"A Narrow and Technical Issue"

A propos the recent discussion of Harvard's ethical blindspots, Michael Perry (Law, Emory) calls to my attention this thoughtful critique of Harvard's handling of misconduct by another member of its faculty; an excerpt:

Did the customary conflict-of-interest provisions apply to Harvard economist Andrei Shleifer when, under contract to the U.S. government in the mid-1990s, the young professor led Harvard's mission to Moscow?

After a three-day trial last week, a jury took barely more than two hours to decide that indeed they did.

With the verdict, the government's case against Harvard University and one of its star economists moved to a new level. Harvard's potential liability escalated somewhat, beneath a roughly $40 million ceiling.  So did Shleifer's personal exposure, conceivably as much as $120 million, on a charge of submitting false claims.

U.S. District Court Judge Douglas Woodlock entered a summary judgment against both defendants last summer -- Shleifer on a previous count of fraud for having attempted to set up a mutual fund business with a colleague, Harvard on breach of its contract to provide disinterested advice, rather than the treble-damages False Claims Act violation for which the government had asked.      

What the jury's verdict really changed, according to attorneys for two of the three main parties in the matter, were the incentives to settle the case.

Now that Harvard's bold claim has failed -- that it didn't matter if its chief adviser to the government of Russia invested hundred of thousands of dollars in Russian securities, since he was living in Newton, Massachusetts, at the time and commuting only periodically -- attorneys for all sides once again will meet and attempt to come to terms....

Harvard's reaction Thursday was terse. "Today's verdict related to a narrow and technical issue in the case.  Harvard remains confident that as the matter proceeds we will demonstrate that the work on the Russia Project was of great value to both the Russian Federation and the United States government...."

...

Justice Department attorney Sara McLlean made the government's opening argument. "This is a case about conflict of interest rules and common sense," she began. "Harvard professor Andrei Shleifer was the head of a very important foreign aid project in Russia, and now his lawyers and Harvard's lawyers are going to come in here and tell you that the conflict of interest rules for that project didn't apply to him.

"The conflict of interest rules in question said that people couldn't invest in the foreign countries to which they were assigned, and as Judge Woodlock has just told you, the question for you is going to be: Was Russia a foreign country to which Professor Shleifer was assigned?"  The answer, asserted McLean, would be yes.

The single most compelling piece of evidence the government offered probably was a letter Shleifer wrote in June 1995 to Jim Norris, the Moscow representative of his employer, the U.S. Agency for International Development.

"Dear Mr. Norris,"

"Thank you for your letter. Indeed I was well aware of your interest in meeting me. It is certainly my intention to keep you informed about the status of the HIID [Harvard Institute for International Development] projects. I very much wanted to meet with you on my last trip, but it was simply impossible. This was a very short trip, made more or less on an emergency basis at [privatization chief] Maxim Boycko's request, and I had no spare time at all.

"I arrived in Moscow on Friday evening.  Friday night, Saturday and Sunday morning were spent in a meeting with several Russians..., discussing the possibilities of tax reform in Russia.  The result of this was a memo prepared for Maxim.  Unfortunately, given my understanding with Maxim about the confidentiality of this work, I cannot send you a copy of the memo.

"I spent Sunday afternoon at the Legal Reform Project [which was drafting measures for regulatory reform], discussing mostly personnel issues that were absolutely urgent.  As you probably know, the reduction by USAID of post-differentials has created huge problems for several people, who wanted a compensatory raise and threatened to quit. It appears that these issues have been resolved, but at a great cost of time. I also spent some time on Sunday evening with [Federal Securities Commission chairman] Dimitri Vasiliev and Jonathan Hay discussing the future of the Securities Commission and the GKI.

"As you can see, I had a pretty packed trip -- even more so than usual. While I realize that it is important for me to see USAID when I come to Moscow, you should recognize the workload that I have since Maxim's and [soon-to-be chief economic adviser Anatoly] Chubais' promotions have been put in place has risen enormously.

"You also have permanent access to Maxim, Jonathan and others who reside in Moscow, and who are obviously intimately familiar with all HIID's activities.  Thus, while I intended to make every effort to see you, I hope you appreciate the level of activities that I have to monitor and be involved in. And, as I have already mentioned to you..., the efforts to uses others to perform many of these tasks simply have not worked.  I run an extremely lean operation in the U.S. and most people working for us insist on dealing with me."

Plenty of other evidence was introduced, including various Harvard blandishments of "impartial oversight" in response to government's help-wanted advertisement that "a completely neutral third party, void of any vested interest in the [privatization] contracting process, is required."

One Harvard proposal promised, "During the first year, Dr. Shleifer will work full-time on the project, dividing his time between the U.S. and Russia...."

...

Assistant U.S. Attorney Sara Bloom closed the government's argument. "In this country, no one is above the law," she began. "Today these defendants stand before you literally arguing that the rules, the conflict of interest rules of the United States government, do not apply to the Harvard professor who headed a $57 million U.S. government program in Russia.

"Would it make any sense to read this provision to apply to the American secretaries, to the bookkeepers, to the assistants, and not to the man at the top, the man who was giving advice to the Russian officials on the creation of securities markets in Russia, to the man who directed all the other employees, to the man who had the most information about the financial markets in Russia of everyone on the project?"

...

At 43, Andrei Shleifer no longer exhibits the boyish enthusiasm of the teenager who arrived from Russia in 1977 in Rochester, New York, knowing no more English than what he had learned from episodes of "Charlie's Angels" on television. Within a of couple years, a sharp-eyed recruiter had offered him a scholarship to Harvard College. And there, as sophomore, he entered into a life-changing friendship when he brashly offered to correct the math errors in a paper by first-year assistant professor of economics named Larry Summers. 

Today, Summers is president of Harvard University. Shleifer, too, has come a very long way. Despite the legal proceedings that have been grinding on against him for most of a decade, Shleifer has continued to rise in the economics profession. He sold his interest in a prosperous money management firm some years ago; he is a moderately wealthy man. Today, he edits the prestigious Journal of Economic Perspectives for the American Economics Association. He is considered a leading expert on finance, behavioral economics and, of all things, corruption....

Mainly, he is a man who does not seem to possess a fundamental understanding of the predicament in which he finds himself -- in the dock because of the moral compass of a handful of young government lawyers who considered that even Harvard University with its lofty good intentions must obey the law. He is hoist on his own petard in the very sort of legal system whose robust checks and balances he was supposed to explain to the government of the Russian Federation....

So why did the trial take three days?  Why did Harvard spend all that money on a question that took a laughing jury, unanimous from the start of its deliberations (by jurors' own accounts), little more than two hours to decide?

That is the really interesting question. There's something unexplained about Harvard continuing to defend the integrity of its professor, the expert on corruption who began investing in Russian securities with his deputy almost as soon as he got the advisor's job, who argues now that the conflict of interest rules didn't apply to him. 

That's what makes this such a fascinating case....The sheer audacity of putting so weak a case before a jury makes you think there must be something more at stake.

At a minimum, when the collective judgment of those who run America's oldest university differs so radically from the common sense of its everyday citizens, as expressed by the jury last week, the institution itself must be alarmed, and enter into a deeper self-examination.

And at a maximum? What if the men and women at the pinnacle of American education simply don't know wrong from right? The "narrow and technical issue" at the heart of Harvard's ill-fated Russia Project may be one of those innumerable pivots on which American history regularly turns.

Perhaps the myth of left-wing Harvard will have to be joined by the myth of ethical Harvard?