Case Closed on Shleifer

Knowles says ‘appropriate action’ taken, but ethics panel members upset

The Faculty of Arts and Sciences has concluded its ethics inquiry into allegations that Jones Professor of Economics Andrei Shleifer ’82 defrauded the U.S. government, but neither Shleifer nor FAS officials would say whether the University had punished the renowned economist.

Interim Dean of the Faculty Jeremy R. Knowles said yesterday that “appropriate action” had been taken in the investigation, brushing aside charges that he mismanaged the Shleifer case by acting without consulting the committees that had investigated the matter.

The seven-member Committee on Professional Conduct (CPC), along with a three-member investigating subcommittee, scrutinized Shleifer’s purported role in conspiring to defraud the U.S. government by making private investments in the Russian economy while he helped advise a federally sponsored and Harvard-run aid program there.

In recent weeks, however, Knowles’ silence on the matter has disturbed members of the CPC and the investigating subcommittee. Several committee members are upset with the dean’s management of the issue and some have questioned whether the case was handled fairly, according to two individuals who have spoken with professors on the committee.

The individuals were granted anonymity because the Shleifer case is considered confidential. Members of the committee have declined to comment publicly on the investigation.

Shleifer, who was in Amsterdam to deliver a lecture, declined to say whether he had been punished by Knowles.

“I am delighted that this matter is fully behind me,” he wrote in an e-mail message sent from his BlackBerry. “I look forward to following [Knowles’] advice and focusing my energies fully on scholarship, teaching, and on service to economics and to [H]arvard.”

Shleifer’s statement appeared to indicate that he would remain at Harvard as a professor. The individuals close to CPC members said it would be unlikely for Knowles to revoke Shleifer’s tenured teaching post—a move that would require the approval of the Harvard Corporation, the University’s top governing body.

For Shleifer, the investigation’s conclusion marks an end to a saga that has dogged the 45-year-old’s career for nearly a decade. A federal judge found him liable for conspiring to defraud the federal government in 2004, and last year, Harvard paid $26.5 million to settle the case, while Shleifer, who has denied any guilt, paid $2 million.

When Knowles took over as interim dean this past July, he received the CPC subcommittee’s report on Shleifer. The dean has declined to detail the contents of the report or to say whether Shleifer has been punished, citing FAS policy against commenting on personnel matters.

“This case raised important issues, which have been thoroughly investigated according to the published procedures of the Faculty, and appropriate action has been taken,” Knowles wrote in an e-mail.

He added that he had communicated the “appropriate action” to Shleifer in a recent letter.

Knowles was the dean of FAS in 2002 when Shleifer was originally elevated to the Jones professorship. That was three years after Shleifer received a prestigious prize awarded to the top American economist under age 40, the John Bates Clark Medal, which his close friend, Lawrence H. Summers, had won six years earlier.

While Shleifer was an undergraduate at Harvard, he was hired as a research assistant by Summers, then an MIT assistant professor, according to The Journal of Economic Perspectives. And prior to Shleifer’s appointment as the Jones professor, around the time that Shleifer’s once-and-future boss became Harvard’s president, Summers told Knowles that he “was concerned to make sure that Professor Shleifer remained at Harvard” because of Shleifer’s academic potential, according to a 2002 deposition given by Summers.

Summers later told The Crimson that he recused himself from the Shleifer case “within a few days since I took office.” The Corporation’s senior fellow, James R. Houghton ’58, and the University’s former top lawyer, Anne Taylor, have both publicly stated that Summers had no involvement in the Shleifer litigation.

Interim President Derek C. Bok has also said he would not participate in any disciplinary decisions regarding Shleifer because of his role as an adviser to both the Corporation and Shleifer during the Summers presidency.

The Shleifer case has been a source of discontent in the Faculty of Arts and Sciences, especially during Summers’ tenure. Some professors believe that Shleifer received preferential treatment due to his close relationship with Summers.

In February, McKay Professor of Mechanical Engineering Frederick H. Abernathy contributed to the downfall of Summers when he asked the then-president about the case.

When Summers said that he was not sufficiently knowledgeable about the case to express an opinion, he lost the support of several senior FAS professors and members of the Corporation, The Crimson has reported.

The Shleifer case is not on the Faculty’s agenda for next Tuesday, but the topic could be raised during the meeting’s free-for-all “question period.”

Abernathy said that he has no plans to resuscitate the case at next week’s meeting, but he hopes that in light of Knowles’ statement, some of his colleagues will press the issue.

“I don’t think that the faculty should be satisfied,” Abernathy wrote in an e-mail.

Though FAS regulations do not require Knowles to make his course of action public, he is not bound by the same confidentiality rules that prevent CPC members from speaking publicly about the case.

One CPC member, speaking on condition of anonymity, emphasized that in misconduct cases, “the Dean of the Faculty is free to make any statement he wishes.”

In light of a July Crimson story confirming that a report on Shleifer had been delivered to Knowles, “it would be appropriate for some faculty member at the October 17 faculty meeting to ask the Dean what action has been taken,” the CPC member added in an e-mail.

FAS rules state that investigations of misconduct should be kept confidential “to the extent that it is appropriate and consistent with other obligations of the Faculty.”

Several CPC members believe that Knowles has an obligation to inform the committee of his course of action, and some members believe the decision should be made entirely public, the two individuals close to CPC members said. The sources added that at least three members of the CPC did not know the details of Knowles’ decision.

The CPC’s chairman, Stanfield Professor of International Peace Jeffry A. Frieden, said that while some deans have in the past kept the CPC in the loop on decisions, “it is really up to the discretion of the dean.”

“These cases are very sensitive. They involve people’s careers,” he added.

In addition to Frieden, the CPC includes physicists Paul C. Martin and Gary J. Feldman, English professor Philip James Fisher, Government Department Chair Nancy L. Rosenblum, geologist John H. Shaw, and chemist Gregory L. Verdine. The investigating subcommittee’s membership is considered confidential, and it includes professors not on the CPC. The two sources said the subcommittee is composed of a Law School professor and two FAS members.

—Staff writer Javier C. Hernandez can be reached at jhernand@fas.harvard.edu.