The commutation, which drastically reduced Libby's punishment, is just short of a presidential pardon, which would have exonerated Libby and wiped the conviction from his record.

The key adviser to Cheney and an architect of the Iraq war, Libby was convicted March 6 in federal court. A jury found him guilty of lying to prosecutors who were trying to determine if top Bush administration officials leaked the identity of former CIA operative Valerie Plame Wilson -- purported retaliation for her husband's contention that the Bush administration twisted intelligence facts to justify the 2003 invasion of Iraq.

"I respect the jury's verdict," Bush said in a statement announcing his decision. "But I have concluded that the prison sentence given to Mr. Libby is excessive."

While the president has the right to pardon convicted criminals and commute prison sentences, such actions are rare, and normally are taken after a thorough investigation by the Department of Justice. Bush, however, said in his statement that he made the decision personally.

The president noted that Libby's supporters believe the punishment does not fit the crime, while his critics point to the fact that he was convicted of perjury and obstructing justice in an open court. While both sides "have made important points, I have made my own evaluation," Bush said.

Democratic Party leaders, including several of the party's presidential candidates, were outraged, saying the commutation shows disrespect for the judicial system and smacks of a different legal standard for Bush's top aides.

In a statement issued last night, Senate majority leader Harry Reid called Bush's decision "disgraceful," adding that Libby's jury trial and conviction "was the one faint glimmer of accountability for White House efforts to manipulate intelligence and silence critics of the Iraq War. Now, even that small bit of justice has been undone."

But House Republican whip Roy Blunt applauded the decision, saying, "President Bush did the right thing today in commuting the prison term for Scooter Libby. The prison sentence was overly harsh and the punishment did not fit the crime. The sentence was based on charges that had nothing to do with the leak of the identity of a CIA operative."

Libby's lawyer, William Jeffress , said he was pleased by the president's decision. "The prison sentence was imminent, but obviously the conviction itself is a heavy blow to Scooter," he told the Associated Press.

The case against Libby, authorities say, stemmed from a White House decision to play hardball with critics who challenged their reasoning for the war. Cheney was particularly incensed at a New York Times opinion article by Joseph Wilson, Plame Wilson's husband, a retired ambassador who accused the administration of exaggerating the security threat in Iraq.

As the White House was preparing its case for war, the CIA asked Wilson, a retired ambassador who had served in Africa, in 2002 to check out reports that Niger had sent materials for a nuclear weapon to Iraq. Upon returning, Wilson told the CIA he found no evidence of such a transfer.

Nonetheless, Bush said in his 2003 State of the Union speech that the British government "has learned that Saddam Hussein recently sought significant quantities of uranium from Africa."

In July 2003, Wilson wrote an op-ed piece for The New York Times stating that the intelligence the president cited in his speech had been "twisted" to exaggerate the Iraqi threat and convince Congress and the nation that war was necessary. According to evidence introduced during the trial, Cheney clipped the article and jotted a note on it: "did his wife send him on a junket?"

Shortly afterward, Plame Wilson's name was leaked as a CIA operative, appearing first in a column written by Robert Novak. A federal investigation was launched, and special prosecutor Patrick Fitzgerald interviewed many administration insiders, including Libby, as well as several influential Washington journalists. The investigation focused on whether Plame Wilson's name was leaked as retaliation for her husband's article and to undercut his credibility.

Reached by telephone yesterday, Wilson said he believes Bush's commutation of Libby's sentence raises further suspicion about what role the president, vice president, and other top aides may have had in revealing his wife's identity.

Fitzgerald maintained after Libby's verdict that his false testimony and obstruction may have prevented a case from being brought for the original act of leaking the identity of an undercover intelligence operative.

Bush "has effectively guaranteed that there is no incentive for Mr. Libby to tell the truth about what really happened," Wilson said, adding that his wife "is just as outraged as I am."

Bush's action came at a time when many Democrats and some Republicans have called for a continued investigation into how the president went to war. Some Democrats had hoped the investigation that led to Libby's conviction would unearth fresh information about how the administration manipulated journalists and the Congress with misleading information about the allegation that Iraq had weapons of mass destruction.

Analysts said Bush's decision demonstrated the continuing influence of Cheney, who issued a statement after the sentencing that he was "deeply saddened" by the 30-month term. "Speaking as friends, we hope that our system will return a final result consistent with what we know of this fine man," Cheney and his wife, Lynne, said at the time.

While there has been considerable speculation that Bush would commute Libby's sentence or pardon him, the swiftness of the decision surprised many political observers because it came before Libby exhausted his legal appeals.

