Harvard-Russia Aid Funds Probed
Filed at 9:34 a.m. EST
BOSTON -- Two Harvard University staffers who took part in a federally funded program to establish capitalism in Russia are being investigated to determine if they profited from stock investments there at the same time, The Boston Globe reported today.
Andrei Shleifer, an economics professor, and lawyer Jonathan Hay both worked for the Harvard Institute for International Development, which was paid $43 million by the U.S. Agency for International Development (USAID) to advise Russian President Boris Yeltsin and his economists.
Federal investigators want to know if Shleifer and Hay violated federal law by profiting from investments made in Russia's stock market by Shleifer's wife and Hay's girlfriend, the Globe reported, citing anonymous sources.
USAID's own investigation already concluded that Shleifer and Hay gained influence over Russian capital markets they were helping establish, and had ``abused the trust of the United States government by using personal relationships ... for private gain.''
USAID canceled its contract with the institute in 1997 and eliminated the final $14 million of a $57 million grant.
The Harvard institute's rules prohibit employees or members of their families from investing in the country they are advising.
Shleifer and Hay, who were dismissed from the institute, have denied the allegations. Shleifer's wife, Nancy Zimmerman, and Hay's girlfriend, Elizabeth Hebert, denied any conflict of interest in their investments.
Among the allegations: that Hay invested in Russian government securities while advising the Yeltsin government on capital markets, and the he helped Hebert establish a Russian mutual fund.
Hay is no longer associated with Harvard; Shleifer is still a professor.
Shleifer's lawyer, Earl Nemser, acknowledged that there is an investigation, but said he understands it does not involve his client.