ILBE-Consulting provides advice to private companies and individuals on how to invest in the Russian economy,

The decision by Schleifer's wife, the president of Fixed Income Associates Inc., to hire ILBE as a consultant for her investment in Russia would be considered unethical because Shleifer was in a position to advise the Russian government on economic policies, Pressley said.

Nancy Zimmerman, Shleifer's wife, did not return calls requesting comment. Shleifer, who has previously denied any wrongdoing, also did not return calls.

Conflicts of interest of this type are prohibited by HIID conflict-of-interest policy, according to Sachs. The rules of the Faculty state that if a member "has significant financial interests...that could reasonably appear to present significant conflict...if it is deemed necessary after consultation, [he or she should] modify his or her activities appropriately." Dean of the Faculty Jeremy R. Knowles said that "every member of the Faculty is sent a copy of this document."

According to a press release, HIID's policy states that "people working on an overseas project for HIID, as well as their family members, may not make financial investments within the country where the project is taking place."

The press release also states that "this broad policy is meant to avoid any possible appearance of impropriety."

Sachs denied HIID's connection to ILBE-Consulting.

"We do not have subsidiaries making investments," Sachs said. "We have no subsidiaries."

"Investing is completely contrary to our rules and our policy," Sachs said. "We act on it immediately and stop it."

USAID officials say Zimmerman, as well as Hay, allegedly used HIID resources for personal reasons.

"I think that the symbol we have always been trying to give to the Russian government is that this capital economy is based on a transparent market where people have an equal opportunity to participate in that market," Pressley said.

"A market where no special benefit comes from being close to the system," he added.

Pressley, who said Friday in an interview that he did not know any of the specifics about ILBE-Consulting until recently, said that USAID has not yet finalized the results of its investigation.

"The information that we used for the basis of our decision to suspend the grant is based on preliminary information," Pressley said.

"There are several people who need to be able to tell their side of the story," he said.

Pressley said that USAID's funding of other HIID projects would continue.

--Matthew W. Granade contributed to the reporting of this story.