News Afghanistan Convicts 21 in Kabul Bank Scandal

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Afghanistan Convicts 21 in Kabul Bank Scandal
Mar 5th 2013, 10:23

KABUL, Afghanistan – An Afghan court on Tuesday delivered the first convictions in connection with the near collapse of Kabul Bank, a scandal that has become a byword for Afghanistan's rampant corruption. The bank's founder and its former chief executive were each found guilty of fraud, sentenced to five years in prison and fined hundreds of millions of dollars.

In total, 21 defendants were found guilty on Tuesday of crimes ranging from fraud to negligence for their roles in the failure of Kabul Bank, which investigators have described as little more than a Ponzi scheme. Its main function was to funnel depositors' money to its own shareholders and their cronies.

The convictions were once unthinkable for many in Afghanistan, where political connections often equal legal impunity. Both Sherkhan Farnood, the founder, and Khalilullah Frozi, the former chief executive, had financial and personal ties to President Hamid Karzai and other senior officials.

The prosecution began only after Western countries made clear that billions in aid dollars hinged on legal action.

American and European officials have in recent months lauded the government's decision to prosecute. But the choice of whom to try has left lingering doubts about the Afghan government's commitment to cleaning up corruption, which pervades every level of the government and is seen as fueling support for the Taliban insurgency.

American and European officials have been particularly concerned that Mahmood Karzai, a brother of the president, has yet to be charged with any crimes. He was given large loans, one of which he used to buy 7 percent of the bank, and none of which he was expected to pay back. Some Afghan and Western investigators say he still owes tens of millions of dollars, though he says he has repaid all his debts.

At the same, those convicted on Tuesday included a handful of Afghan regulators who had tried to uncover the fraud at Kabul Bank. They were convicted negligence; one was fined and the others were sentenced from six months to two and a half years in prison.

According to Afghan and Western investigators, the regulators were actively deceived by the bank's owners, who kept double books and engaged in other ploys to cover up their deceit. The owners even created fictitious companies, including fake letterheads and rubber stamps to leave a paper trail that would appear legitimate.

The Karzai administration also stymied the regulators' work, the investigators said before Tuesday's verdicts. They had characterized the prosecutions as an attempt to seek retribution.

Once celebrated by American and Afghan officials as a cornerstone of the Western project to rebuild Afghanistan, the Kabul Bank was taken over by regulators in August 2010 after becoming perilously insolvent.

At the time of its takeover, 92 percent of its loan portfolio — $861 million, or about 5 percent of Afghanistan's annual economic output at the time – had gone to 19 people or companies, according to a forensic audit by Kroll Associates, an international investigative firm. All were part of a clique that was tied to Mr. Karzai's government.

Bailing out the bank cost the cash-strapped Afghan government roughly $825 million, a sum that at that time represented most of the government's annual revenues. Estimates of how much has been recovered from those who received loans vary from $200 million to $400 million, Afghan and Western officials have said.

Yet few of the people who received millions of dollars in loans have been charged with any crimes, although they took the money with no expectation of repaying it — an act that investigators have said could make them liable to conspiracy charges.

Among that group are Haseen Fahim, the brother of First Vice President Muhammad Qasim Fahim. Kroll had recommend that both he and Mahmood Karzai, the president's brother, be prosecuted. Its audit said they each still owe at least $5 million. Both men have previously denied any wrongdoing.

But the biggest recipients of the bank's largess were its two largest shareholders: Mr. Farnood, the founder, who Kroll said should be held liable for $270 million, and, and Mr. Frozi, the chief executive, whose personal liability was estimated at $94.2 million by Kroll.

Along with their five-year prison sentences, Mr. Farnood was fined $280 million on Tuesday, and Mr. Frozi was fined $530 million, which is what the court had determined they stole. Both were remanded to the custody of The National Directorate of Security, Afghanistan's intelligence agency.

They can appeal their convictions and Mr. Farnood's lawyer said on Tuesday that his client would do so. "My client did not do anything illegal. This was not a fair trial, it was a political trial, and many high ranking people abused their positions to the detriment of my client," said Sebjhutullah Tamil, the lawyer. Neither Mr. Frozi nor his lawyer could be immediately reached for comment.

