But in 1997, Shleifer and another HIID consultant, Jonathan Hay, were accused of using their positions for personal gain and investing in Russian securities while advising the Russian government.
US AID immediately canceled the remainder of its grant, depriving the program of some $14 million. Sachs fired Hay, and Shleifer was forced to return to the economics department.
And the situation got blacker: U.S. Attorney Donald K. Stern decided to move ahead with a federal investigation, which is ongoing.
Stern's is a familiar name to Harvard's lawyers. In 1996, Harvard agreed to a $775,000 settlement after Stern charged the University with improprieties at its pharmacy.
All in all, Russia was the culmination of HIID's fears.
"Russia represents what could go wrong anywhere we're working," Pagett says. "HIID does get involved in a lot of risky situations."
And at the same time the Russia scandal broke, HIID raised further ire in the administration by running a deficit.
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