Transcript Conflict of Interest - Georgia Institute of Technology

Conflict of Interest
Jilda Diehl Garton
May 30, 2006
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Overview
Definitions
Federal Regulations
Corporate Governance, Sarbanes Oxley, and
Excess Benefits Transactions
State of Georgia Law
Georgia Tech Policy
Procedure & the Conflict of Interest Committee
Management Plans
Special Cases: STTRs & SBIRs
Human Subjects Research and the Institutional
Review Board
Overview
Ethics and Entrepreneurship
Ethics and entrepreneurship are not
incompatible and are, in fact, requisites
one for the other.
Overview
Research universities
are concerned about
financial conflict of
interest because it
strikes to the heart of
the integrity of the
institution and the
public’s confidence in
that integrity.
Overview
AAU Report, October 2001
Transferring university-developed knowledge to
the private sector fulfills one of the goals of
federally funded research, by bringing the fruits
of research to the benefit of society. With this
important technology transfer comes
increasingly close relationships between
industry and universities, which provide benefits
but also increases the risk of academic research
being compromised in two ways, through:
Overview
AAU Report, October 2001
1. individual financial conflict of interest
in science, which refers to situations in
which financial considerations may
compromise, or have the appearance of
compromising, an investigator’s
professional judgement in conducting or
reporting research.
Overview
AAU Report, October 2001
(1 continued) The bias such conflicts may
conceivably impart not only affects
collection, analysis, and interpretation of
data, but also the hiring of staff,
procurement of materials, sharing of
results, choice of protocol, involvement of
human participants, and the use of
statistical methods; and
Overview
AAU Report, October 2001
2. institutional financial conflict of
interest, which may occur when the
institution, any of its senior management
or trustees, or a department, school, or
other sub-unit, or an affiliated foundation or
organization, has an external relationship
or financial interest in a company that itself
has a financial interest in a faculty
research project.
Overview
AAU Report, October 2001
(2 continued) Senior managers or trustees
may also have conflicts when they serve
on the boards of (or otherwise have an
official relationship with) organizations that
have significant commercial transactions
with the university.
Overview
AAU Report, October 2001
(2 continued) The existence (or
appearance) of such conflicts can lead to
actual bias, or suspicion about possible
bias, in the review or conduct of research
at the university. If they are not evaluated
or managed, they may result in choices or
actions that are incongruent with the
missions, obligations, or the values of the
university.
National Society of Professional Engineers
Code of Ethics for Engineers
II. Rules of Practice; Section 4.
• Engineers shall disclose all known or potential conflicts
of interest that could influence or appear to influence
their judgment or the quality of their services.
• Engineers shall not accept compensation, financial or
otherwise, from more than one party for services on the
same project, or for services pertaining to the same
project, unless the circumstances are fully disclosed and
agreed to by all interested parties.
• Engineers shall not solicit or accept financial or other
valuable consideration, directly or indirectly, from outside
agents in connection with the work for which they are
responsible.
National Society of Professional Engineers
Code of Ethics for Engineers
II. Rules of Practice; Section 4.
4. Engineers in public service as members, advisors, or
employees of a governmental or quasi-governmental
body or department shall not participate in decisions
with respect to services solicited or provided by them or
their organizations in private or public engineering
practice.
5. Engineers shall not solicit or accept a contract from a
governmental body on which a principal or officer of
their organization serves as a member
Conflict of Interest
Faculty Handbook 5.2
The mission of Georgia Tech includes both assuring that
research conducted at the Institute benefits the public
and assisting the State of Georgia in creating or retaining
industry, creating jobs, and promoting economic
development. Georgia Tech recognizes that employee
participation in bringing their inventions…into public use
through commercialization plays an important role in this
mission.….Companies in which employees have such an
interest may transact business with the Institute only
after transactions are reviewed and found not to pose a
conflict of interest or if the transactions are conducted
under a written conflict of interest management plan as
described in section 5.2.4.6
Definitions
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Conflict of Interest
Conflict of Interest Committee
Conflict of Commitment
Excess Benefits Transaction
Family Member
Institutional Conflict of Interest
Institutional Review Board
Personal Conflict of Interest
Significant Financial Interest
Substantial Financial Interest
Transact Business
Definitions
“Conflict of Interest”
A conflict of interest occurs when there is a
divergence between an individual's private
interests and his or her professional obligations
to the University such that an independent
observer might reasonably question whether the
individual's professional actions or decisions are
determined by considerations of personal gain,
financial or otherwise. A conflict of interest
depends on the situation, and not on the
character or actions of the individual.
