If Rick Lazio is elected to the Senate on Nov. 7 over Hillary Rodham Clinton, the interminable 2000 Senate race will have boiled down to a story published in the Daily News on Oct. 25. The story, an inevitable outgrowth of the New York State-cum-Middle East style of politics, revealed that Mrs. Clinton had accepted $51,000 from members of groups that oppose Israel.

Those who follow Middle Eastern affairs likely recognized a name cited in the Daily News account: Steven Emerson. Mr. Emerson, a Washington, D.C.-based researcher and freelance journalist, has made a career out of plotting the intricate networks that connect Arab organizations and link them to Islamic militants.

Mr. Emerson told Off the Record it was he who brought the story to the attention of the Daily News . Why? He cites a broader context, one he has written about for years: the mainstreaming of militant Islamic groups through political organization. "You have a mosaic here, which I have provided to the New York Daily News ," Mr. Emerson said. "There was no grand plan or effort that this article was designed to sink her candidacy."

The story may not sink the Clinton candidacy, but in the final days of the campaign, the issue is dominating coverage.

The News story said that Mrs. Clinton had raised $50,000 at a fund-raiser in Boston on June 13 hosted by the American Muslim Alliance, a pro-Palestinian organization. Further, the story reported that she had accepted a $1,000 contribution from a board member of the American Muslim Council, who once visited the White House and later said he went there and "defended what is called Hamas," the Palestinian group which the State Department has branded a terrorist organization.

The day the story appeared, Mrs. Clinton announced at a press conference that she was returning the $51,000. The next day, the story was on the front page of The New York Times , and the New York Post picked up Mr. Lazio's incendiary characterization of the contribution: "Blood Money."

Mr. Emerson has had a long and controversial tenure as a counterterrorism expert. He produced a documentary for PBS entitled Jihad in America, which traced Middle Eastern terrorist groups into the United States. He also wrote a book, The Fall of Pan Am 103 , about the jet bombing over Lockerbie, Scotland, as well as articles for The New Republic and the Wall Street Journal . In the process, he has generated criticism from Arab-American groups, some of which Mr. Emerson has written about.

His controversial moment, though, came in 1995 when, as a consultant for CBS News, he suggested that Islamic fundamentalists were responsible for the Oklahoma City bombing. "Oklahoma City, I can tell you," Mr. Emerson said the day of the bombing, "is probably considered one of the largest centers of Islamic radical activity outside the Middle East." He added, "This was done with the attempt to inflict as many casualties as possible. That is a Middle Eastern trait."

Mr. Emerson defended those remarks: "The information was correct at the time that it was stated, in the same way when one reports about an ongoing investigation, that's what the prevalent belief was," he said.

By the next day, however, reports surfaced that two white males having nothing to do with Middle Eastern politics were the suspects. Said one reporter: "I learned from Oklahoma City never to listen to the guy."

The Clinton fund-raising story, however, constituted a big scoop. Certainly it is being touted that way by the News . Yet the tabloid doesn't seem eager to be linked to Mr. Emerson. The original Daily News story noted: "Information about the White House visits and the Boston event, independently confirmed by the News , will appear in an article by Steven Emerson, a counterterrorism researcher." And, of course, Mr. Emerson is claiming the story as his own.

Still, the Daily News spokesman refused to say whether Mr. Emerson was the person who initially made the paper aware of the story. "We do not disclose our confidential sources and reporting methodology," said the spokesman, Ken Frydman, in a bizarre invocation of source confidentiality.

Unlike Mr. Frydman, Mr. Emerson thought it was pretty clear from the Oct. 25 story that he had tipped off the News. "I was cited, I received a mention in the article, and I am very happy about that," Mr. Emerson said.

Mr. Emerson made extensive materials purporting to document extremist statements by American Muslim Alliance officials available to the Daily News , as well as to other journalists at Mrs. Clinton's Oct. 25 press conference and later to Off the Record, but only two points were made in the original Daily News story.

The third paragraph of the story notes: "The alliance's Web site features photos of a 12-year-old boy killed by Israeli troops in Gaza this month under the title 'The Real Face of Israel.'" The photographs were widely published following the Oct. 30 shooting, and Israel was widely criticized.

