The $26.5 Million Professor
Harvard has settled with the Department of Justice in the Harvard Institute for International Development fraud case. Under the terms of the settlement, Harvard will pay $26.5 million to the federal government. And that raises more questions about the fate of Harvard economist, and close friend of Larry Summers, Andres Shleifer.
Some background. In 1992, HIID won a $50-million contract from USAID to consult on Russia's transition from communism to capitalism. At the time, HIID—which no longer exists—was run by Shleifer. But it all came crashing down when the government charged Shleifer with insider trading, allegedly investing in companies he was directing US dollars toward. In 2000, the government filed a civil lawsuit against Harvard, charging fraud.
The settlement appears to be a victory for both sides. The government gets some money and some vindication; Harvard gets rid of a lawsuit that has dragged on for years, brought reams of bad publicity—it would bring more if it weren't so darn complicated—and could, if they'd lost a trial, have cost the university considerably more than $26.5 million.
So now comes the interesting part: What will Larry Summers do with Andres Shleifer? Though Shleifer is mysteriously on leave for the upcoming school year, he still has tenure at Harvard. He is officially the Whipple V. N. Jones professor of economics.
On the one hand, Shleifer has just cost the university almost $27 million. (Perhaps more, if you include legal fees.) On the other hand, he's one of Summers' close friends at Harvard. And though Summers was said to have recused himself, it's widely believed that he remains a staunch supporter of his friend.
Let's pose a hypothetical, to make this even more interesting: What would Summers do if the professor who cost the university that much money were African-American and taught African-American Studies? Or a female sociologist? Or an African-American anthropologist?
I think the answer is pretty clear; those people would no longer be teaching at Harvard. More: Summers would make an example of them.
At this point, Summers may have no choice but to bid farewell to Shleifer. Certainly the language of the Harvard Gazette story on the matter (see link above) doesn't bode well for Shleifer.
"We welcome having this matter behind us," Robert W. Iuliano, the University's vice president and general counsel, told the Gazette. "Over the course of the litigation, the Court has affirmed our position that the University engaged in no institutional wrongdoing. "
Note that phrase, "no
institutional wrongdoing."
A couple paragraphs down, the Gazette adds this: "The University was found liable only for breach of contract, and the Court made clear in its ruling that the conduct causing the breach was not done with Harvard's knowledge or to Harvard's benefit."
Hmmm...and we all know who did engage in that conduct, don't we? Is Harvard hanging Shleifer out to twist in the wind?
I find this drama fascinating from a moral and political perspective, but from a personal one, it must be tough for Summers. It can't be easy to have to fire a friend. But I don't see how Summers has any other choice.
Here's a question I don't know the answer to, and maybe someone out there can help: Do Harvard professors get paid while they're on leave? (I would think they do, except under exceptional circumstances.) More specifically, is Shleifer going to be paid this school year?
(Are you out there, Harvard Crimson?)
If so, hasn't he cost Harvard enough?
