TRADING TRUTH: A REPORT ON
HARVARD’S ENRON
ENTANGLEMENTS
(Summary and Recommendations)
A HARVARDWATCH REPORT
January 31, 2002
ABOUT HARVARDWATCH:
HarvardWatch is a broad-based coalition of students and alumni across the University’s schools concerned with corporate
governance at Harvard. The independent and unaffiliated organization advocates a more transparent and accountable
administration responsive to the concerns of Harvard students, alumni, and staff. HarvardWatch publicizes information
about the nature of Harvard’s governance system and investments in an effort to improve the functioning of the
University; members of HarvardWatch want the University to be the best it can be. The opaque, unelected seven-member
Harvard Corporation is the University’s highest governing body, and does not release their meeting times, places,
agendas, or notes; moreover, there is no process to appeal Corporation decisions, and the Corporation refuses to meet
with members of the Harvard community to explain its decisions or its decision-making process. HarvardWatch believes
that reform is urgently needed and is overwhelmingly in the best interests of all of Harvard University.
SUMMARY OF FINDINGS
QUESTIONABLE FINANCIAL TRANSACTIONS AND INTERLOCKING DIRECTORATES
- Herbert “Pug” Winokur is a member of the Harvard Corporation, the university’s seven-member self-selecting governing
body, and a longtime member of the Board of Directors at Enron Corporation. He is currently the chair of the board’s
Finance Committee. In this capacity Winokur reportedly approved the creation of more than 3,000 partnerships and
subsidiaries which were allegedly used by Enron to hide debt and avoid taxation. Winokur’s position on the board’s
Finance Committee gave him unique access to Enron’s financial structure and should have alerted him to the company’s
imminent collapse.
- During the period in which Enron executives touted the company’s stock to employees, Harvard’s main private investment
fund ¡X Highfields Capital ¡Xshortsold several million shares of Enron stock for an estimated profit of $50 million. Mr.
Winokur’s leadership positions at Enron and Harvard raise questions regarding Highfields' massive short-selling
transactions, which benefited the Harvard endowment. There has been insufficient investigation into the possibility that
Highfields operated with inside information when it short-sold millions of Enron shares.
- Highfields Capital manages an estimated $2 billion of Harvard’s endowment. Jonothan Jacobson, the co-founder of
Highfields Capital, previously worked under Mr. Winokur’s directorship at Harvard Management Company. Highfields Capital
was founded with $500 million of Harvard’s endowment.
INSTITUTIONAL CAPTURE¡XHOW ENRON SHAPED HARVARD’S RESEARCH AGENDA
- Through financial incentives and personal connections, Enron influenced Harvard’s research agenda. Harvard’s academic
resources were consistently used to support Enron’s unsustainable business plan.
- Robert Belfer, a director of Enron and the largest individual shareholder of the company’s stock, is a major donor to
Harvard, and served on the Committee on University Resources (COUR) for 9 years and on the Visiting Committee at the
Kennedy School of Government (KSG). He re-endowed the Kennedy School’s Belfer Center, previously called the Center for
Science and International Affairs.
- Enron and board members including Winokur and Belfer have contributed millions of dollars to Harvard and have aided in
the creation and funding of research centers, which have consistently advocated an agenda of deregulation in the energy
industry. The research produced at Harvard’s Kennedy School of Government by the Harvard Electric Policy Group (HEPG),
the Environment and Natural Resources Program (ENRP), and the Belfer Center exemplify Enron’s influence over Harvard’s
research agenda.
- These centers have collaborated with Enron and its consultants and have defended the company and other energy industry
monoliths against assertions of price manipulation and other illegal activities. Academic rationales for deregulation
produced at Harvard were essential cover for the short-lived success of the Enron business model.
- Enron has cultivated deep relationships with the Harvard Business School (HBS). Five HBS case studies have touted the
Enron model as innovative and worthy of replication. Glowing studies of Enron were produced by HBS as recently as August
of 2001, just before the company imploded.
- HBS professors have received compensation for services provided to Enron. Professors have also co-authored major works
on Enron with senior company executives.