Habib Zahori and Sangar Rahimi contributed reporting.

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News Russia Detains Suspect in Bolshoi Ballet Acid Attack

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Russia Detains Suspect in Bolshoi Ballet Acid Attack
Mar 5th 2013, 09:05

MOSCOW – Authorities announced on Tuesday the detention of a suspect in the January acid attack on the Bolshoi Ballet's artistic director, Sergei Filin, the first indication that investigators are making headway on a crime that gripped Moscow and threatened to haunt one of Russia's most revered institutions.

Mr. Filin suffered burns to his face and eyes when a masked man approached him outside his apartment near midnight on Jan. 17 and flung a jar containing sulfuric acid at him. He has undergone a series of operations in hopes of preserving as much of his eyesight as possible and is receiving further treatment at a clinic in Germany.

Russia's Interior Ministry said in a statement that it was proceeding with "a series of urgent investigative actions," including questioning the suspect, who was detained in the Moscow suburb of Stupino, and searching his apartment.

A law enforcement official told Russian television that the man is suspected of carrying out the acid attack on a contract basis and not associated with the Bolshoi Theater. The official said investigators have not identified the person who ordered the attack.

Katerina Novikova, the theater's spokesman, said the announcement was good news and that the attacker would lead police to the crime's mastermind. She noted that Mr. Filin had been harassed for weeks leading up to the attack, with barrages of calls to his cellphone and hackers breaking into his personal e-mail.

"I am hopeful, because I know that the investigators have worked long and hard, and I am very glad that someone has been arrested," she told Ekho Moskvy, a radio station. "I hope this is the right path, and the crime will be entirely solved, because it is important to know everyone who stands behind this: behind the attack on the Internet, the telephone calls, and above all the act of vandalism which was carried out on the 17th of January against Sergei Filin."

Mr. Filin and Bolshoi officials have said they believed the attack was motivated by a professional grudge, and the weeks after the attack brought a deluge of commentary on behind-the-scenes power struggles at the ballet company.

There was particular scrutiny of the rancor between Bolshoi officials and the premier dancer Nikolai Tsiskaridze, who has been passed over for administrative positions in the past. Mr. Tsiskaridze said on Tuesday that the detention had come as a surprise and that investigators have not approached him since he was questioned immediately after the attack.

Vesti, a Russian news channel, reported that the police tracked the man down by checking the records of mobile telephone calls that were placed from the area around the attack.

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News China Said to Back New Sanctions Against North Korea

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China Said to Back New Sanctions Against North Korea
Mar 5th 2013, 07:34

HONG KONG — China has agreed to support a new round of United Nations sanctions against North Korea to punish it for the nuclear test it conducted in February, diplomats said late Monday.

The Chinese, North Korea's main ally, have reached agreement with the United States on the wording of a sanctions resolution, diplomats told The Associated Press, although no details were available on the proposed measures. The United Nations Security Council plans to hold a meeting on the issue on Tuesday.

The support of China, with its Security Council veto power and economic ties to North Korea, is considered vital in terms of building international support for actions against North Korea's nuclear and missile programs. China provides all of North Korea's fuel and remains its biggest trading partner, but analysts believe that its influence on Pyongyang is nevertheless limited.

The sanctions, if approved, would be the latest U.N. action in response to North Korea's weapons development. After the U.N. approved a round of sanctions in January in response to a North Korean rocket launch the month before, an increasingly belligerent Pyongyang threatened both the United States and South Korea militarily, and just weeks later detonated its third nuclear device.

Previous rounds of sanctions have tried to curtail North Korea's nuclear and ballistic missile ambitions by blacklisting trading and financial firms believed to be involved with such programs. The sanctions have also restricted the importation of luxury goods, an effort directed at the country's ruling elite.

Diplomats have said that future rounds of sanctions could expand the number of entities that come under the sanctions umbrella and heighten enforcement, perhaps even through cargo inspections.

On Monday, the Russian U.N. ambassador, Vitaly Churkin, whose country currently holds the rotating Security Council presidency, said that the Council could approve a sanctions resolution this month.

