Prosecution takes off, but stalls

Jan. 1 may have marked a new year, but Sept. 11 was still the date on everyone's mind. As 2002 dawned, the federal government wasted no time in opening its trial against Zacarias Moussaoui, the alleged 20th hijacker in the infamous attacks. The French citizen of Moroccan descent was jailed in August 2001 after paying $35,000 in cash for flying lessons in Minneapolis. In January he was charged with six counts of conspiracy, including four counts that carried a penalty of death.

Although investigators worked throughout the year to establish more than circumstantial ties between Mr. Moussaoui and al-Qaeda, German defense lawyers refused to turn over key documents, despite a high-level agreement struck in Berlin, and that stalled the government case in late November. (The German constitution forbids submitting evidence to foreign courts if that evidence could result in an execution.) With the issue still unresolved at year's end, the case was expected to last well into 2003.

Blue-light special in the red

Fireworks and champagne toasts couldn't erase the sense of economic foreboding as 2001 turned into 2002. Revelers may have been singing "Auld Lang Syne," but the old anxiety still loomed. The year got off to a bad start when Kmart Corporation filed for federal bankruptcy protection on Jan. 22. The $16 billion filing--the largest ever in the retail sector--meant hundreds of store closings and thousands of layoffs from Kmart's payroll of 240,000.

Kmart's collapse foreshadowed a year of big bankruptcies. Less than a week later, on Jan. 28, telecom company Global Crossing filed for protection of its $22 billion in assets. That, in turn, was dwarfed by the $107 billion filing by WorldCom on July 21, the largest bankruptcy in U.S. history. USAirways entered Chapter 11 in August, followed, on Dec. 9, by giant United Airlines, which said it lost some $2.5 billion in 2002.

First "act" of a do-nothing Senate

In a sign of battles to come, President Bush on Jan. 11 skirted a reluctant Senate and installed two of his nominees in a controversial recess appointment. Democrats, led by Majority Leader Tom Daschle, had refused for months to give a hearing to Otto Reich for a State Department post or Eugene Scalia for a top slot at Labor. With the Congress home for its long Christmas break, however, the president broke the logjam by granting both men a temporary appointment that does not require Senate approval. Mr. Daschle and his colleagues were livid, accusing the president of overstepping his bounds. Mr. Bush stayed largely silent throughout this particular controversy, but the do-nothing Senate would continue to rankle him until the November elections, when he would turn the issue to his advantage.