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Colleges Cope With Inquiry

Anti-Trust Probe

By Tara A. Nayak

As a massive federal investigation into possible antitrust violations by prestigious colleges forged ahead, Harvard this year assumed a leading role in coordinating legal defense efforts among the schools under scrutiny.

The investigation began last summer, when the Justice Department sent requests to a few northeastern schools--including Harvard--requesting every document relating to tuition, financial aid and faculty salary practices for the last five years. In the coming weeks, the Justice Department slowly expanded its investigation, until 58 schools had acknowledged they were under scrutiny.

The Justice Department still will not say what prompted its investigation, but many observers speculate that the unprecedented high coast of education drew public scrutiny to the schools' financial practices, some of which were of dubious legality. For instance, experts agreed that the practice of sharing financial aid information in so-called overlap groups, in an effort to offer similar financial aid packages to the same students, could amount to illegal collusion.

Most of the schools called in outside counsel, both to help sort through the years of records and to build a defense against the allegations. And many of them, including Harvard, retained high-profile Washington law firms that ware familiar with federal corporate litigation.

That, of course, proved costly, as some schools spent as much as $500,000 on information gathering and outside counsel.

Meanwhile, Harvard spearheaded the efforts to provide a common defense for the colleges.

Vice President and General Counsel Daniel Steiner '54 was one of the principal authors of a "white paper" submitted to the Justice Department this winter on behalf of a group of colleges. Steiner, representing those same schools, later met whit Justice Department officials to discuss that paper and other matters relating to the investigation.

Meanwhile, Yale University and at least one other school dropped out of the overlap groups this spring to shield themselves from further possible legal damage.

In April, the Justice Department appeared to narrow the investigation's scope. A second round of letters, sent to only a few of the schools, demanded information going back five additional years, but requested only documents on tuition-setting. Some hoped that meant the Justice Department was satisfied with the current financial aid practices.

But experts were quick to warn against second-guessing the Justice Department.

"There's probably enough antitrust risk given the state of the law that I would have to tell them to stay out of [the overlap groups]," an antitrust lawyer representing one of the 58 schools says.

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