South Korean officials said Tuesday that while U.N. officials were moving forward in punishing Pyongyang for the February nuclear test, details still needed to be worked out.

"Significant progress has been made, but no final agreement has been reached yet," said Cho Tai-young, a foreign ministry spokesman.

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News Early Tally Shows Kenyatta Ahead in Kenya Vote

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Early Tally Shows Kenyatta Ahead in Kenya Vote
Mar 5th 2013, 08:26

Pete Muller for The New York Times

Kenyan election observers sorted ballots at a polling station in Nairobi on Monday.

NAIROBI, Kenya — Uhuru Kenyatta, a Kenyan politician who has been charged by the International Criminal Court with crimes against humanity, was leading by a wide margin in the Kenya election on Tuesday, with more than a third of the votes counted.

Masai voters wait to cast ballots in the Kenyan election, in which many people lined up before dawn.

Mr. Kenyatta, who is one of the richest men in Africa and a deputy prime minister and has been accused of bankrolling death squads that killed women and children, was ahead 55 percent to 41 percent over the second-place candidate, Raila Odinga, Kenya's prime minister.

Preliminary results showed that voters, who poured into the polls on Monday, some waiting for 10 hours, voted overwhelmingly along ethnic lines, with some areas voting 98 percent for the leader from their ethnic group. Many shops in Nairobi remained shuttered, with people worried about riots once the final results are declared and a clear winner and loser become apparent.

Police officers were everywhere, some wearing helmets and padded riot suits. Kenya's election commission has been steadily tabulating the votes and expects a preliminary result by Wednesday. Kenya's police chief, ‪ David Kimaiyo, said that several suspects had been arrested in connection with a spate of attacks on Monday, in which at least four police officers were murdered with machetes. He said more suspects were on the loose and added, "We will catch them."

Kisumu, a city in western Kenya and Mr. Odinga's ethnic stronghold, which exploded in riots in 2007 and 2008 during the last presidential election, was quiet on Tuesday.

"We're just waiting," said Christine Ololo Atieno, a seller of secondhand shoes and a passionate Odinga supporter. "People are still hoping that more votes will come in and things will change."

Mr. Odinga says he was cheated out of winning the last election, and many analysts say that Kisumu could erupt again if there is vote rigging and Mr. Odinga loses again.

Millions of Kenyans poured into polling stations on Monday to cast their ballots in a crucial, anxiously awaited presidential election, and as the voting proceeded relatively smoothly a real chance emerged that a candidate charged with financing death squads could win the race, raising an array of complex challenges for Kenya's international relationships and with the court itself.

The United States and other Western allies of Kenya have warned of "consequences" if Mr. Kenyatta wins, though few Western officials have been willing to discuss exactly what kind of repercussions or sanctions this could bring.

This is Kenya's first presidential vote since 2007, when a dubious election, marred by widespread evidence of vote rigging, set off ethnic clashes that swept the country and left more than a thousand people dead. Many Kenyans have worried that history could repeat itself, and in the past week, the atmosphere in Nairobi has been almost like a hurricane about to hit.

Flour, rice, bread and other staples were stripped from supermarket shelves as families stocked up on supplies, in case riots break out. Many people have fled ethnically mixed urban areas, fearing reprisal killings should the vote go awry.

"We must keep the peace," said William Ruto, after voting early Monday.

Mr. Ruto was running for deputy president as Mr. Kenyatta's running mate, and he has also been charged by the International Criminal Court with crimes against humanity, accused of orchestrating widespread violence. After the last botched election, Mr. Ruto's supporters killed scores of Kikuyus, the ethnic group of Mr. Kenyatta and Kenya's president, Mwai Kibaki, who is stepping down because of term limits. Many of Mr. Ruto's supporters had backed Mr. Odinga at the time and claimed that the Kikuyus had historically oppressed them and rigged that election.

