The Harvard Institute for International Development (HIID)--which advises developing nations around the globe--may have been offering advice to more than just foreign governments for the last six years. Its expertise and involvement in Russia may have also benefited Harvard's investment arm, Harvard Management Company.

Or so alleges an article in this week's Nation magazine, which explores the troubles HIID's activities in Russia encountered last May. A year ago the institute lost the remaining $14 million payment of a $57.7 million government contract because of allegations of misconduct by professors and employees in its Russia project.

These allegations also come at a time of massive restructuring of the University's activities and resources devoted to development. Starting this summer, HIID will launch a joint project with the Kennedy School of Government (KSG), a new initiative for research and teaching on development issues called the Center for International Development (CID).

Advising and Investing?

According to The Nation, on several occasions HMC and billionaire George Soros were the only foreign entities allowed to participate in auctions of Russian companies. These 1995 auctions--known as "loans for shares"--were an integral part of the Russian economic recovery program designed in part by HIID.

HMC President Jack Meyer acknowledged that HMC and Soros purchased significant shares of both Novolipetsk, Russia's second-largest steel mill, and Sidanko Oil, one of the world's largest oil companies.

The Nation article characterizes these purchases as a blatant conflict of interest on Harvard's part. University officials acknowledge that if advice or special privileges were given, this would represent a violation of both HIID and HMC conflict of interest rules.

But Meyer, who said HMC has invested in Russia for six years, offered a different explanation.

"It was not a direct investment by HMC," Meyer said.

HMC and Soros jointly own an investment firmcalled Sputnik which indirectly made both thesepurchases as limited partners, according toUniversity sources.

HMC never received advice from HIID, accordingto Meyer, who adds that The Nation article is"highly misleading."

But Anne Williamson--whose forthcoming bookHow America Built the New Russian Oligarchyexplains how the loans for shares programbenefited HMC--said conflicts of interest areinherent in an institution that both advises andinvests in a country.

"There isn't really a legal wall betweenHarvard Management and the University," Williamsonsaid in an interview. "Whether people over herewere complicit, I don't know. Maybe they were justnaive."

HIID Director Jeffrey D. Sachs '76disassociated himself and HIID from theallegations.

"I don't know any of the details of thistransaction. I wasn't aware of any of this untilthis article," Sachs said.

He agreed with Williamson, however, that theboundary between Harvard's investment and advisoryfunctions must be maintained.