The debate on conflict of interest has once again surfaced in the news. This time, the focus is on a Minister of the Government whose spouse is the Managing Director of a law firm in Guyana that recently announced the opening of offices in Houston, Texas to provide legal services in the oil and gas sector to potential clients desirous of setting up operations in Guyana.
ExxonMobil is also headquartered in Houston and operates in Guyana through three subsidiaries – Esso Exploration and Production Guyana Ltd., CNOOC Nexen Petroleum Guyana Ltd. and Hess Guyana Exploration Ltd. According to the Production Sharing Agreement dated 27 June 2016, the registered offices of these three companies are the same as that of the law firm in question. It is, however, not clear to what extent the firm is associated with these subsidiaries but in a court matter relating to environmental permits, the Managing Director is reported to be representing two of the above companies.
In our article of 16 September 2013, we had stated that the Managing Director was also the Company Secretary of the Amaila Falls Hydro Inc. at a time when he was the chairman of the Alliance For Change (AFC). The AFC had voted against an amendment to the Hydro Electric Act as well as the lifting of the ceiling for government guarantee of loans to public entities to facilitate the proposed power sharing agreement between the company and the Guyana Power and Light. Three weeks later, the AFC had a change of heart and voted in favour of the two amendments when they were re-tabled in the Legislature. The Managing Director resigned as chairman, but it is not clear whether such action had to do with the conflict of interest or whether it was as a result of internal disagreements within the party.
However, his spouse, another senior executive member of the AFC and a Member of Parliament, through her company Video Mega Productions, was at the same time providing public relations services to Synergy Holdings Inc. and Sithe Global, both of which were connected to the Amaila Falls Project.
Conflict of interest in perspective
A conflict of interest occurs where a public official’s decisions are influenced by his or her personal interest. It has the potential to undermine the impartiality and objectivity of the person because of the possibility of a clash between his or her self-interest and the person’s professional or public interest. A conflict of interest exists regardless of whether that influence actually takes place. Once there is reasonable belief that there is a risk that decisions may be influenced by ‘secondary’ interests, there is conflict of interest. It can also exist even though there are no improper acts since differing roles are likely to provide an incentive for improper conduct.
There are various types of activities that can create possible conflict of interest situations. Two of these can be singled out: nepotism – the practice of giving favours to relatives and close friends, especially in relation to hiring and the award of public contracts; and self-dealing – a situation where a person in a position of responsibility in an organization having outside conflicting interests and acting in his/her own interest rather than that of the organization.
Most professions have codes of ethics or conduct dealing with conflicts of interest. For example, auditors hold positions of trust and must display objectivity and impartiality, have an unbiased attitude and avoid conflicts of interest. Competing interests will almost certainly destroy that trust and hence the credibility of their work. Auditors are therefore precluded from accepting engagements or employment in situations that can give rise to conflicts of interest.
In deciding whether there is a conflict of interest, the overriding consideration, indeed the standard test, is whether a reasonable, unconnected and uninformed person, weighing all the specific facts and circumstances available at the time, would be likely to conclude that the risk of conflict of interest exists, despite safeguards that may be put place to mitigate the effects of such a risk.
Ways of dealing with conflicts of interest
There are a number of ways of mitigating conflicts of interest. These include: eliminating the conflict of interest in its entirety; disclosure of the facts to the appropriate authorities; recusal from any deliberations of the matter giving rise to the conflict; third party evaluation; and adherence of codes of ethics.
For elected public officials, the options are, however, very limited by virtue of the fact that they hold positions of public trust, and the first and foremost consideration is the public interest. As such, the highest standards of integrity, ethics and probity are expected of them. Elected public officials should at all times avoid conflicts of interest, and where such conflicts are likely to exist, elimination by removal from the setting is perhaps the best option. For example, if someone elected to public office owns corporate stocks and is a member of several corporate boards, he or she is expected to either dispose of such stocks and resign from the boards, or demit public office.
Disclosure does not eliminate or remove the existence of a conflict of interest. Rather, it serves to inform stakeholders of the existence of competing interests. It is then the responsibility of those in authority to decide whether there are enough safeguards to prevent private interests taking precedence over the public interest, and advise accordingly.