Definitions
“Conflicts of Commitment”
Faculty Handbook 5.2
A conflict of commitment existis when an
employee undertakes external
commitments which burden or interfere
with the employee’s primary obligations to
the Institute. Conflicts of Commitment
may arise out of consulting arrangements
or with an entrepreneurial interest when a
faculty member is involved in a start up
company.
Definitions
“Individual Conflicts of Interest”
Faculty Handbook 5.2
Individual conflicts of interest may arise when
an employee has the opportunity to influence
research, academic or Institute decisions in
ways that could lead to personal financial gain.
The financial gain may be derived from owning
stock in a company that is sponsoring
research, from ownership interest or
employment in a company that may benefit as
a licensee of an invention, from the existence
or expectation of entering into a consulting
arrangement with a company sponsoring
research.
Definition
“Institutional Conflict of Interest”
Faculty Handbook 5.2
Institutional conflicts of interest occur when the
Institute, or one of its affiliated entities such as
Georgia Tech Research Corporation, Georgia
Tech Foundation or Georgia Advanced
Technology Ventures, has a financial stake in the
outcome of its research programs or licensed
technology. The conflict may arise out of an
equity interest in a start-up that licenses
technology from the Institute or in the nature of
royalties to be earned from licensing such
technology.
Definition
“Family”
“Family” means at least the spouse
and dependent children of the
principal…..
Federal Regulations
Federal regulations require that we have a
written policy that includes written
disclosures, not less than annually, of
potential or actual conflicts of interest in
the design, conduct and reporting of
research and that we take steps to
reduce, eliminate, or manage real or
potential conflicts of interest and that the
policy be enforced.
Conflict of Interest Policy
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NIH Guide – Objectivity in Research
http://grants2.nih.gov/grants/guide/noticefiles/not95-179.html
FDA "Guidance: Financial Disclosure by
Clinical Investigators" (March 20, 2001)
http://www.fda.gov/oc/guidance/financialdis.
html
GAO "Biomedical Research: HHS Direction
Needed to Address Financial Conflicts of
Interest" (November 2001)
http://www.aau.edu/research/gao.pdf (PDF)
NIH Guide - Financial Conflicts of Interest
and Research Objectivity: Issues for
Investigators and Institutional Review
Boards, June 5, 2000
http://grants.nih.gov/grants/guide/noticefiles/NOT-OD-00-040.html
NSF - IMPORTANT NOTICE Investigator
Financial Disclosure Policy: October 7, 1996
http://www.nsf.gov/pubs/stis1996/iin117/iin11
7.txt
Federal Regulations:
Disclosures
The existence of conflicts of interest and
the steps used to reduce, eliminate, or
manage such conflicts must be disclosed
in writing to federal agencies.
• NSF – upon request
• NIH – at the time of the proposal
• Other agencies – check with your OSP
Contracting Officer
Federal Regulations:
Human Research Volunteers
The Institutional
Review Board is
required by federal
law to review real and
potential conflicts of
interest in research
that involves human
subjects. This is a
separate review.
Corporate Governance, Sarbanes Oxley and
Excess Benefits Transactions4
• Tax exempt organizations are established for public
purposes therefore, funds or other assets in their control
must be used for their tax exempt purpose.
• The IRS developed new penalties to address situations
in which a tax exempt organization’s engages in
transactions that excessively benefit private persons.
• Excise taxes are imposed if a tax exempt organization
provides an “excess benefit” to a “disqualified person”
and if the benefit received by the disqualified person
exceeds the value of the goods or services provided to
the organization in return.
4. 26 CFR 53.4958
Corporate Governance, Sarbanes Oxley and
Excess Benefits Transactions
• “excess benefit transaction”: economic benefit is
provided by a tax exempt organization directly or
indirectly to or for the use of any disqualified
person, and the value of the economic benefit
provided by the organization exceeds the value
of the consideration (including the performance
of services) received for providing such benefit
• “disqualified persons” those who have
substantial influence over the affairs of the
applicable tax exempt organization at any time
during the five years preceding the transaction
Corporate Governance, Sarbanes Oxley and
Excess Benefits Transactions
• Safe Harbor" has three required steps:
– full advance disclosure of the facts of a
transaction and review by parties without a
conflict of interest
– consideration of Fair Market Value and
comparability
– documentation of the decision and the
underlying facts.
