The issue in the LaRue case was whether the Employee Retirement Income Security Act permits an individual account holder to sue plan administrators for breaching their fiduciary duties.

The language of the law refers to recovering money for the "plan" rather than for an individual, raising the question of whether a participant can sue solely for himself.

Justice John Paul Stevens, in his opinion for the court, said that such lawsuits are allowed. "Fiduciary misconduct need not threaten the solvency of the entire plan to reduce benefits below the amount that participants would otherwise receive," Stevens said.

The decision overturned a ruling by the 4th U.S. Circuit Court of Appeals in Richmond, Va.

Unlike people enrolled in traditional pension plans, employees in 401(k) plans, which have exploded in number in the past two decades, choose from a menu of options on where to invest their money. That puts workers squarely in the middle of decision-making about their pensions and inevitably leads to the kind of disputes LaRue has with his plan's administrators.

"Defined contribution plans dominate the retirement plan scene today," unlike when ERISA was enacted in the mid-1970s, Stevens said.

Many traditional pension plans guaranteeing a fixed monthly benefit have either been frozen or terminated, and 401(k) plans are the main source of retirement income, said the Air Line Pilots Association, which represents 60,000 pilots at 41 air carriers.

The Bush administration argued in support of workers. The government said the appeals court ruling barring LaRue's lawsuit would leave 401(k) participants without a meaningful remedy from any federal, state or local court when plan administrators fail to live up to their duties.

Business groups supported LaRue's employer. They argued that ERISA is aimed at encouraging employers to set up pension plans, while guarding against administrative abuses involving the plan as a whole. The law doesn't permit individual lawsuits like LaRue's, the business groups said.

Congress enacted ERISA after some widely publicized failures by companies and labor unions to pay promised pensions. Workers in class-action lawsuits have long relied on the law, most recently in the scandal-ridden collapses of companies like Enron and its 401(k) plan for workers.

The term 401(k) refers to a section of the Internal Revenue Code.

Participants in 401(k) plans do not know how much money they will receive in retirement. Employees invest a certain amount each month and how much they get back depends on how well their chosen investments have performed.

"I'm very disappointed in the article. It's not true," the likely Republican presidential nominee said as his wife, Cindy, stood beside him during a news conference called to address the matter.

"I've served this nation honorably for more than half a century," said McCain, a four-term Arizona senator and former Navy pilot. "At no time have I ever done anything that would betray the public trust."

"I intend to move on," he added.

McCain described the woman in question, lobbyist Vicki Iseman, as a friend.

The newspaper quoted anonymous aides as saying they had urged McCain and Iseman to stay away from each other prior to his failed presidential campaign in 2000. In its own follow-up story, The Washington Post quoted longtime aide John Weaver, who split with McCain last year, as saying he met with lobbyist Iseman and urged her to steer clear of McCain.

Weaver told the Times he arranged the meeting before the 2000 campaign after "a discussion among the campaign leadership" about Iseman.

But McCain said he was unaware of any such conversation, and denied that his aides ever tried to talk to him about his interactions with Iseman.

"I never discussed it with John Weaver. As far as I know, there was no necessity for it," McCain said. "I don't know anything about it," he added. "John Weaver is a friend of mine. He remains a friend of mine. But I certainly didn't know anything of that nature."

His wife also said she was disappointed with the newspaper.

"More importantly, my children and I not only trust my husband, but know that he would never do anything to not only disappoint our family, but disappoint the people of America. He's a man of great character," Cindy McCain said.

The couple smiled throughout the questioning at a Toledo hotel.

The published reports said McCain and Iseman each denied having a romantic relationship. Neither story asserted that there was a romantic relationship and offered no evidence that there was, reporting only that aides worried about the appearance of McCain having close ties to a lobbyist with business before the Senate Commerce Committee on which McCain served.

Overall, the number of individual income-tax audits reached a 10-year high in 2007 – and the IRS plans to increase that number this year.

The push comes as the agency faces heavy pressure from Congress to raise additional revenue and shrink the nation's $290 billion "tax gap," the difference between what's collected and what should be collected.

IRS research indicates that much of the tax noncompliance is committed by self-employed workers, such as consultants and small-business owners, whose taxes aren't withheld from their pay and whose income isn't reported separately.

This year, "we will continue to focus on audits of high-income individuals," said Linda Stiff, the IRS's acting commissioner.

In addition, agents have increased audits of taxpayers involved in partnerships and businesses organized as "S corporations."

For the vast majority of taxpayers, the odds of getting audited remain low. Only about 1 percent of all individual returns filed in recent years have been audited. But the chances now are higher than just a few years ago.

The IRS relies on numerous techniques to choose which returns to audit. Many are selected using a secret computerized-scoring system that the IRS recently updated, which is based on a continuing research project involving in-depth audits of thousands of returns. Computer programs assign each tax return a score that evaluates the potential for inaccuracies, based on the IRS's experience with similar returns.

Others are picked because of "mismatches" – which means that something a taxpayer reported doesn't match what was reported separately to the IRS by employers or financial institutions.

