Shleifer Verdict Expected Today

The federal jury trying part of the case against star Harvard economist Andrei Shleifer ’82 is expected to deliver a verdict this morning after considering heated closing arguments in court yesterday.

Harvard and Shleifer have been the subject of investigation and prosecution on-and-off for seven years, ever since a federal agency discovered allegedly illegal investments Shleifer and a close Harvard associate made in the Russian economy.

The investments were made while Shleifer, who is the Jones professor of economics at Harvard, was advising the Russian government on market reform in the early 1990s.

Today, the jury will determine whether Shleifer was technically “assigned to” Russia as defined by Harvard’s two contracts with the U.S. Agency for International Development (USAID), which funded the market reform program through the Harvard Institute for International Development (HIID).

The USAID program was suspended after the allegations against Shleifer and Harvard arose in 1997.

The case centers around key provisions in the USAID contracts, which stipulate that employees “assigned to” foreign countries are not allowed to make investments in those countries.

Much of the arguments yesterday centered around the definition of the word “assigned”—during the course of the court proceedings, both sides combined used four different dictionaries while addressing the jury on the word’s meaning.

Shleifer’s defense team argued in closing statements yesterday that Shleifer was not “assigned to” Russia because he was not living there.

“It’s the burden of the government to prove that the government ‘assigned’ Shleifer to Russia,” said defense lawyer Robert Ullmann. “Shleifer never lived in Russia and so wasn’t assigned to Russia.”

The prosecution contended that a “common sense” interpretation of the contract indicates that Shleifer— who frequently traveled to Russia but was living in Cambridge for the length of the program—would be covered under the provision.

“You were assigned to jury duty and you were then assigned a place to sit,” prosecutor Sara Bloom told the jury. “But you don’t have to live in your seat to be assigned to jury duty.”

“What’s this clause trying to do, ladies and gentlemen? It’s a thou-shalt-not-invest clause,” she added.

Bloom faltered for a moment in her closing when the judge asked her to stop talking about the conflict of interest agreement Harvard had with USAID, saying that it was beyond the scope of this trial.

U.S. District Court Judge Douglas P. Woodlock tried to direct the attention of the jury to the “slice of the case” put before them—whether or not Shleifer was assigned to Russia.

Both the defense and the prosecution used an HIID Overseas Assignment time sheet filled out and signed by Shleifer as evidence to bolster their arguments.

On the form, the defense stressed the location of where Shleifer’s work took place—listed as his home in Newton, Mass.—while the prosecution pointed to the title of the form.

“They told you the Overseas Assignment form was a distraction,” said Bloom to the jury. “I love that. ‘Distraction.’ It says ‘Overseas Assignment’, it says Russia and it’s signed by Shleifer. Yes, he lived in Newton, but he was assigned to Russia.”

Last June, Shleifer and former HIID employee Jonathan Hay were found liable for fraud because of personal investments they made in Russia while advising the Russian government on privatization.

Today’s verdict will have implications for the outcome of a future trial that will assess the amount of damages Shleifer and Hay are liable to pay under the False Claims Act. Each man could face triple damages of up to $104 million.

Harvard was cleared of fraud charges last June but may still be liable for up to $34.8 million in damages to USAID for breach of contract.

Three members of the defense team rose simultaneously to object when prosecutor Bloom asked a witness, former HIID employee Kathaleen Mercier, if she “knew that Shleifer was a close friend of the President of the University [Lawrence H. Summers].” Judge Woodlock sustained the objection.

“Affiliations among people at large institutions are not part of this case, so you just put it out of your mind,” he told the jury.

Jury members seemed tired and a few snoozed through some of the more tedious testimony yesterday, the last day of a three-day trial. Shleifer has looked calm throughout the trial, laughing and patting his defense team on the back during recesses.

—Staff writer May Habib can be reached at habib@fas.harvard.edu.