John Harvard's Journal
The federal lawsuit concerning the conduct of the Harvard Institute for International Development’s advisory work on the privatization of Russia’s economy has been expensively settled, without any admissions of institutional or personal liability, as reported [“Russia Case (and Dust) Settle,” November-December 2005, page 59]. But an in-depth narrative of the underlying events has not been available, until now. The January issue of Institutional Investor, long the bible for the international money-management and finance industry, features as its cover article “How Harvard Lost Russia,” a 29-page account by David McClintick ’62 (www.institutionalinvestor.com). A journalist who has written extensively on the intersection of riches and regulation around the world, McClintick pieced events together from the several dozen depositions, the court records, hundreds of documents, and personal interviews in the United States and Russia; the principal Harvard-affiliated figures declined to comment. (Note: McClintick has been a member of the Harvard Magazine Inc. Board of Incorporators since 1991; he did not report on the Russia story for the magazine.)
McClintick details the politically pressured, freewheeling atmosphere during Russia’s transition from communism and a controlled economy toward new forms of government and market institutions in the early 1990s. He interweaves a chronology of the policies advocated by and management actions of the Harvard advisersJones professor of economics Andrei Shleifer and Jonathan Hay, J.D. ’92with the financial investments in Russian securities and start-up enterprises by them, family members, and associates. The article finds that the advisers did help launch Russia’s principal stock exchange, but quotes international observers who feel that the conduct of the Harvard experts and collapse of the advisory effort damaged Russian economic reform substantially.
Beyond Harvard’s $26.5-million share of the legal settlement (plus expenses) and the closing of HIID in the wake of the investigations, the experience has lingered in Cambridge because Shleifer and President Lawrence H. Summers have long been close friends: as student and teacher, during Summers’s service in Washington, D.C., and now in his Harvard presidency. In light of that relationship, Summers recused himself from the legal proceedings. The University has declined comment on the matter since the settlement. McClintick quotes faculty members who think that Shleifer should have been disciplined; the Faculty of Arts and Sciences, as is its norm, does not comment on any individual professor’s status.