Larry Summers: "The World's a Shitty Place"
That's what obscenity-prone Larry Summers told scandal-tarred financier Nancy Zimmerman, the wife of equally scandal-tarred economist Andrei Shleifer, when discussing the possibility of Zimmerman and Shleifer becoming involved in Russia's economic transition from communism to democracy.
Respected journalist David McClintick, author of Indecent Exposure, reports that fact for his story, "How Harvard Lost Russia," reported in this week's Institutional Investor. (You may have to sit through an E-bay ad to get to the story.) McClintick's article is a lengthy, exhaustively-reported, and utterly damning account of Shleifer's corruption—and it doesn't make Larry Summers look so great either.
Shleifer, as you may know, was found liable for conspiracy to defraud the United States government; Shleifer, some of his associates, and Harvard were compelled to pay $31 million to make restitution.
It would appear from McClintick's story that Shleifer got off easy.
McClintick's article, as the magazine describes it, "chronicles Shleifer's role in the university's Russia Project and how his friendship with Summers has protected him from the consequences of that debacle inside America's premier academic institution."
Boy, does it ever. The chronicle of Shleifer's unbridled greed, arrogance and deception is incontestable and sickening—and Summers is deeply implicated in trying to cover it up.
A few things, with some italics on my part.
1) McClintick writes that
Summers "knew [Shleifer and Zimmerman] were investing in Russia" even while they were on government contract to help build Russian economic institutions. "Summers had heard enough to caution the couple," McClintick points out.
Larry Summers, a former Treasury secretary, surely knew the federal conflict-of-interest laws surrounding such work, and as current Harvard president, he must have known that, by investing for personal gain, Shleifer and Zimmerman were breaking both federal law and Harvard regulations.
I don't know if this makes Summers legally culpable as some sort of accomplice (though he certainly wasn't charged with any crime)—but if you know someone is committing a crime and you do nothing about it, what does that make you? Does it make you fit to lead a university filled with young people? A university with the motto "Veritas"?
2) And what if you do more—what if you actually work on behalf of your friends' illicit interests? In a deposition, McClintick writes, "Summers hinted [that]...he felt his friend Shleifer might have been unfairly accused—that
there was nothing necessarily wrong with 'providing advice on a financial issue in which one had an interest.'"
Let us remember the specifics here. Shleifer was giving advice about U.S. investments in Russia event though he had made secret financial investments in specific companies; he had not disclosed his financial interests, because he was legally forbidden to have them in the first place.
If Larry Summers doesn't think it inappropriate to give financial advice without disclosing a financial interest in the matter at hand, the possibility for corruption on the Harvard Corporation is significant. Let us not forget that one of the reasons Jack Meyer left the Harvard Management Corporation is because Larry Summers and Bob Rubin were trying to compel him to make specific financial decisions. Members of the Board of Overseers should immediately ask whether Summers and Rubin have given advice on any matters in which they have financial interests.
3) What if you not only knew of your friends' illicit activities, not only tried to cover them up, but actually
promoted the wrongdoer?
Here's McClintick, again with italics added, on the quid-pro-quo between Summers and Shleifer:
"[When] it became known in early 2001 that Summers was on the short list of candidates to succeed Neil Rudenstine...Shleifer and Zimmerman began campaigning for Summers to get the Harvard post, giving meet-and-greet parties for him at their home. Summers stayed with them when he visited Harvard...
"Having his close friend as his boss would turn out to be quite helpful for Shleifer.
Summers asserted in his deposition that he recused himself from any involvement in the university's handling of the Shleifer matter, but the new president stayed involved anyway. [R.B.: Is this perjury?] Early in his presidency [Summers] told the dean of the faculty of arts and sciences, Jeremy Knowles, to keep Shleifer at Harvard... Not long after Summers says he intervened on the professor's behalf, Knowles promoted Shleifer from professor of economics to a named chair, the Whipple V.N. Jones professorship....
"Shleifer's legal position changed on June 28, 2004, when Judge Woodlock ruled that he....had conspired to defraud the U.S. government.... Still, there was no indication that the Summers administration had initiated disciplinary proceedings. To the contrary, efforts were seemingly made to divert attention from the growing scandal."
Even after Shleifer was convicted, Summers kept the professor close. "The Summers-Shleifer friendship flourished. They spoke on the phone more than once a day, on average. Two months after the court ruling against Shleifer, he hosted Summers at a break-the-fast dinner on Yom Kippur."
And when a number of professors tried to initiate disciplinary proceedings against Shleifer, they became convinced that Summers was blocking any such action.
The decision whether to take any action regarding Andres Shleifer is, ostensibly, before Bill Kirby, but there's circumstantial evidence that he, too, has been intimidated by Summers. On two occasions, when pressed by faculty members to do something, Kirby "turned red in the face and angrily cut off discussion."
Does Bill Kirby have a spine? And if so, could someone find it for him?
Two concluding thoughts.
It is a moral embarrassment to Harvard that a crook—a man hired to help a new democracy take flight who instead plundered its emerging riches, and defrauded the United States government in the process—is still a member of its faculty, sheltered under the wing of its president.
And second, Larry Summers has consistently argued that Harvard must take a broader and more proactive role in international affairs. If the Shleifer matter, and Larry Summers' role in it, are any indication of what a greater overseas presence for Harvard would look like, then his argument must be rejected. Because Harvard's international presence can only be as moral as the men and women who are involved in it.
