Harvard University Scam Exposed by Feds
by Jim Kouri, CPP
Jim Kouri is Vice President of the
National Association of Chiefs of Police
Saturday, August 06, 2005
Harvard University is ordered to pay back over $20 million
to the US government as part of a settlement deal
resulting from a multi-million dollar scam. Two Harvard
employees are also ordered make restitution bringing the
total settlement to $31 million.
Two senior Harvard University advisors, Andre Shleifer
and Jonathan Hay were paid under a US Agency for
International Development grant to lead a project
to provide advice to the nascent Russian economy on
privatization following the fall of communism and
the creation of fair and open markets and the rule
of law. The US Attorney's Office alleged that instead,
Shleifer and Hay used their positions and substantial
influence over Russian officials at this pivotal time
in Russian history to advance their own and their spouses'
private financial interests.
Under a settlement, the total repayments will exceed
$31 million by Harvard University and it's two advisors.
Specifically the settlement calls for Harvard to pay $26.5
million; Shleifer to pay $2 million; and Hay to pay between
$1 million and $2 million. Also factored into the
settlement amount total is $1.5 million already paid to
the United States by FFIA, formerly known as Farallon
Fixed Income Associates, LP, a company owned by
Shleifer's wife, Nancy Zimmerman. In addition, Shleifer
and Hay have agreed to be debarred by USAID.
The defendants were entrusted with the important task
of assisting in the creation of a post-communist Russian
open market economy and instead took the
opportunity to enrich themselves. Such conflict of
interest activities only serve to undermine important
development programs, according to officials.
As evidenced by the hard fought five-year litigation
of this matter, the US Attorney's Office is committed to
protecting federal funding from misuse and ensuring the
adherence to the requirements of government contracts.
"Improper use of federal grant programs for the purpose
of self-enrichment will not be tolerated," said Peter D.
Keisler, Assistant Attorney General for the Civil Division.
"[This] settlement demonstrates our commitment to
fighting fraud and abuse against the United States wherever
we find it."
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 government further demonstrated that
Shleifer and Hay were self-dealing by sing 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 Civil Complaint alleged, and the Court found, that
while they were being paid by USAID, the two Harvard employees
engaged in the following prohibited investments and businesses
in Russia:
* Shleifer and his wife Zimmerman invested and reinvested $200,000
through Renova-Invest, a United States/Russian investment entity, in
various Russian companies and in Russian government debt;
* Shleifer, Zimmerman and Hay purchased several hundred thousand
dollars worth of shares in Russian oil companies, but placed the
ownership of those shares in the name of Shleifer's father-in-law;
and
* Hay and Shleifer participated in the launching and/or financing of:
Russia's first licensed mutual fund, which was started by
Elizabeth Hebert, Hay's then girlfriend, now wife; and Russia's
first licensed mutual fund depository, the First Russian Specialized
Depository, which was started by Hebert's business partner
and provided support services to the mutual fund.
The United States alleged and demonstrated that Shleifer,
Hay and Harvard University never disclosed any of these
prohibited personal business activities and/or investments
to USAID.
The Civil Complaint alleged that as a result of the
misconduct of the defendants, USAID funds expended on the
Project were diverted, abused and wasted. As a result
of the defendants' misconduct, USAID suspended and
ultimately terminated the HARVARD project in Russia.
"Conflicts of interest and corruption attack at the core
of what USAID strives to achieve for developing nations
throughout the world and are certainly two of the most
serious threats to the success of USAID sponsored
programs," stated Acting USAID Inspector General Bruce
Crandlemire.
"Eight years of intensive investigation and tireless
litigation on this case represents a firm and dogged
commitment by the offices charged with the
protection of federal dollars to the principle that
power and influence does not provide a free pass to
those who would attempt to exploit their positions
of public trust for private gain."
After extensive summary judgment briefings, US District
Judge Douglas P. Woodlock, in a one hundred-page opinion,
found liability against Shelifer and
Hay under the False Claims Act, and against Harvard
University for breach of contract
with USAID. At a federal civil trial, a jury found
additional liability against Shleifer for his violation of
the conflict of interest policy in USAID's contracts
with Harvard.
Jim Kouri, CPP is currently fifth vice-president of the National Association of Chiefs of Police. He's former chief at a New York City housing project in Washington Heights nicknamed "Crack City" by reporters covering the drug war in the 1980s. In addition, he served as director of public safety at a New Jersey university and director of security for several major organizations. He's also served on the National Drug Task Force and trained police and security officers throughout the country. He writes for many police and crime magazines including Chief of Police, Police Times, The Narc Officer, Campus Law Enforcement Journal, and others, and he's a columnist for TheConservativeVoice.Com. He's appeared as on-air commentator for over 100 TV and radio news and talk shows including Oprah, McLaughlin Report, CNN Headline News, MTV, Fox News, etc. His book Assume The Position is available at Amazon.Com, Booksamillion.com, and can be ordered at local bookstores. Kouri holds a bachelor of science in criminal justice and master of arts in public administration and he's a board certified protection professional. |
