‘Tawdry Shleifer Affair’ Stokes Faculty Anger Toward Summers

Six months after the University paid $26.5 million to settle a government lawsuit implicating Harvard economist Andrei Shleifer, controversy over the case has erupted anew and fed the Faculty’s current uprising against Shleifer’s close friend, University President Lawrence H. Summers.

“I’ve been a member of this Faculty for over 45 years, and I am no longer easily shocked,” is how Frederick H. Abernathy, the McKay professor of mechanical engineering, began his biting comments about the Shleifer case at Tuesday’s fiery Faculty meeting.

But, Abernathy continued, “I was deeply shocked and disappointed by the actions of this University” in the Shleifer affair, which was detailed in a lengthy magazine article that jolted many professors out of their reading period slumber last month.

Shleifer, the Jones professor of economics, was found liable by a federal court in 2004 for conspiracy to defraud the U.S. government while leading a Harvard economic reform program in Russia as it transitioned to capitalism in the 1990s. Shleifer settled the case for $2 million.

The article, in the January issue of Institutional Investor magazine, suggests that Shleifer’s relationship with Summers shielded the professor from the consequences of the scandal while at Harvard.

At Tuesday’s meeting, many professors let out murmurs of disbelief when Summers said he was not sufficiently familiar with the facts of the case to comment on it.

“I have taken no role in Harvard’s activities in the courts, nor...familiarized myself with the facts of the situation,” Summers told Abernathy.

“Do you have no opinion of this situation?” Abernathy queried in response, having already stepped away from the microphone.

“I am not knowledgeable of the facts and circumstances to be able to express an opinion as a consequence of my recusal,” Summers said, eliciting more murmurs from the audience.

‘THERE MIGHT BE A SCANDAL’

The 18,000-word article, “How Harvard Lost Russia,” by investigative journalist David McClintick ’62, is a copious narrative of the activities of the Harvard Institute for International Development (HIID) in advising the Russian government while supported by funding from the State Department’s Agency for International Development (AID).

Federal prosecutors have charged that Shleifer and his wife, hedge fund manager Nancy Zimmerman, violated State Department conflict-of-interest restrictions by investing in Russia beginning in 1994.

The U.S. government filed an 11-count lawsuit in September 2000 against the University, Shleifer, Zimmerman, former Harvard employee Jonathan Hay, and Hay’s wife Elizabeth Hebert.

McClintick’s article alleges that Summers knew that Shleifer and Zimmerman had been investing in Russia, but not that Summers knew specific details of the investments.

In an e-mail last night, Summers’ spokesman reiterated the stance the president took at the Faculty meeting Tuesday, insisting that Summers could not comment because of his recusal.

“The president’s position is that without specific knowledge of the arguments in evidence offered in the litigation from which he was recused, he is not in a position to comment on the matter,” the spokesman, John D. Longbrake, wrote.

But in an August 1996 scene recounted in McClintick’s article, Summers, then the deputy secretary of the Treasury, told the couple it would be “a good idea for Andrei to make sure he was operating within the rules of whatever legal arrangements he had with Harvard.” Summers told Zimmerman she “should just think hard” about her activities, the story reported.

“There might be a scandal, and you could become embroiled,” Summers told Zimmerman, according to the article. “The world’s a shitty place.”

‘UNTHINKABLE’

Years later, after Summers became University president in 2001, he “was concerned to make sure that Professor Shleifer remained at Harvard” and expressed as much to then-Dean of the Faculty Jeremy R. Knowles, Summers testified in a 2002 deposition quoted in the article. Knowles later elevated Shleifer to an endowed professorship.

On June 28, 2004, a U.S. district court found Shleifer liable for conspiracy to defraud the U.S. government, and concluded that Harvard had breached its contract with the government. Under the settlement, announced in August, neither the University nor Shleifer admitted any liability.

But as became apparent at Tuesday’s meeting, a number of professors remain unconvinced that Summers’—and Harvard’s—hands are clean.

“The outcome of the tawdry Shleifer affair...would have been unthinkable—unthinkable—during the last two presidencies, but is all too characteristic of the present malaise,” Agassiz Professor of Zoology Farish A. Jenkins Jr. told Summers at the meeting.

Abernathy said yesterday that he was not satisfied with Summers’ response that he knew too little about the matter to comment on it.

“I’m sure he’s more familiar with the facts than I am or you are,” Abernathy said. “I would have been very pleased had President Summers said that it was a sorry event in Harvard’s history but it’s behind us, and I have recused myself from it, and I’m not going to make any comments one way or the other.”

One of Shleifer’s colleagues, Professor of Economics David I. Laibson, yesterday expressed his department’s support for one of its stars.

“By any measure, he is on a Nobel Prize winning trajectory,” Laibson wrote in an e-mail. “We are very lucky to have Shleifer as a colleague. And that view is shared by everyone in our department.”

Shleifer yesterday declined to comment on McClintick’s article or on the meeting.

“I wasn’t there and I don’t have anything to say,” he wrote in an e-mail.

‘IS IT TRUE?’

McClintick, a former investigative reporter for The Wall Street Journal and the author of three books, said in a telephone interview last night that his research, which included two trips to Russia and a close reading of the “very revealing” court record, had helped shed light on the Shleifer affair by presenting a detailed account of the whole matter in a single article.

But until the story’s publication, many professors were wary of discussing the matter.

“There is a good deal of pent-up concern about this on the Harvard Faculty, but many Harvard Faculty members have been reluctant to speak out,” McClintick said. “Most of the conversations I had [with faculty] were away from Harvard Square, away from Cambridge, in people’s homes late at night.”

Now, thanks to McClintick’s article, the Shleifer matter is getting broader attention from observers.

“A number of people have contacted and asked me about [the article],” said Harry R. Lewis ’68, the McKay professor of computer science. “People I haven’t heard from in years...have called me up and said, ‘Is it true?’”

Lewis is writing a book about Harvard, which claims, in a passage quoted in McClintick’s piece, that the “relativism with which Harvard has dealt with the Shleifer case undermines Harvard’s moral authority over its students.”

Shleifer, meanwhile, remains a senior Faculty member with a coveted endowed professorship. Yet some Faculty members speculate that Harvard has pursued or is considering disciplinary action against him.

The group of professors that usually investigates complaints against Faculty members, the Committee on Professional Conduct, operates confidentially. But Abernathy said yesterday that outgoing Dean of the Faculty William C. Kirby told him that the committee may be examining the Shleifer case.

“Kirby said to me such things are normally heard by [the committee],” Abernathy said. “But his remark was noncommittal.”

Kirby’s spokesman, Robert Mitchell, declined to comment on that possibility, citing Faculty policy.

Yet even as much of the controversy surrounding the Shleifer affair centers on circumstantial evidence and speculation, it has provided ammunition for some of Summers’ most vocal critics.

J. Lorand Matory ’82, professor of anthropology and of African and African American studies, called Summers’ responses at the Faculty meeting to queries about the Shleifer matter “nothing short of disgusting.”

“He cares so little for Harvard’s name and Harvard’s mission to do good in the world,” Matory said of Summers.

—Evan H. Jacobs contributed to the reporting of this story.
—Staff writer Nicholas M. Ciarelli can be reached at ciarelli@fas.harvard.edu.
—Staff writer Anton S. Troianovski can be reached at atroian@fas.harvard.edu.