PORTLAND – The owner of a Portland-based investment company is suing two Harvard economists who were hired to bring free-market reforms to the former Soviet Union.

John Keffer of Forum Financial Group charges that Andrei Shleifer and Jonathan Hay used hidden partnerships and influence with corrupt Russian officials to take control of Russia’s first mutual fund.

Forum said it set up the financial infrastructure of the fund, but was unable to reap the benefits.

Shleifer and Hay were associated with the Harvard Russia Program, which had U.S. government funding. The program was intended to attract investments that would move industry out of state control and improve the lives of ordinary Russians.

Instead, it ended in failure amid accusations that the university’s American employees hijacked the process for their own benefit.

Harvard, which eventually killed the program, also is named in the Forum lawsuit. The university maintains the suit has no merit.

In documents filed in federal court in Portland, lawyer David Apfel argued Forum’s contract was with Russia, not Harvard, and U.S. courts can’t second-guess the decisions of foreign governments.

U.S. District Judge Gene Carter rejected Apfel’s argument that if the case did go forward, it shouldn’t be in Maine.

Forum came to Russia with high hopes of doing good and making profits, but was disappointed on both counts, said Peter DeTroy, Forum’s lawyer. “We went in there excited, and left with a pretty bad taste in our mouths,” he said.

Beginning with the fall of the Soviet Union, Harvard economists have been a driving force in U.S. economic policy in the former Cold War superpower. Starting in 1992, the U.S. government paid more than $40 million to the Harvard Institute for International Studies to help build a market economy in Russia.

Shleifer and Hay were part of a circle of American economists who worked with Anatoly Chubais, the chief economic architect of former president Boris Yeltsin.

From offices in Portland, Forum has set up and operated mutual funds in the United States, Poland, Bermuda and Malta. The company is a recognized expert in setting up overseas mutual funds.

In 1996, Forum received a contract from the Russian Securities Exchange Commission to set up and operate a specialized depository, which holds assets and keeps records of money invested in mutual funds.

Forum invested $400,000 for 49 percent ownership of the depository, with the understanding that the company would manage it.

The rest of the depository would be owned by Russian investors, in accordance with Russian law.

But according to the complaint, Shleifer and Hay pressured Forum to financially back a new mutual fund, which was licensed to Hay’s girlfriend.

Keffer said Hay then told him Forum would not get paid for running the depository unless it transferred majority ownership and management control to Julia Zagachin, an American married to a Russian, who was also employed as a Harvard Russia Program associate.

Hay knew the Harvard economists could block Forum’s participation because they also were advisers to the Russian SEC. Keffer charges Forum had no choice but to pull out and get its $400,000 back.

Forum argues the company lost future profits as well as the money it spent to send some of its top employees to Moscow to work on the depository. The depository still exists and could become profitable if the Russian economy revives.