Harvard University reaches settlement agreement with USAID

Harvard University has reached an agreement with the Department of Justice and the United States Agency for International Development (USAID) to pay $26.5 million to settle a $120 million civil lawsuit arising out of a project awarded to the former Harvard Institute for International Development (HIID).

“We welcome having this matter behind us,” said Robert W. Iuliano, the University’s Vice President and General Counsel. “Over the course of the litigation, the Court has affirmed our position that the University engaged in no institutional wrongdoing. We take very seriously our responsibilities to manage federal projects and funds appropriately, and have strong compliance programs in place to that end. We are pleased that we were able to find a mutually acceptable resolution with the government, and look forward to continuing our long-standing collaboration with USAID and other government agencies on a broad range of important research and related activities.”

In 1992, HIID began work on a USAID-funded project to provide advice to the Russian government about how to make the transition from a state-run to a market-based economy following the collapse of the Soviet Union. HIID received $50 million in USAID funds to support a team at Harvard and elsewhere working on the set of issues presented by the transition.

In 1997, the government began an investigation into the project, which resulted in a civil lawsuit filed against the University and others in 2000. The government alleged that a contract term concerning conflicts of interest was violated in the course of the project. In 2001 and June 2004, the United States District Court for the District of Massachusetts cleared the University of the most serious allegations. The University was found liable only for breach of contract, and the Court made clear in its ruling that the conduct causing the breach was not done with Harvard’s knowledge or to Harvard’s benefit.

In agreeing to the settlement, Harvard will avoid the significant costs of continuing to litigate a matter that has either been under investigation or in court since 1997. The University also avoids the further accrual of pre-judgment interest on the breach of contract claim. Under state law, pre-judgment interest accrues on contract damages at the rate of one percent per month from the first date of the alleged breach.