Conflict of Interest

1
Conflict of Interest

• State Ethics Commission

2
Conflict of Interest

• Person A has role X regarding issues Q
• X requires competent/objective judgment regarding
  Q
• As having X thereby justifies others (B) to rely
  on A regarding Q
• A (actually, latently, potentially) is subject to
  influence, loyalties, or other interests tending
  to make As competent objective judgment in X
  regarding Q less likely to benefit B than As
  occupying X justifies B in expecting.

(see Conflict of Interest in the Professions by
Michael Davis, portions here from Davis work)
3
Bottom Line

• a personal interest (usually financial
  benefit/competition detriment)
• b official duty/public interest
• c objective, professional, or independent
  judgment
• Can a b c ?
• If not, seek a remedy

4
Conflict of Interest

• Any situation in which an individual or
  corporation (either private or governmental) is
  in a position to exploit a professional or
  official capacity (role) in some way for their
  personal or corporate benefit (role).
• Therefore, conflict of interest conflict of
  roles

5
Conflict of Interest

• Having a conflict of interest is not, in and of
  itself, evidence of wrongdoing
• For many professionals, it is virtually
  impossible to avoid conflicts of interest from
  time to time
• It can, however, become a legal matter if an
  individual tries influencing the outcome of the
  decision for personal benefit (a breach of the
  Duty of Loyalty) see N.C.G.S. 138A-12 and
  138A-36.

6
Conflict of Interest

• A conflict of interest may exist even if there
  are no improper acts as a result (Conflict of
  Roles and Conflict of Interest)
• A person with two roles (e.g. a stockholder and
  government official) may experience situations
  where those two roles conflict
• Having two roles is not illegal, but the
  differing roles may provide an incentive for
  improper acts in some circumstances
• The conflict can be mitigated- but it still exists

7
The Ethics Act and Types of Conflicts of Interest

• Self-dealing in which public and private
  interests compete, if not collide
• Outside employment in which the interests of one
  job contradicts or competes with another
• Family interests in which a spouse, child, or
  other close relative is employed or where goods
  or services are purchased from said relative

8
Conflicts of Interest

• Other improper acts that are sometimes classified
  as conflicts of interest are probably better
  classified otherwise
• Accepting bribes can be classified as corruption
• Unauthorized disclosure of confidential
  information, in itself, should not be considered
  conflict of interest
• Use of government or corporate property or assets
  for personal use is fraud

9
Ways to Mitigate Conflict of Interest

• The best way to handle conflicts of interest is
  to avoid them entirely
• Short of avoiding conflicts of interest, the best
  way to deal with them is one or more of the
  following (mitigation) measures

10
Ways to Mitigate Conflict of Interest(see
138A-2 15 especially 36 Public Servants and
Official Actions)

• Disclosure or remedies
• Severity of Conflict of Interest
• Likelihood that professional judgment will be
  influenced, or appear to be influenced, by the
  secondary interest, and
• The seriousness of the harm or wrong likely to
  result from such influence or its appearance
  (see 138A-36 and Article 3 138A-21-27SEI)

11
Ways to Mitigate Conflict of Interest

• Recusal
• To minimize any conflict, the board member should
  not participate in any way in the decision,
  including discussions
• Third-party evaluations
• The cure (rules/law) can create difficulties in
  matching the rule to the great variety of
  conflicts of interest
• A response to the common claim that ethics cannot
  be legislated morality and law overlap/interact
  in many mutually reinforcing ways, especially
  with Conflict of Interest (appearance, potential,
  actual), as discussed in N.C.G.S. 138A The
  State Ethics Act

12
Failure to Recognize Conflict of Interest and Act
Upon It May Become Felonious

• The courts have interpreted honest services to
  include honest and impartial government, and a
  general duty on the government official to act
  out of loyalty, honesty, independence,
  impartiality, and integrity.
• Accordingly, the public has a right to have its
  public officials perform their duties free from
  improper influences, corruption, fraud, deceit,
  self-enrichment, self-dealing, and conflicts of
  interest.

13
Failure to Recognize Conflict of Interest and Act
Upon It May Become Felonious

• The taxpayer, the media, and government leaders
  are paying attention- so should we.
• These federal statutes, which predate The Ethics
  Act but whose potential applications are made the
  more probable, are the ones under which a former
  Council of State officer, a U.S. Congressman from
  North Carolina, a former N.C. legislator, and a
  former board member were recently convicted.
• The Congressman is serving a four-year prison
  term, and the former Commissioner is facing a
  maximum of 20 years pursuant to the federal and
  state violations.

14
Remember

• Conflict of interest consists of a set of
  conditions by which professional judgment
  concerning a primary interest (e.g. patients
  welfare) tends to be unduly influenced by a
  secondary interest (e.g. financial gain) with a
  board, the primary interest is the business,
  mandate, or responsibility of the board, being
  influenced by a board members secondary
  (individual) interest.

15
Bottom Line (again)

• a personal interest (usually financial
  benefit/competition detriment)
• b official duty/public interest
• c objective, professional, or independent
  judgment
• Can a b c ?
• If not, seek a remedy

16
The Trust Test

• Would stakeholders (relevant others) trust my
  judgment if they knew of my conflict of
  roles/conflict of interest?
• It is easier to see Conflict of Interest in
  others than yourself so, discuss with others and
  promote/act with transparency This is the goal
  of the Statement of Economic Interest
• (Article 3, SGEA)

(from Michael McDonald, Chair, Department of
Applied Ethics, University of British Columbia)