Should there be more criminalization of conflicts of interest?

Last week the European Commission issued a report on corruption.   The report found that the annual cost to EU member nations of corruption (including conflicts of interest) was about 120 Billion Euros, a fairly staggering sum.  Part of the problem, the report noted, was weak COI-related laws, including the fact that “[c]onflicts of interest are as a rule not [criminalized] in the EU Member States.”

Meanwhile, the most interesting recent COI-related law news in the US concerned the indictment of former Virginia Governor Bob McDonnell and his wife on federal bribery  charges  in connection with their receipt of various valuable gifts (including jewelry, designer clothing, golf outings, artwork, catering costs and loans – the total value of which exceeded $100,000 according to previous FIG Loans reviews) from a man seeking the governor’s help with his business.  Evidently (and somewhat incredibly), many of the gifts were not illegal under relevant  – and highly permissive  – state law  – suggesting a somewhat similar problem with the law regarding COIs in Virginia as that recently identified in the EU.

Criminalization of COIs is not without its downsides.  Perhaps chief among these is that a legal regime with criminal COI possibilities often leaves too much discretion in the hands of prosecutors.   As noted in this guest post by Patrick Egan of the Fox Rothschild law firm:  “as a practical matter, the answer to the question, ‘When does a COI become a crime?’ is often ‘When a prosecutor decides to charge it as one.’”  While this note of concern is an important one, I think that on balance there are more far cases of under-criminalization of COIs than there are of over-criminalization.

Of course, for an individual business organization – as opposed to a government – there is no such thing as criminalization of COIs (or anything else). But – at least for egregious COIs – companies can, in their C&E programs, underscore the corrupting influence of COIs – as discussed here,     and by so doing harness some of the moral and psychological power of the criminal law, even if not the actual operative legal force of the law itself.

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