PSLM Protests Harvard's Investment in Gambling

Harvard's substantial interests in a company that invests primarily in gambling are unethical, the Progressive Student Labor Movement wrote in a letter delivered to the Harvard Corporation on Friday.

Harvard has invested at least half a billion dollars in Highfields Capital Management, one of the largest stockholders of Las Vegas casino owner Park Place Entertainment.

In Friday's letter, PSLM asked the Corporation to divest Harvard from Highfields Capital because of its stake in the gambling industry.

"For the sake of public perception and to fulfill its ethical mission as an institution of human learning, Harvard must reevaluate its relationship with Highfields Capital," the letter reads.

The request comes after months of research spearheaded by PSLM member Aaron D. Bartley, a third-year student at Harvard Law School.

He said he stumbled across Harvard's relationship with Highfields while researching the University's investments on the Internet.

"I was pretty surprised," Bartley said.

Bartley said that the investment is particularly objectionable since Highfields' history and management are so closely linked to Harvard.

Highfields Capital was founded in 1998 by Jonathan Jacobson, the former portfolio manager of Harvard Management Company, which manages the University's endowment.

Harvard invested $500 million in Highfields' founding, Bartley said.

"They basically gave money to their employee, and said, 'You can do your own thing with it,'" Bartley said. "It's not a detached relationship."

In addition to its leading position in Park Place, Highfields also owns large shares of Station Casinos, Lakes Gaming and other gambling companies, according to the most recent Securities and Exchange Commission Findings, Bartley wrote in the PSLM letter.

"Gambling comprises the largest segment of Highfields' equity portfolio when ranked by industry," he wrote.

And, in direct contrast to endowment funds invested directly by Harvard Management, there is no accountability mechanism in place, Bartley said.

Since Highfields is a private company, their investment portfolio is not included in the Annual Report on Shareholder Responsiblity--a summary of investments that discusses Harvard's responsibility with regards to corporations whose securities are owned by Harvard.

"We need to be able to figure out easily where all the endowment money is headed," Bartley said.

Although it is not included in Harvard's annual report, the details of Highfields' investment portfolio are easily accessible, Bartley said.

"I'm surprised they thought they could get away with it," he said.

Ben D. Tolchin '01, student representative to the Advisory Committee on Shareholder Responsibility (ACSR), said ACSR often does discuss investments of private companies--although they have not discussed Highfields Capital.

"It's up to us to review ethical issues related to any of Harvard's endowment," Tolchin says.

He said that given PSLM's letter to the Corporation, Harvard's relationship with Highfields could be on the agenda when ACSR meetings resume Feb. 26.

And according to Bartley, this is an issue that sorely needs to be addressed.

"This sets a destructive, dangerous precedent," Bartley said. "As one of the biggest educational institutions in terms of money, Harvard has a moral responsibility, and the priorities they set here have a big impact on shaping society."

"Taking into consideration the socially detrimental impact of the gambling industry, PSLM believes that the vast majority of Harvard faculty, staff, alumni and students would strenuously object to Harvard-affiliated investments in Big Gambling," he wrote in the letter.

Tolchin said that while he is interested in the issue, he thinks that Harvard's endowment funds are involved in greater vices than gambling.

"My intuition is that there are a lot worse things going on in the companies Harvard invests in," Tolchin says. "Companies are involved in what seems to me to be pretty shady labor practices that are more ethically troubling to me than gambling."

HMC President Jack Meyer declined comment, referring questions to Elizabeth A. Gray, secretary to the Corporation's Committee on Shareholder Responsibility. Gray was unavailable for comment.