Corporate Governance, Sarbanes Oxley and
Excess Benefits Transactions
• Taxes on disqualified persons. The excess benefit
tax is imposed on each excess benefit transaction
between the tax exempt entity and the disqualified
person. This 25% tax is imposed and must be paid by
the disqualified person. If the tax is not paid during the
taxable period, an addition excise tax equal to 200% of
the excess benefit is imposed.
• Tax on organization managers. Managers of the tax
exempt organization including officers, directors, and
trustees, may be taxed 10% of the excess benefit
transaction if the manager knowingly participated in the
excess benefit transaction unless the manager’s
participation was not willful and was due to reasonable
cause.
State of Georgia Law
The General Assembly adopted a series of
statutes addressing business transactions
between state officers and employees and
state agencies or entities. These are found
in O.C.G.A. Title 45.
• O.C.G.A. §§ 45-10-20 through 45-10-28
are of particular interest.
State of Georgia Law
In a 1926 case, Montgomery v. City of Atlanta, 162 Ga.
534, 546 (1926), the Attorney General of Georgia
opined:
One who is entrusted with the business of others will
not be allowed to make out of the same a pecuniary
profit to himself. This doctrine is based upon
principles of reason, morality, and public policy. No
public agent shall have the opportunity or be led into
the temptation to make profit out of the public
business entrusted to his care, by contracting with
himself, directly or indirectly, in respect to such
business.
State of Georgia Law:
Code of Ethics1
In a 2004 opinion, the Attorney General of
Georgia pointed out that the General Assembly
has established a “Code of Ethics for Government
Service” which lists a number of aspirational goals
for all state officers and employees. These tenets
include:
1. Found in O.C.G.A. § 45-10-1
State of Georgia Law:
Code of Ethics1
• A government official should never use any information
coming to him confidentially as a means for making a
private profit.
• A government official or employee should not engage in
any business with the government which is inconsistent
with the conscientious performance of his governmental
duties.
• A government employees is specifically prohibited from
taking any official action on any matter where he knows
or should know that he has a direct or indirect monetary
interest in the subject matter of the transaction.
1. Found in O.C.G.A. § 45-10-1
State of Georgia Law:
Conflict of Interest2
It shall be unlawful for any public official,
or for any business in which such public
official or a member of his/her family has a
substantial interest, to do business with
the agency s/he serves. However,
2.
From O.C.G.A. 45-10-22.
State of Georgia Law:
Conflict of Interest2
These provisions do not apply to:
• Any transaction made pursuant to sealed competitive bids;
• Any transaction that does not exceed $250.00 and when the
aggregate of all such transactions does not exceed
$9,000.00 per calendar year;
• Any transaction involving the lease of real property if it has
been approved by the State Properties Commission or the
Space Management Division of the Department of
Administrative Services.
2.
From O.C.G.A. 45-10-22.
So you charges personal mileage to a federal grant, eh?
That ain’t nothing! I gave the appearance of a conflict of interest!!
Of Bribes and Kickbacks
The Appearance of a Conflict of Interest
Bribe, n. A price, reward, gift
or favor bestowed or
promised, with the view to
pervert the judgment of or
influence the action of a
person in a position of
trust
Kickback, n. A return of a
portion of a monetary
sum received, esp. as a
result of coercion or a
secret agreement
Of Equity and Royalties for Inventors
The Appearance of a Conflict of Interest
• We look for potential
CoI and then plan to
reduce, eliminate, or
manage the situation
• Potential conflict of
interest IS NOT
necessarily “bad”
Sometimes it seems as though the role of
Technology Transfer is to create
Conflicts of Interests
• Faculty Start-Ups
– License Technology from the Institution
– Sponsor Research at the Institution
– Involve students of the Institution
– Conduct human studies
• Institutional Conflict of Interest
– If the institution owns equity, its decisions may not be
viewed as unbiased
– If an institution accepts funding from a company its
research and decisions may not be viewed as
unbiased
Georgia Tech Policy
University Concerns
The university3 must protect itself and its faculty,
staff and students from any of the following
allegations:
• exploitation of students for private gain
• undue personal gain from public funds
• compromise of university priorities due to
financial considerations
• unfair access by a company to information or
technology
3. From the Stanford University Conflict of Interest Policy http://www.stanford.edu/dept/DoR/Resources/coi.html
Georgia Tech Policy
University Concerns
The university3 must protect itself and its faculty, staff
and students from any of the following allegations:
• compromise of appropriate controls in the conduct of
research such that research subjects could be harmed
• use of university resources for private gain
• adverse effect by those in leadership roles on the
professional or academic advancement of colleagues,
staff or students as a result of outside interests.