The story also includes partial quotes from American Muslim Alliance president Agha Saeed saying a Palestinian state should be established, "first and foremost through peaceful means." The Daily News then wrote, "But if that fails, he said, U.N. resolutions 'say specifically they have the right to resist by armed force.'"

In a statement from the Muslim Alliance released on Oct. 27, the group said Mr. Saeed was referring to a 1976 United Nations General Assembly resolution that applied its standard re-affirmation of the right to self-determination through "all available means, including armed struggle." Virtually identical language has been applied in U.N. resolutions to South Africa and Namibia as well as the Palestinians. However, some view this as a rationalization for terrorism.

The issue of the Clinton campaign raising money from Palestinian supporters is not entirely new. In May, Eli Lake, a reporter for the Forward , wrote that that month, Mrs. Clinton had attended fund-raisers for her campaign hosted by Hani Masri, who the Forward identified as "a close associate of [Palestinian leader Yasir] Arafat," and Rafat Mahmood, a Pakistani-American real estate developer. The two events raised $120,000 for Mrs. Clinton, according to the paper. "Other candidates supported by Mr. Mahmood or Mr. Masri," Mr. Lake wrote, "either directly or through political action committees, include some of Israel's most vocal critics in Congress, those such as Rep. Jim Moran, Rep. David Bonior and Rep. Tom Campbell." The story was picked up by a handful of news publications, including the New York Post.

Earlier, reports had also circulated about White House events for American Muslims. In 1997, Mr. Emerson himself gave a speech in Canada in which he claimed that American Muslims with ties to extremist organizations were being hosted at the White House.

Despite this previous coverage, the Daily News account took off.

"When she returns $50,000 from Muslim donors in an election which has a high-profile Middle East component, that's a good story," said Dean Murphy, who covered the story for The Times .

It got a second wind with a phone-call campaign launched by the state Republican Party which, according to the Post , informed New Yorkers that Mrs. Clinton had accepted money from a group which "openly brags about its support for a Mideast terrorism group, the same kind of terrorism that killed our sailors" on the U.S.S. Cole .

Like the Republican callers, reporters repeatedly conflated two separate fundraising episodes, equating the $50,000 raised by members of the American Muslim Alliance with the $1,000 donation from the board member of the American Muslim Council. (No evidence has been published linking the Alliance to the more radical groups supported by the Council board member, Abdurahman Alamoudi.)

Yet Daily News political editor Michael Kramer wrote on Oct. 29: "Hillary's in trouble with the Jews–again. This time it's because she accepted $50,000 from a group of American Muslims sympathetic to Hamas, the anti-Israel terrorist organization."

All objective reporting about the money and the contributors seemed to have stopped as soon as the Clinton campaign declared the money objectionable. But maybe that's for the best. Said one veteran political reporter: "The time to have an intelligent dialogue on foreign policy is not in the final days of a New York Senate campaign. That time has passed."

Gear editor and publisher and Penthouse heir Bob Guccione Jr. is breaking up with his No. 2, executive editor Jack Wright. Mr. Wright, who has been at the magazine for three years.

Mr. Wright said that he and Mr. Guccione had simply grown apart and characterized the split as mutual. "It was kind of an intense relationship, and I honestly think we just had enough of each other," he said. "It's like it's his apartment, and I have to move."

Mr. Wright said his departure from Gear is so amicable that he is staying on through the first week of December to close the February issue.

When Mr. Wright was brought on by Mr. Guccione in 1998 from The Daily Express in London, friends of Mr. Wright said it was with the understanding that Mr. Wright would get the editor-in-chief title soon enough. That never happened. Nonetheless, Mr. Guccione and Mr. Wright were said to get along smashingly. Recounted one Gear insider: "One story I heard is that Bob hired Jack while they were both in a Jacuzzi, stoned out of their minds, having just been serviced by a couple of hookers. It rings true."

Actually, it isn't. The truth, Mr. Wright said, was that he met with Mr. Guccione and was offered the job in New York. Of the other version, Mr. Wright said, "I wish it was true."

