Compliance program standards of proof

The Chauvin trial in Minneapolis has caught the attention of much of the US, and rightly so, given the importance of the issues it raises and the highly compelling nature of the proof in the court. The case – like many highly public prosecutions – also provides the occasion for instructive civics lessons in various aspects of litigation.

One of these concerns standards of proof, with  commentators describing and discussing “proof beyond a reasonable doubt.” Another concerns the defendant’s state of mind, with possibilities including “depraved mind murder.”

Compliance officers sometimes deal with standards of proof and state of mind in connection with disciplinary procedures.  Less obviously, these issues can be relevant to conflicts of interest.

While some organizations bar conflicts of interest in all cases, many opt for allowing COIs  to exist where appropriate. But how should appropriate be defined for these purposes?

One formulation that I have recommended is: A COI may be approved only where doing so would clearly be in the best interest of the company.

Two comments about this.

First, the word “clearly” is intended to require a showing greater than a mere preponderance of the relevant facts. Of course, it is not as high as “beyond a reasonable doubt,” which, in my view, would be widely seen as too much in this setting.  But, it is still a high standard  and presumably would require rejection of any proposed COI where there was a lack of genuine clarity on this issue.

Second, the “best interest of the company” should be read broadly. It requires more than an absence of corruption or other  outright misconduct. Rather, it also mandates consideration of how  the COI at issue could impact the ethical culture of the organization and related matters.