Ethics and Conflict of Interest
by Michael McDonald
You've seen the headlines, "Politician caught in
conflict of interest " or "professional denies conflict
of interest allegations. " You probably were thankful
that you were not the subject of the newspaper story.
But you also may have wondered what exactly is a
conflict of interest, why such conflicts are ethically
significant, and what you can do to avoid being in one.
Definition
I define a conflict of interest as "a situation in which
a person, such as a public official, an employee, or a
professional, has a private or personal interest
sufficient to appear to influence the objective exercise
of his or her official duties. " There are three key
elements in this definition. First, there is a private
or personal interest. Often this is a financial
interest, but it could also be another sort of interest,
say, to provide a special advantage to a spouse or
child. Taken by themselves, there is nothing wrong with
pursuing private or personal interests, for instance,
changing jobs for more pay or helping your daughter
improve her golf stroke.
The problem comes when this private interest comes into
conflict with the second feature of the definition, an
"official duty" -- quite literally the duty you have
because you have an office or act in an official
capacity. As a professional you take on certain official
responsibilities, by which you acquire obligations to
clients, employers, or others. These obligations are
supposed to trump private or personal interests.
Third, conflicts of interest interfere with professional
responsibilities in a specific way, namely, by
interfering with objective professional judgment. A
major reasons clients and employers value professionals
is that they expect professionals to be objective and
independent. Factors, like private and personal
interests, that either interfere or appear likely to
interfere with objectivity are then a matter of
legitimate concern to those who rely on professionals --
be they clients, employers, professional colleagues, or
the general public. So it is also important to avoid
apparent and potential as well as actual conflicts of
interests. An apparent conflict of interest is one which
a reasonable person would think that the professional's
judgment is likely to be compromised. A potential
conflict of interest involves a situation that may
develop into an actual conflict of interest.
Leading examples
With this in mind, consider the following types of
typical conflicts of interest listed by Canadian
political scientists Ken Kernaghan and John Langford in
their book, The Responsible Public Servant. They list
seven categories:
[1] Self-dealing. For example, you work for
government and use your official position to secure a
contract for a private consulting company you own.
Another instance is using your government position to
get a summer job for your daughter.
[2] Accepting benefits. Bribery is one example;
substantial [non token] gifts are another. For example,
you are the purchasing agent for your department and you
accept a case of liquor from a major supplier.
[3] Influence peddling. Here, the professional
solicits benefits in exchange for using her influence to
unfairly advance the interests of a particular party.
[4] Using your employer's property for private
advantage. This could be as blatant as stealing
office supplies for home use. Or it might be a bit more
subtle, say, using software which is licensed to your
employer for private consulting work of your own. In the
first case, the employer's permission eliminates the
conflict; while in the second, it doesn't.
[5] Using confidential information. While working
for a private client, you learn that the client is
planning to buy land in your region. You quickly rush
out and buy the land in your wife's name.
[6] Outside employment or moonlighting. An
example would be setting up a business on the side that
is in direct competition with your employer. Another
case would be taking on so many outside clients that you
don't have the time and energy to devote to your regular
employer. In combination with [3] influence peddling, it
might be that a professional employed in the public
service sells private consulting services to an
individual with the assurance that they will secure
benefits from government: "If you use my company, I am
sure that you will pass the environmental review."
[7] Post-employment. Here a dicey situation can
be one in which a person who resigns from public or
private employment and goes into business in the same area. For example, a former public servant sets up a
practice lobbying the former department in which she was
employed.
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TRAINING
Association of Certified Fraud Examiners
17th Annual ACFE Fraud Conference and Exhibition
CPE Credits: 44
7/9/2006 - 7/14/2006
The Venetian
3355 Las Vegas Blvd.
Las Vegas, NV 89109
(877) 283-6423
(702) 414-1000 (Fax)
Room Rate: $169.00 - subject to availability
Tampa Bay Chapter
Dinner
Meetings
January 10, 2006
"Creating an Ethical Environment in an Organization."
February 7, 2006
"Forensic Science & the Fraud Investigator"
March 14, 2006
"T.B.A."
April 11, 2006
"T.B.A."
