The Times and the Shleifer Scandal
Posted on February 27th, 2006 in Uncategorized | 5 Comments »
On the third page of today’s New York Times business section, Sara Ivry weighs in with a piece about the influence of David McClintick’s Institutional Investory story on the Shleifer scandal.
Ivry summarizes the article and quotes various people (myself included) on the extent of its influence. Surprisingly, I thought that it was quite influential, and Alan Dershowitz did not.
(That last line is to be read with a veneer of sarcasm.)
To my mind, McClintick’s reporting both distilled the essence of the Shleifer scandal and provided a bevy of appalling specifics. Dershowitz, however, claims that “there weren’t more than 20 or 30 people who read it” and that it was “full of leaps of logic.”
Mr. Dershowitz has a remarkable facility for throwing out unsupported numbers that happen to support his personal opinionsâthe majority of professors and students at graduate schools are solidly behind Summers, only 20 or 30 people read the McClintick story. It is almost as if he had done research.
I would like to invite Mr. Dershowitz to name one or two leaps of logic. Because, after all, I’m sure that he would never smear a journalist’s work without having something to back up his smear.
Professor, you are a great one for challenging people to debate, so I’d like to challenge you to share your criticisms of the McClintick story. You could either post something below, or, if you prefer, e-mail me at [email protected]. I’ll post whatever you write, unless it’s your unpublished novel. As the kids would say, If you got it, bring it.
Meanwhile….Summers’ spokesman John Longbrake, whose job must really be unpleasant these daysâand by the way, there used to be “Harvard spokespeople,” and now we have “Summers’ spokesman,” a telling shiftâdeclined to say whether Summers himself had read the piece and whether it had influenced his decision to resign.
Ivry probably couldn’t have gotten an answer to this, but I wish she had put those questions to members of the Corporation.
Couple of points.
The existence of this articleâparticularly in the Times, particularly in the hard-news business sectionâis not good for Summers. There, in the title, you have “Expose”âsorry, don’t know how to type the accent over the second “e” on this keyboardâfollowed by the words “Harvard’s President.”
Then, in the subhead, you have the phrase “Lack of Candor.”
Such language makes powerful impressions. And there’s more of it.
Readers of this blog may have noted that I continually refer to the Shleifer scandal as “the Shleifer scandal.” That’s because I believe it to be scandalous, and because I hope that the word “scandal” becomes firmly attached to any description of the episode. Not the “Shleifer case” or the “Shleifer affair,” but the “Shleifer scandal.”
So I’m delighted to see Ivry say that I have “written frequently about the scandal on [my] blog.” Every time the word “scandal” is used in reference to the Shleifer, um, scandal, a little bit of history is shaped. (And, of course, it’s nice to see some mention of this blog in print.)
Finally, I think Ivry did a nice job with this piece, and not just because she quoted me accurately. McClintick’s article was influential, and it was smart to point that out, and Ivry did so fairly. Sometimes, the Times reminds you of how good it can be.
5 Responses
2/27/2006 2:13 pm
The Shleifer scandal is worrying for several reasons. First, it appears that one of the reasons that Shleifer was so intent on Summers’ becoming president was that he wanted more protection than he was getting under Rudenstein. It appears that, in protecting Shleifer and changing Harvard’s legal strategy before he even took office, Summers was guilty of abusing the powers of his office and neglecting his fidicuciary responsibilities to protect a friend.
What most commentators don’t seem to understand is that hundreds of researchers at Harvard depend on millions of dollars of grants from the government, NGOs, etc., and almost all of them are expected to abide by conflict-of-interest clauses. By defending the indefensible, Harvard has implied that it may not expect its other researchers to abide by their contracts. That could make it more difficult for Harvard researchers to convince the government and other sources of funding that they are the right people, and Harvard is the right place, to carry out valuable research. By helping a friend, Larry Summers put the research and funding of hundreds of honest faculty at risk-and not just those in the FAS. His actions may have repurcussions for researchers in the medical school, the school of public health, the JFK School of Government, etc.
2/27/2006 3:35 pm
Actually, every time you read a NYT article, it reminds you that the editors are overpaid, or not truly paying attention. What about the phrase: “Andrei Shleifer, a professor of economics who is a friend and protégé of Dr. Summers’s”…no need for the ugly s’s possessive (or any possessive)at the end of Summers, there…and what about calling Shleifer, a PhD, Mr. Shleifer, and Summers, Dr Summers? Is it the individual’s personal preference…I don’t think so. When I once quoted Summers in an article, he preferred Mr Summers (granted, it was seven years ago…)
2/27/2006 3:59 pm
More on Summers and Shleifer from the web (The Nation blog):
Summers & Russian Corruption
After the World Bank job and before the Harvard presidency, Summers was a Clinton man. At the Treasury Department, he was America’s architect of economic policy toward Russia, at a time when that nation was struggling to emerge from its Soviet past, and looking to us for guidance.
