How Harvard lost Russia
Tuesday, January 24, 2006
Source: Institutional Investor Magazine, Americas and International Editions
The best and brightest of America's premier university came to Moscow in the
1990s to teach Russians how to be capitalists. This is the inside story of how their
efforts led to scandal and disgrace.
Since being named president of Harvard University in 2001, former U.S.
Treasury secretary Lawrence Summers has sparked a series of controversies that
have grabbed headlines. Summers incurred the wrath of African-Americans when
he belittled the work of controversial religion professor Cornel West (who left for
Princeton University); last year he infuriated faculty and students alike when he
seemed to disparage the innate scientific abilities of women at a Massachusetts
economic conference, igniting a national uproar that nearly cost him his job; last
fall brought the departure of Jack Meyer, the head of Harvard Management Co.,
which oversees the school's endowment but had inflamed some in the community
because of the multimillion-dollar salaries it pays some of its managers.
Then, in quiet contrast, there is the case of economics professor Andrei Shleifer,
who in the mid-1990s led a Harvard advisory program in Russia that collapsed in
disgrace. In August, after years of litigation, Harvard, Shleifer and others agreed
to pay at least $31 million to settle a lawsuit brought by the U.S. government.
Harvard had been charged with breach of contract, Shleifer and an associate,
Jonathan Hay, with conspiracy to defraud the U.S. government.
Shleifer remains a faculty member in good standing. Colleagues say that is
because he is a close longtime friend and collaborator of Summers.
In the following pages investigative journalist David McClintick, a Harvard
alumnus, chronicles Shleifer's role in the university's Russia Project and how his
friendship with Summers has protected him from the consequences of that
debacle inside America's premier academic institution.
ff duty and in swimsuits, the mentor and his protégé strolled the beach at Truro.
For years, with their families, they had summered together along this stretch of
Massachusetts' famed Cape Cod. Close personally and professionally, the two
friends confided in each other the most private matters of family and finance. The
topic of the day was the former Soviet Union.
"You've got to be careful," the mentor, Lawrence Summers, warned his protégé,
Andrei Shleifer. "There's a lot of corruption in Russia."
It was late August 1996, and Summers, 42, was deputy secretary of the U.S.
Treasury. Shleifer, 35, was a rising star in the Harvard University economics