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Harvard denies owing damages in Russia case


By Marcella Bombardieri, , Globe Staff, 1/31/2003

arvard University sharply denied yesterday that it
owes damages to the federal government because two of
its employees made personal investments in Russia,
while they were working under a government contract,
that allegedly harmed relations between Washington and
Moscow. 

  

Harvard contends the civil suit against it is ''an
attempt on the part of the government to achieve a
more than $100 million windfall.''

Federal prosecutors argued last December in US
District Court that Harvard should pay a fine of up to
$102 million because two Harvard employees, Andrei
Shleifer and Jonathan Hay, used their influential
positions as advisers to the Russian government from
1994 to 1997 to make insider investments in Russia's
securities market and oil industry. The prosecutors
said the investments caused lasting damage to
US-Russia relations and tainted at least $350 million
in US projects.

In a strongly-worded response filed yesterday, Harvard
said that, although prosecutors said Shleifer and
Hay's dealings harmed US-Russia relations, the US
Agency for International Development has spent years
touting the benefits of the pair's work.

''Shleifer's and Hay's contributions to Russian reform
have been described by current and former United
States and Russian officials with words like
''brilliant,'' ''ingenious,'' ''fantastic,'' and
''colossal,'' the university said.

Harvard lawyers asked US District Judge Douglas P.
Woodlock to rule that the government cannot prove
actual damage and is therefore not entitled to
compensation.

A lawyer for Harvard added that the project
encompassed much more than the work of the two men.
Shleifer, an economics professor, led the project with
Hay, a legal specialist, as his deputy at the Harvard
Institute for International Development.

''The government's claim that the work on the project
was valueless is an insult to the scores of HID
employees and consultants who gave their soul'' to
rebuilding Russia, said attorney David J. Apfel,
representing Harvard.

Prosecutors say Harvard should return the $34 million
the government paid to the university from July 1994
to May 1997. But under the False Claims Act, Woodlock
could levy triple damages -- a total of $102 million.
The government contends triple damages are warranted
because Harvard ''refused'' to remove Shleifer and Hay
until after the government canceled the contract.



Marcella Bombardieri can be reached at

bombardieri at globe.com.

This story ran on page B2 of the Boston Globe on
1/31/2003.
© Copyright 2003 Globe Newspaper Company. 


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