Conflict of Interest

A conflict of interest (COI) occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other.

The presence of a conflict of interest is independent from the execution of impropriety. Therefore, a conflict of interest can be discovered and voluntarily defused before any corruption occurs. A widely used definition is: “A conflict of interest is a set of circumstances that creates a risk that professional judgment or actions regarding a primary interest will be unduly influenced by a secondary interest.” Primary interest refers to the principal goals of the profession or activity, such as the protection of clients, the health of patients, the integrity of research, and the duties of public office. Secondary interest includes not only financial gain but also such motives as the desire for professional advancement and the wish to do favors for family and friends, but conflict of interest rules usually focus on financial relationships because they are relatively more objective, fungible, and quantifiable. The secondary interests are not treated as wrong in themselves, but become objectionable when they are believed to have greater weight than the primary interests. The conflict in a conflict of interest exists whether or not a particular individual is actually influenced by the secondary interest. It exists if the circumstances are reasonably believed (on the basis of past experience and objective evidence) to create a risk that decisions may be unduly influenced by secondary interests.

William K. Black insists that "Conflicts of interest matter." In the run up to the Savings and loan crisis of the 1980s and early 1990s, control frauds like Charles Keating were able to get legislators like Speaker of the House Jim Wright, the Keating Five Senators and majorities in both the US House and Senate to suppress investigations of massive criminality until their Ponzi schemes finally collapsed. Only then did citizen pressure and media involvement force political action. Then regulators filed thousands of criminal referrals that translated into over a thousand felony convictions. The current foreclosure and Subprime mortgage crisis is similar to the run up to the S&L crisis with zero criminal referrals and zero prosecutions of key finance executives. Black calls this the de facto decriminalization of elite financial fraud. As with the S&L crisis, the current situation is facilitated by conflicts of interest in the media and the US system of privately funded political campaigns.