Three of the four can be seen in the current Sex Issue: Ms. Iley wrote about her size 34 E breasts, Mr. Young road-tested a suit hooked up to a computer that stimulated his genitals and Mr. Greer wrote several articles, including one on Ally McBeal's Lucy Liu, who is pictured topless in the magazine.

So Mr Young said the non-renewal took him by surprise. "In my case they originally signed me to a one-year contract in May 1998, and my first check came at the beginning of June," said Mr. Young, who had been fired as a contract writer once before by the magazine, only to be rehired after Mr. Guccione had a change of heart. When the check arrived this year at the beginning of June, Mr. Young said he was sure "there was no question that I was going to be renewed" for another year.

But beware false signs of job security. "We did tell the writers later than we would have liked," executive editor Jack Wright said. "The timing wasn't perfect. That much I'd admit. But is there a good way to terminate someone's contract? I've never discovered one."

Later, he called back to correct himself: "We didn't terminate them. We just didn't renew them…What we were late in doing was not renewing them. Anyone who was expecting a check after that was making a presumption."

Gear , which is going up against Maxim , the Golin-ized Details and soon-to-launch FHM in the horny young men's market, is not yet audited, though it claims it sells 180,000 off the newsstand and has more than 40,000 subscribers.

Does this mean that the magazine is cutting costs? "No, quite the opposite," said Mr. Wright. He said writers could actually make more money if they were paid for each piece they contribute, not one lump sum under an annual contract. "It's unlikely but possible," Mr. Wright later said.

He also insisted that eliminating the contracts–which restricted the writers from working for other American men's monthlies and did not provide benefits–was done for editorial reasons. "What was happening was that we contracted so many writers, it was stopping us from using other ones," he said.

Mr. Wright would not say if all of the four will still be writing for the magazine. But Mr. Young is not yet ready to say die. "They hired me, they fired me, rehired me, then refired me," he said. "Who knows, maybe they'll rehire me next week."

Color came back to the Daily News cover on July 18 (for John F. Kennedy's disappearance), 19 (for the David Cone perfect game special section) and 22 (for a life-vested Ted Kennedy and an American flag after John's body was found) for the first time since 1998. Then it went away again.

"We decided that we would use color because of the extraordinary nature of the event," said Daily News editor Debby Krenek, who noted that there's been a color ad for Parliament cigarettes running every Monday for about a month.

The comedy of color in the News goes back more than three years, to when the paper spent $200 million on its new Liberty View plant in Jersey City, N.J., which included supposedly state-of-the-art $63 million Goss Newsliner color printers. The presses had a new "keyless" color-inking system that was supposed to be more efficient–it was designed to not need many adjustments by hand over the course of the print run. Unfortunately, it "wouldn't work correctly," Ms. Krenek said. According to one source familiar with the process, too much water got on the plates giving the entire page a reddish-orange tint towards the end of press runs. "It was supposed to simplify press operations," said Michael Aiello, the News ' executive vice president for manufacturing and distribution. Instead there were electrical problems and shut downs.

The News sued Goss Graphic Systems over the faulty inkers, but the suit was dismissed in May 1998. Mr. Aiello said conventional color inkers were installed this past February. But to do so, they had to bypass the defective color inkers and jury-rig the massive printers "to fool it to think it's still running the keyless inker," he said. That triggered one problem during the latest experiment in color: On Sunday, there was an electrical short which shut down the entire press and resulted in some of Monday's paper being printed in black and white. "It's just a matter of trial and error," Mr. Aiello said.

But as Rupert Murdoch's new state-of-the-art South Bronx printing plant gets closer to its grand opening, giving the New York Post both full color and distribution from within the city, the News' dream of a 32-page color edition is still in doubt.

And getting it up and running will cost money. "There are a lot of things you have do technically to produce high quality color and they take time and they cost money," said Martin Krall, executive vice-president and chief legal officer. "It takes time to get your workforce and equipment calibrated, and it takes longer to produce the newspaper each night."

