Economics Professor Shleifer To Stay at Harvard

Award-winning professor, defendant in $102 million federal suit rejects NYU offer

Andrei Shleifer ’82, a prize-winning economist but also a co-defendant in a $102 million federal suit against the University, will remain at Harvard despite an offer from New York University’s Stern School of Business.

A leader in a variety of fields who lends star power to the economics department’s study of finance, Shleifer confirmed his plans to stay in an e-mail yesterday.

“I decided to stay at Harvard because I have incomparable colleagues and students here,” Shleifer wrote.

Shleifer had been courted by Stern, which wanted to add him to their finance department.

The Chronicle of Higher Education reported in early January that the school had tried to lure Shleifer away from Harvard with an offer of nearly $500,000.

In January, a spokesperson for New York University (NYU) disputed the dollar amount of the offer but declined further comment.

Officials and professors from NYU could not be reached for comment yesterday.

Though Harvard officials said in January they would push hard to keep Shleifer, none would say yesterday whether Harvard had made him a counter-offer.

Chair of the Economics Department Oliver S. Hart wrote only that he was “delighted” with Shleifer’s decision.

Morris University Professor Dale W. Jorgenson—who was unaware of Shleifer’s decision to remain at Harvard—said that the University is fortunate not to lose one of its top economics professors.

“He’s one of the leaders at the core of a very strong effort that has attracted a lot of interest by undergraduates and by Ph.D. students,” Jorgenson said. “This is going to mean an enormous amount to our department.”

Shleifer, 41, is a winner of the John Bates Clark Medal, which honors the nation’s top economist under age 40 and is seen within the field as nearly as prestigious as the Nobel Prize.

But he also represents a colossal liability for the University. Shleifer, Harvard and former employee Jonathan Hay are defendants in a federal suit that alleges they defrauded the U.S. government while running an economic advising program in Russia.

The U.S. Department of Justice argues that personal investments Shleifer made in Russia constituted a breach of contract and undermined his program’s mission to help manage Russia’s transition to capitalism.

A “disregard for ethics,” the government argues in court papers, taught Russians a lesson that was “the exact opposite from the one Harvard was paid to promote.”

Shleifer’s lawyers deny that his investments were improper and argue that they did not technically violate any rules.

The government is seeking $102 million in punitive and compensatory damages. According to one printed report, the University offered to settle for $24 million, but the case has moved forward.

The parties now await a ruling by U.S. District Court Judge Douglas P. Woodlock in the summary judgement phase of the suit.

Despite the allegations, Shleifer’s colleagues have steadfastly argued that Harvard should do what it could to retain him.

“He’s a very valued colleague and I hope the University will do the right things to have him stay,” Hart said in January.

Hart has said the government’s allegations should not play a part in the University’s calculus. “The lawsuit plays out in court, and that’s the right place,” he said at the time.

In addition to the support of his department, Shleifer also has a powerful ally in University President Lawrence H. Summers.

As a young professor, Summers advised Shleifer, and the two remain close friends.

In a deposition taken last year for the lawsuit, Summers testified that he had discussed with then-Dean of the Faculty Jeremy R. Knowles the need to retain Shleifer, come what may.

Summers has since recused himself from matters pertaining to the suit, but in January said through a spokesperson that he hoped Shleifer would remain on the faculty.

Shleifer, whose primary economic interests include applied theory, corporate finance and economic transition—is on leave of absence for the current academic year.

—Staff writer Jenifer L. Steinhardt can be reached at steinhar@fas.harvard.edu.