The harm from conflicts you often can’t see

A few days ago Newsweek ran a piece on the Trump family’s “endless conflicts of interest,” describing in detail several dozen actual, apparent and potential conflicts, and related ethical infirmities. Another such list is maintained and periodically updated by The Atlantic. The sheer volume of these cases is so overwhelming that it may be worthwhile to step back and consider what the harm from COIs is as a general matter.

Over the years, one of the themes of this blog has been that the harm caused by COIs is often significantly underappreciated. Some of these posts are collected here.

Broadly speaking, COIs often give rise to two categories of harm: they encourage people to make undesirable decisions and discourage them from making desirable ones, as described in this post.  Neither type of harm is generally easy to spot but, of the two, the first – being incented to make bad decisions – is presumably more identifiable as a general matter than is the second – being discouraged from making good ones, as actions are typically more noticeable than inactions.

But an interesting and important case of the latter has been on display the past few days as Hui Chen – a highly regarded member of the compliance and ethics (“C&E”) community – has publicly explained her decision to leave her position as compliance counsel for the Justice Department’s Fraud Section. As described in The Washington Post : As a contractor for the Justice Department, Hui Chen would ask probing questions about companies’ inner workings to help determine whether they should be prosecuted for wrongdoing. But working in the Trump administration, Chen began to feel like a hypocrite. How could she ask companies about their conflicts of interest when the president was being sued over his? “How do I sit across the table from companies and ask about their policies on conflict of interest, when everybody had woken up and read the same news?” Chen said in an interview. “I didn’t want to be a part of the administration whose job it is to question others about these precise things.”

While this may seem like “inside baseball” to those outside of the C&E community, Hui Chen’s departure from Justice represents a loss for all who can be protected by strong C&E programs, meaning millions of shareholders, consumers, employees, taxpayers and others – in short, pretty much everyone.