“The University was encouraged by the court’s conclusion that at no time did Harvard know of or engage in any fraudulent conduct, a position which Harvard has been asserting to the government since the inception of the lawsuit,” he said. “As to the breach of contract claim, even that is a function of conduct of which the University was unaware.”

Harvard asserts that despite the breach of contract claim, its work in Russia was still valuable and thus it should not be subject to repayment of the entire $34 million grant.

But Shleifer was found liable for conspiring to get the U.S. government to pay false claims on the project because he knew about the investments when funding requests were submitted. Shleifer was traveling and could not be reached for comment, his assistant said.

Earl H. Nemser, a New York lawyer representing Shleifer, said he was pleased that the judge had narrowed the case, dismissing charges that Shleifer made—rather than conspired to make—fraudulent claims.

“It’s something we can kind of put our arms around and put some definition to,” he said. “In that respect, we’re a lot further along than we were before.”

“We think that several aspects of the court’s decision will probably not withstand analysis and we would intend to pursue those aspects further in the court proceeding,” he added.

The court’s findings against Hay, who currently practices law at the London office of Cleary, Gottlieb, Steen & Hamilton, were most serious. He was found liable for entering false claims, making false statements in support of false claims and conspiring to defraud the government to pay false claims.

“A reasonable jury could only conclude that Hay was acting in reckless disregard” of his duties, Woodlock decided.

Hay and his New York lawyer, Lawrence S. Spiegel, declined comment yesterday.

IS THE DAMAGE DONE?

The government argues that Harvard should be liable for the entire value of the contract because conflicts of interest tainted the project.

“The government contends that the conflict of interest rendered HIID’s advice to Russia worthless,” Woodlock wrote.

The University maintains that the government must show “actual harm,” noting that the government is unlikely to get the millions of dollars it seeks.

“In all likelihood any damages assessed against Harvard for the contract violation would be only a fraction of the damages originally sought by the government,” the University said in a statement.

“The government’s claim that the work on this project was valueless is an insult to the scores of HIID employees and consultants who gave their souls to this project,” said David J. Apfel, who was then representing the University, when the University filed arguments disputing the claims last year.