Some returns get audited because they were done by a tax preparer the IRS suspects of wrongdoing.

Then there are those that get selected because of a tip from confidential informants, such as a former business partner or ex-spouse.

The Supreme Court yesterday protected the makers of medical devices that have passed the most rigorous federal review standards from lawsuits by consumers who allege that the devices caused them harm.

The court ruled 8 to 1 against the estate of a New York man who was seriously injured when a balloon catheter manufactured by Medtronic burst during an angioplasty in 1996. Charles Riegel, who died three years ago, and his wife sued under New York law, alleging that the device's design was faulty and its labeling deficient.

Justice Antonin Scalia, writing for the majority, said federal law preempts the imposition of liability under state laws for devices that have undergone the Food and Drug Administration's pre-market approval process, the most rigorous of the FDA's testing procedures.

Justice Ruth Bader Ginsburg was the lone dissenter. Congress did not intend the preemption clause, Ginsburg wrote, "to effect a radical curtailment of state common-law suits seeking compensation for injuries caused by defectively designed or labeled medical devices."

Courts are filled with lawsuits over preemption, which New York University law professor Catherine M. Sharkey called "the fiercest battle in products liability litigation today."

The Supreme Court this year took several cases that invoke federal preemption. Cases still to be heard include lawsuits in state courts that seek to punish cigarette makers and drug manufacturers.

The court ruled in 1996 that devices approved by the FDA under a less-rigorous process were not protected from state lawsuits. The agency agreed with that.

In 2004 the government reversed its position, and when the case decided yesterday was argued in December, the government said such suits undermine the FDA's authority.

Allianz, Europe's biggest insurer by gross premiums and the owner of Dresdner Bank AG, said it earned 665 million euros ($974.62 million) in the October-December period, down by more than half from nearly 1.4 billion euros a year earlier. The company blamed the slip on a bad quarter for Dresdner.

Revenue rose 4 percent gain to 25.9 billion euros ($37.9 billion) in the fourth quarter compared with 24.8 billion euros in the same quarter a year earlier.

Allianz shares rose 3 percent to 121.03 euros ($177.38) in Frankfort.

Allianz's U.S. units include Bill Gross' Pimco, one of the world's largest bond managers; Fireman's Fund; Oppenheimer Capital; and fund managers Nicholas-Applegate and RCM Capital.

For the year, the company confirmed its preliminary figures released last month, earning 8 billion euros ($11.7 billion), up 13 percent from 7 billion euros it earned in 2006. Revenue also rose to 102.6 billion euros ($150.4 billion) in 2007 compared with 101.1 billion euros in 2006.

"Despite challenging conditions in 2007, we were able to further improve our operating efficiency and profitable growth, and to achieve a record result for the year," said chief executive Michael Diekmann.

He said the results, despite the fourth-quarter narrowing, came because of "the well-diversified business activities of the group" which meant "we were less vulnerable to shocks and cycles in individual markets and segments."

Though the company's core insurance operations, including health and life insurance, as well as property and casualty insurance, were improved, the overall results were pulled lower by Dresdner, Germany's third-biggest bank, and its investment banking arm, Dresdner Kleinwort.

For the year, the bank's operating profit came in at 730 million euros ($1 billion), or about half the 1.4 billion euros it earned in 2006.

The report by Legislative Analyst Elizabeth Hill shifted the state's fledgling budget debate to whether new taxes should be part of the solution — an approach the Republican governor has opposed.

It also sparked the kind of partisan sniping that Democrats and Republicans had so far avoided in hopes of preventing a repeat of the protracted budget debate that paralyzed the capital last summer.

Schwarzenegger last month pegged the shortfall at $14.5 billion through June 2009, but Hill said it has grown to $16 billion. She said Schwarzenegger's proposal for the 2008-09 budget year was flawed because it fails to set funding priorities or correct the state's chronic imbalance between spending and revenue.

"A decline in revenue means we have a larger shortfall than the governor projected," she said. "Our recommendations will affect all Californians in some way. However, we think that will benefit all Californians in the long run."

Overturning a lower court decision that AIG could withhold the documents as privileged, a unanimous five-judge panel of the Appellate Division of New York State Supreme Court ruled that the two former AIG executives are entitled to the legal memoranda, which include some related to AIG’s allegedly fraudulent 2000 loss portfolio reinsurance deal with General Re Corp.

Yesterday’s appeals ruling stems from then-New York Attorney General Eliot Spitzer’s 2005 lawsuit charging Messrs. Greenberg and Smith with fraud related to the Gen Re deal and other allegedly sham transactions designed to manipulate AIG’s financial statements. AIG itself was originally a defendant, but settled with regulators in 2006, paying $1.6 billion.

Messrs. Greenberg and Smith have argued in part that they relied on the advice of legal counsel in the transactions cited in the attorney general’s lawsuit, and have sought copies of all legal memoranda related to the transactions prepared at the time they were AIG officers.

AIG refused to turn over the documents, and a New York judge ruled that they were protected by AIG’s attorney-client privilege.

The Appellate Division panel reversed that ruling, though, finding that the two former executives have a qualified right to inspect the memoranda.