To do color, the News' contract with its pressmen stipulates additional staffing on the presses. "There is additional press labor required to run color, additional plates and film, and waste will increase slightly," Mr. Aiello said.

Meanwhile, color and presses aren't the only problems plaguing the News . The mailroom–where papers are stacked, bundled, and loaded onto delivery trucks–is also plagued by equipment problems. Around the same time the Goss presses were purchased, the News bought "stackers" and "strappers" from Ferag for the mailroom, which were supposed to make loading trucks more efficient. The News wasn't happy with the equipment and, as of last July, according to a source at the Daily News , the paper stopped payment on the equipment. Ferag subsequently sued the News and the matter is still being litigated in Federal court in Philadelphia.

So the Daily News , under the leadership of Fred Drasner, chief executive officer and co-publisher, has spent millions of dollars on equipment it has later deemed unsatisfactory. "I guess you can call it bad luck," Mr. Krall said. But, he added, "In both cases it's not as if the Daily News is not smart enough to operate its equipment or the Daily News screwed it up. I mean there is no doubt in both cases that the equipment doesn't do what it's supposed to do."

Mr. Aiello predicts that, "You will see color in the Daily News by the end of the year," probably first in the "Sunday product, a page or two at a time." For the moment, however, "We sort of jumped the gun" on it, he said, and "it didn't come out the greatest that we'd like."

Ms. Krenek said "for the most part" she was happy with the recent, short-lived color experiment. But, she added, "Considering that we haven't been doing color here, some that were going out weren't as good as we wanted them to be."

– with Gabriel Snyder

For many stock-option-owning members of The New York Times management who are afraid of being shut out of possible Internet IPO riches if the company decides to spin off its Times Company Digital division, Sholnn Freeman's "Personal Business" column in the July 18 issue of the Times "reeked of subtext." Without mentioning the Times , the column discussed a matter on the minds of many Times staffers: "As companies plan to sell shares in their Internet operations to the public, they face a quandary: whether to limit the potentially huge stock benefits in the spinoff to the unit's employees or managers, or to share the wealth throughout the company."

The next day, The New Yorker reported that a spinoff of the Times' Web holdings was very much in the offing–and that it had only been delayed by Goldman, Sachs saying that it wasn't ready back in May.

Times spokesperson Nancy Nielsen told Off the Record that "There's been no decision made about whether a spinoff would happen," of the digital division, which was formed this past May out of the 50 or so Websites the company owns, which are mostly content sites. At the time, the company's chairman, Arthur Sulzberger Jr., announced, "By aggregating our portfolio of Internet assets into one business unit, we will sharpen our strategic focus and gain the flexibility to bring our digital future to scale."

For Times staffers, there are two issues here: control of content and dollars. Senior Times management gets stock options as part of their annual bonus. This extends down as far as department heads, as well as some deputies in departments. "It's how senior editors send their kids to college," said one.

As for content, much of what's delivered on the Web sites is repackaged journalism previously printed on paper.

According to several Times sources, executive editor Joe Lelyveld and his possible successor, editorial page editor Howell Raines, who normally don't agree on much, have united to advance the case that there can't be "separate and unequal classes of options holders" at the paper.

Said one Times editor: "It's a big topic here, how to integrate a digital company into a newspaper. There's some tension on this. If they didn't let the people who create the content be able to share, it would be divisive."

"There's anxiety–not tension–as to how it will all play out," said another editor. "Less from the money point of view than who will have control over what is New York Times material."

The Personal Business column didn't helped the anxiety level. It noted several companies, including Barnes & Noble, which gave a better stock deal to its dot-com employees when their Internet division went public. It also examined how companies like Forbes Inc. and the Walt Disney Company were thinking about taking their Web divisions public. And it quoted a compensation specialist who said, "If companies set out to prevent hurt feelings, then they will fail to create a rich-enough package to attract top-notch talent."

Said one Times editor: "In my world, it's the subject of gallows humor. The whole prospect seems absurd."

But Ms. Nielsen said all will be worked out by the steering committee of Times grandees. "People are obviously discussing" the money issue, she conceded. "I really don't have much to add."