A world-renowned Harvard chemist has been denied advanced payment of legal fees to defend against charges of making false statements to a governmental agency and failing to report all of his income for tax purposes under the indemnification policy of Harvard University. 

The advance was originally denied to Charles M. Lieber, former head of the Harvard Chemistry department, by the executive vice president of the University after Lieber had been indicted in 2020 for making false statements to the Department of Defense during an investigation of possible Chinese scientific espionage.  He was subsequently indicted for additional tax offenses.  The denial was affirmed by a trial court in Boston and has now been affirmed by the state’s Supreme Judicial Court in an opinion issued a few weeks after Lieber was convicted in a jury trial on all six charges against him.

According to information available to the University, Lieber had entered into three contracts with the Wuhan University of Technology between 2011 and 2013 under which he was to assemble a research team, mentor students and publish articles.  Under two contracts he received monthly compensation of $50,000.  Under another he was paid under the Chinese program to attract foreign scientific talent called the “Thousand Talents Plan.”  His payments were provided by depositing half in a foreign bank account in his name and half in cash when he visited China.

Under Harvard’s reporting policy to assure compliance with regulations, he filed 17 financial activity reports and financial conflict of interest disclosure forms between 2012 and 2019.  None of them identified any contracts or affiliations with, or payments from, Wuhan.  When questioned by the Department of Defense in 2018, he allegedly denied any participation in the programs.

Harvard’s indemnification policy provides that the University may pay legal fees in advance of final disposition of a case upon receipt of a written undertaking by the defendant “to repay all such amounts if it is ultimately determined that he or she is not entitled to indemnification.”  The next sentence of the policy provides that “this paragraph shall not apply if it is determined that it is reasonably likely that the person seeking indemnification will not be entitled to indemnification under this policy.”

Lieber argued that the second sentence should be struck because it is ambiguous, or because the Court should order Harvard to advance the payments as a matter of “public policy.”  The Court disagreed with both contentions.

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The Court said that a Massachusetts nonprofit corporation is authorized, but not required, to provide indemnification to its officers, directors and employees “to whatever extent shall be specified in or authorized by” its articles of organization, bylaws, or a vote by a majority of the members entitled to elect directors.  It said indemnification provisions are interpreted “according to traditional principles of contract law.”

On the argument about ambiguity, the Court noted that Lieber did not argue the traditional basis for ambiguity, i.e. that the language was susceptible to more than one interpretation.  Instead, he argued that it was “confusing.”  But the sentence “is entirely straightforward,” the Court said.  “Lieber’s request for advancement of indemnifiable fees and expenses has been denied, as Harvard has determined that it is reasonably likely that, when all is said and done, he will be found to be ineligible for indemnification. Contrary to Lieber’s suggestion, that determination was made consistent with the plain meaning of the policy.”

On public policy, Lieber argued alternatively that the sentence should be stricken because it violates “strong public policies” favoring advancement and the protection of his rights under the Fifth and Sixth Amendments to the Constitution.  “This argument, too,” the Court wrote, “misses the mark.”

Lieber argued that allowing Harvard to refuse advancement would be inconsistent with the primary purpose of indemnification, which he said was to convey “to an institution’s most valuable and talented people” that the school will stand behind them when their honesty or integrity is challenged.  The Court said that Harvard had taken the broad authority authorized by law and “adopted an indemnification policy that affords it a fair amount of discretion when it comes to making certain determinations, including when it comes to the advancement of fees and expenses.  That may or may not be in Harvard’s best interest, but Lieber has failed altogether to establish that it violates public policy.”

The Court concluded that the trial judge “did not abuse her discretion when she concluded that Lieber has not established a likelihood of success on the merits of his claims” and that the motion for a preliminary injunction was properly denied.  (Lieber v. President and Fellows of Harvard College, Supreme Judicial Ct., MA, SJC-13141, 1/10/22.)

YOU NEED TO KNOW

This case, and Lieber’s actual conviction for false statements and tax filings, shows again that it is not necessary for the government to prove espionage or potential damage to the country.  It is necessary only to prove the false statements and tax filings utilized in an attempt to cover up the facts. 

From the point of view of the University and its indemnification policy, it was a clear victory for its exercise of discretion, sustained both by the available evidence at the time of denial and the conviction prior to the final opinion.