Harvard Settles Fraud Lawsuit

The University has quietly settled a lawsuit that accused it and two employees who ran a program on the Russian economy of defrauding a private company of millions of dollars.

The terms of Friday’s agreement, which ended a two-year-old suit by the Maine mutual funds firm Forum Financial Group, were undisclosed.

“We are pleased that the case has been dismissed with prejudice and that litigation is over,” University spokesperson Joe Wrinn said.

The parties had agreed to the settlement in October and submitted finalized terms to a judge Friday, agreeing to dismissal and to no future liabilities.

Neither Wrinn nor Forum’s lawyer, Stephen Delinsky, would comment on why Harvard had agreed to settle. Wrinn called the suit “baseless” when it was filed in October 2000, while then-General Counsel Anne Taylor said, “At the end of the day, Harvard will not be liable.”

The suit claimed that Professor of Economics Andrei N. Shleifer ’82 and former Harvard employee Jonathan Hay conspired to defraud the company and its owner of the profits from the rights to Russia’s first mutual fund.

Forum and its owner John Y. Keffer had requested punitive and compensatory damages against Shleifer, Hay and Harvard, which they say has “vicarious liability” and was negligent in the oversight of its employees. The Associated Press reported that Forum had asked for $4.4 million in compensation, although Delinsky would not confirm that figure.

But in a related case that is likely to go to trial, the U.S. government is suing Harvard and the same two former employees of the Harvard Institute for International Development (HIID) for $102 million, alleging violations of conflict-of-interest policies in the federally-funded program in Russia.

The government suit accuses Shleifer, Hay and Harvard of breach of contract for violating policies against investing in a country while acting in an advisory role. HIID, which was dissolved two years ago, received $50 million in federal money to help privatize the Russian economy.

—David H. Gellis contributed to the reporting of this article.

—Staff writer Elisabeth S. Theodore can be reached at theodore@fas.harvard.edu.