Eisenson agrees that there was nothing unusual about the investment.

“HMC’s investment in Harken Energy Company was larger than many of its individual investments at the time it was made, but was by no means HMC’s largest investment,” he writes. “The HMC Board was at all times aware of the Harken-related investments and was comfortable that they were within prudent diversification limits for the portfolio.”

Although HMC’s private equity investments are no longer handled internally, Meyer says that until the split in 1998, “it was quite common for HMC to own more than half of the shares in a company.”

Meyer declined to comment on other companies in which Harvard has a significant stake, saying that it is HMC policy not to discuss individual investments.

According to Meyer, the only reason he has provided so much detail about HMC’s involvement with Harken is to defend HMC against false allegations.

Eating the Cooking

At the same time Harvard was investing in Harken, two of its investment managers were serving on Harken’s executive board and owning personal shares in the company—a situation which HarvardWatch has criticized as a conflict of interest.

The Crimson reported in July that Eisenson and Donald D. Beane held positions on Harken’s Board of Directors with Bush and personally owned 10,000 shares of common stock in the company.

But Meyer says that HMC investors in private equities frequently join the boards of the companies in which they invest—and, more importantly, perhaps, during the 1980s investors were encouraged to buy personal stock in companies in which they placed money for HMC.

The practice, called “eating your own cooking,” helped investors build a personal stake in ensuring good investments for their companies.

“In the 1980s, HMC employees were encouraged to own stock in the companies they were investing in on behalf of Harvard, provided their individual transactions did not front-run Harvard and subject to the specific approval of the HMC Compliance Committee,” Eisenson writes. “This was not uncommon among investment firms at the time and was thought to align interests.”

“Eating your own cooking” has since fallen out of favor in Wall Street firms, and Meyer says that he ended the practice at HMC soon after he took over.

“There are good aspects, but there are also potential conflicts,” Meyer says.

Buying and Selling

At the same time Harvard was increasing its shares in Harken, another stock owner—Bush—was selling his.