It turns out that people think conflicts of interest don’t much matter. “If you disclose a conflict of interest, people in general don’t know how to use that information,” George Loewenstein, an economics professor at Carnegie Mellon, says. “And, to the extent that they do anything at all, they actually tend to underestimate the severity of these conflicts.”
Usually, conflicts of interest lead not to corruption but, rather, to unconscious biases. Most analysts try to do good work, but the quid-pro-quo arrangements that govern their business seep into their analyses and warp their judgments.
“People have a pretty good handle on overt corruption, but they don’t have a handle on just how powerful these unconscious biases are,” Loewenstein says.
To test the idea, Loewenstein and his colleagues Don Moore and Daylian Cain devised an experiment. One group of people (estimators) were asked to look at several jars of coins from a distance and estimate the value of the coins in each jar. The more accurate their estimates, the more they were paid. Another group of people (advisers) were allowed to get closer to the jars and give the estimators advice. The advisers, however, were paid according to how high the estimators’ guesses were. So the advisers had an incentive to give misleading advice. Not surprisingly, when the estimators listened to the advisers their guesses were higher. The remarkable thing was that even when the estimators were told that the advisers had a conflict of interest they didn’t care. They continued to guess higher, as though the advice were honest and unbiased. Full disclosure didn’t make them any more skeptical.
In the course of the experiment, Loewenstein discovered something even more startling: that disclosure may actually do harm. Once the conflict of interest was disclosed, the advisers’ advice got worse. “It’s as if people said, ‘You know the score, so now anything goes,’ ” Loewenstein says. Full disclosure, by itself, may have the perverse effect of making analysts and auditors more biased, not less.
Obviously, we shouldn’t keep conflicts of interest secret. But revealing them doesn’t fix a thing. To restore honesty to analyses and audits, you need to get rid of the conflicts themselves.
http://www.newyorker.com/talk/content/?021209ta_talk_surowiecki
An official US audit provided evidence yesterday of widespread corruption in postwar Iraq, finding that L. Paul Bremer’s occupation authority failed to keep track of nearly $9,000,000,000 in reconstruction funds. The critique added to warnings from US and international auditors about weak financial controls in Iraq, and growing evidence of cronyism and fraud.
http://www.guardian.co.uk/Iraq/Story/0,2763,1403034,00.html
President Bush awarded the Presidential Medal of Freedom, the nation’s highest civilian honor, to former CIA director George Tenet, who told Bush it was a “slam dunk” that Iraq still had weapons of mass destruction, and L. Paul Bremer, who presided over the first 14 months of Iraq reconstruction.
http://www.washingtonpost.com/wp-dyn/articles/A63623-2004Dec14.html
Commentator Armstrong Williams was paid $241,000 by the Education Department to promote Bush’s education policy. Columnist Maggie Gallagher received $21,500 from the Health and Human Services Department to work on the president’s marriage initiative; syndicated columnist Michael McManus received about $4,000, and his group Marriage Savers $49,000, to work on the program. http://seattletimes.nwsource.com/html/nationworld/2002164731_pundits30.html
Halliburton has the largest number of Iraqi reconstruction contracts. It was the Pentagon’s No. 7 overall contractor in 2003, up from 37th place in 2002. In Iraq, The U.S. Government Accountability Office said Halliburton overcharged the government by more than $165,000,000. The agency said the company had charged three times what the Defense Department spends to send gasoline into Iraq.
http://www.iht.com/articles/530577.html
Halliburton is still making annual payments of up to $1,000,000 per year to its former chief executive, the vice-president Dick Cheney.
http://www.guardian.co.uk/Iraq/Story/0,2763,912515,00.html
High-level government officials engaged in criminal, terrorist-related conduct, jeopardizing thousands of American lives to protect foreign business and diplomatic relations.
http://www.antiwar.com/edmonds/?articleid=3230
The Defense Policy Board, a group of outside advisors to the Pentagon, got a classified presentation from the super-secret Defense Intelligence Agency on crises in North Korea and Iraq. Three weeks later, the then-chairman of the board, Richard N. Perle, offered a briefing of his own at an investment seminar on ways to profit from possible conflicts with both countries. He also, reportedly, solicited money from a Saudi who was seeking to influence U.S. policy on Iraq.
http://www.commondreams.org/headlines03/0507-03.htm
At least $1,000,000,000 made its way from the Saudis to the Bush-allied companies and institutions. The bin Laden family’s Texas money manager, James Bath, invested in Arbusto, a company founded by George W. Bush. When George W. was investigated by the S.E.C., Robert Jordon (James Baker’s law partner) helped him beat the rap; when Bush became president, Jordon was appointed ambassador to Saudi Arabia. George H.W. Bush invested in the Carlyle Group, a major defense contractor, and became a member of the company’s Asia Advisory Board. Saudis close to Prince Sultan, the Saudi defense minister, were encouraged to put money into Carlyle as a favor to the elder Bush. Under the leadership of ex-officials like former Secretary of State (and Carlyle Senior Counselor) James Baker and former Defense Secretary Frank C. Carlucci, Carlyle developed a specialty in buying defense companies and doubling or quadrupling their value. When relatives of 9/11 victims sued the Saudi Defense Minister, Baker’s law firm to defend him. George W. Bush served on the board of directors for CaterAir, a company owned by the Carlyle Group. The 27 classified pages of a congressional report about Sept. 11 describe direct, specific links between Saudi officials, two 9/11 hijackers and other potential co-conspirators.
http://www.michaelmoore.com/warroom/f911notes/index.php?id=17
http://www.michaelmoore.com/warroom/f911notes/index.php?id=18
http://www.michaelmoore.com/warroom/f911notes/index.php?id=19
http://www.michaelmoore.com/warroom/f911notes/index.php?id=20
Also see “Imagine Accountability.”