Harvard Reacts

Harvard responded to the investigation bystrongly reiterating HIID's policy for dealingwith conflicts of interest. This policy statesthat employees working on an overseas project andtheir family members are forbidden from makinginvestments in the country they are assisting.

"Our rules are stronger and more stringent thanthe government's," said Joe Wrinn, a Harvardspokesperson. "Harvard's own review found HIID'spolicies were fundamentally sound."

The University relieved both Shleifer and Hayof their duties at HIID in the wake of USAID'scharges in 1997.

"Hay was terminated," Taylor said. Shleiferretains tenure and continues to teach at Harvard."There was no determination made at the time that[Shleifer] had done anything wrong."

Taylor added that Harvard is not attempting toinvestigate Shleifer's actions.

Harvard is not the "principal investigator,"Taylor said. She said the University is waitingfor the results of the federal investigationbefore making any decisions.

Sources close to the U.S. attorney'sinvestigation said Harvard does not suspect HIIDhead and Stone Professor of International TradeJeffrey D. Sachs '76 or other top Harvardadministrators of any misuse of funds.

The Shakedown

But HIID has not escaped scrutiny from theUniversity. Harvard hired the accounting firmCoopers and Lybrand, L.L.P. to review theInstitute's management structure. Their report,issued this summer, cited numerous problems withthe oversight of HIID's international operations,according to one source.

HIID Executive Director Richard B. Pagett saidthe Institute is currently following many of thereport's recommendations.

"There is nothing inherent in any structurethat prevents people from doing what theyshouldn't," Pagett said.

Part of the difficulty with the way HIID hadbeen set up, according to Pagett, was that alldepartments reported directly to Sachs.

Pagett said HIID has now added a "second tier"of management--now each HIID department reports toone of six thematic groups.

The University has also created the Center forInternational Development (CID), which Pagett saidconcerns itself with broader, less "applied"aspects of the international development field, ascomplement to HIID.