Let's Go: HSA

Over four of the last five years, profits at Harvard Student Agencies have grown twelve-fold. The $3.5 million business has moved out of the Yard and into spiffy new offices on Church Street. The money's pouring in, especially at HSA's publishing and sales arm Let's Go, Inc. But is the largest student-run company in America really fulfilling its mission at Harvard? Scrutiny by Stephen E. Frank

The president of the largest student-run corporation in America is laughing.

Leaning back in the swivel chair in his spacious new office, he is the picture of confidence--relaxed, nattily dressed in his blue blazer, starched white Ralph Lauren oxford and khaki slacks.

He plays absent-mindedly with his wristwatch, the soft light from his porcelain desk lamp glittering off its metal face. The smile that dances perpetually around the edges of his mouth betrays slight bemusement at all the attention he is getting.

Here is the reporter, jotting down his every word. Here is the photographer snapping pictures.

"The flash didn't go off on that last one," he chuckles.

"Make sure you get the earring," he grins, turning his head to accentuate the diamond stud in his left ear. "I'm a cool president."

Martin Escobari '94, native of Bolivia, resident of Winthrop House, and concentrator in economics, has reason to smile.

As president of Harvard Student Agencies (HSA), he manages the day-to-day operations of a campus behemoth: a $3.5 million corporation, comprising 10 separate divisions and employing more than 1,000 of his classmates.

HSA isn't just huge, it's diversified. One branch of the company concentrates on laundry and dry-cleaning, another does catering, another operates a snack and magazine shop. HSA includes a typographics firm, a travel agency, a distribution arm, and a separately incorporated publishing and sales group.

Last year alone, HSA's Let's Go publishing division produced 20 editions of the world's bestselling budget travel guide, with a readership estimated at 3.5 million. Royalties on the book contract approached $800,000 in fiscal 1993, and are expected to reach at least $930,000 by 1997, according to HSA's tax returns.

And 21-year-old Martin Escobari is on top of it all.

"I sign every check," he says. "I've signed checks for over $100,000."

HSA is now 36 years old and at the pinnacle of its success. Between 1989 and 1992, the company's profits grew by more than 12 times--soaring from $41,327 in fiscal 1989 to $499,725 in 1992--according to tax returns.

HSA recently vacated its longtime Harvard Yard headquarters, a dark and mazelike warren of passageways in the basement of Thayer Hall, for a brighter, airier home in Harvard Square. The move means higher rent--by 1995, HSA will be paying virtually double the $31,147 it paid for the Thayer Hall space in 1992--but also a greater degree of independence from the University.

Officials say the company is hoping to expand, possibly opening two new divisions within the next year. General Manager Richard M. Olken '68, who has been in office for almost one year, says HSA may take over the management of several House grills.

But for all the good news, there have been growing pains as well. The burgeoning size of the company means that its managers have more money to play with, and more to lose.

Last year, for example, HSA lost nearly $170,000, according to its tax returns. Company officials say the number does not include all the profits earned at Let's Go--which was spun off at the start of fiscal 1993 and stopped filing joint returns with HSA--and reflects a national and regional economic slowdown.

But even beyond the regular business cycles faced by all companies, some of HSA's divisions are showing signs of aging. Its linen agency, which throughout the 1960s commanded a virtual monopoly on campus laundry service, posted a 58 percent decrease in profits last year, according to the IRS filings. The Crib, HSA's convenience store in the Harvard Union, lost nearly $14,000 last year, after showing a slight profit in fiscal 1992.

And managing the money is only one concern. In recent years, HSA officials have struggled with concerns over whether the company is straying from its mission as a tax-exempt, not-for-profit charity aimed at benefiting students.

As outlined in documents on file with the state attorney general's office, HSA's primary mission is to provide practical business experience for Harvard students "who are in need of financial assistance to defray the expenses of their education."

HSA is also supposed to contribute all "profits in excess of reasonable needs" toHarvard's general financial aid fund, according tothe documents.

But HSA's business practices raise questionsabout whether the company's resources really arebenefiting students in need. All students,regardless of need, are allowed to work at HSA,and the vast majority of the company's employeesearn only a few hundred dollars a year.

In addition, despite the sizable profits ofrecent years, HSA has never contributed money toHarvard. And the company last year spun off itsmost profitable divisions--publishing andsales--into Let's Go, Inc., a separate, for-profitsubsidiary. The reason? According to companyofficials, they realized that the Let's Go travelguides were aimed primarily at the communitybeyond Harvard.

With all these concerns, why is Martin Escobarilaughing?

For one thing, Escobari's future looks rosy.Asked about his plans, the HSA president rattlesoff a list of the prestigious Wall Street firmswhere his predecessors now work. The leader ofAmerica's largest student-run corporation speaksof one day working at the International MonetaryFund or the World Bank.

More importantly, however, Escobari's presentis pretty rosy as well. The long hours he spendsworking at HSA's Church Street offices are wellcompensated. Last year, Escobari pocketed ahandsome $11,800, according to HSA's tax returns.

Other HSA managers did similarly well, withvice president Regina Ford '95 earning just over$10,000.

Escobari does not deny that the money is apowerful incentive for HSA's employees to makesignificant time commitments to theirextracurricular activity.

"No job at HSA is volunteer," he says. "Everyperson here is paid a competitive wage, eventhough some people would do this for free. We'reall pulling in nice salaries."

Still, Escobari adds, broken down into anhourly wage, his earnings amount to "less thanminimum wage."

"Nobody is getting rich at HSA," he says."Nobody here considers themselves overpaid."

And Escobari says he doesn't believe theattraction of big bucks is an undue motive for HSAemployees. "Are people mesmerized by the money? Idon't think so," he says.

But Dean of the College L. Fred Jewett '57, amember of HSA's board of directors, says therehave been problems in the past.

"There have been people at times in historywhere we've worried a bit," he says.

Indeed, outside of management ranks, wagesdiminish considerably. In fiscal 1993, accordingto tax records, HSA paid out $916,240 in salariesto 954 student employees, working out to anaverage of about $960 per student. But thosefigures include the five-digit salaries ofEscobari, Ford and a small number of othermanagers, meaning that most students earned a fewhundred dollars at most from HSA.

HSA Controller David T. McCarthy says thecompany tries to minimize discrepancies inemployee compensation levels.

"The [board of directors'] goal is not to pay afew people extremely well, but to contributereasonable amounts to a number of students payingfor financial aid," McCarthy says.

Financial aid, however, is a sticky topic withHSA's officers. Escobari, Olken, McCarthy andJewett acknowledge that they have no idea how manyHSA employees really need the money.

And the officials concede that, while thecompany was created to employ Harvard students inneed of financial assistance, anyone can work atHSA, whether in need of financial assistance ornot, and the company maintains no records ofwhich, or how many, students are on financial aid.

"[The percentages of students on financial aidare] probably fairly close to those of theUniversity as a whole," ventures PublishingDirector Peter J. Keith '94.

"We have students who work here who do not needmoney and we have people here who absolutely haveto have a job in order to stay in college," saysOlken, referring further questions on the subjectto HSA board member Martha H. Homer, Harvard'sassociate director of financial aid for studentemployment.

But Homer says she, too, doesn't know preciselyhow many HSA students actually work there ofnecessity.

"By far, most students use it to earn a smallamount," Homer says. "And [for] lots of students,that's all they need, a little bit every now andthen. But the ones who get fully engaged in theactivities of HSA, they do very well."B-10CrimsonJamie W. BilletHSA's business practices raise questions aboutwhether the company's resources really arebenefiting students in need.