Former McKinsey consultant loses 500 million for Harvard

http://www.bloomberg.com/apps/news?pid= ... ou7iMlBMN8

Harvard’s Bet on Interest Rate Rise Cost $500 Million to Exit

By John Lauerman and Michael McDonald

Oct. 17 (Bloomberg) -- Harvard University’s failed bet that interest rates would rise cost the world’s richest school at least $500 million in payments to escape derivatives that backfired.

Harvard paid $497.6 million to investment banks during the fiscal year ended June 30 to get out of $1.1 billion of interest-rate swaps intended to hedge variable-rate debt for capital projects, the school’s annual report said. The university in Cambridge, Massachusetts, said it also agreed to pay $425 million over 30 to 40 years to offset an additional $764 million in swaps.

The transactions began losing value last year as central banks slashed benchmark lending rates, forcing the university to post collateral with lenders, said Daniel Shore, Harvard’s chief financial officer. Some agreements require that the parties post collateral if there are significant changes in interest rates.

Notice that if you look at Daniel Shore's biography, you see this:

http://www.evp.harvard.edu/content/vice ... nt-finance

"Before joining Harvard, Dan was as a consultant at McKinsey & Company."

McKinsey & Company is involved in what is considered history's largest insider trading scandal that includes participation from an IBM executive:

http://www.nytimes.com/reuters/2009/10/ ... .html?_r=1

October 16, 2009

U.S. Charges Billionaire Rajaratnam With Record Insider Trading
By REUTERS

NEW YORK (Reuters) - Billionaire hedge fund founder Raj Rajaratnam and executives from some of the most prestigious U.S. companies were charged on Friday with the largest hedge fund insider-trading scheme ever.

Three executives from major American companies IBM, top consulting firm McKinsey & Co and the venture capital arm of chip giant Intel Corp are also facing criminal charges.

"This is not a garden-variety insider trading case," Preet Bharara, the U.S. Attorney for Manhattan, said at a news conference. He said the scheme made more than $20 million in illegal profits over several years. http://graphics.thomsonreuters.com/109/ ... RD1009.gif

One of the criminal complaints accuses Rajaratnam, 52, considered the richest Sri Lankan in the world, of conspiring with Intel Capital treasury department managing director Rajiv Goel and Anil Kumar, a director of McKinsey & Co. The alleged offenses took place over three years starting in January 2006.

A second criminal complaint accused three other people -- New Castle portfolio manager Danielle Chiesi, New Castle general partner Mark Kurland and Robert Moffat, a senior vice president in the IBM technology group -- of insider trading crimes and earning millions of dollars in illegal profits.