Wednesday, April 20, 2011

A Structural Conflict of Interest in Feinberg's BP-Claims Disbursement Office

A year after the BP oil rig explosion in the Gulf of Mexico, only $4 billion of the $20 billion fund alloted by BP had been paid to claimants. Out of 800,000 claims submitted, two-thirds had been processed.  That is to say, two-thirds of the claims translates into 20% of the available funds. It appears that Ken Feinberg, the lawyer tasked with administering the funds, was being too stingy.


The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

Tuesday, April 19, 2011

Business Ethics in the Business World: A Glimpse from Goldman Sachs

Goldman Sachs’ ethics code reads in part, “[We] expect our people to maintain high ethical standards in everything they do. . . . From time to time, the firm may waive certain provisions of this Code.”[1] The explicit conditionality is notable and significant. I contend that among other reasons, a negative impact on the bank’s financial position and/or profits is apt to trigger such a waiver not only at Goldman Sachs, but from the business standpoint more generally.


The full essay is in Cases of Unethical Business, available at Amazon.com.


1. William D. Cohan, Money and Power: How Goldman Sachs Came toRule the World (NY: Doubleday, 2011).

Conflicts of Interest for Public Officials: How Broad?

Michael Carrigan, a member of the City Council in Sparks, Nevada, “says he was trying to make sure his vote on a proposed casino, one that his campaign manager helped develop, did not pose an ethics problem.”[1] Carrigan backed the Lazy 8 casino project proposed by Red Hawk Land Co. Carrigan’s friend and campaign manager, Carlos Vasquez, worked as a consultant on the project. The question is whether the elected official’s relationship to his campaign manager who was a consultant on a project to be voted on constitutes a conflict of interest sufficient for the official to have not voted. The Sparks city attorney told Carrigan that he could vote on the project as long as he publicly disclosed his relationship with the project consultant. The attorney was obviously thinking in terms of transparency. Carrigan made the recommended disclosure. The Nevada Ethics Commission, however, claimed after the vote that Carrigan had a conflict of interest and should have abstained even with the transparency. In its reprimand, the commission cited ethics law that says public officials must not vote when their judgment could be affected by a commitment or relationship to someone in their household, a relative, business partner, or a person “substantially similar” to those specified. The commission classifies the campaign manager in the “substantially similar” category because Carrigan’s loyalties to his campaign manager would have affected his judgment. Caren Jenkins, executive director of the Nevada Ethics Commission, explains, “Here was a friend, a buddy, a close confidant. If Mr. Carrigan ever thought it was in his best interest to vote against the project, would he have?”[2] Carrigan sued the commission for its reprimand, claiming it violated his free speech rights. The Nevada Supreme Court sided with Carrigan, who pointed to the fact that he was not in business with his campaign manager. The Nevada Supreme Court said the catch-all category the commission cited failed to “limit the statute’s potential reach (or) guide public officers as to what relationships require recusal.”[3] The state court said the law “thus chilled speech.” In its appeal to the U.S. Supreme Court, the lawyer representing the commission argues, “State and local legislators have no personal ‘free speech’ right to cast votes on particular matters, much less ones in which they have a personal interest.”[4] The Reporters Committee for Freedom of the Press similarly claims that rules such as Nevada’s are important to ensure politicians don’t vote based on personal interests.


The full essay is at "Conflicts of Interest for Public Officials."

1 Joan Biskupic, “Nev. Official’s Vote Turns Free-Speech Case,” USA Today, April 18, 2011, p. 6A.
2. Ibid.
3. Ibid.
4. Ibid.