But in a sign of how pliable political alliances can be, analysts said, Mr. Ruto and Mr. Kenyatta decided to team up this time to improve their chances of beating the charges in the International Criminal Court. Kenya is of the most industrialized and democratic countries in sub-Saharan Africa, a beachhead for Western interests and a close American ally, but its history has been haunted by intense, often violent ethnically charged politics. Mr. Odinga says he was cheated out of winning the election in 2007.

Before Monday, many analysts predicted that neither Mr. Odinga nor Mr. Kenyatta, a deputy prime minister and the son of Kenya's first president, would win more than 50 percent of the vote, mandating a runoff in April. There is also a requirement that the winner receive 25 percent of the vote in the majority of Kenya's counties, which, in a country crisscrossed by stubborn ethnic fault lines, could be difficult.

This election is the most complicated Kenya has ever held. A host of new positions has been created, like governorships, Senate seats and county women representatives, in an attempt to change the winner-take-all nature of Kenyan politics. And Kenyan civic groups have tried mightily to make this an election about issues, not about ethnicity, with countless public service advertisements telling voters to pick candidates based on their integrity and plans.

Still, many Kenyans vote along ethnic lines, picking a candidate from their ethnic group.

Terry Wamaitha, a vegetable seller and a Kikuyu, boasted of how she had voted for Mr. Kenyatta.

When asked if this was for ethnic reasons, she smiled.

"No way," she said. "It's just that he's our boy."

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News DealBook: Senate Report Said to Fault JPMorgan

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DealBook: Senate Report Said to Fault JPMorgan
Mar 5th 2013, 02:03

While a trader known as the "London whale" has come to represent a multibillion-dollar blowup at JPMorgan Chase, Congressional investigators have discovered that the problems involved more senior levels of the nation's largest bank.

A report by the Senate Permanent Subcommittee on Investigations highlights flaws in the bank's public disclosures and takes aim at several executives, including Douglas Braunstein, who was chief financial officer at the time of the losses, according to people briefed on the inquiry. The report's findings — scheduled to be released on March 15 — are expected to fault the executives for allowing JPMorgan to build the bets without fully warning regulators and investors, these people said.

The subcommittee, led by Senator Carl Levin, could ask Mr. Braunstein and other senior executives to testify at a hearing this month, according to the people. The subcommittee does not currently intend to call the bank's chief executive, Jamie Dimon, but Congressional investigators interviewed Mr. Dimon last year.

JPMorgan, which has been cooperating with the investigation and discussed the findings with the subcommittee, declined to comment. Mr. Braunstein and other bank executives have not been accused of any wrongdoing, and he is not the focus of a separate law enforcement investigation into the trading loss.

Congressional officials have yet to set the final details of the hearing and plans may change, the people cautioned. Politico earlier reported the scheduled date for the release of the report.

The Congressional investigation could revive questions about the role of senior executives in the $6 billion trading loss at a time when the bank has started to put the blunder behind it.

Mr. Dimon declared last year that the "Whale has been harpooned." The bank reported record earnings in January and has forced out the architects of the bet.

The Senate report, however, shifts the focus from lower-level traders in London who placed the bet to senior executives and regulators who failed to stop it. Expanding on a sweeping report the bank released in January, the Congressional inquiry is expected to open a window into how executives ignored warning signs and failed to alert investors about changes to its method for detecting risk.

Because a large majority of the executives involved in the trade have since departed the bank, the hearing could increase scrutiny of Mr. Braunstein and Mr. Dimon, the remaining senior executives. Within JPMorgan, people close to the bank say, executives have expressed dismay about the lingering questions.

The report, a reminder that Wall Street blowups continue even four years after the financial crisis, could galvanize support for regulations like the Volcker Rule that aim to rein in risky trading. Mr. Levin, a Democrat of Michigan who champions the Volcker Rule, is expected to use the report to endorse policy changes, including stricter public disclosures.

But Mr. Levin's staff is still negotiating with the committee's Republicans over the recommendations. John McCain, the ranking Republican, has largely approved the report's findings but continues to examine the policy ideas, the people said.

A spokesman for Mr. McCain declined to comment.

The subcommittee's report coincides with a federal investigation into four employees in London, including Bruno Iksil, the so-called Whale, who carried out the trades at the bank's chief investment office. The Federal Bureau of Investigation is conducting inquiries into some of the traders, according to officials, suspecting they hid problems from the bank.

