After years of legal wrangling, the university settled out of court--to the tune of $2 million (plus $500,000 in lawyers' fees).

Problem: Appearances?

Even the appearance of a conflict of interest can be harmful--which is why some members of the committee oppose the second provision, which allows deans to be consulted on investment decisions.

"I would have hoped it would have been as separated as possible from officers involved in academic decisions," said committee member and Professor of Medicine Edgar Haber. "I guess that hasn't happened."

Deans and other administrators make decisions about office space, teaching loads and promotions. And the academic integrity of resource allocation could be compromised if deans were also determining the fate of the University's financial holdings, committee members said.

University administrators have said that keeping deans in the dark about the work their faculty members are doing would be equally harmful.

But committee members said that academic officers are likely to have intimate knowledge of the status of a developing technology, which could unfairly privilege their advice--or give the appearance thereof.

Green pointed to an incident at the Massachusetts Eye and Ear Hospital about 10 years ago as the "touchstone" for the committee, illustrating exactly what members hoped Harvard could avoid.

The hospital received shares in a start-up drug research company that was co-sponsored by a faculty member.

News announcements reported that the company's work was going well, and the firm's stock skyrocketed.

The hospital sold its shares at a substantial profit. But after the company's drug failed, the stock plummeted.

"The hospital did nothing wrong, absolutely nothing wrong." Green said. "But from an institutional point of view, it was very harmful.