"I'm surprised it was this quick. There were other appeals that could have been taken," said University of Richmond School of Law professor Carl Tobias. Tobias noted that the three-judge panel is composed of two Republican appointees and one Democratic appointee, which indicates Libby might have had a tough time winning an appeal. "They were unanimous and these were not what anybody would consider left-wing judges," Tobias said.

During the sentencing hearing, Fitzgerald urged US District Judge Reggie Walton "to make clear and loud that truth matters and one's station in life does not." Walton, in announcing the sentence, said "it is important we expect and demand a lot from people who put themselves in those positions. Mr. Libby failed to meet the bar."

‘‘I came to understand that providing payment services to online gambling businesses serving customers in the United States was wrong,’’ Lawrence said prior to entering his plea.

Lawrence, 47, faces as much as five years in prison on the charge. Sentencing is set for Oct. 29.

John David Lefebvre, another Neteller founder, and Lawrence were arrested and charged with conspiracy in the matter in January. Lefebvre is awaiting trial.

As part of his plea agreement with the government, Lawrence agreed to cooperate with its investigation and agreed to a forfeiture of $100 million.

Lawrence, who lives in the Bahamas, was Neteller’s chairman until May 2006 and left its board last October, while Lefebvre was the company’s president from October 2000 to 2002 and served on the board until December 2005.

Neteller, which is publicly traded in London, has said Lawrence and Lefebvre are no longer affiliated with the company. Neteller has stopped handling transactions involving online gambling from U.S. customers.

Electronic Clearing House Inc., another online payment processing company, entered a nonprosecution agreement with the government in March and agreed to disgorge $2.3 million. Neteller was one of its customers.

U.S. authorities have cracked down on online gambling in recent months, arresting executives of some overseas online gambling firms when they travel to the United States.

President Bush signed into law legislation in October that makes it illegal for banks and credit card companies to process payments from U.S. customers to online gambling sites.

Court personnel said it had been 60 years since justices had rejected an appeal petition and then reversed themselves and voted to hear the claim.

The switch may reflect frustration among the court's more liberal and centrist members over the Bush administration's handling of the Guantanamo issue, according to civil liberties lawyers who have been battling with the government.

Three years ago, the court ruled that the hundreds of prisoners at the U.S. military facility in southern Cuba were entitled to a hearing before a neutral judge to challenge the government's basis for holding them. In a rebuke to the high court, President Bush and the then-Republican-controlled Congress enacted a law to strip these "unlawful enemy combatants" of their right to be heard in the federal courts.

Friday's order may signal that a majority of the justices are prepared to rule that the Constitution's habeas corpus guarantee gives the Guantanamo detainees the right to go to court and contest the government's reason for holding them.

"The Supreme Court, along with the rest of the nation, should be sick and tired of what it's seeing in Guantanamo," said Matthew MacLean, an attorney for four Kuwaiti detainees at the prison. "It's anybody's guess what changed the Supreme Court's mind, but I hope the justices are seeing the discomfort that so many people in this country and abroad have with Guantanamo."

White House National Security Council spokesman Gordon Johndroe reacted to the justices' announcement by saying: "We did not think that court review at this time was necessary, but we are confident in our legal position."

The prison may be closed before the court acts. Defense Secretary Robert M. Gates has said he would like to move the detainees to another location, and congressional Democrats have threatened to cut off funding for the current facility.

Despite years of legal skirmishing, little progress has been made in establishing a system for deciding who is a dangerous foreign fighter who should be held prisoner.

Although former Defense Secretary Donald H. Rumsfeld once described the Guantanamo prisoners as the "worst of the worst," many of them have been released.

Since terrorism suspects were first brought to Guantanamo five years ago, the Bush administration has argued that foreign fighters who are not part of a regular army have no rights in American law and also are not prisoners of war entitled to rights under the Geneva Convention.

However, in response to the high court's 2004 ruling, the Pentagon did agree to review the status of each prisoner held at Guantanamo.

During a Combatant Status Review Tribunal, three military officers examine the evidence. The detainee does not have a lawyer.

Last week, an Army lawyer who has participated in several such hearings questioned their fairness. Lt. Col. Stephen Abraham filed a sworn statement in one appeal before the Supreme Court that said officers were pressured to rule in favor of keeping the detainees in prison as "enemy combatants."

"I certainly think the Abraham declaration proves what everyone has long surmised, that the CSRT process is just a kangaroo court that doesn't provide any meaningful review," said David Cynamon, the lead attorney in one of the cases the high court will consider, Al Odah vs. Bush. "It seems to be the straw that broke the camel's back."

