Conflict of Interest Investigations
A conflict of interest occurs when an employee or agent—someone who is authorized to act on behalf of a principal—has an undisclosed personal or economic interest in a matter that could influence his professional role.
These schemes involve self-dealing by an employee or agent and can occur in various ways. For example, a conflict might occur when an employee accepts inappropriate gifts, favors, or kickbacks from vendors, or when an employee engages in unapproved employment discussions with current or prospective contractors or suppliers.
Conflict of interest schemes generally constitute violations of the legal principle that an agent or employee must act in good faith, with full disclosure, and in the best interest of the principal or employer.
Conflicts of interest do not necessarily constitute legal violations, as long as they are properly disclosed. Thus, to be classified as a conflict of interest scheme, the employee’s interest in the transaction must be undisclosed.
There are a number of ways in which an employee can use his influence to benefit a company in which he has a hidden interest.
common conflict schemes, including conflicts in:
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Purchase Schemes
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Sales Schemes
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Delayed Billings
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Business Diversions
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Resource Diversions
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Financial Disclosures
Detection of Conflicts of Interest
Conflicts of interest are probably one of the most difficult schemes to uncover. Therefore, there are no fast and easy detection methods for this type of fraud. Some of the more common methods by which conflicts are identified include tips and complaints, comparisons of vendor addresses with employee addresses, review of vendor ownership files, review of exit interviews, comparisons of vendor addresses to addresses of subsequent employers, policies requiring certain employees to provide the names and employers of immediate family members, and interviews with purchasing personnel regarding favorable treatment of one or more vendors.
