Feds Sue Harvard Over Russia Advisers

B O S T O N, Sept. 27, 2000 -- The federal government sued Harvard University and

four associates for $120 million on Tuesday, claiming that Harvard

staffers benefited personally from a U.S.-backed program to help

post-Cold War Russia make the transition to capitalism.

Harvard economics professor Andrei Shleifer and former Harvard legal expert Jonathan Hay “abused their positions as high-level and trusted advisers to and on behalf of the United States in Russia,” according to the suit.

The government said the two men played major roles in the Harvard Institute for International Development in Russia, which received $40 million in federal funds to advise Russia on privatization, capital markets and legal reform after the fall of the Soviet Union in 1991.

Harvard closed the institute in January.

The Justice Department said Hay and Shleifer, along with Shleifer’s wife and a woman now married to Hay, made investments and business deals in Russia that were in conflict with their duties.

Investing While AdvisingAmong other things, the lawsuit charges that Shleifer and his wife invested $200,000 in Russian companies and $60,000 in Russian government bonds.

“What the United States of America was bargaining was transparency, a conflict-free, bias-free set of advisers,” U.S. Attorney Donald K. Stern said. “That’s what the bargain was and they failed to produce it.”

The suit seeks $120 million in damages under the False Claims Act, which allows plaintiffs to seek triple damages.

Through their lawyers, the four defendants denied any improprieties.

“We are confident that, as the civil case unfolds, the court will confirm that the Harvard program significantly fostered Russian reform and that the government received its money’s worth,” said David Zornow, Hay’s lawyer.

Anne Taylor, Harvard vice president and general counsel, said the university upheld its end of the deal.