Cynamon's client, a Kuwaiti named Fawzi Al Odah, has been held for six years with no charges filed against him.

The case has been consolidated with another involving six Algerian men who lived in Bosnia in the 1990s. They were arrested by Bosnian police in 2001 on suspicion of involvement in terrorism, but the following year the Supreme Court of Bosnia and Herzegovina ordered them released for lack of evidence.

They were immediately taken into custody by the U.S. military, shackled, put under hoods and shipped to Guantanamo, where they have been held since.

The lead plaintiff, Lakhdar Boumediene, was kept in a cold cell and deprived of sleep for 13 consecutive days, according to a report by the Center for Constitutional Rights, an advocacy group representing a number of the detainees.

In April, three of the court's liberal justices — Stephen G. Breyer, David H. Souter and Ruth Bader Ginsburg — voted to hear the pair of Guantanamo cases. Justices John Paul Stevens and Anthony M. Kennedy said they were willing to wait while the detainees and their lawyers went through an appeal process created by Congress, but the justices agreed that the issues involved were important.

The lawyers for Boumediene and Al Odah petitioned the justices to reconsider, because their clients faced many months of appeals that would almost certainly fail.

Friday's order did not say who voted to take up the case, but the lawyers involved assumed that Stevens and Kennedy had supplied the fourth and fifth votes.

At issue is an anti-terrorism law that Bush pushed through Congress last year taking away the right of the foreign terrorist suspects held at the U.S. prison at Guantanamo Bay in Cuba to have a judicial review of their detention.

The decision by the court to hear the two cases was a setback for the Bush administration which had urged the justices to turn down the appeals.

There are about 375 detainees now at the prison which critics, including some of Washington's allies, have demanded be closed. The first arrived more than five years ago after the United States launched its war on terrorism in response to the Sept. 11 attacks.

The indefinite detention and allegations of prisoner mistreatment at Guantanamo, which the U.S. military denies, have tarnished the U.S. image abroad. Human rights groups have demanded Guantanamo be closed and detainees charged with crimes or released.

Three of the nine justices in April dissented from the decision to reject the appeals by the Guantanamo prisoners. The high court on Friday gave no explanation for its reversal in now deciding to hear the cases.

After the appeals had been rejected in April, lawyers for the prisoners asked the court to reconsider, and the court on Friday agreed. It has been the first time in decades the high court has granted such a request.

The Supreme Court's action in the Guantanamo cases was announced the day after the justices had ended their 2006-2007 term.

A conservative majority led by Chief Justice John Roberts said other means besides race considerations should be used to achieve diversity in schools.

"The way to stop discrimination on the basis of race is to stop discrimination on the basis of race," he wrote.

More than a half-century after the high court outlawed segregation in public schools, the justices were deeply divided over one controversial outgrowth of that decision: what role race should play, if any, in assigning students to competitive spots in elementary and secondary schools.

The cases from Kentucky and Washington state revisit past disputes over race and education, stemming from the landmark 1954 Brown v. Board of Education decision.

"Before Brown, schoolchildren were told where they could and could not go to school based on color of their skin. The school districts in these cases have not carried the heavy burden of demonstrating that we should allow this once again-- even for very different reasons," Roberts wrote.

He was joined by Justices Antonin Scalia, Clarence Thomas, Anthony Kennedy and Samuel Alito.

But Kennedy held out hope for school systems that use race that their criteria might be allowed in some narrow circumstances.

Reading his concurring opinion from the bench, Kennedy said, "This nation has a moral and ethical obligation to fulfill its historic commitment to creating an integrated society that ensures equal opportunity for all its children.

"A compelling interest exists in avoiding racial isolation, an interest that a school district, in its discretion and expertise, may choose to pursue."

He added, "Crude measures of this sort [as illustrated in this case] threaten to reduce children to racial chits valued and traded according to one school's supply and another's demand."

And Thomas said, "Simply putting students together under the same roof does not necessarily mean that the students will learn together or even interact. Furthermore, it is unclear whether increased interracial contact improves racial attitudes and relations."

Those on both sides of the issue, as well as the Bush administration, had hoped the Supreme Court would clarify when and to what lengths state and local officials can go to promote diversity in K-12 education.

In a landmark case three years ago, the justices affirmed racial quotas were unconstitutional but offered a limited, but nonetheless powerful endorsement of affirmative action in higher education. The Supreme Court has now ruled that legal standard does not apply in a K-12 public school setting.