3. From the Stanford University Conflict of Interest Policy http://www.stanford.edu/dept/DoR/Resources/coi.html
Georgia Tech Policy
Conflict of Interest
Faculty Handbook 5.2
• Activities which constitute Conflicts of Interest where an
employee has a Substantial Interest are unlawful.
– The direct or indirect ownership of more than 25% of the assets or
stock of any business.
• Activities which constitute Conflicts of Interest where
there is Significant Financial Interest are prohibited
unless a plan to reduce, eliminate or manage the
Conflict of Interest has been expressly approved
and/or pursuant to the provisions of this policy.
– A financial interest that does not exceed $10,000 in value and does not
represent more than 5% ownership.
Conflict of Interest
Faculty Handbook 5.2
• Annual Disclosure
– April
• Disclosure is also required on routing
sheets for sponsored research proposals
• Disclosure is also required any time
circumstances change
Conflict of Interest
Faculty Handbook 5.2
• Forms are reviewed by school chairs or lab
directors.
• If a management plan is needed, the form
should be forwarded by the school chair to the
Conflict of Interest Committee.
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Randy Nordin
Jilda Garton
Ron Rousseau
Bob Nerem
• Forms must be retained in departmental files.
– Retention time varies with circumstances.
Conflict of Interest
Faculty Handbook 5.2
• Forms are reviewed by school chairs or lab
directors.
• If a management plan is needed, the form
should be forwarded by the school chair to the
Conflict of Interest Committee.
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Randy Nordin
Jilda Garton
Ron Rousseau
Bob Nerem
• Forms must be retained in departmental files.
– Retention time varies with circumstances.
Georgia Tech Procedure and
the Conflict of Interest Committee
• The Department Chair performs the first review
– form must be signed by the chair of the individual’s tenureinitiating unit or supervisor
• If the individual is a chair, center director, dean, or other
senior official, the next supervisory level must review and
sign the form
• Consulting and routine situations are generally handled
by the first reviewed
• This review is for accuracy, completeness of
disclosure, fit with mission and objectives of
the department and need for management of
any potential conflict of interest
Georgia Tech Procedure and
the Conflict of Interest Committee
• The form is reviewed for completeness and signatures
• If other circumstances are disclosed, more information is
sought
• Department chair’s recommendations are considered
• A CoI Management Plan may be necessary
CoI Management Plans
Management Plan: A written agreement
that sets up a structure so that situations
with potential conflicts of interest are
monitored and managed to ensure that
inappropriate actions or the perception of
impropriety are prevented.
CoI Management Plans
Conflict of interest management plans are
generally considered to be open records
under Georgia Law and would most likely
be open records under the Federal
Freedom of Information Act once they are
submitted to the government.
CoI Management Plans
• Limitations on who may serve as a PI on a sponsored
project
• Distinction between activities appropriate for consulting
and for sponsored programs
• Limitations on ownership of stock or stock options
• Technology transfer or licensing provisions
• Designation of responsibility for control of donated funds
• Provisions for the use of university facilities
• Provision for the employment of university students
• Disclosure requirements
• Relationship to other funded projects &/or proposals
• Designation of parties responsible for review
Management of
Institutional Conflicts of Interest
A university’s institutional financial conflict of
interest processes – for both financial holdingrelated conflicts and those involving senior
officers – should follow a three-fold approach:
• 1) disclose always;
• 2) manage the conflict in most cases;
• 3) prohibit the activity when necessary to protect
the public interest or the interest of the
university.
Special Cases: STTRs & SBIRs
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PI for the company
PI for the award to Georgia Tech
Students
Level of ownership by Georgia Tech
faculty, inventors, family
• Relationship to ongoing and proposed
research – whether federally or privately
funded – in Georgia Tech
• Time and Effort Reporting