Conflict of Interest State Ethics Commission

Conflict of Interest Person A has role X regarding issues Q Person A has role X regarding issues Q X requires competent/objective judgment regarding Q X requires competent/objective judgment regarding Q A’s having X thereby justifies others (B) to rely on A 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. 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) a = personal interest (usually financial benefit/competition detriment) b = official duty/public interest b = official duty/public interest c = objective, professional, or independent judgment c = objective, professional, or independent judgment Can a + b = c ? 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). 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 Therefore, conflict of interest = conflict of roles

Conflict of Interest Having a conflict of interest is not, in and of itself, evidence of wrongdoing 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 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. 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 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 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 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 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 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 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 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 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 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… 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”: 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 Recusal –To minimize any conflict, the board member should not participate in any way in the decision, including discussions Third-party evaluations 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) a = personal interest (usually financial benefit/competition detriment) b = official duty/public interest b = official duty/public interest c = objective, professional, or independent judgment c = objective, professional, or independent judgment Can a + b = c ? 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)