Students Rally Against Cuts

Students and Staff Rally For Budget Say

Published On Wednesday, May 20, 2009 3:14 AM

By ERIC P NEWCOMER
Crimson Staff Writer

Over 150 students, workers and staff attended a rally outside of University Hall yesterday afternoon to support an effort aiming at greater transparency and inclusion in the University’s budgeting system.

The event, entitled “We Are Harvard,” came just over a week after the Faculty of Arts and Sciences, the University’s largest school, enumerated $77 million in cuts to cope with the current financial downturn, affecting everything from athletic teams to breakfast offerings in the Houses and drawing a round of student and staff concerns.

The organizers of yesterday’s protest had planned for it to coincide with the monthly meeting of the Faculty of Arts and Sciences that was slated to end at 5:15 p.m., but the meeting unexpectedly ended minutes before a critical mass of students had arrived. Many faculty members exited before students and staff were able to encircle the building in protest.

But by 5:15 p.m., a crowd that consisted mostly of students chanted slogans like “Hey hey, ho ho; Where did all the money go?” and held signs as they walked around University Hall. Very few workers were in attendance as many of them were unable to leave work in time for the event, according to representatives from the Student Labor Action Movement.

The rally was slated to focus on inclusion and transparency in the budget-trimming process, but some of the student and worker speeches seemed to drift off message—a number of them demanding that Harvard save jobs.

But a speech by Eva Z. Lam ’10, the president of the Harvard Democrats, refocused the group’s attention on the stated goal.

“We have the entire community here,” she said. “I’m not here to work against [Dean of the Faculty of Arts and Sciences] Michael Smith. We can’t work with them unless they allow us to.”

“The students want to have input,” she said.

Adams House Committee Co-Chair Amol K. Jain ’10 said that Harvard students are often told they are the best and brightest. “If that’s true,” he said, “[Administrators] should really be asking us, including us.”

Judith H. Kidd, associate dean of Harvard College, said after the event that “anytime the students feel strongly enough about standing up and chanting, it gets the administration’s attention.”

“I think this was good,” she added.

Institute of Politics president Mary K. B. Cox ’10 said that even though many faculty members left the meeting early, the rally seemed to go “without a hitch.” She added that she suspected that only the event organizers noticed that the meeting had adjourned ahead of schedule.

Earlier yesterday afternoon at 3:30 p.m., event organizers handed out a sheet of paper containing information about the “We Are Harvard” rally to faculty members as they entered University Hall. Members of the Student Labor Action Movement also separately distributed folders with information.

In a separate event at 4:00 p.m., a group of Harvard workers convened around the John Harvard statue with members of SLAM and gave speeches in support of worker jobs.

Johnny F. Bowman ’11, a member of SLAM, told the workers present to “please keep the fight up, keep the hope up.” Bowman said that SLAM argues for a “collective sacrifice.” “We feel Harvard has a responsibility to its lowest paid workers,” he said.

Lam, an organizer of the “We Are Harvard” event, told workers, “We’re here for you. We’re not here just here for hot breakfast.”

Bedardo Sola, a staffer who was laid off and then rehired by Harvard subcontractor ABM OneSource, spoke to the crowd in Spanish. Daniel Brasil Becker, a representative for the Service Employees International Union Local 1615, interpreted Sola’s remarks.

“For Harvard we are numbers,” Sola said. “Numbers they write in with pencil—and erase as well.”

Harvard University Police Department officers stood at each entry to University Hall during both of yesterday’s rallies.

Organizers were instructed not to obstruct the entrances and the protest remained peaceful throughout the day.

—Staff writer Eric P. Newcomer can be reached at newcomer@fas.harvard.edu.

Law School Announces Layoffs

Law School Will Cut Staff To Trim Budget
Acting Dean says layoffs are inevitable due to drop in endowment payout

Published On Tuesday, May 05, 2009 11:43 PM

By ELIAS J GROLL
Crimson Staff Writer

Harvard Law School will lay off staff members in response to budgetary constraints imposed by University administrators, acting Dean Howell E. Jackson said Monday.

The likely layoffs come amidst continued estimates of a 30 percent decline in endowment value by year’s end and a corresponding reduction in the endowment payout—a major source of funding for the University’s different schools that accounts for 40 percent of the Law School’s annual revenue.

A recent University request for a 10 percent reduction in the Law School budget has made staff layoffs inevitable as the school works to maintain its commitments to financial aid and its educational priorities, Jackson said in an interview with The Crimson Monday.

“These are material changes that will affect our budgets in future years,” Jackson said. “We will need to reduce our staff levels in order to live within our new means.”