But the subcommittee's investigators seized on e-mails suggesting that Mr. Iksil had raised alarms about the bet. In an e-mail to a more senior trader in January 2012, he advised against increasing the bet, according to people who reviewed the message. The size of the trades, Mr. Iksil said, were becoming "scary" and advised that the investment office take the "full pain" now, according to a person briefed on the e-mails. JPMorgan released the e-mails without naming the traders.

By February, Mr. Iksil grew worried as he struggled to understand why losses were escalating. Later that month, he instructed a junior trader to temporarily halt trading. Their boss later reversed that decision.

The subcommittee's report is expected to detail how senior executives failed to heed warnings from London. Some of those findings echo JPMorgan's report, released this January, which examined the role of Mr. Braunstein; Ina Drew, who led the chief investment office; and Barry L. Zubrow, a former chief risk officer. Ms. Drew and Mr. Zubrow have since left the bank.

Scrutiny around Mr. Braunstein, who is now a vice chairman at the bank, partly focused on his reliance on other people's assurances about the safety of the trades. In its own analysis of the trade, JPMorgan said Mr. Braunstein incorrectly assumed that the positions in the chief investment office were "manageable."

The focus on Mr. Braunstein also stems from the bank's inconsistent statements. He dismissed concerns about the positions in April 2012, assuring analysts in a conference call that the bank was "very comfortable with our positions." The subcommittee has examined whether those disclosures were misleading.

The subcommittee further examined whether the bank failed to alert investors about a change in its internal alarm system. The bank in January 2012 introduced a new value-at-risk model that underestimated the losses in the investment office. The bank did not inform investors about the model change until May.

In the lead-up to the subcommittee's reports, the bank faced questions about similar disclosures to regulators. In some instances, the people briefed on the report said, bank employees initially resisted requests from regulators at the Office of the Comptroller of the Currency who sought deeper details.

But regulators will not escape criticism in the report.

The bank warned some regulators about the changing risk model, a person briefed on the matter said. In an e-mail to an official in the comptroller's office, the bank disclosed that the new model could cut its risk in half, something that might have been viewed as a startling revelation.

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News Malaysia Attacks Filipino Rebels on Borneo Island

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Malaysia Attacks Filipino Rebels on Borneo Island
Mar 5th 2013, 06:55

MANILA – Malaysian forces used fighter jets and mortars, followed by a ground assault, on Tuesday to attack Filipino gunmen seeking to reclaim parts of northern Borneo Island for a defunct sultanate in the southern Philippines.

It was unclear how many of the nearly 200 Filipinos in the armed group were killed or wounded in the attack, but the Malaysian state news agency Bernama said no Malaysian forces were killed. It was also unclear if the assault had resolved the issue.

"The government must take action to defend the country's dignity and sovereignty as demanded by the people," Malaysian Prime Minister Najib Razak said in announcing the attack.

The incident began on Feb. 12 when members of the group came over on boats to the remote village of Lahad Datu in northeastern Malaysia. The group represented itself as a royal militia in service of the Sultanate of Sulu, an Islamic kingdom that for centuries ruled the southern Philippines and parts of what is now Sabah state in Malaysia.

Under orders from a self-proclaimed sultan based in Manila, the armed group tried to resurrect the sultunate's claim to the area despite pleas from both the Philippine and Malaysian governments that it return to the Philippines.

Since the incursion, the Malaysian authorities have launched multiple assaults on the group, whose members had dispersed into neighboring villages, authorities said. More than 21 people have been killed in fighting in recent weeks related to the incident.

The continuing violence in Sabah, which has escalated into one of the most serious security emergencies in recent Malaysian history, has strained relations between the two Southeast Asian allies. Late Monday, the Philippine secretary of foreign affairs, Alberto del Rosario, met with the Malaysian defense and foreign ministers in Kuala Lumpur in an attempt to lessen tensions.

