Conflict of Interest State Ethics Commission
Conflict of Interest • Person A has role X regarding issues Q • X requires competent/objective judgment regarding Q • A’s 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 A’s competent objective judgment in X regarding Q less likely to benefit B than A’s occupying X justifies B in expecting. (see Conflict of Interest in the Professions by Michael Davis, portions here from Davis’ work)
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
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
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.
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
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
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
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…
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-21-27:SEI])
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”
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.
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.
Remember Conflict of interest consists of a set of conditions by which professional judgment concerning a primary interest (e.g. patient’s 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 member’s secondary (individual) interest.
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
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)