But at this stage, the magnitude of future layoffs remains unclear, and will depend on the participation rate that the school sees in an early retirement incentive program for staff that will conclude next week, according to Marie H. Bowen, an assistant dean and chief human resources officer at the Law School.

To supplement the results of the early retirement program and diminish the need for layoffs, the Law School will try to keep currently unfilled staff positions empty in order to trim operating expenses, Jackson said.

But how effective this hiring “chill” will be at closing the gap in the school’s budget remains to be seen.

“If we can use the chilled positions that would obviously be easier, but my expectation will be that we will have some layoffs in [the upcoming fiscal year],” he said.

Jackson emphasized Monday that any decision to lay off workers would be carefully weighed “to make sure it’s the right choice.”

But according to labor activist and first-year law student Marissa A. Vahlsing, the school has already initiated de facto staff cuts, asking subcontractors to cut their expenses, which has resulted in job losses and the summer closure of a cafe in the basement of Harkness Commons, the Law School student center.

Student labor activists present at a brief private meeting with Jackson last week said that the acting Dean was unaware of the impending cafe closure and criticized the lack of transparency in the decision making process regarding layoffs.

Student activists have recently disputed the notion that the University’s core mission revolves around its educational mission—a central argument behind the administration’s justification for staff layoffs.

Laura M. Binger, a third year law student who said Jackson made that claim during the recent meeting with labor activists, expressed her concern over what she views as a distortion of Harvard’s mission.

Recent weeks have seen a proliferation of labor protests at the College over staff layoffs, but student activists at the Law School expressed concern over their peers’ apparent lack of engagement with the issue, which they say poses a potential hurdle to mounting layoff protests similar to those at the College.

—Staff writer Elias J. Groll can be reached at egroll@fas.harvard.edu.

HMC Tax Concerns Aided Federal Inquiries

HMC Tax Concerns Aided Federal Inquiries
Former employee expressed concerns over tax reporting, offshore accounts
Published On 4/23/2009 1:40:04 AM

By PETER F. ZHU
Crimson Staff Writer

He says he was told it was simply a difference in investment policy.

But to Steven M. Rose, then a tax director for Harvard Management Company, the deceptive financial reporting and pervasive ethical deficiencies he says he witnessed there were far from benign. And while the University commissioned an investigation into the issues he raised, he says he quickly reached the point where he felt his concerns had been brushed aside.

“The general disregard for the rules, procedures and compliance—it was ridiculous,” Rose said in an interview with The Crimson. “You had to be quiet and do it and put blinders on. If you were doing work in other aspects of the company, you could just do your job. But in [my] part of the job, you couldn’t ignore things.”

Harvard Management Company—which oversees Harvard’s multi-billion dollar endowment—was plagued by a culture of ethical laxity, Rose said. Special relationships with funds run by former employees and the use of offshore investment companies—both used to boost HMC’s once-legendary returns—may not be illegal, but are considered to be ethically questionable by some, particularly in light of Harvard’s non-profit status.

“Some people think that even if you’re [using offshore companies] legally, there’s something...unethical about it,” said Benjamin Leff, a visiting professor at Harvard Law School who specializes in taxes and regulation of non-profit organizations. “Would there be totally legal and proper things that an investment company with a Cayman subsidiary would be doing? There could be. Could there be illegal [things]? Definitely. Are there some things in between? Yes.”

In Sept. 2001, Rose resigned after deciding he could no longer subordinate his judgment to others at the company, and he sent a four-page memo to then-University President Lawrence H. Summers outlining his concerns, causing the University to hire an external legal counsel to investigate. But whether the move led to substantive changes in Harvard’s investment policies remains unclear.

According to tax filings for the year ending in 2007, the most recent one available, Harvard maintains investments in various foreign entities—including several that had been listed in previous filings as Cayman Islands companies. Harvard has ceased to list the specific locations of its related companies in the most recent tax filings.

When asked about these companies’ current locations, University spokesman John D. Longbrake declined to comment. He also would not elaborate on whether Harvard continues to have special reduced-fee arrangements with external investment managers, writing only in an e-mailed statement that Rose’s complaints were “the subject of a thorough review by an external expert” that ultimately concluded they were “without merit.”

But Rose was not alone in voicing such concerns. A 2004 New York Times article raised questions about HMC’s advantageous relationships with firms run by former employees, and quoted then-Chief Executive Jack R. Meyer as saying the special agreements had yielded $125 million in savings for the University up to that point.

