Jim Clark, who was the former governor's chief of staff, agreed to plead guilty to a single count of conspiracy fraud in a filing in U.S. District Court in Anchorage. He was scheduled to enter his plea at an arraignment hearing on Tuesday.

Clark admitted to taking $68,550 in illegal contributions from the state's largest oil-services company, VECO Corp, for Murkowski's failed 2006 reelection bid in exchange for working on VECO's behalf to secure an industry-friendly version of tax legislation, according to the plea agreement.

He is the first official from the Murkowski administration to be charged in a federal criminal investigation that has so far resulted in convictions of three former state lawmakers, the indictment of a fourth and guilty pleas from two top VECO executives and one former lobbyist.

Murkowski, who was also a former U.S. senator, was soundly defeated in the 2006 Republican primary by Sarah Palin, Alaska's current governor who ran as an anti-corruption reformer.

Clark and VECO conspired to hide the illegal contributions "in a manner so that the public would be deceived and the payments would not be disclosed, as required by law," according to charging documents.

The federal investigation centers around a revision of an oil-tax law that passed the state legislature in 2006 at Murkowski's urging. Bill Allen and Rick Smith, two former VECO executives, pleaded guilty to bribing state lawmakers for a pro-industry version of the bill and other favorable actions.

Former state Senate President Ben Stevens, son of powerful U.S. Senator Ted Stevens, received much of that bribe money, Allen and Smith testified in court last year.

"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.

The justices' decision Tuesday includes no comment explaining why they turned down the appeal from the American Civil Liberties Union.

The ACLU wanted the court to allow a lawsuit by the group and individuals over the warrantless wiretapping program. An appeals court dismissed the suit because the plaintiffs cannot prove their communications have been monitored.

The government has refused to turn over information about the closely guarded program that could reveal who has been under surveillance.

That bill also would have shielded from lawsuits telecommunications companies that helped the government wiretap U.S. computer and phone lines after the Sept. 11 terrorist attacks without clearance from a secret court that was established specifically to oversee such activities. In its competing version of the legislation, the House intentionally left out that feature.

"American citizens must understand, clearly understand that there's still a threat on the homeland. There's still an enemy which would like to do us harm," Bush said. "We've got to give our professionals the tools they need, to be able to figure out what the enemy is up to so we can stop it."

"By blocking this piece of legislation, our country is more in danger of an attack," he said.

Democrats, in turn, accused Bush of fear-mongering and misrepresenting the facts.

"This is not about protecting Americans. The president just wants to protect American telephone companies," Rep. Rahm Emanuel of Illinois, head of the House Democratic Caucus, said Friday.

Beyond the rhetoric, the central issue is what the government can and can't do come midnight Saturday, when a temporary eavesdropping law adopted by Congress last August expires.

That law let the government initiate wiretaps for up to one year against a wide range of targets. It also explicitly compelled telecommunications companies to comply with the orders, and protected them from civil lawsuits that may be filed against them for doing so.

However, the two added at a hearing before the Senate Banking Committee that official 2008 growth forecasts made late last year by the central bank and the president's Council of Economic Advisors are likely to be lowered in the coming months.

The Fed is currently predicting 1.8% growth for this year but Bernanke said a new forecast would be finalized next week. The Council of Economic Advisors' most recent estimate was for the economy to grow by 2.7% in 2008.

In their prepared testimony, the head of the central bank and the Bush administration's point man on the economy said steps taken already this year will be able to keep the economy moving forward despite the continued downturn in housing and troubles in credit markets.

"At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt," said Bernanke in his opening statement, referring to a series of Fed interest rate cuts and a $170 billion tax rebate and stimulus plan signed by President Bush Wednesday.

But Bernanke conceded that banks are getting tighter in their lending standards, the housing and home building markets are likely to weaken further and the labor market may be softening.

"More-expensive and less-available credit seems likely to continue to be a source of restraint on economic growth," he said.

The Fed last month made two deep rate cuts: three-quarters of a percentage point at an emergency meeting, followed by half a point eight days later.

Bernanke said Thursday that the Federal Open Market Committee, its rate-setting body, was ready to act again if further economic readings justify it.

"The FOMC will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke said.

Democratic leaders of a House science subcommittee alleged yesterday that the Federal Emergency Management Agency manipulated scientific research into the potential danger posed by a toxic gas emitted in trailers still housing tens of thousands of survivors of hurricanes Katrina and Rita.

FEMA "ignored, hid and manipulated government research on the potential impact of long-term exposure to formaldehyde" on Katrina and Rita victims now living in the FEMA trailers, the congressmen wrote in a letter to Homeland Security Secretary Michael Chertoff, whose department includes FEMA.

Reps. Brad Miller (N.C.) and Nick Lampson (Tex.) cited agency documents given to Congress in alleging that the federal Centers for Disease Control and Prevention -- generally considered a repository of nonpartisan scientific expertise -- was "complicit in giving FEMA precisely what they wanted" to suppress the adverse health effects.

The lawmakers said the CDC's Agency for Toxic Substances and Disease Registry ignored one of its experts, Christopher T. De Rosa, after he informed FEMA there was no "safe level" of long-term exposure. They said FEMA bypassed that opinion and "shopped" the agency for its desired recommendation to study only short-term exposure.

"Any level of exposure to formaldehyde may pose a cancer risk, regardless of duration," De Rosa wrote in a Feb. 27, 2007, letter to a FEMA lawyer, recently obtained by a House Science and Technology investigative subcommittee that Miller chairs. "Failure to communicate this issue is possibly misleading and a threat to public health."

De Rosa wrote the letter after learning that the CDC bypassed his office to produce a Feb. 1, 2007, report for FEMA that did not consider long-term exposure risks, contradicting his recommendation to the agency in June 2006.

"Honest scientific studies don't start with the conclusion, and then work backwards from there," Miller said.

FEMA said the health agency's report last February did not address long-term health effects but rather concerned ways to avoid toxic exposure to formaldehyde. "FEMA did not suppress or inappropriately influence any report," agency spokesman James McIntyre said.

More than 40,000 trailers are still being used by families displaced by Katrina in August 2005 and Rita weeks later. FEMA announced last July that it would test occupied trailers, after congressional investigators disclosed that the agency had suppressed warnings for more than a year from its field workers about health problems experienced by Katrina survivors.

Tests on 500 trailers, finally begun last month, are being performed by CDC, the lawmakers noted. "The Committee is concerned about the independence and scientific integrity of any indoor air testing for formaldehyde levels in these trailers done under the auspices of FEMA," Miller and Samson wrote.

"For those who are too poor to live elsewhere, FEMA's position remains as it was in 2006: there are no possible adverse health effects that can't be cured by opening the windows," they added.