a backhoe to dig a channel to retrieve underground water. And while his message focused on faith and love for his family, his frustration also showed through. He wrote that this company has got to modernize.

Chile is the worlds top copper producer and a leading gold producer, and has some of the worlds most advanced mining operations. But both the company that owns the mine, San Esteban, and the National Mining and Geology Service have been criticized for allegedly failing to comply with regulations. In 2007, an explosion at the San Jose mine killed three workers.

President Sebastian Pinera said Monday that there is not going to be any impunity and said investigations were under way.

Shortly after the accident, Pinera fired two top executives of Sernageomin, Chiles mine safety regulator, after reports that the mine had reopened too soon, and without real security improvements, after a fatal accident three years before. Pinera has also asked a commission for proposals to increase worker safety in Chile.

The miners relatives are suing and claim their loved ones were put at risk working in a mine known for unstable shafts and rock falls. Company executives have denied the accusations and say the lawsuits could force them into bankruptcy.

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Associated Press writers Federico Quilodran in Santiago, Chile, Peter Orsi in Mexico City and Michael Warren in Buenos Aires contributed to this report.