Feds Sue Harvard Over Russia Advisers

ByABC News
September 27, 2000, 8:58 AM

B O S T O N, Sept. 27 -- 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 Harvardlegal expert Jonathan Hay abused their positions as high-leveland trusted advisers to and on behalf of the United States inRussia, according to the suit.

The government said the two men played major roles in theHarvard Institute for International Development in Russia, whichreceived $40 million in federal funds to advise Russia onprivatization, capital markets and legal reform after the fall ofthe Soviet Union in 1991.

Harvard closed the institute in January.

The Justice Department said Hay and Shleifer, along withShleifers wife and a woman now married to Hay, made investmentsand business deals in Russia that were in conflict with theirduties.

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

What the United States of America was bargaining wastransparency, a conflict-free, bias-free set of advisers, U.S.Attorney Donald K. Stern said. Thats what the bargain was andthey failed to produce it.

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

Through their lawyers, the four defendants denied anyimproprieties.

We are confident that, as the civil case unfolds, the courtwill confirm that the Harvard program significantly fosteredRussian reform and that the government received its moneysworth, said David Zornow, Hays lawyer.

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