California Bank Sues HBS Prof.

Harvard was ordered to stop paying a visiting professor at the Business School for a week last month after the University was named along with the professor in a suit by a California bank to recover $2.7 million in legal damages assessed before his appointment last year, according to court documents obtained by The Crimson.

Visiting Professor of Business Administration Marc J. Epstein has been charged by Los Angeles-based Mitsui Manufacturers Bank with failing to pay the money. The bank's suit seeks to appropriate Epstein's Harvard paychecks in order to recover the bank's money.

In a preliminary ruling, Superior Court Judge Paul A. Chernoff ordered Harvard to stop Epstein's paychecks for one week last month. It was unclear yesterday whether the court has taken any further action.

Epstein is obligated to pay the money to Mitsui Manufacturers Bank because he, in connection with two California investment groups, defaulted on a $1.5 million loan, according to documents and a Manufactures Bank lender who spoke on condition of anonymity. The $2.7 million figure arrived at by a California court includes interest and legal fees.

Mitsui Manufacturers Bank filed the initial lawsuit in California in 1988, and Los Angeles Superior Court Judge Madelein Flier ruled for the bank on March 3, 1992. But Epstein, whose legal residence is in Houston, left California shortly after the lawsuit was filed to become a full professor at the business school of the Yeshiva University in New York City.

In his response to the new suit, which was filed with the Middlesex court, Epstein acknowledged that he owed the money but denied that he withheld payment. "The defendant has paid all or part of the sums due the plaintiff," the response said. Epstein's response did not indicate the method of payment.

Business School Director of Communications Loretto E. Crane, the only school official authorized to speak publicly, and Mary Keefe, manager of the school's financial office, refused to comment yesterday.

Epstein's Boston attorney, James I. Rogal, yesterday refused to detail the exact nature of his client's involvement in the business. His Los Angeles lawyer, Robert C. Baker, could not be reached for comment yesterday.

In an affidavit filed with the Middlesex court earlier this year, bank Vice President Karen Willey expressed concern that Epstein might leave Massachusetts when he learned of the lawsuit here. She said in the affidavit that for this reason, the court should allow Manufacturers Bank to take the money from his Harvard paycheck.

Willey was out of her office and could not be reached for comment yesterday.

The person answering the phone in Epstein's office yesterday said the professor was in Finland attending a conference and would not return until later next month. Rogal, Epstein's lawyer, said he not spoken with his client in nearly six weeks.

Epstein, who taught a popular first-year course on financial reporting and management accounting in the fall, was not scheduled to teach a class this spring.

Harold Nierenberg, dean of the business school at Yeshiva University, said Epstein taught an extremely popular course in accounting. Nierenberg said he had tried to convince Epstein not to leave, but the professor departed last spring for Harvard.

"It was a loss when he left," Nierenberg said. "I spent a lot of time trying to convince him not to leave.

In an affidavit filed with the Middlesex court earlier this year, bank Vice President Karen Willey expressed concern that Epstein might leave Massachusetts when he learned of the lawsuit here. She said in the affidavit that for this reason, the court should allow Manufacturers Bank to take the money from his Harvard paycheck.

Willey was out of her office and could not be reached for comment yesterday.

The person answering the phone in Epstein's office yesterday said the professor was in Finland attending a conference and would not return until later next month. Rogal, Epstein's lawyer, said he not spoken with his client in nearly six weeks.

Epstein, who taught a popular first-year course on financial reporting and management accounting in the fall, was not scheduled to teach a class this spring.

Harold Nierenberg, dean of the business school at Yeshiva University, said Epstein taught an extremely popular course in accounting. Nierenberg said he had tried to convince Epstein not to leave, but the professor departed last spring for Harvard.

"It was a loss when he left," Nierenberg said. "I spent a lot of time trying to convince him not to leave.