Recusal relates to one-off events and not continuing situations. The practice is common among members of the legal profession. For example, judges and magistrates routinely recuse themselves from presiding over cases where, because of an association with the plaintiff or the defendant, they may be placed in a difficult situation to maintain their impartiality. However, in an organizational setting, recusal presents its own difficulties, especially if the person involved is the head of the organisation. One recalls when the Sanata Textiles Ltd. was sold, a former President insisted that he had recused himself from the Cabinet’s deliberations and decision-making regarding the sale because the potential buyer was his close friend. The Cabinet approved of the sale to the President’s friend. While there might have been justifiable grounds for doing so, it is difficult for an ordinary person to conclude that the Cabinet could have done otherwise.
Third party evaluation takes place where a need exists to ensure that a transaction being undertaken is an arm’s length one, especially in relation to setting prices. For example, a private sector entity that leases a property owned by its Chief Executive Officer may well consider it advisable to have an independent evaluation so that a fair price can be obtained for the leasing of the property. However, since in the public sector accountability is far more rigorous and demanding, in such a setting it would be desirable to procure the services elsewhere through a process of competitive bidding.
While in principle conflicts of interest should be eliminated in their entirety, it is recognized that in certain cases removal of the conflict can present difficulties. Many organisations and professional bodies have therefore developed codes of ethics or conduct which members are obliged to follow, and the failure to do so can result in disciplinary action being taken against the person involved. In Guyana, the code of conduct for senior public officials, Ministers of the Government and other Members of Parliament, is contained in Schedule II to the Integrity Commission Act.
The Stabroek News Editorial
The Stabroek News editorial of 8 October 2018 weighed in on the controversy referred to above by asserting that “[b]est practices in modern governance require careful scrutiny of the private interests of elected officials – particularly ministers – to ensure that there is no actual conflict, or even an appearance of one, if, indeed, the government in question intends to maintain the highest standards of probity… As a senior official of government, [the Minister] will be privy to the deepest deliberations at Cabinet about everything to do with oil and gas including local content policy, which oil firms may be under consideration for contract awards, proposed legislative changes etc.”
The editorial further pointed out that while there was no imputation of any impropriety, in modern governance codes, the avoidance of even the appearance of conflict of interest is seen to be just as important. This needs to be avoided in order to boost public confidence in government and to provide assurance that the highest standards are being adhered to.
Concern by the Transparency Institute Guyana Inc.
The Transparency Institute Guyana Inc. (TIGI), for its part, stated that it considered that a potential conflict of interest exists, and that enough assurances had not given that such an interest is not real. The statement considered that “[j]ust the fact that [he] is the husband of [the] Minister … means that there is a potential conflict of interest … But the problem here is that there is a major conflict of interest in [the husband] playing an integral role in linking people who might get into the oil industry in Guyana, given that his wife is a current minister of government. TIGI is not satisfied that conflict of interest is ruled out or adequately dealt with.”
TIGI referred to the new code of conduct for public officers dealing with conflicts of interest, among others, and enquired whether any declaration was made to the Integrity Commission. If so, the local transparency body enquired about what steps were being taken to guarantee that no conflict of interest will be acted upon. One of the requirements of the Code is for a Minister to declare any private interest relating to the discharge of his or her duties and responsibilities and to ensure that this or her personal decisions and actions are not in conflict with the national interest.
The Minister’s response
In response to the above concerns, the Minister issued a statement indicating that she had notified the Integrity Commission on 10 October 2018 as well as the Cabinet and was awaiting further legal advice on the matter. Up to the time of writing, neither the Integrity Commission nor the Cabinet has issued any statement on the matter. There was also no indication if the Minister is in receipt of the requested legal advice. The Minister further stated that until such advice is provided, she would refrain from attending any oil and gas discussions at Cabinet meetings.
Given that oil revenues are expected to flow in early 2020 – mere months away – it is very likely that oil and gas matters will be a standing item on Cabinet’s agenda for its weekly meetings. This implies that, unless there is a resolution of the conflict, the Minister will be absent from aspects of all Cabinet meetings for the foreseeable future, which will be a most undesirous situation for a Minister to be placed in. Besides, the Minister is likely to have access to all Cabinet papers and other related material, notwithstanding her absence from Cabinet discussions on oil and gas.
The way forward
The Minister has made a declaration with the Integrity Commission of her spouse’s involvement in setting up offices in Houston, Texas and has also apprised the Cabinet of the situation. The question, however, remains as to whether a reasonable, unconnected and uninformed person is likely to conclude that a conflict of interest still remains. If the answer is yes, then the Minister, regardless of how difficult and painful it would be for her, should take the honourable course of action and demit office. The failure to do so is likely to leave a cloud of suspicion of her involvement or influence in any decision by the Government in relation to oil and gas matters, especially if such a decision is viewed as favourable to the oil companies operating in Guyana.