After his resignation, Rose said his concerns only deepened, fueled in part by Enron’s high-profile implosion due to unethical accounting practices—including the liberal use of offshore accounts. He says he noticed disturbing similarities in Enron’s and HMC’s investment strategies, which prompted him to file a disclosure in early 2002 detailing his concerns with the Internal Revenue Service and the U.S. Senate Finance Committee.

All the documents and correspondence in this article were provided by Rose, and many of the entities and people mentioned declined to discuss the exchanges, citing policies not to comment on their relationships with clients.

The Finance Committee took notice, according to Dean A. Zerbe, then-senior counsel on the Committee for Senator Charles E. “Chuck” Grassley. Rose said he discussed possible legislative action to curb abuses by public charities with Zerbe after the Committee received the disclosure. Zerbe said in an interview that Rose was “certainly knowledgeable” about his area of work and that his early input to the Committee was of “extraordinary value” in shaping the ongoing review of rules governing university endowments.

But though recent changes could bring more transparency to non-profits, Rose questions whether new disclosure requirements will be enough to curb the widespread unethical practices he says he saw at HMC.

“The switch was on for all sorts of indiscretions,” Rose said. “I’ve never been that close to unabashed, raw greed in my life, up to and since then.”

‘NO TAX AUTHORITY’

Before joining HMC, Rose lectured in taxation at Northeastern University and worked as a tax manager for what is now PricewaterhouseCoopers.

While Rose only served as a tax director for a year at HMC before resigning, he previously helped prepare the company’s taxes for ten years as an independent contractor. Although he had never noticed any suspect activity at HMC before—he said he was simply given data from which to produce returns—his new position’s oversight and personnel access provided him with information that gradually coalesced into broader—and more disturbing—insights into the company’s complex network of operations.

According to Rose, HMC frequently under-reported its income from outside money management firms by “netting” it, or cancelling it out, with management fees paid out by the University. This practice, which reduces HMC tax obligations, is questionable because much of the income that Harvard receives from the firms actually derives from management fees that the firms collect from other investors—activities unrelated to the University’s tax-exempt purpose.

Daniel Halperin, an HLS professor who specializes in tax policy and non-profit organizations, said that an evaluation of the proper tax treatment for the income would also depend on whether Harvard’s share of the management fees is collected from regularly conducted trade or business, and the reasons why Harvard is making special arrangements with the money managers. He added that resolving these issues conclusively is difficult without access to more detailed information.

Rose said that when he raised concerns to HMC lawyers about netting, they said they had “no tax authority,” or legal precedent, to be engaging in the practice—but continued nonetheless.

Leff, the visiting HLS professor, said that while he did not have enough understanding of Rose’s specific concerns to make an informed judgment, “a lawyer asked by an auditor about the legal authority for the treatment of a transaction should be able to give at least the legal reasoning under which the treatment is proper.”

In the 2004 Times article, former HMC CEO Meyer—who later left the company with 30 employees and a $500 million initial investment from the University to start his own hedge fund—said none of the relationships were deceptive and that he had an “outside legal opinion [on netting], which he declined to share.” But the story cited two former high-ranking IRS officials who disputed Meyer’s interpretation of netting, as well as concerns from accounting firm PricewaterhouseCoopers that caused one firm to report their fees in full instead.

PricewaterhouseCoopers declined to comment for this story, citing their policy not to discuss individual clients, and Meyer, through an assistant, also declined to comment.

‘TAX-ADVERSE’

A further point of contention was HMC’s use of complex “structured finance agreements,” which created and linked so many investment entities that tax reporting became nearly impossible to conduct without attending planning discussions among the managers and HMC lawyers, Rose said.

And many of the entities that Harvard owned and invested in, both for- and non-profit, were directed and staffed by former University employees who continued to receive millions of dollars in management fees from Harvard, presenting what he saw as a conflict of interest.

In one particularly infuriating incident, Rose said that after he repeatedly inquired about a seemingly purposeless investment vehicle, a lawyer informed him that the company was actually set up to help a former employee defer his income to a Cayman Islands entity—thereby avoiding substantial tax payments. He also mentions another instance in his disclosure in which HMC officials adamantly opposed the reporting of a foreign entity—likely because the form used would have been attached to the publicly visible IRS Form 990, exposing Harvard to questioning about its use of offshore accounts.

Offshore tax havens can help organizations avoid federal taxes of up to 39 percent, according to a 2007 story in the Chronicle of Higher Education. A 2008 Senate report estimated that the United States loses up to $100 billion a year in tax revenue to offshore havens.

