THE WEEK

By CHARLOTTE FALTERMAYER, JANICE M. HOROWITZ, LINA LOFARO, BELINDA LUSCOMBE, JEFFERY C. RUBIN, ALAIN L. SANDERS AND SIDNEY URQUHART

NATION

GRILLING HILLARY

Hillary Rodham Clinton appeared on Friday before a Whitewater federal grand jury to testify behind closed doors about the mysterious reappearance at the White House of her missing law-firm billing records. Following the four-hour interrogation, she told reporters she was "glad" to have had the chance to repeat what she has always maintained: "I do not know how the billing records came to be found where they were found."

COMPARING SPEECHES

Facing one of the most partisan Congresses in years, President Clinton delivered his third State of the Union message--a smooth, politically centrist proclamation designed to appeal directly to voters. Republicans accused the President of failing to match his balanced-budget rhetoric with deeds, but they saved some of their toughest adjectives--uninspiring, harsh and stumbling--for one of their own: majority leader Bob Dole and his TV response to the President.

ABOUT-FACE FOR THE G.O.P.

Republican leaders switched directions and agreed to compromise on the budget. Congress averted a third federal closure by adopting a measure that provides reduced funds for agencies through March 15. The G.O.P. leaders also said they would drop their threat to block the raising of the nation's debt ceiling and work instead to hammer out cuts both they and the President can accept.

A DEFENSE DEAL

President Clinton said he would sign a compromise $265 billion defense authorization bill. Congressional Republicans dropped their insistence on building a Star Wars-type missile-defense system and on restricting the President's authority to deploy troops. For his part, Clinton acceded to increased arms spending, a ban on abortions at overseas military hospitals, and the discharge of personnel testing positive for the aids virus. The measure provides for a 2.4% military pay raise. In a separate action, the Senate ratified the 1993 start ii treaty with Russia, which calls for dramatic nuclear arms reductions.

LIVE FROM L.A.: O.J. TALKS!

So where was he and what was he doing on the night of the murders? In his first major live TV interview since his acquittal, O.J. Simpson told a national cable-TV audience on Black Entertainment Television that people will have to buy his $29.95 video to hear those details. Many may prefer to wait a bit and instead hear his responses--for the first time under oath--to the deposition questioning that began this week in the civil case brought by the families of murder victims Nicole Brown Simpson and Ronald Goldman. Transcripts of those closed-door proceedings are expected to be released later. In his TV interview, O.J. said he did not commit the murders, and he blamed the media for having turned much of the public against him.

GADDAFI, ELECTION ADVISER

On a tour of Africa, Nation of Islam leader Louis Farrakhan visited Libyan strongman Muammar Gaddafi. Libya's official news agency said the two men discussed the situation of Muslims, blacks and other "oppressed minorities" and how to "unify, mobilize and organize" them in U.S. elections.

A NEW ARMY DISCHARGE

An American medic was court-martialed by the U.S. Army and convicted of disobeying a lawful order: refusing to accept foreign command on a U.N. operation. Specialist Michael New was given a bad-conduct discharge for refusing to join his unit in a U.N. peacekeeping mission in Macedonia. New, who claims the order was unconstitutional, plans to appeal.

WORLD

COLOMBIAN PRESIDENT UNDER FIRE

Denying charges that he accepted drug money during his 1994 campaign, President Ernesto Samper Pizano rejected calls to step down and suggested a referendum to let the people decide his fate. Critics denounced the plan as costly and having the potential to incite a civil war. Students and veterans demanded that Samper resign after his ex-campaign manager said the President had known the Cali cartel was funding his election bid with millions of dollars. Former campaign treasurer Santiago Medina fueled their anger by saying Samper personally gave the order to distribute some $400,000 of drug money for his campaign.

POLISH PREMIER RESIGNS

Prime Minister Jozef Oleksy resigned after military prosecutors launched a formal investigation into allegations that he had spied for Moscow for more than a decade. Oleksy welcomed the probe as an opportunity to clear his name. President Aleksander Kwasniewski asked Oleksy to stay on until he could assemble a new government.

BOSNIAN SERBS COOPERATE?

Bowing to pressure from Serbian President Slobodan Milosevic, Bosnian Serb leaders agreed to release some 180 prisoners of war and allow a full probe into suspected mass graves. They also pledged cooperation with war-crimes investigators. The commander of NATO-led forces in Bosnia said there may be 200 to 300 mass graves in Bosnia. As many as 7,000 people are missing from Srebrenica alone, which was overrun by Bosnian Serb forces last July. By week's end, Bosnian Croats and Muslims had freed 250 prisoners; the Serbs none.

VOTE MARRED BY MISTRUST

Charges of falsified counts, intimidation at the polls and missing ballot boxes have delayed final results of the Palestinian elections, which were intended to set a standard for democracy in the Arab world. P.L.O. chairman Yasser Arafat, in the race for President of the Palestinian Council, crushed challenger Samiha Khalil with 88% of the valid vote. Preliminary results showed his Fatah organization won about 50 of the 88 parliamentary seats.

BROKEN TRUST

Former South Korean Presidents Chun Doo Hwan and Roh Tae Woo were already in jail on corruption charges; last week the two ex-generals were indicted for treason in connection with the 1980 "Kwangju massacre," in which hundreds of demonstrators were killed. They could face the death penalty.

BUSINESS

THE BIGGER THEY ARE ...

Japan's substantial trade surplus with the U.S. fell 17%, its first drop in five years. Many analysts expect the decline to continue, as Japan moves more manufacturing offshore and the high yen encourages imports.

ORANGE COUNTY SETTLEMENT

In a move that some considered a slap on the wrist, the Securities and Exchange Commission filed civil charges against Orange County, its board of supervisors and its two top financial officials. The sec cited fraud, misrepresentation and a failure to disclose key information in the sale of 11 highly risky bond issues, but the agency did not seek financial penalties. The county filed for bankruptcy 13 months ago.

TOBACCO: NEW ALLEGATIONS

The former chief of research at Brown & Williamson, the nation's third largest cigarette manufacturer, accused his company's former chairman of perjury. In a pretrial deposition obtained by the Wall Street Journal, Jeffrey Wigand charged that in 1994 chairman Thomas Sandefur told Congress he did not believe nicotine was addictive when in fact he was saying privately that his company was "in the nicotine-delivery business." Wigand also accused B&W lawyers of concealing potentially damaging research. The disclosure prompted cbs News to air on Friday part of a 60 Minutes interview with Wigand that it had declined to broadcast earlier for fear of a lawsuit. The full interview will be broadcast this Sunday.

SCIENCE

FAKE-FAT DIP, ANYONE?

Olestra, the fake fat that took Procter & Gamble 25 years and $200 million to develop, finally won FDA approval. Critics still contend that the zero-calorie, zero-cholesterol fat impostor, which passes through the body without being digested, causes unwanted side effects--among them diarrhea, cramps and, in rare cases, anal leakage. It can also rob the body of nutrients. Olestra products will carry a warning label.

THE ARTS & MEDIA

AMERICAN FIASCO IN PARIS

The venerable American Center in Paris is closing down. Just 19 months ago, the center unveiled a dazzling new $41 million building designed by West Coast architect Frank Gehry, but construction costs ate up the center's entire endowment, leaving nothing for running the literature, language and dance classes that had made the center the pre-eminent showplace for American artistry in Europe.

--By Charlotte Faltermayer, Janice M. Horowitz, Lina Lofaro, Belinda Luscombe, Jeffery C. Rubin, Alain L. Sanders and Sidney Urquhart