Summers used his position to sing the praises of the so-called “energetic young reformers” – a phrase Boris Yeltsin helped coin that these days is rarely spoken in Russian circles except as a sarcastic insult.
Ten years ago, on the eve of Yeltsin’s 1996 re-election, the Russian president disappeared from view and his most famous “young reformer,” Anatoly Chubais, took the stage. Chubais had a few months earlier been publicly fired by Yeltsin – Yeltsin at that time had accused him, in so many words, of being on the take, of selling off Russia’s oil fields and precious metal mines for kopecks in return for bribes. Now here was Chubais on TV again, apparently in charge of things – this came as a shock to many Russians. And as Yeltsin was heading in for risky heart by-pass surgery, he was promising, in not-so-veiled language, a Chubais-led junta if the surgery failed. (Did I mention that Chubais talked of ruling via a committee named “The Cheka”?)
This topped a year in which Chubais had been absolutely indifferent in public to the then-new-and-horrible war in Chechnya (and a few years later, Chubais would cry “treason” when responsible national figures dared question Vladimir Putin’s reprise of Yeltsin’s war). A year in which Russia’s natural resources had been parceled out among friends, via openly-rigged “auctions.” A year of political campaigning in which Chubais had met in the Kremlin with leading Russian newspaper editors and, according to Nezavisimaya Gazeta editor Vitaly Tretyakov, ordered them to do as they were told, because “if you don’t, bones will crack.”
None of this – not the flirtation with a Chubais-led Cheka, not the hijacking of the nation’s wealth – worried Summers. When Yeltsin survived surgery and promoted Chubais back to a top government post, Summers enthused that Russia had just received her”economic dream team.” (Perhaps Summers was thinking of shipping US toxic waste to Russia?)
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While Clinton Administration official Summers praised the dream team, some of his good friends were working with it.
Andrei Shleifer – a young economist protégé of Summers’ – ran a US-government-funded project to help Russia map its economic future. Under the auspices of the Harvard Institute for International Development, Shleifer and his American team advised Chubais and his Russian team on how to sell off the natural resource fields, how to set up capital and financial markets, etc.
Five years after its launch, Shleifer’s project collapsed amid corruption allegations. It quickly became public — thanks to whistleblowers in Russia — that even as they were providing “disinterested advice” to Russia, Shleifer, his lieutenant Jonathan Hay, and both men’s wives had been making direct investments to the tune of several hundred thousand dollars in these same projects. Perhaps most damningly, to quote a US government press release on the matter, “Shleifer and Hay 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 (b) Russia’s first licensed mutual fund depository, the First Russian Specialized Depository (‘FRSD’), which was started by Hebert’s business partner and provided support services to the mutual fund.”
In 2004, Shleifer & Co. lost a case brought by the US Justice Department against them and against their employer, Harvard University: the Justice Department accused them of violating conflict-of-interest provisions in their contracts. The original 98-page complaint asserted that Shleifer and his lieutenant arranged for the US government to pay hefty salaries to people who worked on their personal side business projects, and who rarely showed up for their ostensible government jobs “other than to collect their pay or for the free lunches.”
It was an ironic coincidence that Summers technically joined old pal Shleifer in the docket: In the interim he had become President of Harvard and so was listed among the accused. (For an excellent account of the beating Harvard took in this trial at the hands of baffled and indignant ordinary American jurors, click here.)
In July 2005, Harvard and Shleifer finally settled the case. Harvard agreed to pay $26.5 million, Shleifer $2 million. Shleifer defiantly insisted to the end that he had done nothing wrong. Or, rather, that it had not been wrong of him to invest up, down, left and right in the same games he was being handsomely paid with US government funds to referee. Summers, and Harvard stood by throughout. And now Summers and Shleifer will, apparently, be teaching econ together next year at Harvard.
2/28/2006 9:09 pm
You have some work to do. Google Smackdown counts 1 result each for “Schleifer Case” and “Schleifer scandal” and 6 for “Schleifer affair”.
3/1/2024 3:38 pm
Probably because his name is Shleifer, without a c.