While supporters on both sides of the issue seemed to agree classroom diversity is an important goal, differences remain over how to maintain it without the real or perceived consequence that some families may be unfairly discriminated against or inconvenienced.

In dissent, Justice John Paul Stevens said the majority "reverses course and reaches the wrong conclusion. In doing so, it distorts precedent, it misapplies the relevant constitutional principles, it announces legal rules that will obstruct efforts by state and local governments to deal effectively with the growing resegregation of public schools, it threatens to substitute for present calm a disruptive round of race-related litigation."

Stevens was joined by Justices David Souter, Ruth Bader Ginsburg and Stephen Breyer.

The Seattle and Louisville plans are voluntary, introduced in the years after integration of schools in many areas was managed by the courts. They were not designed as remedial efforts to achieve diversity, but to maintain it, as a reflection of the larger communities' racial makeup.

During oral arguments in December, hundreds of demonstrators -- many of them African-American college students -- marched and chanted outside the court in support of the affirmative action plans. Some carried signs such as "Equal education, not segregation."

Louisville-area schools endured decades of federal court oversight after schools there were slow to integrate. When that oversight ended in the late 1990s, county officials sought to maintain integration, requiring that most public schools have at least 15 percent and no more than 50 percent African-American enrollment. The idea was to reflect the whole of Jefferson County, which is 60 percent white and 38 percent black. Officials say their plan reflects not only the need for diversity but also the desire of parents for greater school choice.

A white parent, Crystal Meredith, sued, saying her child was twice denied the school nearest their home and had to endure a three-hour bus ride to a facility that was not their top choice. Many African-American parents raised similar concerns.

In Seattle, public schools often rely on a "tiebreaker." Under the plan, begun in 1998, families can send their children to any school in their district. When there are more applicants than spaces available, and when a school is not considered "racially balanced," race is one of several "integration tiebreakers" used to achieve diversity.

A group primarily of white parents from two neighborhoods sued in 2001, saying about 200 students were not admitted to the schools of their choice, preventing many from attending facilities nearest to their homes.

One school at the center of the controversy is Franklin High. Half of its roughly 1,500 students are Asian-American, a third are African-American, and about 7 percent are Hispanic. White enrollment dropped from 23 percent in 2000 to 10 percent last year.

The Seattle diversity plan was suspended while the appeals worked their way through the courts.

From the justices' comments during oral arguments and in the various written opinions, it was clear the legal sticking point was whether those diversity efforts represented a "compelling government interest."

The Bush administration supported the parents bringing suit against the choice plans. Solicitor General Paul Clement told the justices the two plans at issue represented "very stark racial quotas." He argued they were a "clear effort to get the schools to mimic the overall community" and that other "race-neutral" means to achieve classroom diversity should be used.

In a statement, Countrywide denied that a raid had occurred but didn't address the general subject of an investigation.

"Even if there were [such a probe], it's company policy not to comment on anything to do with our regulators," a spokesman said.

In the insider trading case, the former executives — Alan Cao, 38, of Woodland Hills; Jun Shi, 43, of Moorpark; and Quan Zhu, 43, of Santa Monica — admitted in plea agreements that they had made tens of thousands of dollars by selling Countrywide shares, including some stock they had borrowed to profit from a price drop in a technique known as short selling, and by buying options giving them the right to sell Countrywide shares.

Countrywide reported Oct. 20, 2004, that its third-quarter profit was 7 cents a share lower than analysts had forecast. The company also cut its earnings forecast. Its stock sank 11.5% that day.

Prosecutors said the illegal profits amounted to $47,668 for Cao, who was Countrywide Financial's vice president of financial planning; $35,547 for Zhu, executive vice president of portfolio risk management; and $19,995 for Shi, first vice president of planning at Countrywide Bank.

Cao and Shi settled a related Securities and Exchange Commission lawsuit in March 2006 by returning their earnings plus interest and paying a fine equal to their profit, the SEC said.

In the plea agreements, prosecutors said they would recommend home confinement and probation if pre-sentencing reports turn up no other wrongdoing. No one else is expected to be charged in the case, said Assistant U.S. Atty. Beong-Soo Kim in Los Angeles, the prosecutor in the case.

In a statement about the trading case, Countrywide said it was "committed to the highest ethical standards."

"The company's policies prohibiting illegal insider trading are strictly enforced," Countrywide said.

The company described the three executives as "mid-level managers" and said it had cooperated fully with regulators and prosecutors in the case.