Monday, August 8, 2005
The federal government settled its long-running civil False Claims Act case against Harvard University and two University advisors who worked on a program funded by USAID to provide advice to the post-Communist Russian government on how to structure a market economy. Harvard agreed to pay $26 to settle the false-billing claims, and the two advisors, Andrei Shleifer and Jonathan Hay, will pay approximately $4 million; a firm controlled by Shleifer's wife, through which the false billings were made, has already repaid $1.5 million. According to a press release (here) issued by the U.S. Attorney for the District of Massachusetts:
The United States' case provided extensive evidence that, despite the clear terms of the agreements, SHLEIFER, and HAY were making prohibited investments in Russia in the areas in which they were providing advice. The United States further demonstrated that SHLEIFER and HAY were self-dealing by using their positions, as well as USAID-funded resources, to advance their own personal business interests and investments and those of their wives and friends. Their self-dealing activities included using their influence over the Russian Securities Commission to which they were key advisors to secure for themselves and their wives the first ever launched and licensed mutual fund in Russia. The terms of the USAID grant strictly prohibited any investments in Russia by American advisors funded under the grant . . . The United States alleged and demonstrated that SHLEIFER, HAY and HARVARD never disclosed any of these prohibited personal business activities and/or investments to USAID.
The civil case was certainly a black-eye for Harvard, which failed to properly oversee Shleifer and Hay's activities. (ph)