Harvard dons deny insider trading

February 12, 1999


United States government prosecutors are investigating charges that two Harvard University economists, involved in a Harvard-sponsored effort to help Russia adapt to capitalism, profited from insider trading.

The investigators are trying to determine if economics professors Andrei Shleifer and Jonathan Hay made money from investments in the Russian stock market while advising Russian president Boris Yeltsin and his finance officials.

Dr Shleifer and Dr Hay, of Harvard's Institute for International Development, were working under a $43 million US government grant in the early 1990s when Dr Shleifer's wife and Dr Hay's girlfriend made investments in the Russian stock market.

The US Agency for International Development, which supplied the grant, determined that the men "abused the trust of the United States government by using personal relationships I for private gain". The agency cancelled its contract with the Harvard institute in 1997.

Government and institute rules prohibit employees and their relatives from making investments in the countries they advise. The congressional committee on international relations is also planning an investigation, although it has been delayed until the criminal probe has ended.

Investigators have met university attorneys during the past few months and have requisitioned volumes of documents, a Harvard spokesman confirmed.

Dr Shleifer's attorney, Earl Nemser, said he was aware of the scrutiny, but said his client was not under investigation. He declined to comment further.

Dr Shleifer, his wife, Nancy Zimmerman, Dr Hay and his girlfriend, Elizabeth Hebert - who declined to comment on the latest developments - have all previously denied that they incurred conflicts of interests by investing in the Russian markets.

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