Eventually, Rose said that the culture of silence and the “creativity” that managers encouraged among employees to circumvent tax payments became so disruptive that he could no longer properly conduct his work. The culture of HMC, Rose said, was such that managers consciously avoided providing him with necessary reporting information. He recalls one incident in particular in which a lawyer told him he was “rocking the boat” after he raised a legitimate tax issue.

“They were really tax-adverse, and they did anything possible to reduce taxes,” Rose said, pointing to the individual greed of HMC’s executives. “I had to deal with the money managers’ mindset [that] if Harvard somehow has to pay a tax, that would reduce their take-home pay as well.”

‘THE ROAD TO HELL’

In an Oct. 2001 letter responding to Rose’s concerns, Summers wrote that he took the issues “very seriously” and that Harvard was hiring an independent counsel to ensure that Harvard maintained “the highest level of legal and ethical compliance.”

Jerome Kurtz, the independent attorney retained by Harvard to investigate the HMC practices and a former Internal Revenue Service commissioner, said he does not recall Rose or his concerns, though “that doesn’t mean it didn’t happen.” He added that he only remembers being hired to examine compensation arrangements with some of the investment managers, though he verified that signatures on correspondence with Rose regarding the concerns were indeed his.

Shortly after his resignation, Rose said he became increasingly concerned that Harvard may have had ethically questionable ties to Enron, which went bankrupt in late 2001. Herbert S. Winokur ’65 served both on the secretive Harvard Corporation and on Enron’s board of directors, a dual commitment that Rose said he found disconcerting. He also found ethically troubling Harvard’s 49 percent ownership interest in former Enron affiliate Cook Inlet Energy Supply—which he said made substantial profits from the debilitating California energy crisis of 2000 and 2001.

In a phone interview, Winokur said that legal investigations have since concluded that Harvard had no improper relationship with Enron.

But despite the University’s internal investigation, Rose said he feared his ethics concerns were not being taken seriously by the administration. So he decided to go to the federal government, where he found sympathetic listeners.

“The road to hell is paved with bricks that are stamped with ‘it’s legal,’” said Zerbe, Senator Grassley’s chief counsel. “But particularly for a leading charity like Harvard, I think there’s an expectation of better behavior than just ‘it’s legal,’ as opposed to ‘it’s best practice.’”

Now, seven years later, changes in non-profit tax reporting have finally been made—and many of the revisions reflect Rose’s concerns.

For the tax year ending 2009, the IRS is phasing in the use of a new Form 990, which is filed by non-profit organizations. As the first major revision in 30 years, the report will include more detailed questioning of company governance and policies, compensation, foreign activities, and organizational structuring. And since previous filings asked organizations to report some information in unstructured attachments—which often led to incomplete or missing information—the new revision increases the number of additional reporting forms from two to 16.

In recent years, Harvard has included increasing amounts of disclosures on its tax forms. And in 2006, then-HMC chief Mohamed A. El-Erian hired a “chief compliance officer,” echoing a suggestion Rose made in a letter to Kurtz four years earlier. El-Erian, who succeeded Meyer and pledged to “rebuild and reinvent” the company, said at the time that the move was not prompted by regulatory requirements, but merely a desire to stay “at the forefront of the industry.”

Rose says he hopes that the improved Form 990 will “open the blinds” on Harvard’s practices, though he says he wishes the changes had come earlier.

“I don’t know what I could have done differently, and I keep thinking about it,” Rose said. “Lots of people that work for Harvard enjoy working there, and I would have liked to have that. But it was not possible for me given the environment.”

—Staff writer Peter F. Zhu can be reached at pzhu@fas.harvard.edu. --~--~---------~--~----~------------~-------~--~----~
No Layoffs Campaign Blog at: http://harvardnolayoffs.blogspot.com/

Sign the Petition!

The Student Labor Action Movement (SLAM) has created an online petition. Please follow this link (http://www.hcs.harvard.edu/slam/petition5) and sign it! Here is the text:

Don't forget - Thursday, April 16, 4pm-6pm No Layoffs Rally at Holyoke Center in Harvard Square!

Petition Against Layoffs at Harvard

We, the undersigned, are concerned with Harvard University’s response to the economic crisis. We recognize that Harvard confronts a difficult challenge with a significant drop in the endowment announced in November 2008. However, Harvard remains the wealthiest university and one of the wealthiest non-profit organizations in the world. In this difficult moment, Harvard faces a choice: it can either use its wealth in order to strengthen the community — students, faculty, and workers together — or allow greed and fear to divide and erode our institution of higher learning. We call upon Harvard in these times to act, not out of a logic of fear, but out of a logic of courage and creativity. Laying off workers should be an absolute last resort, not a quick solution.

We ask Harvard to comply with the following demands...

