Uncertain Outcome for Accused Harvard Scholar

University ends its ethics inquiry into Andrei Shleifer, who was charged with defrauding U.S. But was he punished?
October 13, 2006


Andrei Shleifer has weathered a lot in recent years, including a legal settlement in which Harvard University agreed to pay $26 million to resolve claims that he and other leaders of a project in Russia were liable for conspiracy to defraud the United States government. And his colleagues have grumbled that he benefited from favoritism shown by his friend and Harvard's former president, Lawrence H. Summers. Now, it appears that he has withstood a Harvard ethics investigation with his job intact, although exactly what the inquiry found remains a mystery.

The interim dean of the faculty, Jeremy R. Knowles, was quoted in The Harvard Crimson saying that "appropriate action” had been taken against Shleifer, who is the Jones Professor of Economics. However, Knowles declined to answer questions about whether Shleifer had been punished for his actions. The Crimson article also quoted faculty close to the investigation expressing concern that the case had not been handled fairly by Knowles.

“In other cases of professional misconduct, without the millions of dollars lost, just charges of plagiarism, university officials have made public statements,” said Harry Lewis, the Gordon McKay Professor of Computer Science and a former dean of Harvard's main undergraduate college. In a recent book on Harvard, Lewis documented recent investigations of mere scholarly misconduct that were later publicly aired in statements by the university president.

Shleifer is out of the country and did not answer a question asking if he had been punished. “I am sitting on an airplane ready to take off. I gave a comment to the Crimson yesterday, which was printed accurately,” he responded via BlackBerry.

His assistant, Lori Reck, sent an e-mail with the statement that appeared in the paper. “I am delighted that this matter is fully behind me.  I look forward to following Dean Knowles' advice and focusing my energies fully on scholarship, teaching and service to economics and to Harvard.” Shleifer also declined to answer similar questions posed by the Crimson, said its reporter, Javier C. Hernandez.

While testifying to a federal grand jury that was investigating Shleifer, Knowles stated that faculty should know the regulations prohibiting conflicts and “understand the spirit, not just try to squeeze past the letter….” Knowles did not return e-mails or a telephone call seeking comment.

A subcommittee of Harvard’s Committee on Professional Conduct carried out the investigation and a committee member, the physicist Gary Feldman, said that the subcommittee's report is a confidential, fact finding document that may or may not recommend disciplining Shleifer. However, Knowles is free to make a statement, release the report and punish Shleifer, Feldman said.

“The case has received so much  outside attention that that it would probably be in Harvard’s interest to make public what action has been taken,” said Feldman.

The most detailed story on Shleifer and the role he played in bringing about the huge fine levied against his institution has been written by Harvard alum, David McClintick. A former investigative reporter for the Wall Street Journal, McClintick pored through documents and court transcripts to write "How Harvard Lost Russia."

“It’s hair raising,” said Lewis.

In the article, McClintick documents “an extraordinary display of overweening ‘best and brightest’ arrogance toward the rules and laws” by Shleifer and Harvard colleagues working in the 1990s to reform the Russian economy and introduce capitalism. Shleifer ran elements of the university’s renowned Harvard Institute for International Development. With a contract from the U.S. government's Agency for International Development, the Harvard institute advised the Russian government on ways to privatize its economy and create capital markets, as well as about laws and institutions for regulation.

Shleifer and his wife, the hedge fund manager Nancy Zimmerman, invested large sums of personal money in Russian oil and gas stocks even while Shleifer was providing the country with supposedly objective advice on privatization. The investments were hidden by registering the shares with Zimmerman’s father.

Harvard later fired Shleifer from his position at the Harvard institute, although he retained his tenured position in the economics department. Lewis says that Knowles later promoted Shleifer, who now holds an endowed chair.

Criminal charges were never filed and Harvard, Shleifer and others eventually settled years of litigation by agreeing to pay the U.S government $31 million.

Frederick H. Abernathy, McKay Professor of Mechanical Engineering at Harvard, has long been a critic of the whole affair. “I think it’s a disgraceful blotch on Harvard’s history,” he said. He then asked how faculty can expect ethical behavior from students when there is so little expected of faculty.

“Our president has published a statement saying that Harvard should be transparent, and have high moral standards and blah, blah, blah…. And it just seems that we haven’t done that,” he said.


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