Conflicts of Interest – It Means Something Different at Work

Sometimes, an illegal “conflict of interest” at work can be a normal part of everyday home life. That’s one of the reasons that conflicts of interest (COIs) can be so difficult to understand. Imagine this scenario. You’re outside working in your yard and a neighbor calls out, “You have the best-looking flowers in the neighborhood! How do you do it?” You say it’s because of a new plant food you found and you give your neighbor the phone number of the company that sells the product. “You should really try it,” you say. “Mention my name and they’ll cut you a good deal.” What you don’t tell your neighbor is that your brother-in-law owns the company. You don’t tell your neighbor that you get the product free. And you don’t tell the neighbor that you get $20 for every customer you refer.

In your home life, it probably makes sense to steer business to your brother-in-law, especially if you like the product. It seems normal to steer business to family members, especially if you use the product and like it. Getting a small reward for the referral isn’t a big deal. In the end, you figure, everyone wins. The neighbor gets a good product, your brother-in-law gets new business, you get a $20 reward, and nobody was hurt.

In the business world, referring a potential customer to a company in which you have a personal, professional or financial interest is a conflict of interest. Accepting a reward for the referral is a kickback. Telling someone that a product has been reviewed or approved by an outside agency is fraud. Any one of those actions can inflict a large fine BBNC and jail time on you.

Regulating Conflicts of Interest

BBNC has a strict policy against conflicts of interest. Similar restrictions are imposed by federal and state law, global regulatory agencies, and organizations that represent the industries our companies work in.

There are as many definitions of COI as there are regulations and agencies that enforce them but a workable definition of an organizational conflict of interest (OCI) is “a situation in which an organization has other interests that could diminish its ability to give impartial, objective service or that could provide it with an unfair competitive advantage. As an example, Company A hires Company B to audit the financial records of a small company it is interested in acquiring. The “hiring” company expects an objective, technically sound audit on which to base a significant financial decision. Company B never disclosed that it had advised the small company in the past about ways to restructure its loans. That past relationship represents a potential conflict of interest, even if it does not affect the company’s objectivity and work for its new client. Failure to disclose the potential COI is most likely both unethical and illegal.

“Personal conflicts of interest” (PCI) are defined differently and are specifically addressed under several new regulations. A PCI may exist if an employee who is in a position to influence the decisions, contacts or performance of its employer has personal relationships, financial interests or personal activities that could influence his or her objectivity or work.

Disclosure and Fraud

All of us have a stake in the objectivity and integrity of our co-workers, corporate executives, clients, subcontractors and competitors. Beyond that, COI can be the stepping stone that leads to fraud, bribery and corruption under laws as wide-ranging as the False Claims Act and the Foreign Corrupt Practices Act. “Disclosure” is a central issue in compliance with COI regulations. Potential COIs are an everyday fact of business life. Employees are hired because of their knowledge of the industry, usually gained in their employment with other companies in our field. Friends we have known since college may work for one of our competitors. Something overheard in a public restaurant may describe another company’s strategy for winning a government contract that we are pursuing.

Many of us may have potential conflicts of interest, but we cannot allow them to be hidden conflicts of interest. As employees, we must disclose any situation that may be, or that gives the appearance of, a conflict of interest. As a company, we are required to disclose any potential conflict of interest to the appropriate regulatory or funding agencies – a requirement BBNC cannot meet if our employees do not disclose their potential COIs.

Points to Consider

  • The same behavior that is acceptable in our private lives may be an illegal conflict of interest in the working world.
  • COIs are coming under increasing regulation and restriction by federal and state governments, universities and hospitals and industry trade groups.
  • Violations of laws including the False Claims Act and the Foreign Corrupt Practices Act often begin with an undisclosed conflict of interest.
  • Multiple regulations require companies to disclose potential conflicts of interest. A failure to do so can result in the company’s suspension, debarment or prosecution.