7th Annual Fraud & Computer
Crimes Seminar
May 9 - 10, 2006
Ruth Eckerd Hall
1111 McMullen Booth Road
Clearwater, FL 33759
2005 - 2006
OFFICERS &
DIRECTORS
PRESIDENT
Steve
Hooper, CIA, CFE, CCSA
Clerk of the Circuit Court
Hillsborough County, FL
(813) 276-2029 x3703
VICE PRESIDENT
Christine Dever, CPA, CFE
SECRETARY
Kara Preston, CFE
Polk County Sheriff's Office
(863) 499-2400
TREASURER
Laura Krueger Brock, CFE, CPA
Cherry, Bekaert, Holland, LLP
(727) 822-8811
DIRECTOR
Mark Dubina,
CFE
Florida Department of
Law Enforcement
(813) 878-7366
DIRECTOR
Ellen Wilcox, CFE
Florida Department of
Law Enforcement
(727) 298-2482
DIRECTOR
Penny Borjas, CFE, CIA
CHAPTER TRAINING
Wayne Boytim, CFE
City of Tampa,
Internal Audit
(813) 274-7167 |
Some tests
How do you determine if you are in a conflict of
interest, whether actual, apparent, or potential? The
key is to determine whether the situation you are in is
likely to interfere or appear to interfere with the
independent judgment you are supposed to show as a
professional in performing your official duties. A good
test is the 'trust test': would relevant others [my
employer, my clients, professional colleagues, or the
general public] trust my judgment if they knew I was in
this situation. Trust, in my opinion, is at the ethical
heart or core of this issue. Conflicts of interest
involve the abuse, actual or potential, of the trust
people have in professionals. This is why conflicts of
interest not only injure particular clients and
employers, but they also damage the whole profession by
reducing the trust people generally have in
professionals.
In fact, the 'trust test' suggests one very good way of
dealing with a conflict of interest: reveal your private
interest in the matter to relevant parties. Often if we
let others know what might be influencing our judgment,
they can be on their guard and not caught unaware.
But sometimes it isn't enough to know that there is a
particular private interest influencing a professional's
judgment; the client, employer, etc. expects that the
professional will stay out of such situations. So the
second way to avoid conflicts of interests is to absent
yourself from decision making or advice giving if you
have a private interest. So in the case of potential
self-dealing, the conscientious professional will say
that she can't be involved in a situation where she is
both bidding on a government contract and deciding as a
public servant who is awarded the contract. She will
either step aside and completely [and, I mean,
completely] absent herself from determining who gets the
contract or refrain from bidding on such contracts in
the first place -- which is probably the wisest course
of action.
A final word
It may take some skill and good judgment to recognizing
that you are in a conflict of interest situation. This
is because private and personal interests can cloud a
person's objectivity. So it may be a lot easier to
recognize when others are in a conflict, than when you
are. This suggests that it may be useful to talk to a
trusted colleague or friend when you are in doubt.
But once you recognize that you are in or are headed
into a conflict of interest situation, the ethical
responses are straightforward: get out of the situation,
or, if you can't, make known to all affected parties
your private interest. These responses will preserve the
trust essential to professional objectivity.
It is important to realize that avoiding conflicts of
interest is only one part of being a conscientious
professional. Another part is the difficult task of
making choices when the ethics of the situation aren't
clear or when there are good moral reasons for acting in
diametrically opposing ways. This is typical in the case
of whistle blowing, in which a duty of loyalty to a
client or employer counsels confidentiality but this
conflicts with a duty to warn the public of a serious
harm or danger. Source:
http://www.ethics.ubc.ca/people/mcdonald/conflict.htm
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News from the ACFE
Who to
Contact at the ACFE
This month we feature
Wendi Williams, Higher
Education Initiative Program Manager.
The ACFE has established the Higher Education
Initiative to address the unprecedented need for fraud
examination education at the university level. Wendi is
responsible for managing the Higher Education program and
providing assistance to educators and educational institutions
around the globe. She also administers the Ritchie-Jennings
scholarship. Please contact Wendi if you are interested in
speaking at a university or college in your area.
CPE NEWS
DEADLINE APPROACHING: Confirm your CPE compliance before Jan 31,
2006
CPE Facts:
-
CFEs may earn CPE
credit for attending college classes
-
Auditing and
Accounting are approved “fraud-related” fields of study
-
Training you
complete for work may earn you CPE
Read about other
types of Continuing Professional Education credit in the
Career Center and then confirm your CPE compliance in the
Members Only section today!
Annual CPE Reporting for 2005 Simplified
ACFE has simplified
requirements on how CFEs communicate compliance with annual CPE
credits earned. No detailed reports, no confusing deadlines, and
no worry whether a mailed or faxed document arrived by the
deadline.
Read more.
Featured ACFE Product
Fraud Resource
Center
In place of the
usual ACFE product I wanted to bring the Fraud Resource Center
to your attention. Located on the ACFE home page the Resource
Center is a collection of useful anti-fraud information for the
fraud examiner.
Visit the
Resource Center
today to find articles, checklists, sample documents and other
downloadable information.
17th Annual ACFE
Fraud Conference and Exhibition update
It is official now.
The Annual Fraud Conference will be held in Las Vegas next year.
You can learn more about the event with a visit to the
conference
web page.
The conference will run July 9-14 and be held at the Venetian.
Participation is
Key
Discover the
additional benefits of membership when you participate with your
local chapter:
-
Network with
leaders that can advise in your career advancement
-
Enhance
leadership skills with committee participation
-
Engage with
professionals in your community
-
Earn continuing
education credits at local meetings while saving time and
money
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Our next Dinner Meeting is scheduled for January
10, 2005.