The Brazil project at the heart of the lawsuit was born in the country’s impoverished northeast. The university provided almost all the capital for the agricultural development; Brazilian private equity firm Gordian BioEnergy managed it, establishing a company called Terracal Alimentos e Bioenergia, according to people familiar with the matter.
Gordian planned to spend around 6 billion Brazilian reais ($1.5 billion) on agricultural developments, court records show. The first would transform thousands of acres around the remote town of Guadalupe on the Parnaiba River using modern irrigation technologies. It would process sugarcane into sugar and ethanol, grow tomatoes to make tomato paste and produce electricity from the waste.
At the time, Brazil was booming, but it has since slipped into an economic crisis. By the end of 2015, the endowment grew skeptical, canceling plans to invest another $350 million after an initial commitment of $270 million, documents show.
In May, Ricardo Moura, Terracal’s former chief executive officer, sued Harvard and Gordian in a state labor court in Rio de Janeiro, saying they owe him the equivalent of $8 million in profit sharing and bonuses.
It is one of at least three legal disputes Harvard faces from investments in Brazil. The other two involve allegations that some other farmland Harvard acquired has fraudulent titles, something the endowment has disputed. The farms are in a region known as the Cerrado, which like the Amazon to the north saw a surge in wildfires this year.
Officials from Gordian BioEnergy, which is based in Rio, didn’t return calls and emails seeking comment. Gordian was founded and is run by Diomedes Christodoulou, who earlier in his career helped spearhead Enron Corp.’s expansion in South America before the energy company collapsed in 2001.
Neither Harvard or Gordian has filed a formal response to the May suit over compensation, according to court records. A judge in the case issued a brief ruling in July, saying that the land in question can’t be sold without disclosing Moura’s claim to potential buyers.
Sorting out the mess left by the Brazil farm investment fell to 46-year-old Butterfield, who was hired in 2016 as a managing director overseeing Harvard’s natural resource portfolio. Before joining Harvard, he was CEO of Radar SA, a Brazil-based agriculture investor backed by retirement-fund giant TIAA.
The lawsuit captures the tension unfolding in 2017. Harvard pushed Gordian to sell off farmland piecemeal but the private firm wanted to find a new investor to keep the project alive.
Gordian hired five brokers that contacted almost 70 potential buyers for the land, from pension funds in Europe to money managers in Asia to blue-chip foundations in New York. They found little interest, according to the lawsuit. TIAA said it didn’t find the location of the land attractive, according to an internal report.