Managing and Monitoring Conflicts of Interest - sv

Managing and Monitoring Conflicts

of Interest

Practical Solutions

June, 2013

Urton Anderson

Clark W. Thompson Professor

Department of Accounting

The University of Texas at Austin

Sheryl Vacca

SVP/Chief Compliance and Audit Officer

University of California

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Agenda

? Conflicts of Interest ¨C A Hot Topic

? What is a Conflict of Interest?

? Assessing Risks Regarding Conflicts of Interest

? Monitoring & Auditing the Program

? 7 Key Questions

? Contacts

? Appendices

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Why are Conflicts a Hot Topic?

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Conflicts of Interest in the News

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Goldman Sachs ¨C Securities & Investment Banking ¨C Settled 2012

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Los Angeles City Council ¨C Government & Politics ¨C Filed 2013

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UT Professor Charles Groat issued a report stating there was no link between fracking operations and water

contamination while receiving $1.5 million annually as compensation while on the board of a drilling company.

Dr. Raymond Orbach has resigned as head of the Energy Institute.

Securities and Exchange Commission ¨C Government & Politics ¨C Nominated 2013

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Councilman voted on settlement in favor of Clear Channel Outdoor while holding stock in it¡¯s parent company.

Councilman also participated in a vote involving Home Depot while owning over $2,000 in Home Depot stock.

An investigation by the L.A. Ethics Commission has been requested..

University of Texas at Austin¡¯s Energy Institute. ¨C Higher Education ¨C Settled 2012

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$20 million in fees lost

Goldman Sachs advised El Paso Corp on a $20 billion sale to Kinder Morgan while having a multibillion©\dollar stake in

Kinder.

Mary Jo White, nominee for SEC Chairman, will receive monthly retirement payments of $42,000 upon retirement from

Debevoise & Plimpton LLP.

John W. White, husband to Mary Jo White, is a partner at the law firm Cravath, Swaine & Moore LLP.

She has assisted clients such as JPMorgan Chase & Co., Deloitte & Touche and former Bank of America chief Ken Lewis

Food ¨C Reviewed 2010

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Reviews by industry experts and the FDA of food manufacturers tied to outbreaks of salmonella, e.coli and other food

contaminates found many companies were given high ratings by private food inspectors

Inspectors are private companies with no public oversight and are paid by the company under inspection.

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Conflicts of Interest Definitions

How General Bodies Define it

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Any relationship that is or appears to be not in the best interest of the

organization. A conflict of interest would prejudice an individual's

ability to perform his or her duties and responsibilities objectively.

Institute of Internal Auditors (IIA)

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A real or seeming incompatibility between one¡¯s private interests and

one¡¯s public or fiduciary duties.

Black¡¯s Law Dictionary

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A conflict between the private interests and the official responsibilities

of a person in a position of trust

Merriam©\Webster

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Conflict of interest as virus

¡­conflicts of interest can be thought of as the

viruses that threaten the organization¡¯s

wellbeing. As in the microbial world, these

viruses come in a vast array of constantly

mutating formats, and if not eliminated or

neutralized, even the simplest virus is a mortal

threat to the body.

Carlo V. di Florio

Director, Office of Compliance Inspections and Examinations

October 2012 speech to National Compliance Officers

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Conflicts of Interest Definitions

How We Define It

A potential moral hazard that occurs when a

person or organization has competing or multiple

interests from its prime directive or responsibility

within an organization. Conflicts of Interest may

or may not be associated with direct financial

benefit for each party and therefore may be

difficult to recognize, monitor, manage or uncover

in an isolated or recurring environment.

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