Harvard will not conduct an internal investigation into a scandal involving Harvard Institute for International Development (HIID) that may cost the University $14 million in government grants, Provost Albert Carnesale said last week.

The U.S. Agency for International Development, which administers a program to aid Russian development, released the preliminary findings of a report accusing two employees of HIID, Professor of Economics Andrei Shleifer and Jonathan R. Hay, an HIID associate, of using the institute's resources for their own personal gain.

Carnesale said Shleifer will remain in his position as a tenured professor, although he has been relieved of his HIID responsibilities. Dale W. Jorgenson, the outgoing chair of the economics department, declined to comment on the situation.

Hay, who is also director of the Institute for a Law-Based Economy (ILBE), a non-profit subsidiary of HIID, has also been relieved of his HIID responsibilities, according to Jeffrey D. Sachs '76, director of HIID.

Although Harvard officials have repeatedly stressed that they are cooperating fully with USAID's investigation, it is likely the Institute's work in Russia will end.

According to Sachs, HIID is cooperating with USAID in the investigation.

"They raised serious concerns. We are doing everything we can to facilitate their investigation," Sachs said.

"HIID has for a long time and in all of its activities maintained scrupulous standards," Sachs said. "This [incident] is an abberation."

According to The New York Times, Russia's Deputy Prime Minister Anatoly B. Chubais said in a press conference last Friday that he would no longer work with HIID because he did not want to be influenced by U.S. government funds.

"We are currently in discussion with the people at HIID and the Russian government on how to best finish up the work that has been started," said Donald L. Pressley, deputy assistant administrator of USAID.

"We're working to figure out what is the best next step," Pressley added. "A possible next step may not involve Harvard."

HIID's project, which involves four key steps, was originally granted $57 million by USAID. Three of these steps are nearly completed: assistance in the privatization of state-owned enterprises, the development of a of a commercial law center and support to capital markets, involving such projects as the establishment of a security secretariat.

The fourth area of the project-reform of the tax system-is the area with the greatest potential for continued support from Harvard, according to Pressley.

USAID had informed HIID that its funding was limited, and that "over time they needed o find ways that they could be self-sustaining.

It would have to find ways to support itself," according to Pressley.

To solve its long-term funding problem, HIID established a for-profit consulting arm, ILBE. A large portion of ILBE-Consulting's initial funding came from HIID. Additional funding was provided by the World Bank.