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News Social Media Embrace Same-Sex Wedding at Tokyo Disneyland

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Social Media Embrace Same-Sex Wedding at Tokyo Disneyland
Mar 5th 2013, 02:42

Courtesy of Koyuki Higashi

Koyuki Higashi, left, posed with her partner, Hiroko, at Tokyo Disney Resort on Friday in the first same-sex wedding at the theme park in Japan.

TOKYO — The wedding was a fairy-tale affair, with flowing dresses and a three-tiered cake set in the most coveted of Japanese venues: the Tokyo Disney Resort.

Koyuki Higashi and her partner of one and a half years tied the knot in front of 30 well-wishers on Friday, but much more of the country was in on the celebration, the first same-sex wedding at the theme park here.

Ms. Higashi, a stage actress turned gay rights activist, and her partner, Hiroko, who has not revealed her full name, posted frequent social media updates of their wedding plans and from their Christian-style ceremony, with a romantic gondola ride.

"My partner Hiroko and I just held a gay wedding at the Tokyo Disney Resort. Even Mickey and Minnie are here to celebrate with us!" Ms. Higashi, 28, wrote in a Twitter post that also had a picture of the newlyweds posing with the big-eared Disney characters and a flower-festooned cake. Her entry was reposted more than 6,000 times, drawing largely positive responses.

"Congratulations," replied Masaki Koh, a Japanese gay porn star. "Your wonderful wedding will bring inspiration and hope to many people who still hesitate to take the first step. I was also encouraged that Tokyo Disney Resort was so understanding."

But on the Naver Matome site, which collects and curates social media entries, a user who identified himself as Nizo Hakoda remarked: "I don't particularly mind homosexuality and same-sex marriage, but watching the news made me wonder why they had to hold their ceremony at a crowded place like Disney. It's fine for the people who accept it, but there are others who don't."

The Walt Disney Company had long allowed same-sex celebrations in a limited way on its grounds, like in banquet halls. But in 2007, it began allowing same-sex couples to buy high-end wedding packages, which can include elaborate ceremonies, Disney characters and public displays at its theme parks and on its cruises.

Despite that change in policy, Ms. Higashi found that no same-sex wedding had ever occurred at Tokyo Disney Resort. She reported on her blog and on Twitter that she had inquired about weddings at Tokyo Disney Sea, a part of the Disney Resort. But when it became apparent to the organizers that her partner was female, Ms. Higashi reported, she was asked if one of them could wear a tuxedo — so that other visitors to the park would not feel uncomfortable.

Her posts set off the first stir on Japanese social media sites.

A week later, the organizers at Milial Resort Hotels, a subsidiary of the company that runs Tokyo Disney, got back to Ms. Higashi with good news: both brides were welcome to wear wedding dresses (or both tuxedos, for that matter). "Mickey Mouse supports gay marriage!" Web headlines declared.

Milial Resort Hotels issued an apology. "Initially, there was an incomplete understanding on the part of our staff over the requirement for dresses," said Jun Abe, a Milial spokeswoman. "If we caused them sadness and discomfort, we are sorry."

Of course, their dream wedding did leave something to be desired for the couple: legal standing.

Japan does not recognize same-sex marriages, though there is little in the way of religious opposition from Buddhism, imported from China, or Japan's native Shinto religion. Japanese historical texts contain references to same-sex relationships.

Some local governments, including Tokyo, ban discrimination at work based on sexual identity, but even so, in this group-conscious, relatively conformist society, most gay residents remain in the closet. Gay public figures tend to be in TV entertainment, where gay men win laughs as flamboyant queens.

Ms. Higashi came out less than three years ago after a short-lived stage career, while Hiroko says she cannot use her full name widely because some family members are not fully comfortable with her sexuality.

Hiroko said, however, that she was emboldened by the response the couple had received from friends, family and social media, and that she hoped that her wedding helped create a public discussion.

"This could prompt Japan to question why it so often ignores or discriminates against minorities," Hiroko said. "Mostly we just want people to know that gay people exist for real, and we would like to throw weddings like everyone else."

A version of this article appeared in print on March 5, 2013, on page A12 of the New York edition with the headline: Gay Wedding Is Embraced By Disney In Tokyo.

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