1. We demand a meeting with the President, the Corporation, relevant University administrators, students, and staff in order to begin working together on creative and alternative solutions to layoffs.
2. We demand that Harvard suspends layoffs and recall all workers, full-time and temporary, laid off due to budget cuts since October 2008.
3. We demand that Harvard not reduce the hours of its workers putting them below a living wage.
4. We demand that Harvard not ask its remaining workers to do an unsafe amount of additional work due to the hiring freeze.
5. We demand that Harvard treat its workers with dignity and respect.

April 16 - Day of Action!

April 16
Holyoke Center (Harvard Square next to Au Bon Pain)
4pm: Organized by SEIU 615 (represents janitors and security guards)
5:15: Organized by the No-Layoffs Campaign

There will be marching, chanting, dancing, and other forms of raucousness and entertainment organized by the Student Labor Action Movement (SLAM).

No to Layoffs At Harvard!
Harvard Has the Money!

Crimson Article: HMS Staff Refuse To Accept Layoffs

HMS Staff Refuse To Accept Layoffs

Published On Tuesday, April 07, 2009 1:02 AM

By LAURA G. MIRVISS
Crimson Staff Writer

+ Click to Enlarge CRIMSON/ COURTESY JACK RAVENSCROFT

At 6:00 a.m. yesterday morning, nine subcontracted custodians tried to clock in for work at Harvard Medical School. Although their layoffs were effective last Friday, the custodians showed up for their normal shifts, ready to work, as part of staged protest.

More than 25 Harvard undergraduates, law students, medical students, and union members escorted the workers through the back entrance to Gordon Hall where they were met by security and administrators who told the protestors that they had three to four minutes to exit the building.

“We’re from American Cleaning, and we want to work,” custodial workers told an administrator sitting behind a sign-in desk.

American Cleaning Company—a subcontracted cleaning service that has worked with Harvard for the past year—was told by University officials in February that working hours would be significantly cut, which has translated into company layoffs.

Alyssa M. Aguilera ’08-09, a member of Harvard’s Student Labor Action Movement who participated in the protest, said that the Harvard layoffs have occurred in decentralized chunks.

Aguilera added that there has to be a priority that is more important than Harvard’s endowment.

“These are not just notches on a budget, these are people’s lives and families,” she said.

After the workers had attempted to clock in, they retreated to a basement hallway. There, protestors held hands and presented the laid off workers with bread and roses which they said represented livelihood and dignity, respectively.

“We are one community,” said Daniel B. Becker, an organizer for Service Employees International Union Local 615, which represents custodial workers at Harvard. “We are with you, and you are with us.”

After the ceremony, Robert E. Christiano, the associate director of campus operations at HMS, escorted the protestors out of the building.

Benjamin J. Oldfield, a medical student, said that he and other students will continue to fight to reemploy the workers.

“Harvard says it has trimmed all the fat and the layoffs are a last resort,” Oldfield said. “This is something that, as students, is hard to reconcile with the excesses we see on campus.”

Ana Guevara, one of the laid off workers, said through a translator that she has no plans for future employment through American Cleaning. She has not heard from the company since she received a letter terminating her employment.

Guevara said her work as a housekeeper was her only source of revenue.

“Without [my job], I don’t have anything,” she said through a translator. “I have my rent, car insurance, regular bills for me and my family.”

Guevara said that she had been studying to get her GED through a bridge program with Harvard, but because she will no longer be affiliated with the University, she will have to leave the program after this semester.

Reina Coto, another laid off worker, said that American Cleaning Company sent mixed messages about its plans for layoffs.

According to Coto, the company mentioned that people would be laid off, but a week later told Coto she could stay. Two days later, she said, the president of the company told her he had made a mistake because there was another worker with more seniority.

“I feel like they are playing with our feelings,” she said through an interpreter.

The layoffs were especially frustrating for Coto because many workers had gone above and beyond their normal duties, she said. Occasionally workers would cover two or three extra floors when other workers were absent—sometimes with extra pay, sometimes without.

Richard M. Shea, the associate dean for Physical Planning and Facilities at HMS, said he had never heard that workers had not been paid for their work.

“I would expect people to be paid for that,” he said. “I would not expect people to work for free.”

Shea said that HMS is still trying to figure out ways to help American Cleaning redeploy its workers. He said that there have not been any definite plans for future layoffs, and that future decisions are will be contingent on the University-wide early retirement packages and other budgetary decisions.

—Staff writer Laura G. Mirviss can be reached at lmirviss@fas.harvard.edu.

PIX FROM MARCH 5 NO LAYOFFS RALLY