Shleifer Report Sent to Knowles

The professional future of Jones Professor of Economics Andrei Shleifer ’82 rests in the hands of Harvard’s top officials, who are weighing a committee report issued last month on the economist’s alleged role in defrauding the U.S. government while he served as an adviser to Russia, people close to the committee said.

While the content of the report was not immediately clear, Shleifer could face penalties as severe as the revocation of his tenured teaching appointment, according to two individuals who have spoken with members of the Committee on Professional Conduct (CPC), the eight-member group investigating the matter.

Following standard procedure, the committee forwarded the results of its months-long investigation to interim Dean of the Faculty Jeremy R. Knowles last month, the two individuals said. Interim President Derek C. Bok and members of the Harvard Corporation—the University’s most powerful governing body—have also been briefed on the matter, one of the individuals said.

The sources spoke on the condition of anonymity because the committee’s work is considered confidential and the individuals agreed not to divulge what they had been told by committee members.

A federal court held Shleifer liable in 2004 for conspiring to defraud the U.S. government by privately investing in Russia while leading a Harvard economic reform program in the country. The Harvard program was funded by the U.S. government.

Last year, Harvard agreed to pay $26.5 million to settle the suit, in addition to a $2 million payment by Shleifer himself, who has denied any wrongdoing.

Knowles’ reaction to the report could be the first significant—and perhaps the most thorny—decision of his tenure as interim dean, which began Saturday.

Knowles was dean of the Faculty in 2001 when Lawrence H. Summers—a close friend of Shleifer—was named president. In a 2002 deposition, Summers acknowledged that earlier in his presidency, he had told Knowles that he was “concerned to make sure that Professor Shleifer remained at Harvard.” Knowles elevated Shleifer to the Jones professorship in 2002.

If Knowles recommends the retraction of Shleifer’s appointment, University rules dictate that he must go to the Corporation for implementation. The third statute of the University’s charter gives the Corporation the authority to remove professors only for “grave misconduct or neglect of duty.”

The committee’s report is the product of a three-person investigating subcommittee, which is formed only when the CPC determines that a case “merits further action,” according to FAS regulations. Under the same rules, the accused party is given the right to appear before the investigating subcommittee and to issue a response to the report that is sent to the FAS dean.

The subcommittee’s findings were unanimous, according to one individual in touch with committee members.

The identities of the three subcommittee members were not immediately known, but one individual said that a member of the subcommittee was affiliated with a non-FAS school.

Some professors have said that Summers’ affiliation with Shleifer contributed to his failed presidency, which ended last week after five turbulent years. Just weeks before his resignation, Summers said at a confrontational Faculty meeting that he did not know enough details to have an opinion on the Shleifer case, angering some Faculty members who saw his remarks as disingenuous.

The University’s decision to pay settlement costs and to allow Shleifer to maintain his teaching post have also irked some professors, who believed it might be the result of Shleifer’s close relationship with Summers. But in May, the Corporation issued a statement saying that Summers had been ”recused totally” from discussions about the litigation and any possible disciplinary decisions in the case.

An FAS spokesman declined to comment yesterday on the committee’s report, citing school policy. Shleifer also declined to comment for this story.

Shleifer is set to return to Harvard this academic year after a year-long leave of absence. In addition to a class on psychology and economics, he will co-teach a new course entitled “Economics 2470: Law and Economics.” He will also teach “Economics 980a: Political Economics,” according to the FAS course catalog.

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