- Herbert Winokur, a director of both Enron and Harvard, has also funded several reports recommending privatization of
defense services. Winokur is a leading investor in Dyncorp, a major defense contractor. The Herbert Winokur Fund at the
KSG provides another example of how Winokur influenced Harvard’s research agenda for corporate and personal enrichment.
- Mr. Winokur’s relationship to Dyncorp has raised concerns among those investigating Enron, since Dyncorp manages
e-mail and information systems for many of the leading investigative agencies, including the Department of Justice and
the Federal Bureau of Investigation.
RECOMMENDATIONS
1. Harvard University should initiate a credible investigation into alleged financial improprieties regarding the
management of the university’s endowment. The investigation should be undertaken by a representative body that has the
confidence of the entire Harvard community
2. Pending the outcome of the investigation, Herbert Winokur should be suspended effective immediately from the Harvard
Corporation. Harvard University must send a strong and unequivocal signal to the academic community by distancing itself
from the failed leadership at Enron Corporation.
3. Harvard University should initiate a comprehensive re-evaluation of corporate funding that threatens its academic
integrity and independence. The acceptance of a narrow research agenda and tilt imposed by corporate donors such as
Enron today poses a formidable threat to its academic mission.
4. As part of its investigation, Harvard University should immediately disclose information on its ties to the Enron
Corporation over the past 10 years. This includes, but is not limited to:
- Funding from the Enron Corporation, its executives, and its directors to Harvard University. This includes direct
contributions to Harvard as well as any of its schools and centers, including the Harvard Electric Policy Group, the
Belfer Center and the Harvard Business School.
- Provision of consulting services by researchers at Harvard University and its various Centers to Enron
Corporation¡Xincluding the nature of such services and the compensation paid by Enron.
- A list of all financial transactions conducted by Harvard Management, its subsidiaries, and Highfields Capital
involving Enron or any of its partnerships.
- Disclosure of any Harvard investments in private companies, partnerships or special purpose entities affiliated with
Herbert Winokur.
- A full account of any contact or communication between fund managers at Harvard Management and its officers and
Highfields Capital regarding Enron or its subsidiaries.
- A full account of contact or communication between officers of Harvard Management Company or Highfields Capital and
Enron executives and officers.
- Disclosure of the participation of Enron executives and board members at sessions at HEPG and the ENRP.
5. Harvard University should outline a participatory process for selection of Harvard
Corporation members. This should involve all stakeholders¡Xfaculty, workers, and students.
Appendix
Relevant Biographical Information
Robert Belfer
Harvard affiliation: JD, Harvard; Patron of Harvard’s Belfer Center for International and Strategic Affairs; Harvard
Committee on University Resources (1982-1989); Member of Visiting Board of Harvard’s John F. Kennedy School of
Government
Enron affiliation: Enron’s largest stockholder, Enron Director since 1985
Sanjay Bhatnagar Harvard affiliation: MBA, Harvard
Enron affiliation: CEO of Enron India
Peter Fisher Harvard affiliation: JD, Harvard
Enron affiliation: Undesecretary of the Treasury; implicated in Enron scandal Citgroup Chairman Robert Rubin (see below)
called Mr. Fisher to inquire about the possibility of Federal intervention in support of Enron. The New York Times
reports: It was Fisher’s role as the administration's liaison to the markets that led Robert E. Rubin, the former
Treasury secretary who is now chairman of the executive committee at Citigroup, one of Enron's two main lenders, to call
him about the situation. It also made Mr. Fisher a natural point of contact for Enron itself. Whether simply to keep the
government informed of financial problems at the dominant player in the burgeoning business of trading energy, as Enron
says it was doing, or seeking assistance as it fought to survive, as the administration has suggested twice in recent
days was the case, Mr. Fisher was clearly the go-to guy. In a government filing, Fisher recently disclosed that he owns
at least 10,000 shares of Enron stock.
Pankaj Ghemawat
Harvard affiliation: Professor, Harvard Business School; MBA, Harvard
Enron affiliation: Member, Enron advisory council
William Hogan
Harvard affiliation: Professor, Kennedy School of Government; Director, Harvard Electric Policy Group (HEPG)
Enron affiliation: HEPG receives Enron funding
Jonathon Jacobson
Harvard affiliation: AB, MBA, Harvard; currently manages in excess of $2 billion of Harvard’s endowment through
Highfields Capital
Enron affiliation: Highfields Capital, and Harvard in-turn, short-sold nearly 3 million Enron shares just prior to the
collapse of the stock
Lawrence Lindsey
Harvard affiliation: MA and Ph.D, Harvard; former Harvard faculty, Department of Economics
Enron affiliation: Chief White House economist; Enron advisory board; Citigroup consultant Lindsey’s proximity to the
president place him at the center of inquiry regarding Enron’s relationship to the White House before and after the
company’s collapse. The New York Times reports, “Before he became the president's top economic counselor, Lawrence B.
Lindsey was a paid adviser to Enron.” Lindsey’s position at Enron and consulting for Citigroup, Enron’s banker, will
continue to raise questions about the White House’s relationship to the Enron scandal.
Rebecca Mark
Harvard affiliation: MBA, Harvard
Enron affiliation: Former Chairman of Enron International, Former CEO of Enron subsidiary Azurix Once lauded by the
business press, Mark took the fall for Enron’s failed effort to privatize the world’s water supply through its Azurix
subsidiary. Ms. Mark is named as a defendant in the most prominent lawsuit against Enron. She executed insider trades of
1.4 million shares, pocketing $79.4 million before the company collapsed.
John Mendelsohn
Harvard affiliation: AB, MD, Harvard
Enron affiliation: Enron Director The New York Times reports, “Also on the board is Dr. John Mendelsohn, president of
the M. D. Anderson Cancer Center, one of Houston's most prestigious institutions. Enron has donated more than $600,000
to the center in the last five years.” Mr. Mendelsohn’s ability to serve as a director while receiving large donations
from the company has been questioned.
Paulo V. Ferraz Pereira
Harvard affiliation: MBA, Harvard
Enron affiliation: Enron director; Former President and CEO, State Bank of Rio de Janeiro, Brazil
William C. Powers, Jr.
Harvard affiliation: JD, Harvard
Enron affiliation: Enron director
Robert Rubin
Harvard affiliation: AB, Harvard, 1966; Honorary Doctorate, 2001; former Director, Harvard Management Company;
Enron affiliation: Chairman of the Board, Citigroup (Enron’s largest creditor)
John M. Seidl
Harvard affiliation: MPP and Ph.D, Harvard
Enron affiliation: Former Enron COO and director
Marc Shapiro
Harvard affiliation: AB, Harvard
Enron affiliation: Vice Chairman, Chase Manhattan Bank (major Enron creditor) In recent profiles, both the New York
Times and the Wall Street Journal have focused on Shapiro’s awkward position as Chase’s conduit with Enron, its major
creditor.
Jeffrey Skilling
Harvard affiliation: MBA, Harvard
Enron affiliation: Former Enron CEO; former Enron Director Perhaps the pivotal figure in the Enron scandal, Skilling is
considered the architect of Enron’s high-risk trading system. The New York Times reports that Skilling, “received $66.9
million for 1.1 million shares. Beginning in December 2000, Mr. Skilling began to sell his holdings at a pace of 10,000
shares about every seven days. He still owns about 600,000 shares and options, according to public filings.” While at
McKinsey in the 1980s, Skilling reported to Harvard Corporation member and Harvard Treasurer D. Ronald Daniel.
John B. Wing
Harvard affiliation: MBA, Harvard
Enron affiliation: Former Chairman, Enron Power Group and Enron Cogeneration Co. (owner)
Herbert “Pug” Winokur
Harvard affiliation: A.B., Ph.D, Harvard; Member of Harvard Corporation; Director, Harvard Management Company
Enron affiliation: Enron Director since 1985; Chair, Enron Finance Committee; Former Chairman, Azurix Corporation (Enron
subsidiary)
Robert B. Zoellick
Harvard affiliation: J.D., MPP, Harvard; former director and faculty member of Harvard’s Belfer Center
Enron affiliation: U.S. Trade Representative; Enron Advisory Board; board member of Alliance Capital, major Enron
shareholder Zoellick sits precariously at the nexus of Harvard, the Bush White House and Enron. While at Harvard,
Zoellick directed a pro-corporate energy research center funded by Enron’s largest shareholder.
ENDS